JSE Presents Findings on Black Ownership on the JSE

September 02, 2010


JOHANNESBURG, 1 SEPTEMBER 2010 – Today 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 capitlisation of SA traded equity100% 
Less Cross holdings & Treasury shares11%
Actual capital89%
Less Mandated investments (38% of 89%)34%
Less State held shares1%
Total capital measured54%
Less Foreign operations % of total capital measured (19%)11%
Total available share capital44%
Black shareholding 8% ÷ Total available share capital18%

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.

Issued on behalf of:

Russell Loubser
Tel: 011 520 7001

For media enquiries please contact:

Victoria Williams Roz Thomas
Tel: 011 463 2198 or Tel: 011 463 2198
Cell: 072 452 1772 Cell: 082 925 8806
Email: victoria@corpcom.co.za  Email: rozt@corpcom.co.za  

About JSE Limited
As South Africa’s only full service securities exchange, the JSE connects buyers and sellers in four different financial markets, namely equities, equity derivatives, commodity derivatives and interest rate products. The JSE Ltd offers the investor a truly first world trading environment, with world class technology, surveillance and settlement in an emerging market context. It is amongst the top 20 largest equities exchanges in terms of market capitalisation in the world. For further information, please visit www.jse.co.za

About Trevor Chandler & Associates (TC&A)
TC&A is a network of professional consultants that specialise in BBBEE and sustainability. TC&A’s founder Trevor Chandler is currently a member of the Financial Sector Charter Council Board and also led a financial sector task group that contributed to the development of the generic DTI Codes BEE ownership provisions. TC&A holds a minority interest in Alternative Prosperity which is a leading provider of solutions in the Socio Economic development sphere. For further information, please visit www.tca-empowerment.co.za 

About AQRate Verification Services
AQRate is one of the foremost verification agencies in the country, having extensive experience in the verification of listed companies and in particular the ownership structures of these entities. AQRate has a proud history in the industry, having been one of the founding members of the Association of BEE Verification Agencies (ABVA), and comprising two of the first group of eleven accredited agencies in February 2009. Currently it is the only verification agency in the country that is accredited nationally with separate accredited offices in Gauteng, Western Cape and Kwa-zulu Natal. AQRate is regularly consulted by other verification agencies and consultants on complex ownership structures. Its CEO, Chris van Wyk, is currently the chairperson of ABVA and also in charge of the technical portfolio of ABVA.

Glossary of terms

Department of Trade and Industry (DTI) Codes of Good Practice: The BEE Codes of Good Practice are gazetted under section 9(1) of the broad based black empowerment act and are applied in the development, evaluation and monitoring of BEE charters, initiatives, transactions and other BEE implementation mechanisms. The Codes contains detailed guidance on how to measure black economic interest. While this code has generic application to all sectors of the economy, the JSE takes no view as to what code or measurement mechanism should be applied to specific sectors.

Mandated investments: Any investments made by or through any third party regulated by legislation on behalf of the actual owner of the funds pursuant of a mandate given by the owner to the third party. Mandated investments would include domestic ownership by pension funds, collective investment schemes, insurance company policyholder funds, medical schemes and other forms of mandated investment as defined in the dti Code of Practice. Example: GEPF Pension fund

Foreign operations: Those parts of the business of a company that are not conducted in South Africa. Example: the Australian operations of BHP Billiton.

Investments held by state: Investments that are beneficially owned by the government.

Treasury shares: Shares that a company holds in itself.