JSE changes listing requirements

Africa's largest stock exchange, the Johannesburg Stock Exchange (JSE), has recently put forward new listing proposals aimed at encouraging greater listings and boosting confidence amongst investors both locally and internationally. The main proposal seeks to reposition the JSE Main Board into two segments, the Prime and General Segments, to provide smaller companies with more flexibility at a lower cost. These proposals come at a time when the JSE has seen a decline in the number of listed companies, with only 122 companies currently listed compared to 165 back in 2012. To discuss the implications of these proposals, CNBC Africa spoke with David Shapiro, Chief Global Equity Strategist at Sasfin Wealth. Shapiro, a veteran investor, believes that while the JSE's efforts are commendable, the issue of delistings goes beyond regulations and costs. He points out that delistings are a global phenomenon, with many companies opting for private funding instead of listing on stock exchanges. Shapiro emphasizes that the core problem lies in South Africa's stagnant economy, which has hindered the growth and expansion of businesses, ultimately leading to delistings. He stresses the importance of revitalizing economic growth to attract companies to the stock exchange for capital raising purposes, a function the JSE has historically fulfilled. Although the JSE's proposals aim to provide more flexibility to smaller companies in issuing new shares, undertaking corporate actions, and raising capital, Shapiro believes that these measures will have limited impact unless deeper economic issues are addressed. He highlights challenges such as infrastructure constraints, regulatory hurdles, and investor concerns that are deterring companies from seeking capital and expanding their operations in South Africa. Shapiro also discusses the impact of passive investments and ETFs on the JSE, noting that these investment vehicles have shifted focus away from individual stock picking towards index-hugging strategies. This trend has marginalized smaller and medium-sized businesses on the exchange, as passive investments predominantly target larger companies, diminishing the visibility and investment opportunities for smaller enterprises. Addressing the cost element of listing on the JSE, Shapiro suggests that while reducing costs can be beneficial, the primary focus should be on promoting the growth and recognition of smaller businesses. He emphasizes the need to encourage investment in undervalued companies on the exchange, as there are numerous smaller businesses with potential that are currently overlooked by investors. In conclusion, Shapiro asserts that without significant economic growth and a conducive business environment, efforts to curb delistings and attract new listings to the JSE will face limitations. While the JSE's proposals may alleviate some cost burdens for companies, the fundamental issues plaguing South Africa's economy must be addressed to create a more favorable climate for businesses and investors. He calls for a holistic approach that prioritizes economic revitalization and recognition of the untapped potential in smaller businesses to truly rejuvenate the country's stock exchange market.