JSE CEO talks transformational initiatives to boost new and re-listings

Apart from a global delisting trend, the rising popularity of private capital, and increasingly stringent regulatory and compliance requirements, South Africa’s economic malaise has exacerbated the challenges facing the exchange.

But JSE Group CEO Dr Leila Fourie says that positive market response to South Africa’s Government of National Unity (GNU) is already bearing fruit and stimulating South Africa’s capital markets. As sentiment improves, you may well see the demand for investment increasing, and therefore demand from companies to raise new capital.

Fourie was speaking at the latest PSG Think Big webinar, a series aimed at promoting open dialogue and stimulating critical conversation on some of the country’s most pressing issues. Fourie spoke with host and award-winning journalist, Alishia Seckam on what the future holds for Africa’s largest stock exchange.

“The GNU is much more business friendly because it’s focused on getting the economy growing across key areas such as electricity, logistics and even areas key for delivery such as visas for skilled professionals,” says Fourie. “This positive sentiment works hand in hand to drive market activity. The Top 40 and the and All Share indices are both up post the formation of the GNU.” Both indices have also outperformed the MSCI Emerging Market Index over the same period.

Fourie says that since the election, we've seen a decline in the outflows in the cash equity market. Bond markets have also been positively impacted. While she concedes that these results are not solely attributable to the formation of the GNU, she believes it’s a key factor.

Fourie emphasises that structural forces and a shifting policy environment have also impacted the groundswell of delistings over the past two decades. She says there is a greater demand for liquidity as pension savings have shifted to more of a defined benefit fund environment, which requires daily pricing. “We’ve seen this play out in capital markets across the world,” says Fourie.

To address this shifting environment, she says the JSE has already taken several steps to futureproof the exchange to ensure a continued compelling case for re- and new listings. Firstly, its segmentation project will split the main board into two segments – prime and general – to separately serve the needs of large and small companies respectively by introducing a level of regulatory innovation to remove complexity and cost where possible.

Additionally, the secondary listings framework has been expanded quite materially over the past couple of months. “We previously had seven exchanges that were on our Fast Track or dual listing process. We’ve since added others including Tadawul in Saudi Arabia, Euronext Amsterdam, Paris, Brussels, Dublin, Milan, Lisbon and Oslo.”

With the shrinking opportunity set often cited as one of the key concerns regarding the JSE, this move aims to widen the universe for local investors to access multinational dual listed companies.

Fourie adds that for retirement investors and savers who are further constrained by Regulation 28 and its requirement for 55% of assets to be onshore, this extensive dual listing environment helps to diversify investments.

While the JSE remains focused on the core trading business Fourie says, “Expanding and diversifying our revenue sources protects us against the cyclicality of the trading environment and offsets our fixed cost base and the volatility of the trading revenue line that that we're facing.” This non-trading business has grown by more than 80% since the Covid pandemic and now accounts for 39.8% of JSE revenue.

In addition, she says the JSE is expanding the scope of investment opportunities. “We are also seeing continued growth in our debt space, particularly relating to sustainability and social and green bonds.”

Looking ahead at the top priorities for the JSE over the next five years, Fourie says that it remains responsive to remaining constituents and ensuring the modernisation and robustness of fundamental systems, including cyber protection. "We have deep liquid capital markets and want to stay relevant. This includes focusing on basic hygiene factors, system resilience and cyber investments," says Fourie. She also highlights the JSE’s transformational initiatives, such as partnering with Amazon Web Services to upgrade their BDA system (broker deal accounting), which aims to reduce costs for market participants.

On government’s role in the JSE’s growth and transformation, she stressed the necessity for execution. "We've already seen green shoots in the number of listings. We need a functioning GNU, policy stability and the execution of our policy promises to unlock South Africa's true economic potential," Fourie concluded.