JSE presents findings on black ownership on the JSE

01 September 2010 JSE

The Johannesburg Stock Exchange (JSE) released its first findings on the ownership composition of companies listed on the JSE. According to the independent study, black South African investors currently own 18% of the available share capital in the top 100 companies listed on the exchange. The available capital has been calculated according to requirements as set out by the Department of Trade and Industry (dti).

The analysis was prompted by the extensive debate which has for some time taken place about black ownership on the JSE, which is seen as a good indicator of South Africa’s economic progress and transformation. “There has been much debate about black ownership on the JSE. Various and quite divergent numbers have been mentioned. With the JSE’s unparalleled access to share data, we wanted to enrich the debate through presenting the facts in an impartial manner,” comments Russell Loubser, CEO of the JSE.

The JSE commissioned the research, the first of its kind in South Africa, with the aim of determining and presenting accurate percentages. The analysis - which took five months to complete - was conducted by independent research house Trevor Chandler & Associates using actual shareholder data obtained from the share registers of listed companies. The methodology and the results were verified by AQRate Verification Services. “We believe this to be a comprehensive study based on a rigorous and transparent methodology,” says Loubser.

Loubser explains that the JSE’s top 100 companies by market capitalisation were taken as the study universe. This represents 85% of the total market capitalisation of the exchange.

The methodology selected for the study has its foundations in South African regulation. “It made sense for the JSE to select a methodology that has roots in law and is widely used, instead of developing an alternative method,” adds Loubser. The requirements in the dti’s Code of Good Practice were used as the basis for the study. These requirements are used to determine BEE ownership levels in companies.

The dti Code requires a company’s BEE economic interest to be calculated by taking the total share capital and excluding mandated investments (such as pension funds), investments held by the State, treasury shares (which a company owns in itself) and foreign operations (that is, operations owned by the company outside of South Africa). In addition, cross holdings between entities listed in the top 100 were identified and removed where necessary, to eliminate the capital that is effectively duplicated on the exchange.

Taking account of these exclusions in each top 100 company, the pool of available share capital available for investment equates to 44% of the total market capitalisation. Of this available pool, the study found that 18% is owned by black shareholders.

Total market capitalisation of SA traded equity


Less Cross holdings & Treasury shares


Actual capital


Less Mandated investments (38% of 89%)


Less State held shares


Total capital measured


Less Foreign operations % of total capital measured (19%)


Total available share capital


Black shareholding 8% ÷ Total available share capital


Note: numbers have been rounded

As per the dti Code, foreign ownership (JSE-listed shares owned by foreign investors) was included in the study. If you take this calculation one step further by removing foreign ownership, which by definition excludes all South Africans, the JSE estimates that 36% of available share capital is held by black shareholders.

Due to BEE shareholding requirements in companies, it is possible to determine what ownership in listed companies is held by black shareholders; it is however more difficult to determine what portion is held by white investors. “It is important to note that this is a complex matter – it is not a simple case of separating the black from the white investors,” adds Loubser “We also don’t have accurate figures on retail investors as race segmentation is not a requirement when opening a brokerage account.” Therefore, it is not true to say that the remainder is held solely by white investors.

The percentages evidenced through the study include only persons who are, with current data, able to be established to be black and exclude black economic interests in mandated investments. It is therefore likely that further analysis will indicate more extensive black shareholding of companies listed on the JSE.

“The JSE plays a part in encouraging all South Africans, including black investors to invest on the exchange. This study indicates that there is a good basis from which to grow black ownership specifically,” says Loubser. For a number of years the JSE has run a number of initiatives to improve financial literacy and encourage South Africans to invest on the JSE.

This is the first study of its kind that the JSE has undertaken into ownership. “While we believe this to be a comprehensive study based on a rigorous and transparent methodology, we acknowledge that further work has to be undertaken to refine these figures, which we believe are conservative. “We are open to suggestions from individuals or companies that have relevant data or insights in order refine our methodology,” adds Loubser.

Loubser says the JSE will conduct further research with the aim of playing a constructive role in furthering the ownership debate. The focus will be on gaining a better understanding of ownership in mandated investment vehicles and in the retail investor sector. This comes at a critical time in South Africa’s history as the existing BEE codes come up for review.

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