JSE takes honours in financial World Cup but SA does
September 29, 2010
By Humphrey Borkum, Chairman of JSE
As South Africa is a daily player in
global markets I always look forward to reading the World Economic Forum’s
annual Global Competitiveness Report. This is the real World Cup where South
Africa Inc competes with 138 other countries across a wide range of criteria.
The comparison is not merely against developing countries but against all the
top developed countries in the world.
There was some good news and bad
news in the 2010 report. The good news was primarily in the financial market
development category where I am proud to say that in the regulation of
securities exchanges South Africa (and therefore the JSE) came first; protection
of minority shareholders sixth; the soundness of our banks sixth; financing
through the local equity market and the availability of financial services both
came seventh. Our accountants can also take a bow as they obtained a first for
strength of auditing and reporting standards.
Congratulations are due to
all the main players in the financial services arena in both government and the
private sector. If we maintain our high global standards and hold our line
against the insular, ill-informed and populist rhetoric that swirls around our
body politic, we will help South Africa in its’ quest to enjoy a viable economic
On the bad news front SA slipped nine places overall to 54th
this year. We came 137th for the quality of maths and science education and
138th on the business impact of HIV/Aids.
As laid out in the report, in
order of importance, the five most problematic factors for doing business in SA
are: Inefficient government bureaucracy; Inadequately educated workforce; Crime
and theft; Restrictive labour regulations and Corruption.
This brings me
to the recent public service strike. It was with some disbelief that I witnessed
striking public service workers demonstrating outside the JSE on two occasions
in September. It is the taxes from the 400 well run companies listed on the JSE
that helps pay their salaries while most of their R800 billion Government
Employees Pension Fund is invested on the JSE. What on earth were these people
doing demonstrating against us?
At world economic forums the JSE is one
of South Africa’s great ambassadors. The successful World Cup put us on the
front foot with this endeavour but the nature of the recent strikes, threats to
media freedom, various calls for nationalisation and the dodgy granting of some
mineral rights have put us into a decidedly defensive mode. These actions
provide foreign investors with a good excuse to invest elsewhere in the world.
JSE Limited’s results for the
six months to end June show revenue climbing 14,5% to R623,3m and net profit
after tax increased 13,1% to R207,6m. These positive results were due largely to
increased volumes of trade caused by volatility of local and world markets. The
JSE was again the home for large scale foreign direct investment with foreigners
investing R19.1 billion in South African equities and R36,2 billion in local
bonds. The liquidity on the equities market rose from 48,8% to 53% for the
period. As a predominantly fixed cost business with technology
people comprising the main overheads the JSE expenses increased 13,3% to R293,2
million largely due an increased headcount as a result of the acquisition of the
Bond Exchange of South Africa (BESA).
Six new company listings occurred
during the period – five on the main board (including Wilderness Safaris on the
Africa Board) and one on AltX – compared with four for the same period last
year. This is in line with listings numbers on member exchanges of the World
Federation of Exchanges.
We at JSE Ltd are always looking to diversify
our revenue stream and we now have nine different profit centres with equities
trading (29%), risk management, clearing & settlement (16%) and technology
services (15%) being the main contributors. However, an astute observer may have
picked up that, as a result of our BESA takeover, our interest rate market now
contributes three percent of revenue. Predominantly due to interest rate
differentials our bond market is pumping at the moment with foreign trading in
bonds in August alone being over R12 billion and, for the year to end August,
more than R67 billion has come in – an increase of 450% over the same period in
2009. With our drive towards a centralised, technology driven interest rate
marketplace the JSE is assured of another steadily growing revenue stream.
There has been much debate about
black ownership on the JSE with many divergent numbers bandied about. An
independent research house (Trevor Chandler & Associates) was therefore
commissioned by the JSE to obtain a more accurate picture of black ownership
using actual shareholder data obtained from the share registers of listed
companies. Emerging from this complicated research it would appear that black
South African investors own 18% of the available share capital in the top 100
companies listed on the JSE. These companies represent 85% of the total
capitalisation of the exchange. The methodology and results were verified by
AQRate Verification Services, one of the founding members of the Association of
BEE Verification Agencies. This is the first study of its kind and no doubt the
methodology will be further refined in the future. However we will now be able
to use this research as a benchmark to measure our progress going forward.
The JSE has two main stakeholders –
issuers and investors – and through our Showcase programme we frequently
facilitate meetings between investors and our listed companies. If we are
holding a mining company’s showcase, a week or so prior to the event, we might
hold a mining education showcase for investors. For example, if you are
considering investing in a platinum company, it’s a good idea to know the
difference in potential between the Merensky and UG-2 reefs. The same applies to
all the other sectors.
If you wish to attend one of these showcases
click onto ‘Events’ on the JSE website www.jse.co.za
and become a well
informed member of the JSE investment community.
This article first
appeared in Business Report