JSE delistings ‘not good for anyone’

A2X CEO Kevin Brady said he is very concerned about the number of delistings and lower trading volumes seen on the JSE over the past few years, as it could have a severe impact on South Africa’s investment industry. 

The JSE has seen a spate of delistings over the past few years – a trend projected to get worse.

Over 20 companies were 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. 

In 2022, AmaranthCX rang the warning bells for a string of delistings from the JSE.

The company said South Africa had 332 listed companies across the JSE and the three challenger stock exchanges at the beginning of 2022.

AmaranthCX director Paul Miller said that during the first half of 2022, 18 companies were delisted from the JSE and other exchanges.

Fourteen more companies are in the formal process of delisting or are subject to corporate action likely to result in their delisting.

There are also 16 companies suspended from trading or which have not been able to publish their financial results.

AmaranthCX’s research suggested that at least 32 companies, potentially far more, will delist from South African stock exchanges this year. 

Despite this spate of delistings, A2X has grown exponentially since it was launched in 2017.

The exchange has 183 listed securities with a combined market cap of R8.5 trillion.

It has grown its trade value from R657 million in 2017 to just over R75 billion in 2023. 

However, “a shrinking pot is not good for anyone, even if we’re fortunate enough to be growing within the existing pot”, Brady told Daily Investor.

“Delistings are a concern, and obviously, lower trading volumes are a concern.”

“It’s quite scary, actually, if you look at continuous trade for the months of August, September, and October versus the same period last year – it’s down by 20%.”

Brady said this can largely be attributed to the country’s macroeconomic outlook.

He also believes the country lacks innovation and a more forward-looking regulatory regime that would allow industry roleplayers to do more to grow and compete in the market.

However, he said some companies, including A2X, are aware of the problem and taking steps to address it.

One of the things A2X has started looking at, for example, is to inward list companies from 12 approved offshore exchanges, which would bring new products to the market.

The JSE, under CEO Leila Fourie, has also 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 came into effect on 17 July 2023.