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 equity | 100% |
Less Cross holdings & Treasury shares | 11% |
Actual capital | 89% |
Less Mandated investments (38% of 89%) | 34% |
Less State held shares | 1% |
Total capital measured | 54% |
Less Foreign operations % of total capital measured
(19%) | 11% |
Total available share capital | 44% |
| |
Black shareholding 8% ÷ Total available
share capital | 18% |
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.
ENDS
Issued on behalf of:
Russell Loubser
CEO
JSE Ltd
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.