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JSE pushes Africa investment

5 April 2012

As appetite for investment in the continent continues to grow, the JSE is implementing a new Africa strategy, migrating the companies listed on its Africa board to its main board and diversifying the instrument range it offers to African investors.

The JSE said in a statement on Monday that African companies will be allowed to list directly on its main board and AltX smaller cap board from mid-year, as Africa's largest stock exchange moves to position itself as a more attractive proposition for African listings.

Included in its new offering will depository receipts and a broader range of exchange traded funds and debt instruments.

Since its launch in 2009, the JSE's Africa board has managed to attract only two successful listings: Botswana's Wilderness Holdings, an ecotourism company, and Trustco Group Holdings, a Namibian-based microinsurance and microfinance company.

However, the JSE said, it had found that companies wanted to be ranked with their sector peers, something the Africa board did not allow.

'The Africa strategy'

There were other reasons why it felt the time was right for a strategic shift. "First, the October 2011 announcement by National Treasury that companies previously viewed as foreign listings would in future be treated as domestic makes it easier for South Africans to invest in JSE-listed African stocks - that makes capital raising by foreign companies easier," the JSE said.

Second, the JSE had developed good relations with several stock exchanges on the continent. Third, investment flows into the continent's markets and the number of funds focused on the region were increasing as investors searched for high returns in previously unexplored emerging markets.

"All of this means that there is an opportunity for the JSE to work with these exchanges and various development institutions to build capacity on the continent," said Siobhan Cleary, director of strategy and public policy at the JSE. "It also gives the JSE the opportunity to evolve its Africa strategy.

"This has meant looking critically at what issuers - companies, governments and others - from the rest of the continent are looking for, and aligning their needs with the JSE's objectives."

Diversifying the instrument range

Nathan Mintah, chairman of the JSE's Africa advisory committee, said the evolution in the JSE's strategy was "a step in the right direction in the quest to increase capital flows into the rest of Africa".

"Offering issuers and investors the 'whole JSE' market platform for access to instruments across the capital structure in equities, mezzanine, and fixed income, combined with the JSE's liquidity, will clearly benefit all stakeholders and serve as a catalyst for product innovation in areas such as exchange traded products for the rest of Africa."

The JSE is also working at diversifying the instrument range it offers investors from the rest of the continent.

The bourse currently offers four interest rate instruments from the rest of the continent, as well as an African exchange traded product, Cleary said, but would be giving increased focus to listing further debt and quasi-equity products.

Depository receipts

"These will also include depository receipts (DRs), which are traded like shares and offer investors the same economic, corporate and voting rights as holding underlying shares directly."

DRs enable issuers to reach investors located outside their home markets while reducing the risk of cross-border investment. They would provide a way for African companies to raise capital on the JSE without requiring a secondary listing, Cleary said.

"DRs are applicable for African companies regardless of whether they have an existing listing on an African exchange or any other exchange. Freely traded in South African rands, this will allow African companies to market themselves to both South African and international investors."

Previously, the Africa board only catered for main board listings. Smaller and medium-sized companies from the rest of Africa fulfilling AltX criteria will from now on be encouraged to list.

"The JSE's existing African offering includes 12 African companies," said Cleary. "In future, there will be no differentiation (for listing purposes) between African and non-African companies.

"For equities, this will mean that we will list the companies on the main board or AltX as applicable. We will also actively market and profile the African companies that are already listed."

The JSE said it believed that its approach provided a workable solution to the sometimes complex issue of investment on the continent, while also contributing to the development of markets within their own economies.

SAinfo reporter