South Africa

JSE’s plan to grow the number of listed companies

The Johannesburg Stock Exchange (JSE) has released a listing review response paper that details its plans to stem the decline in listed companies and remain relevant and competitive.

Over the last few years, the JSE has been hit with a delisting crisis which saw the number of companies listed on the exchange plummet.

AmaranthCX director Paul Miller highlighted that this year alone, 18 companies delisted from the JSE and other exchanges.

The trend is continuing. This week, investors learned that Walmart is set to acquire the rest of Massmart and delist it from the JSE.

In another setback for the bourse, Taylor Maritime Investments made a cash offer for Grindrod Shipping, which could see its delisting.

Other big names which are set to disappear from the JSE include Mediclinic, Distell, PSG, and Royal Bafokeng Platinum.

With at least one in ten listed companies anticipating delisting, it is easy to see why the JSE is taking steps to attract new companies to the bourse.

In May 2022, it issued a consultation paper to obtain public input on proposals regarding its listings framework and engage in its efforts to promote capital market activity.

It has now released the outcomes of the consultation paper in its “Response Paper – JSE Listings Review August 2022”.

The response paper provides a roadmap of prioritised items, including broad-scope timelines.

One of the proposals that did not make the cut was the JSE Technology Board.

Many respondents doubted the success of a technology board without a big increase in retail investors on the JSE and other incentives.

“Based on the outcome of the market segmentation proposal, the JSE will reapply its mind to the technology board proposal at the appropriate time,” the report said.

Proposals and the way forward

The table below provides an overview of the most important proposals to reform the JSE’s listings framework.

“There will be a mix of both immediate and medium to long-term objectives, none of which are less important,” the JSE said.

Some proposals may require further co-creation with market participants through research and broader market engagement.

“To this end, the task of enhancing South Africa’s competitiveness and strengthening its financial markets is seen by the JSE as a continuing journey.”

The Way Forward
Proposal Start Date Description
Market Segmentation Q4 2022 The JSE Main Board would be divided into two segments -a high-cap (Main Board Plus) and mid/low-cap (Main Board), with different listing requirements. It will provide regulatory relief for mid/low cap and growth companies.
DCS Structures Q4 2022 Dual class shares (DCS) allow a shareholder to retain voting control over a company disproportionate to their economic interest in the company. A typical DCS structure involves a company having two classes of shares identical in all respects except for voting rights.
Free Float: New listings Q3 2022

The JSE currently requires Main Board listed companies to have a free float of 20%. The JSE is reconsidering the appropriateness of its free float requirements.

Free Float: Institutional Investors and Free Float Assessment Q3 2022

Holdings of 10% or more in an applicant issuer on listing should qualify for free float, provided the funds used to acquire the interest in the applicant issuer represents those of underlying clients.

Simplification Project: The JSE Listings Requirements Q3 2022

Rewrite and repackage the listings requirements to simplify the application and reduce the volume of the listings requirements.

Auditor Accreditation Q3 2022

Remove the Auditor Accreditation Model, which includes the accreditation of audit firms, IFRS advisers and reporting accountant specialists, based on the Financial Reporting Improvements.

Secondary Listings Framework Review Q4 2022

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 listings offering.

Delisting Process – Secondary Listings 2023

Reconsider the delisting regime for secondary listed companies.

Depositary Receipts and Africa Q1 2023 Investors should be offorded access to Africa listings and beyond through Depositary Receipts on the JSE.