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Financials

UPDATE 1-South African companies urged to invest at home to head off downgrade

(Adds CEO quotes, updates shares)

JOHANNESBURG, Feb 26 (Reuters) - The head of Liberty Holdings, South Africa’s fourth-biggest insurer, urged local companies on Friday to invest at home to help the economy grow faster and stave off a sovereign credit rating downgrade.

Finance Minister Pravin Gordhan has said growth in Africa’s most industrialised country will come in less than 1 percent this year - a pace rating agencies say might put the country’s investment grade rating at risk.

“Corporate South Africa needs to invest more. The way to ride a recession is by investing in the economy,” Thabo Dloti, Chief Eecutive Officer of Liberty said after announcing that the company had posted a slight increase in annual profit.

South African companies, which according to the central bank are sitting on nearly 700 billion rand ($45 billion) in cash, are increasingly deploying their spare cash abroad.

Investment house Brait spent a total of $2.2 billion to buy two British companies - gym group Virgin Active in April and budget clothes retailer New Look in May.

Truworths International agreed to buy a majority stake in British shoe chain Office Retail Group for $385 million in November.

Liberty reported a 4 percent increase in annual profit, driven by growth in its corporate division and investment arm.

Liberty, a unit of South African lender Standard Bank, said normalised headline earnings per share inched up to 1,464.5 cents in the year to end-December, from 1,403.36 cents the previous year.

Normalised headline earnings, which exclude certain one-time items and take into account the impact of its black shareholder scheme, is Liberty’s main performance measure.

The Treasury has said a credit downgrade to sub-investment grade, or “junk” status, could trigger a sharp reversal of capital flows and precipitate recession.

Ratings agencies have said they might cut South African debt to junk status after President Jacob Zuma changed finance ministers twice in less than a week in December, raising questions about Pretoria’s commitment to prudent fiscal policy.

$1 = 15.6985 rand Reporting by Thekiso Anthony Lefifi; Editing by Mark Heinrich

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