Downgrade threat concerns SA’s Treasury

The Treasury’s chief director for liability management, Tshepiso Moahloli, says SA’s borrowing costs have gone up.

Johannesburg - The National Treasury has warned that the threat of a sovereign downgrade on South Africa’s credit worthiness at the end of the year should be a serious worry, especially on the cost of borrowing.

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The Treasury’s chief director for liability management, Tshepiso Moahloli, yesterday told the Association of Black Securities and Investment Professionals (Absip) summit in Johannesburg that the country’s borrowing costs had gone up.

“The weaker rand has placed upward pressure on inflation and borrowing costs,” said Moahloli.

“We have seen an 8 percent growth in borrowing costs, and this has the potential to erode finances needed that will enable grow the economy. We are right to be worried… Our borrowing costs are too high.” Moahloli said every year of no growth confined school leavers with low job prospects and argued that there should be more emphasis on employing more people as opposed to handouts.

The Absip summit was dominated by talk on the lack of transformation in the asset management industry.

Delegates heard how 4.4 percent or R309 billion of South Africa’s R6.97 trillion investment and savings industry was managed by black-owned firms. Speakers said the black-owned firms were not growing beyond the small business phase.

Litha Nyhonyha, the chairman of Regiments Capital charged that the black-owned asset management company had to be part of the “premier league” and they could achieve this by putting an end to “small mindednesses”. “We cannot be developing forever, we need to get to a point where we say we have arrived. We are not looking for favours, we have the knowledge and track record, and so why are we not managing funds?”

Mkuseli Mbomvu, the chief executive of the Mineworkers Provident Fund, said 35 percent of their investments was in the control of black-owned fund managers with a 50 percent target in the three years.

Investment decisions

Mbomvu said the fund had assets of R26bn and was one of the country’s oldest black retirement funds. He said asset managers needed to make investment decisions that focused on the needs of members. “Black-owned asset managers are not growing because people are not allocating money to them. They have to differentiate themselves because they understand to plight of our members.”

Azola Zuma, the chief executive of Sanlam Investment Management, said transformation of the industry would help unlock economic growth.

Kelebogile Moloko, the chief investment officer at Prowess Investment, said South Africa had two economies the developed and underdeveloped. “We cannot rely on the government to implement policies, we have the research to engage the government on sections of the economy that can be beefed up.”

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