Transnet Is Said to Be Pushed by Futuregrowth to Remove CEO

(Bloomberg) -- Transnet SOC Ltd. was pushed to remove Chief Executive Officer Siyabonga Gama last week by bondholder Futuregrowth Asset Management after the South African rail and ports operator said auditors could not give a fully clean bill of health to its 2018 financial results, according to people familiar with the matter.

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 authorized 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 180 billion rand ($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.

Read More: Eskom Hasn’t Done Enough for Futuregrowth to Buy Its Bonds

“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.

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