Black South Africans hold at least 23% of the Top 100 companies listed on the Johannesburg Stock Exchange
JOHANNESBURG, 20 February 2015 – As at end 2013, black South Africans hold at least 23% of the Top 100 companies listed on the Johannesburg Stock Exchange. The shares held by black investors includes 10% held directly (largely through BEE schemes) and 13% through mandated investment (mostly through individuals contributing to pension funds, unit trusts and life policies).
White South Africans hold about 22% of the Top 100 companies while foreign investors hold about 39%.
A further 16% of the Top 100 shares which are still to be analysed are likely to include a mix of shareholder demographics, including Black South Africans.
These are the key findings of independent research assessing share economic interest as at 31 December 2013, put together for the JSE by BEE advisory group Alternative Prosperity using data from the JSE, Strate and a large number of investors.
In the previous report published by the researchers, they estimated that black economic interest on the exchange was 21% as at end-2011. This grew to 22% as at end-2012 and 23% a year later. “The shareholder analysis over this period demonstrates that economic transformation is taking place.” says JSE CEO Nicky Newton-King.
The biggest proportion of investment funds of both black and white South Africans is held through mandated investments. Alternative Prosperity estimates that at end-2013 mandated investments accounted for about 37% of total investment into the JSE’s Top 100 companies.
Retirement funds are the biggest South African investors on the stock market, the largest of these being the Government Employee Pension Scheme (GEPF) whose members include most civil servants other than those working for municipalities.
Chairman of Alternative Prosperity and leader of the research team Trevor Chandler estimates that broken down by industry, Financials contribute the most towards BEE economic interest values. The researchers observe that BEE performance tends to do well where industries have significant reliance on sales to government, where BEE plays a role in the granting of business licenses and where sectors have made commitments in terms of sector codes.
Direct investments accounted for about 24% of total South African investment into the Top 100. Of the total 24%, less than a third is owned by individuals with portfolios (or 7% of the total equity capital) made up by black (less than 1% of the Top 100 by value) and white (about 6%).
“Whilst the level of economic interest by black South Africans is linked to our country’s history, the low level of direct participation on the exchange by all South Africans is also linked to generally low financial literacy and related savings,” says Newton-King.
“South Africans are often tentative about investing directly on the market. The financial services industry is working to improve financial literacy; for example the JSE runs directed capital educational programs in schools and universities and to the general public. We are also gearing up to promote the tax free savings accounts for South Africans recently launched by National Treasury, due to kick off in 2015. We believe this will be an important route to encourage more individual saving and investment through the stock market.”
The researchers point out that the value of foreign shareholding over the period increased from 34% in 2011 to 39% in 2013.
Note to editors
Alternative Prosperity – which specializes in Broad-Based Black Economic Empowerment, Responsible Investment and Sustainability – is responsible for the research. Alternative Prosperity Chair Trevor Chandler, the principal consultant on this research project, contributed to the development of the generic Generic code and various sector BEE codes and its CEO, Christiaan Van Der Merwe is a member of DTI’s joint technical committee on the application of BEE law.
For black investors participating through empowerment schemes, a portion of the equity is currently funded through debt. Whilst the precise level of debt is difficult to estimate due to the fact the most BEE consortiums are not public companies, the researchers point out that relative debt levels tend to be lower in periods of strong share price growth. Debt also applies to direct investment only and not to mandated investment.
The Top 100 companies listed on the JSE represent 95% of the total market capitalisation of the biggest 100 listed companies listed on the exchange. It is important to note that the research (and percentages used) related to the date researched by the team – 31 December 2013. With the research now in its fourth year, the researchers are able to be more detailed in their findings than previously. Research was conducted effective 31 December for this first time in 2010.
As yet un-researched: 16% (by value) of the Top 100 companies
The research process is extremely work-intensive and time consuming, including the need to go through thousands of ownership records from Strate and participating schemes which are cross tabulated with other documents to obtain certainty about race profiles of investors. Having started in 2010 by assessing only direct holdings, the researchers have consistently increased the percentage of the Top 100 being assessed each year. A further 16% of the Top 100 shares are still to be analysed; the researchers point out that this might include pockets of black economic interest.
Applying dti Generic Codes of practice (2007) method of calculation to latest research
In the Generic Codes of Practice (2007), the dti describes its method of calculating black economic interest. This approach allows listed companies who own businesses in multiple countries to exclude the value of these foreign business operations but not foreign shareholding from the calculation. Various other portions of the total share capital are also excluded from the calculation. According to the dti method, at end-2013 black South Africans held 39% of issued equity.
The Johannesburg Stock Exchange is based in South Africa where it has operated as a market place for the trading of financial products for 125 years. It connects buyers and sellers in equity, derivative and debt markets. The JSE is one of the top 20 exchanges in the world in terms of market capitalisation and is a member of the World Federation of Exchanges (WFE). The JSE offers a fully electronic, efficient, secure market with world class regulation, trading and clearing systems, settlement assurance and risk management. www.jse.co.za
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