An analysis by TimBukOne revealed that the number of companies listed on the Johannesburg Stock Exchange (JSE) dropped to a thirty-year low.
TimBukOne is a South African information and technology company that provides coverage of companies listed on the JSE and other African stock markets.
Its latest analysis showed that the number of JSE-listed companies dropped to below 300 in 2023, the lowest level since 1990.
It is in line with comments from A2X CEO Kevin Brady, who said the JSE would probably continue haemorrhaging listings over the next year.
He said onerous regulatory and funding conditions make it less attractive to raise capital through initial public offerings (IPOs).
“The regulatory requirements to have a primary listing are burdensome from cost to time to compliance departments, particularly for the smaller companies, which are the ones delisting,” he said.
“We have swung the pendulum too far on regulation and investor protection, and we haven’t spent enough time on how we grow this market,” he said.
AmaranthCX director Paul Miller added that South Africa’s poor economic environment, the electricity crisis, and business-unfriendly government policies also inhibit more listings.
Another big problem is structural changes in how savings in South Africa have been managed since the global financial crisis.
Most South African savings are managed by 11 institutions that invest in only the top 100 companies by size and liquidity.
Foreign institutional investors hold another 40% of the local market with the same size and liquidity requirements as the top local institutions.
Many local stockbrokers have also morphed into wealth managers who move retail investors’ money into the local institutions’ funds and model portfolios.
The smaller end of the market gets severely neglected, making it difficult for smaller companies to raise primary capital in the local market.
“Over the last four years, new companies have not been able to list on the JSE and other exchanges to raise money,” Miller said.
“As a consequence, we are not seeing new companies replacing the ones that delisted over time.”
The good news is that the JSE is working to stem the decline in listed companies and remain relevant and competitive.
Part of its plan includes rewriting and repackaging the listing requirements to simplify the application and reduce the volume of listing requirements.
The JSE is reviewing its list of approved exchanges for potential upgrading to accredited exchange status. It has an Asian stock exchange in mind to expand its secondary listing offering.
The JSE is also actively looking at ways to attract new equity listings and increase activity on the exchange.
JSE CEO Leila Fourie said they plan to cut red tape by dropping some requirements related to auditors and simplifying the disclosure requirements of listed companies.
The JSE is also on a drive to promote South Africa as an attractive investment destination for foreign capital with deep and liquid markets.