THE Johannesburg Stock Exchange (JSE) is currently the largest stock exchange in Africa and one of the oldest on the continent. Since its establishment in 1887, the JSE has played a critical role in capital formation, investment facilitation, and economic development.
It also serves as a key platform for both domestic and international investors seeking exposure to South African equities and bonds, and is renowned for its stringent regulatory framework.
Now, however, there is a different picture emerging and not all of it is looking rosy.
Exodus
In recent years, the JSE has witnessed a concerning trend of companies delisting or considering delisting from the exchange.
For instance, in 2023, 23 companies exited the exchange. But what made 2023 stand out was the lack of new equity listings on the JSE, with one commentator noting this was the worst year for listings since the founding of the exchange.
The JSE is shrinking. We are only at the start of 2024, yet there are signs that this diminishing will accelerate, with further delistings. The shareholders of one of the country’s first black-owned and black-managed firms – African Equity Empowerment Investments (AEEI) - last week voted overwhelmingly (to the tune of 96.3%) in favour of delisting.
What is beginning to look like a mass exodus now raises questions about the exchange’s overall attractiveness as a listing destination and its ability to retain diverse businesses.
As more companies delist or opt for alternative listing venues, the JSE's market capitalisation and liquidity will decline, affecting investor confidence and market stability. A shrinking pool of listed companies could also limit investment options for domestic and international investors, potentially constraining capital formation and economic development.
Should it not, therefore, be examining its options?
Economic transformation
AEEI's presence on the JSE represented a ground-breaking milestone in South Africa's journey towards economic transformation and empowerment post-apartheid when it listed in 1999.
As a black-owned, controlled and black-managed company, AEEI advocated policies and initiatives aimed at promoting economic transformation and empowerment in South Africa.
Its presence on the JSE challenged prevailing norms within South Africa's corporate landscape, where white-owned and managed companies had historically dominated.
The company was much lauded (locally and internationally) for its efforts and was also awarded for its prowess in business performance and reporting.
When it listed, AEEI started off with assets of only R250 000, which is grew to a market cap of more than R4 billion at one point, making it one of the most successful and attractive investment opportunities on the bourse.
Today, it sits at R1.3bn, post an unbundling and disposal of some of its assets, and the JSE will be all the poorer for losing it.
So, why is AEEI going?
AEEI, like it’s listed counterparts, Premier Fishing and Brands (Premier Fishing) and Ayo Technology Solutions (AYO) are major assets of the Sekunjalo Group, under the control of former Struggle stalwart Dr Iqbal Survé.
All three, along with their underlying subsidiaries, have become the victims of systemic economic sabotage.
Premier Fishing has already left and now AEEI is joining it.
These proud symbols of democratic freedom, and their departure from the exchange, mark more than just a corporate decision; they signify a symbolic loss with far-reaching implications for South Africa's economic transformation and the representation of black businesses within its capital markets.
For black businesses, AEEI's exit may also be perceived as a setback, casting doubt on the sustainability of black-owned enterprises within the mainstream economy. It raises concerns about the challenges faced by black entrepreneurs in accessing capital, navigating regulatory frameworks, and competing on a level playing field with established incumbents.
That this is still happening more than 30 years after the advent of democracy is intolerable.
The JSE, a relic of the past?
AEEI’s impending departure also raises questions about the pace and trajectory of transformation within the corporate sector, particularly in terms of ownership and management diversity. The loss of a pioneering black-owned company from the JSE underlines the persistence of structural barriers and systemic inequalities that continue to hinder the full realisation of South Africa's economic potential.
Its delisting symbolises a loss of progress and is a reminder of the ongoing challenges facing black businesses and economic transformation in South Africa. Addressing these challenges requires concerted efforts from policymakers, regulators, and market participants to create an enabling environment that fosters diversity, inclusion, and opportunity for all stakeholders in South Africa's economy.
Not their economic exclusion
While economic challenges and uncertainty have been a primary driver behind most companies' decisions to leave as the country grapples with sluggish growth, high unemployment, and persistent structural issues, regulatory burdens and compliance costs have also been keen drivers of pushing companies away from the JSE.
Although essential for ensuring market integrity and investor protection, an overly burdensome regulatory environment can stifle innovation and hamper business growth.
Moreover, a shift in the investment landscape has influenced companies’ listing decisions. Globalisation and technological advancements have made it easier for companies to access capital markets beyond South Africa’s borders. Many companies are also exploring alternative listing destinations, such as international stock exchanges or private markets, where they perceive greater flexibility and opportunities for growth.
Most worryingly, the departure of companies from the JSE has broader implications for the South African economy, as a weakened JSE could undermine efforts to address unemployment, inequality, and poverty.
Fostering a conducive environment for business growth and investment is paramount to unlocking South Africa’s full economic potential and sustainable development. Therefore, the departure of notable companies, such as AEEI, one of the first black-owned and black-managed companies to list on the JSE, due to several factors, not least of all its deteriorating relationship with an overbearing regulator, underscores the challenges facing the exchange.
It should sound a wake-up call.
Adri Senekal de Wet, Editor-in-Chief Independent Media
BUSINESS REPORT