Post by cjm on Sept 1, 2016 8:31:26 GMT
Money manager Futuregrowth pulls the plug on state companies
South Africa
Wednesday 31 August 2016 - 6:57pm
Eskom is one of the six state entities that Futuregrowth Asset Management has decided to stop lending money to, for now, citing polit
ical uncertainty.
JOHANNESBURG – In-fighting between South Africa’s Treasury and state-owned enterprises had led Futuregrowth Asset Management to freeze lending to the country’s parastatals.
It says it is concerned about how these are being run.
Economist Dawie Roodt said the move was a vote of no-confidence in the governmment.
Other lenders might follow suit and the rand, already under pressure, would contiunue to weaken, he said.
Future-Growth -- Africa's biggest private fixed-income money manager with about R170-billion of assets -- said it had already shelved plans to loan R1.8-billion to three state-owned entities this year.
The companies it is cutting off -- for now -- are Eskom, Transnet, the South African National Roads Agency, Land Bank of South Africa, the Industrial Development Corporation of South Africa and the Development Bank of Southern Africa.
The company said the decision would not immediately affect lending to the government and other state bodies such as water boards and municipalities.
“We’ve observed recent reports that strongly hint of conflict between branches of South Africa’s government, the possible machinations of patronage networks and a seeming challenge to the National Treasury’s independence,” chief investment officer Andrew Canter was quoted as saying by Bloomberg news.
"Into this already unsettling environment, we note the recent and sudden announcement that the Presidency would chair a 'council' to directly oversee the state-owned entities," a Futuregrowth statement said. "The meaning, timing, and intent of this announcement ... is entirely unclear – and, lacking clarity and context, we feel compelled to view this announcement with concern.
"As rational and fiduciary investors we must adapt our views and investment strategies when circumstances change."
Futuregrowth said it would resume offering loans and rolling over existing debt only once it sees signs of proper oversight and governance.
Earlier this month Future Growth disagreed with Eskom CEO Brian Molefe's stance on renewable energy.
South Africa
Wednesday 31 August 2016 - 6:57pm
Eskom is one of the six state entities that Futuregrowth Asset Management has decided to stop lending money to, for now, citing polit
ical uncertainty.
JOHANNESBURG – In-fighting between South Africa’s Treasury and state-owned enterprises had led Futuregrowth Asset Management to freeze lending to the country’s parastatals.
It says it is concerned about how these are being run.
Economist Dawie Roodt said the move was a vote of no-confidence in the governmment.
Other lenders might follow suit and the rand, already under pressure, would contiunue to weaken, he said.
Future-Growth -- Africa's biggest private fixed-income money manager with about R170-billion of assets -- said it had already shelved plans to loan R1.8-billion to three state-owned entities this year.
The companies it is cutting off -- for now -- are Eskom, Transnet, the South African National Roads Agency, Land Bank of South Africa, the Industrial Development Corporation of South Africa and the Development Bank of Southern Africa.
The company said the decision would not immediately affect lending to the government and other state bodies such as water boards and municipalities.
“We’ve observed recent reports that strongly hint of conflict between branches of South Africa’s government, the possible machinations of patronage networks and a seeming challenge to the National Treasury’s independence,” chief investment officer Andrew Canter was quoted as saying by Bloomberg news.
"Into this already unsettling environment, we note the recent and sudden announcement that the Presidency would chair a 'council' to directly oversee the state-owned entities," a Futuregrowth statement said. "The meaning, timing, and intent of this announcement ... is entirely unclear – and, lacking clarity and context, we feel compelled to view this announcement with concern.
"As rational and fiduciary investors we must adapt our views and investment strategies when circumstances change."
Futuregrowth said it would resume offering loans and rolling over existing debt only once it sees signs of proper oversight and governance.
Earlier this month Future Growth disagreed with Eskom CEO Brian Molefe's stance on renewable energy.
See also
Another institution stops lending (Afrikaans)
Precis of ‘Twin Peaks’ Socio-Economic Impact Assessment (SEIA)
24 August 2016
INTRODUCTION
The Assessment falls far short of the minimum requirements of what legislators, policy-makers and role-players need in order to be properly informed about what is proposed. No case is made for the regulatory architectural change, which is the essence of the Financial Sector Regulation Bill, yet change is proposed. The inadequate Assessment might paradoxically be a blessing in disguise because it is a near-perfect example of how not to do a SEIA. If fails in every material aspect. The Assessment does not provide a quantified or documented analysis of problems to be solved.
The Assessment merely makes bald unsubstantiated assertions that there are unconnected problems. In any event these unconnected problems are stated in vague and amorphous terms.
ESSENCE OF THE FINANCIAL SECTOR REGULATORY BILL (the Bill)
Essentially the aim of the Financial Sector Regulation Bill is to create two massive, intrusive, regulatory bureaucracies, costing the public between R4bn-R6bn per annum. This is a new regulatory architecture. There is no justification, either qualitatively or quantitatively for this architectural change. This new architecture is referred to as the Twin Peaks regulatory system.
The first regulator is to concentrate on prudential matters while the second is to concentrate on market conduct matters. This system has been implemented (for valid reasons) in the UK. The division is itself a problem as demonstrated by two almost identical South African cases (“Powerful regulators can wreak havoc”, Sunday Times July 5, 2015). Two auction houses were accused of the same “unethical” business practice, clearly a market conduct issue. The one case proceed through the judicial system where the matter was dealt with in terms of the common law of contract. The Supreme Court of Appeal ruled in favour of the auctioneer.
The second case was processed via the market conduct regulator which culminated in the financial collapse of the auction house which at the time was South Africa’s largest auction house. Market conduct regulators can cause the financial collapse of institutions the prevention of which is the concern of prudential regulators. To make matters worse, the argument that the so-called business practice was unethical was dismissed by the courts nearly 200 years earlier.
UNCONNECTED GROUNDS JUSTIFING CHANGING THE REGULATORY ARCHITECHTURE
As indicated the purpose of the Bill is to change the regulatory architecture to the Twin Peaks system. No justification was given for this change. Instead of the Assessment providing clarity as to why the changed architecture is superior it parades amorphous assertions as “a stable and more inclusive financial sector is needed” and “insufficient information ... and information asymmetries limit the ability of consumers to make sound decisions. To the extent that these need to be addressed no explanation is provided why this is not achieved in terms of the existing architecture and why the new architecture will achieve what the existing cannot.
Of course we all want a stable financial sector. But what justification exists for the belief that the Twin Peaks system will achieve this? None. The Assessment has simply not been done.
The grounds justifying the Bill are simply unconnected to the objective of the Bill.
The Assessment does not give such concrete information as to the numbers of transactions concluded in a given context, the proportion that resulted in complaints, the proportion of those confirmed or rejected by courts or tribunals, the number of transactions in which consumers regarded themselves as having been misled or treated unfairly, the reasons for regarding returns on savings as inadequate, proportion of contract with unlawful provisions, and so on and why it is believed it is the changed architecture which will bring about the improvements.
The Guidelines insightfully lament that “too many regulations are drafted without a clear statement of the problem and the regulatory objective. This can contribute to over-regulation and ambiguity.” This Assessment is such a perfect example of what the Guidelines articulate that the statement could have been written with it in mind.
Not a single proposal is accompanied by an explanation of why it should result in promised benefits (vague as they are).
In short, there is nothing in the SEIA to justify “twin peaks”. It might well be a good idea, and might well generate net benefits, but nothing in the Assessment explains why that should might happen. All that would have changed if the Bill is enacted is that the administrative architecture (organs of state responsible for implementation of laws and policies) will have been restructured.
COSTS AND BENEFITS
In a peculiar analysis of cost, there is no attempt to compare benefits directly with costs.
What consumer benefits will there be and what will they cost consumers? How will impacts differ for different socio-economic groups? Not only are policy-makers, for whom the Assessment is intended, left walking in the dark, but so, it seems, are advocates of the Bill.
Nor is there an estimate of the cost of reduced product range and innovation – both of which it is known from public statements will be curtailed as part of “market conduct” regulation. No market distortion effects are acknowledged or quantified.
Instead a curious comparison is made. Estimated costs are, it is argued, a small proportion of corporate GVA (gross value added). This is no conceivable relevance.
According to the Guidelines “goals, outcomes, standards or targets to be achieved to correct the problem ... should be clearly specified with a clear link to the problem.” Nowhere is this attempted in the SEIA.
Various measures are alluded to, all of which are within existing competencies. No reason is given for believing that the same people will be better at what they do if the name of the origination for which they work changes, or if functions are relocated.
In the absence of clearly stated problems, it would not be possible for the government to assess net benefits even if benefits were clearly articulated and quantified.
SEIAs must describe alternatives considered, and say how they compare. Reasons have to be given for rejecting them. No alternatives are mentioned. It offers policy-makers no choice at all. What it says in essence is that we have dire problems and threats and you have only one option. It happens to be a very costly option, and will hobble financial markets, but, trust us, the problems will vanish as if by magic.
The Study ignores this and creates the illusion that there will be no negative impacts to speak of. There will be direct costs, but no unintended consequences.
The Bill proposes giving the market conduct “peak” far-reaching legislative powers which are either unconstitutional or close to it. For example, this peak is given taxing (levy) powers, implementation and enforcement powers, policing powers, adjudicative powers and so on, all of which appear to violate the most basic rule of law conditions.
Not provision is made for the fact that there must both a monitoring mechanism and monitoring criteria. What will be measured and with what will it be compared to determine if a measure produces “improvements”?
There is no reason suggested why current proposals should not fail for precisely the same reasons as current legislation has failed, to the same extent or worse.
The Assessment is fatally flawed in many ways.
The lesson to be learned from this is that effective ways have to be implemented to ensure that policy-makers get what they need to make sound policy decisions.
24 August 2016
INTRODUCTION
The Assessment falls far short of the minimum requirements of what legislators, policy-makers and role-players need in order to be properly informed about what is proposed. No case is made for the regulatory architectural change, which is the essence of the Financial Sector Regulation Bill, yet change is proposed. The inadequate Assessment might paradoxically be a blessing in disguise because it is a near-perfect example of how not to do a SEIA. If fails in every material aspect. The Assessment does not provide a quantified or documented analysis of problems to be solved.
The Assessment merely makes bald unsubstantiated assertions that there are unconnected problems. In any event these unconnected problems are stated in vague and amorphous terms.
ESSENCE OF THE FINANCIAL SECTOR REGULATORY BILL (the Bill)
Essentially the aim of the Financial Sector Regulation Bill is to create two massive, intrusive, regulatory bureaucracies, costing the public between R4bn-R6bn per annum. This is a new regulatory architecture. There is no justification, either qualitatively or quantitatively for this architectural change. This new architecture is referred to as the Twin Peaks regulatory system.
The first regulator is to concentrate on prudential matters while the second is to concentrate on market conduct matters. This system has been implemented (for valid reasons) in the UK. The division is itself a problem as demonstrated by two almost identical South African cases (“Powerful regulators can wreak havoc”, Sunday Times July 5, 2015). Two auction houses were accused of the same “unethical” business practice, clearly a market conduct issue. The one case proceed through the judicial system where the matter was dealt with in terms of the common law of contract. The Supreme Court of Appeal ruled in favour of the auctioneer.
The second case was processed via the market conduct regulator which culminated in the financial collapse of the auction house which at the time was South Africa’s largest auction house. Market conduct regulators can cause the financial collapse of institutions the prevention of which is the concern of prudential regulators. To make matters worse, the argument that the so-called business practice was unethical was dismissed by the courts nearly 200 years earlier.
UNCONNECTED GROUNDS JUSTIFING CHANGING THE REGULATORY ARCHITECHTURE
As indicated the purpose of the Bill is to change the regulatory architecture to the Twin Peaks system. No justification was given for this change. Instead of the Assessment providing clarity as to why the changed architecture is superior it parades amorphous assertions as “a stable and more inclusive financial sector is needed” and “insufficient information ... and information asymmetries limit the ability of consumers to make sound decisions. To the extent that these need to be addressed no explanation is provided why this is not achieved in terms of the existing architecture and why the new architecture will achieve what the existing cannot.
Of course we all want a stable financial sector. But what justification exists for the belief that the Twin Peaks system will achieve this? None. The Assessment has simply not been done.
The grounds justifying the Bill are simply unconnected to the objective of the Bill.
The Assessment does not give such concrete information as to the numbers of transactions concluded in a given context, the proportion that resulted in complaints, the proportion of those confirmed or rejected by courts or tribunals, the number of transactions in which consumers regarded themselves as having been misled or treated unfairly, the reasons for regarding returns on savings as inadequate, proportion of contract with unlawful provisions, and so on and why it is believed it is the changed architecture which will bring about the improvements.
The Guidelines insightfully lament that “too many regulations are drafted without a clear statement of the problem and the regulatory objective. This can contribute to over-regulation and ambiguity.” This Assessment is such a perfect example of what the Guidelines articulate that the statement could have been written with it in mind.
Not a single proposal is accompanied by an explanation of why it should result in promised benefits (vague as they are).
In short, there is nothing in the SEIA to justify “twin peaks”. It might well be a good idea, and might well generate net benefits, but nothing in the Assessment explains why that should might happen. All that would have changed if the Bill is enacted is that the administrative architecture (organs of state responsible for implementation of laws and policies) will have been restructured.
COSTS AND BENEFITS
In a peculiar analysis of cost, there is no attempt to compare benefits directly with costs.
What consumer benefits will there be and what will they cost consumers? How will impacts differ for different socio-economic groups? Not only are policy-makers, for whom the Assessment is intended, left walking in the dark, but so, it seems, are advocates of the Bill.
Nor is there an estimate of the cost of reduced product range and innovation – both of which it is known from public statements will be curtailed as part of “market conduct” regulation. No market distortion effects are acknowledged or quantified.
Instead a curious comparison is made. Estimated costs are, it is argued, a small proportion of corporate GVA (gross value added). This is no conceivable relevance.
According to the Guidelines “goals, outcomes, standards or targets to be achieved to correct the problem ... should be clearly specified with a clear link to the problem.” Nowhere is this attempted in the SEIA.
Various measures are alluded to, all of which are within existing competencies. No reason is given for believing that the same people will be better at what they do if the name of the origination for which they work changes, or if functions are relocated.
In the absence of clearly stated problems, it would not be possible for the government to assess net benefits even if benefits were clearly articulated and quantified.
SEIAs must describe alternatives considered, and say how they compare. Reasons have to be given for rejecting them. No alternatives are mentioned. It offers policy-makers no choice at all. What it says in essence is that we have dire problems and threats and you have only one option. It happens to be a very costly option, and will hobble financial markets, but, trust us, the problems will vanish as if by magic.
The Study ignores this and creates the illusion that there will be no negative impacts to speak of. There will be direct costs, but no unintended consequences.
The Bill proposes giving the market conduct “peak” far-reaching legislative powers which are either unconstitutional or close to it. For example, this peak is given taxing (levy) powers, implementation and enforcement powers, policing powers, adjudicative powers and so on, all of which appear to violate the most basic rule of law conditions.
Not provision is made for the fact that there must both a monitoring mechanism and monitoring criteria. What will be measured and with what will it be compared to determine if a measure produces “improvements”?
There is no reason suggested why current proposals should not fail for precisely the same reasons as current legislation has failed, to the same extent or worse.
The Assessment is fatally flawed in many ways.
The lesson to be learned from this is that effective ways have to be implemented to ensure that policy-makers get what they need to make sound policy decisions.
