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Support is growing in South Africa for an investment boycott of key state entities, while citizens are increasingly suggesting tax boycotts as a way to get the government to clean up its financial act. South Africa has been mired in controversy, with President Jacob Zuma in the spotlight over a range of transactions linked to the rich Indian Gupta family. The BizNews channels are abuzz with discussion about whether an investment boycott is the right way to force a major shift in political control and management of the country, while citizens are calling on each other to stop paying tax as a way to get South Africa’s rulers to take action. Have a read of the main themes and add your voice to the debate about the Futuregrowth decision to step back from Eskom and other state entities. – Jackie Cameron
Andrew Canter, the head of the investment company that this week took the first move to withdraw lending support from state-owned enterprises (SOEs) troubled by financial mismanagement, may have sparked an investment boycott.
Futuregrowth Asset Management, which manages about R150bn ($10bn; £7.7bn) in domestic fixed interest, has decided to stop lending to the six largest SOEs and will review whether it will expand this ban to include other SOEs.
SOEs immediately affected include: the Industrial Development Corporation (IDC), the Land Bank, the Development Bank of South Africa, all three of those being state-owned lending entities; the South African National Roads Agency (Sanral); Transnet; and Eskom. Futuregrowth will also not support ailing national airline South African Airways (SAA), which needs a major cash injection for working capital and debt consolidation purposes.
Canter told BizNews editor-in-chief Alec Hogg that he hadn’t anticipated that the Futuregrowth decision would hammer the rand’s value as much as it has, but that he expects other asset management companies in South Africa to follow suit. BizNews community members, many of whom work within South Africa’s financial services industry, agree that more companies are likely to step back from lending to SEOs.
Investment boycott “the right thing” for South Africa
Graham Sinclair summed up the general impression of Futuregrowth’s decision on Alec Hogg’s Facebook page. He said: “A good man doing the right thing. More to follow. Well played Andrew Canter.”
Responding under the article Joke is on Eskom boss Molefe after funder dumps Eskom, Reader observed: “The Futuregrowth decision is a game changer. A very big and important game changer. When the big fund managers stop lending to names like Eskom, SAA, Sanral, Land bank etc then Zuma et al had all better sit up and take notice.” Reader added:
The ANC is about to learn ANOTHER big lesson on top of 3 August 2016. The man with the money calls the shots. Always. The Zuptas need to learn that when the money men say “jump” there is only one response…….how high. Have a look at some fund managers fact sheets and be horrified by the amount of money in some of the names mentioned by Futuregrowth. As an investor I will place my money with fund managers who emulate Futuregrowth and avoid those fund managers who don’t.
SouthAfricaFirst also applauded the move by Futuregrowth, with: “BOOM! How can SA banks and asset managers continue ploughing money into what is clearly a front for corrupt tenterpreneur patronage networks, which are sucking the lifeblood out of the country? It’s about time someone took a stand. Well done!”
Ever since the 4 major banks stopped doing business with the Guptas, there's been increasing hostility towards SARB & FIC.
— Kgauza wa Lecowza (@KgaugeloSM) August 31, 2016
Commenting on analysis piece Nuclear bomb triggered: Futuregrowth ends lending to SOEs in wake of Finmin attacks, SouthAfricaFirst asked: “Why aren’t other Asset Managers and Banks fulfilling their fiduciary duties and following suit? Some would label them reckless…”
Mo Haarhoff was all for the boycott on SOEs spreading across the financial services, too. She said: “Thanks for the solo, now can we have a chorus, please. Sanctions from within!”
“Hear hear” said Jack Klok. “Lets stop propping up the criminal cabal that have captured the Seffrican state.”
The Futuregrowth decision hasn’t come a moment too soon for Peter Rossfour. He called for extreme action, even though there will most likely be more financial pain in the short-term. Peter Rossfour said:
“It is about time the business establishment weighs into the fight between Zuma and his corrupt clan and the Treasury. Let’s hope other institutions will follow suit. I have come to the conclusion that only drastic action, even if it hurts our economy even more, is needed to end once and for all Zuma’s draconian grip on our beloved country. The sooner Zuma and his cohorts are kicked into touch the sooner South Africa will start to prosper again.
What we need is a complete purge of the Zuma acolytes in all sections of government, starting with the disgraceful Hawks and the Zuma compliant NPA. Dismiss them, charge them with treason and jail them, Zuma included!
PJ encouraged BizNews visitors to become investment activists, too: “Challenge to you all – get your Pension Fund Trustees to move the Bond Portfolios to Futuregrowth! Hats off to Futuregrowth!”
Neerosh Kistan is also convinced that protest action is essential. She shared her opinion on Facebook: “The gravy train must be stopped immediately! Businesses must take a stand urgently. We must have honest people to take our beautiful country forward.”
Peter Latham had a more sombre response to developments, asking: “What will be the impact on the Rand if Zuma and his cohorts continue with the destruction of the economy? ZAR 50 or even ZAR 100 to the USD within 5 years?”
Precursor to junk status. Keep going at it Jessie Duarte. It would help if she at least ran one spaza shop. https://t.co/PSgOX5jEaT
— Palesa Morudu (@palesamorudu) August 31, 2016
Time for a tax boycott?
Talk soon turned to the possibility of a tax boycott – a recurring theme on the BizNews forums.
Remarked Spyker May: “If Futuregrowth can do it, then surely, so can the South African tax-payer…”
Said Elio Boezio: “Many have suggested a ‘tax revolt’ without thinking through the practicalities thereof (e.g. tax is deducted automatically); this is probably the next best thing to put a stop to the ruling kleptocrats. But it’s going to be a rough ride…”
For Ace Paleis, a tax boycott is a no-brainer. The BizNews visitor said: “The only language GREEDY people understand is money. Cut the cashflow and interesting things start to happen.”
Aylex Cross recommended this approach: “Time we as individuals also acted liking not paying out taxes to them but to a trust account instead.”
Emily Holliday was in favour of South Africans gritting their proverbial teeth and getting on with the business of bringing the country to a standstill. She said: “SA has been on it’s knees before, but managed to get up again, until ZuANC took over……….if this is what it takes to get SA back on track, so be it! Tough love!”
In an apparent appeal for calmer measures, Artemis Elias said: “Sanctions destabilized the apartheid govt – this should do the same but not without huge cost!”
Pension protection, not politics
The Futuregrowth decision was based on uncertainty on the likely outcome of political developments, with a major concern cited as President Zuma’s move to gain greater control of SOEs. But, Canter said, the ultimate choice to stop investing was not with a view to shaking up the establishment.
In an in-depth interview, which you can listen to here, Canter told Alec Hogg: “I just don’t think it’s our job to try to affect political change with pension fund money. It’s our job to protect the pension fund money as a core proposition and that means good lending and good credit practices and that’s what I’m talking about.”
Regardless of the reasons, Futuregrowth’s step back from SOEs has generally impressed onlookers. Said Wayne Domnick: “Andrew is a class act – maybe it’s time to transfer our pension funds to Futuregrowth!”
Thomas William Kelly has warmed to Futuregrowth and the asset management sector in general. He said of the decision to take a stand on lending to SOEs. “Wow. My respect for the lending industry grew a little. From a low base I might add. Still. Kudos to them.”
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