Administration of Financial Markets in South Africa 2023

Challenges

Delistings on the JSE, driven partly by a reported increase in listing regulations. Greylisting has affected capital raising. Increasing risk of cyberattacks. Opportunities to cross list African companies are complicated by the requirements of cross border clearing and settlement. Slow economic growth is reducing valuations. The JSE and several exchanges in Africa remain highly concentrated. The JSE has been criticised for the many requirements needed to list on the exchange. Trade volumes on the JSE have fallen dramatically in recent months.

Introduction

The Johannesburg Stock Exchange (JSE), which was ranked the 19th largest exchange by market cap in September 2023, is suffering from declining volumes and a delistings trend. The volume and value of equity trades has come under pressure, while the number of companies listed on the exchange’s main board had declined significantly. South Africa has three alternative exchanges which are rapidly increasing their number of listings, particularly A2X. The country’s stock markets have experienced significant volatility driven by the Russia-Ukraine war, higher interest rates, inflation, fears of a global recession, greylisting, the elections planned for 2024 and loadshedding. Current trends include digitisation and an increase in sustainable financing products. A project aims to link up exchanges across the continent, which could boost intra-African trade.

Opportunities

Digitalisation is helping to lower trading costs. Helping SMEs to list by reducing listing requirements, setting up specific capital raising platforms or running support programmes. Listing of sustainability products and services such as green bonds and voluntary carbon trading markets. Providing non-trading services such as information and data services. The African Exchanges Linkage Project offers the chance for exchanges to facilitate investment across the continent. Tokenisation and crypto currency assets.

Outlook

Returns from South Africa’s financial markets have been affected by the slowing economy, loadshedding, geopolitical and local political challenges and greylisting. The JSE is facing declining trade volumes and an ongoing delisting trend which reduces liquidity. Stockbrokers say these trends are only likely to be arrested when the economy begins growing faster. Despite this, competition from three alternative local exchanges is expected to drive innovation and lower listing requirements at the JSE. The JSE remains Africa’s biggest exchange by market cap by a significant distance.

Report Coverage

This report covers the administration of financial markets in South Africa, including the activities of the stock exchange and other bodies that regulate or supervise the activities of financial markets, including exchanges for commodity futures contracts. It includes information on the major equity, bond and derivatives markets, market cap and equity performance, number of listings, red tape and expenses, finance income, corporate actions, exchanges in the rest of Africa and international exchanges, crypto products and cybersecurity issues. There are profiles of the JSE, by far the largest exchange, and the three other exchanges - A2X, the Cape Town Stock Exchange and Equity Express Securities Exchange.

Trends

A number of exchanges internationally, including the JSE, have experienced increased delistings. Digitisation. Exchanges are investigating trading in digital assets. Exchanges are looking to increase the share of revenue they generate from non-trading fees. Growth in the number of listings on local alternative exchanges, which have relatively affordable and easy listing requirements. Sustainability and increasing demand for sustainability-linked products. The JSE has experienced a significant decline in trading volumes in 2023.