The company that runs Africa’s largest stock exchange, JSE Ltd., is looking to expand its role in capital formation outside large, listed entities to include smaller companies through its private placements platform.
This comes as the bourse has struggled to stem the flow of delistings and declining trade volumes.
Head of equities and equity derivatives at the JSE Langa Manqele told Newzroom Afrika that the exchange is working with the New Development Bank (NDB) to channel capital flows to private companies and SMMEs.
The JSE is discussing with the NDB how African exchanges can attract more capital for investment during this week’s BRICS conference in Johannesburg.
“There is a very urgent need to channel capital not only to large enterprises but, in particular, to SMMEs and startups,” Manqele said.
The JSE is looking for growth by expanding its private placements platform to play a larger role in capital formation among small, medium and micro enterprises (SMMEs).
To this end, the company has been running its private placements platform for the last year, which aims to help entrepreneurs and unlisted companies access institutional investors.
The platform focuses exclusively on unlisted companies in any sector looking for investment.
So far, 35 deals have been concluded through the platform. Thirty are active, while five are still being developed.
The JSE is also trying to reduce the risk premium of investing in South African companies by ensuring they are feasible.
It has attempted to do this through a project that focuses on SMME development to ensure smaller companies are ready for investment and have shown an ability to commercialise an idea.
“What investors are telling us, and what was echoed by the NDB, is the need for bankable projects that are commercially viable,” Manqele said.
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.
These efforts come as the JSE suffers from a continued trend of delistings and declining trade volumes.
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 social media post 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 this reflects an economy that has ground to a halt, with South Africans having less money and fewer public companies to invest in.
Founder of Herenya Capital Advisors Petri Redelinghuys said the volume and value traded on the JSE have fallen consistently over the last decade.
A decade ago, the JSE had between R25 billion and R35 billion traded daily on the exchange. Last week, the daily value traded dropped from 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.
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.