JSE facing challenges – but it has a plan

The JSE Ltd, the company that runs the Johannesburg Stock Exchange, has seen its market cap decline by R10 billion in five years, with the volume traded on the exchange dropping by over 50%.

Africa’s largest stock exchange has experienced a spate of delistings over the last decade, contributing to the volume traded on the exchange plummeting. 

When coupled with a stagnant economy, the company appears to be in a difficult position with low to no growth in the immediate future. 

The JSE is trading at a nine-year low, with a market capitalisation of R7.9 billion – a far cry from its high of R17.7 billion in 2018. 

Sasfin chief global equity strategist David Shapiro noted in a tweet on Monday that the value traded on the exchange was “worryingly low at R10 billion”.

“Without the Naspers and Prosus buybacks, this would be even lower,” he said.

Shapiro said that this reflects an economy that has ground to a halt, with South Africans having less money to invest in and fewer public companies to invest in. 

Founder of Herenya Capital Advisors Petri Redelinghuys said that the volume and value traded on the JSE have fallen consistently over the last decade. 

A decade ago, the JSE had between R25 billion to R35 billion traded daily on the exchange. Last week, the value traded daily dropped to between R10 billion to R14 billion. 

Over 20 companies delisted from the exchange in 2022 alone. The number of companies listed on the bourse has dropped by more than half over the past 30 years to less than 300. 

The JSE Ltd. earns its revenue from the listing fees of the listed companies and trading fees. The fewer companies on the exchange and the less value traded results in less money for the company. 

The JSE, under CEO Leila Fourie, has embarked on several initiatives to reverse this downward trend. 

The company aims to create new partnerships with exchanges in Southeast Asia, with the JSE hoping to attract new dual listings. 

The JSE recently finalised new requirements and amendments for listed companies to cut red tape and simplify compliance.

It announced that the Financial Sector Conduct Authority had approved amendments to the JSE Listings Requirements in respect of, amongst other things, financial reporting disclosures.

According to law firm Cliffe Dekker Hofmeyr, this project aims to reduce red tape and facilitate a more enabling regulatory environment. 

The amendments to this regulation aim to achieve the following.

• The simplification of the provisions in general.
• The removal of the previous obligation to always prepare an abridged report.
• Limiting the need to prepare an IAS 34 format set of results only if the detailed audited annual financial statements are not available for public consumption electronically.
• Removal of the previous obligation to obtain an auditor’s opinion on interim results published where the previous annual results were published, accompanied by a modified opinion.

The JSE’s new requirements for this obligation come into effect on 17 July 2023.