Who is pushing to axe Transnet CEO Siyabonga Gama? Not us, says Futuregrowth

“The Futuregrowth team has had continuing engagements as a lender to Transnet over many months,” Chief Investment Officer Andrew Canter said in an emailed statement late Monday. “Those discussions have focused on governance policies, practices and reporting, as well as the terms of existing loan agreements. At no time, in any forum, has Futuregrowth requested, required or proposed that any individual or groups of people should be dismissed or replaced at Transnet.”

Canter commented in response to a Bloomberg report that cited two people familiar with the situation as saying Futuregrowth was among creditors who reacted to Transnet securing only a qualified audit by pushing for management changes. The people asked not to be named because they aren’t authorised to speak publicly on the matter.

Lender agreements

In its annual financial statements published on Monday, Transnet said it had signed agreements for bilateral and syndicated loans amounting to R15.8 billion ($1.1 billion) that contain a clause stating that a qualified audit opinion is a default event, enabling the lenders to call in their loans.

“The board and management have engaged these lenders to share the nature of the qualification, root causes, remedial actions and timelines for remediation,” the company said. “To date, half of the lenders granted waivers and/or reserved rights to immediate acceleration. Transnet is confident that an agreement will be reached with all affected lenders.”

Futuregrowth, which has about 180 billion rand under management, has been openly critical of how state-owned firms are run and announced in 2016 it would stop buying bonds of six of them. The company said earlier this month it’s still not prepared to resume lending to Eskom Holdings SOC Ltd., the embattled power utility.

An investigation by law firm Werksmans Attorneys found Transnet had squandered billions of rand and breached regulations while a separate study commissioned by the Treasury said the company overpaid for locomotives after switching a supply contract to a Chinese rail company. Gama, 51, was named CEO of Transnet in April 2016, having acted in that position for the previous 12 months.

The Transnet board last week gave Gama and two other executives until Monday to argue why they shouldn’t be suspended. The CEO is fighting to save his job, saying in a letter to Chairman Popo Molefe seen by Bloomberg the decision was based on an incomplete report.

A Transnet spokesman didn’t immediately respond to a request for comment.

Futuregrowth was among creditors rattled when Transnet said it had secured only a qualified audit due to evidence of irregular spending, said the people, who asked not to be named because they aren’t authorised to speak publicly on the matter. A qualified audit can be grounds for bondholders to declare a default, and Transnet executives have rushed to obtain letters from creditors confirming they will waive that right, the people said.

Futuregrowth, which has about R180 billion ($12 billion) under management, has been openly critical of how state-owned firms are run and announced in 2016 it would stop buying bonds of six of them. The company, South Africa’s biggest specialist fixed-income money manager, said earlier this month it’s still not prepared to resume lending to Eskom Holdings SOC Ltd., the embattled power utility.

“Futuregrowth is one of many lenders to Transnet, and we have provided finance via both listed bonds and syndicated loans for many years,” Chief Investment Officer Andrew Canter said in an emailed response to questions. “We have not made any comments on the conditions of such loans, nor will we at this time.”

A Transnet spokesman didn’t immediately respond to a request for comment.

Fighting suspension

After Cape Town-based Futuregrowth’s intervention, the Transnet board signaled its intent to act by giving Gama and two executives until today to argue why they shouldn’t be suspended. The CEO is fighting to save his job, saying in a letter to Chairman Popo Molefe seen by Bloomberg the decision was based on an incomplete report.

An investigation by law firm Werksmans Attorneys found that Transnet had squandered billions of rand and breached regulations while a separate study commissioned by the Treasury said the company overpaid for locomotives after switching a supply contract to a Chinese rail company. Gama, 51, was named CEO of Transnet in April 2016, having acted in that position for the previous 12 months.

Should he leave, he would follow former Chief Financial Officer Garry Pita and ex-Chairwoman Linda Mabaso, who quit earlier this year. Transnet said earlier Monday it’s putting together a plan to stamp out irregular spending that would be put to the board for approval.