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FIFI PETERS: The JSE came out with its numbers today [August 2, 2023] for the first half of the year, the six months to June. Profit is up 10% despite the fact that the economy was strained.
We have Leila Fourie, the CEO of the JSE, with us for more on the numbers. Leila, thanks so much for your time. It has been quite an eventful year if we look at what has happened in the past six months – the continuation of the Russia-Ukraine war; in March, we had the allegations around Lady R that made the rand blow out as we’re seeing today; and of course, the fact that South Africa’s economy essentially continues to just limp along.
How has the period under review been for you?
LEILA FOURIE: Fifi, notwithstanding the complexity in the global and local macroeconomic and political environment, we are very pleased to have reported a solid set of financials. Our headline earnings per share were up 12%, and our net profit after tax was up 10%. I’m particularly pleased with the quality of these earnings.
We had a subdued equity market and, despite a 6% contraction in that equity market, we managed to report revenue growth of 5%.
That was really off the back of diversified new business, and we’ve very intentionally grown that diversification of revenue.
FIFI PETERS: Before we talk about that new business – because I can see the strong increase on that side – I want to talk about the old business, because you look at the JSE and one thing that people know the JSE for is attracting new companies on its platform to list and increasing its revenue in that regard.
I was speaking with the CEO of the Botswana Stock Exchange the other day, and he was talking about the fact that the economy was still tough. As a result, what he was finding over at his end is that a lot of companies [have] presented sizeable opportunities for private-equity players, and it has been very attractive for them to buy these companies out, leading to delistings on the [BSE]. I want to talk to you about that against the backdrop of the South African economy. Listings – what are those looking like? And are you worried about delistings right now?
LEILA FOURIE: Fifi, delistings have largely been a function of either consolidation or takeouts, corporate action, and many of those companies still remain on the JSE as part of a broader group.
The other delistings that we’ve seen have largely been in the small and mid-caps. If you have a look at our market cap, that has grown year to date by 11%, indicating that there’s a higher value to trade than was the case last year. And there are a couple of important signals and examples in the market.
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Last year BHP Billiton did a share consolidation – previously listed on the London Stock Exchange, the JSE and the Australian Stock Exchange, they chose to list their consolidated organisation on the ASX, the Australian Stock Exchange, and the JSE in favour of the London Stock Exchange. I think this is a very important signal of the liquidity and the depth of the market in South Africa.
That doesn’t ignore the complex and difficult headwinds that we are facing in the macro environment. And of course listings that are potentially in the pipeline will be waiting for more certainty and for positive macroeconomic sentiment and generally substantiated numbers.
FIFI PETERS: Is that what’s happening? Leila, if we look at maybe your expectations for new listings at the start of the year compared to where things stand right now, are companies putting their debut on the JSE on hold, just waiting for the sun to shine again?
LEILA FOURIE: We are certainly seeing that while there is a growing sort of pipeline in the background, companies are waiting for macroeconomic and political certainty.
But what we have also seen is that response cycles are much tighter. There are quicker reactions, and shifts are even faster, so really I think [these are] big important dynamics relating to inflation and recessionary fears – the US particularly. But the UK and EU will also play an important role in emerging-market investor appetite flows into South Africa.
And then locally, the political uncertainty around any election year is always an important element, and the ability of the country to manage through the power situation is another dynamic that really requires a level of certainty and confidence. So all of these factors work together in a company’s willingness or desire to raise capital.
Fifi, it’s important to note that private equity can tend to be cyclical too, and previously it was much cheaper to raise debt than equity. That’s all changing now.
We do tend to see this pendulum shifting over the economic cycles.
FIFI PETERS: Let’s talk about the new side of the business then, where you reported double-digit growth in your information services business, or the JSE Investor Services platform and the private placement platform, I believe. I know that it’s been a year or two since the JSE started to focus a lot more on helping smaller companies, just connecting with capital and facilitating their growth.
As you talk about the new business lines, Leila, and the plans there, I’d also like to know what is happening with the platform that was focused on smaller to medium businesses.
LEILA FOURIE: Fifi, we have grown our markets through a number of innovative new marketplaces and services.
The first one you mentioned is our private placements market. This is infrastructure that enables; it’s similar to a private equity capital-raise environment, just slightly more standardised. We’ve managed to grow that platform tremendously. We now have 29 companies looking to raise capital on that platform, and we’ve grown the investor capital committed by potential investors from R12 billion at the end of last year to R18 billion today. So we are very delighted and very pleased with the success of that.
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In addition, we’ve introduced other innovative solutions. An exchange global first in our link up which we announced last week with ‘big xyt’ delivers a very unique and bespoke market-trading data tool. So traders are able to track their performance, their liquidity, their market share at certain times in the day or throughout the day in certain stocks. This gives them very important information in their trading strategies. Either they feed that in through algorithms if they trade that way, or they use them to redefine and adjust their trading strategies.
We are also looking into a carbon market, a voluntary carbon market and renewable energy certificates. I think this is an important new solution that we would look to grow into the continent and across Africa. So we are really tackling innovation and growth across a number of very important new market opportunities.
FIFI PETERS: That’s quite interesting – the carbon market that you’re looking at potentially growing. Is that similar to what Zimbabwe is currently doing and what I think Zambia is also looking at potentially starting?
LEILA FOURIE: A number of different countries are looking to start that. What we believe is really important in the carbon market is a network effect. Africa has many carbon sinks, and we’re able to allow our countries to monetise that. In order to effectively monetise it, they need to be priced on a global market. If we collaborate and we work together we will provide and create a much more powerful solution to the rest of the world.
So our vision is really to work with other African countries in building a carbon market.
We’re also looking at creating, for example, carbon futures on the South African market. It’s a multifaceted solution that we’re investigating and we’ll certainly come to market as soon as we’re ready to make any formal announcements.
FIFI PETERS: Leila, in parting, a question on the outlook of South Africa’s economy specifically, which ultimately does have an impact on the JSE to the degree that it influences the decisions of companies to come to markets or not. We are hearing quite a number of CEOs are signatories of a pledge to help the government in key areas – energy, logistics, security – to try and fix the country and grow it more. Your take on that? Are you one of those signatories that have pledged to help fix SA?
LEILA FOURIE: I’m certainly part of that group and pretty much endorse everything that private and public-sector partnerships are seeking to achieve. All of that is underpinned by a work stream on narrative and making sure that South Africa is able to present a balanced view of where the country is at.
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We’ve had great reception from the president and his ministers, and I’ve been really encouraged by the very positive ‘can do’ attitude of the private sector, and the willingness to step in and do what’s required. We think that much needs to be done to harness the public and private sector collaboration in resolving some of these challenges that we’ve been facing.
FIFI PETERS: Leila, we’ll leave it there, ma’am. Thanks so much for your time. Great to catch up as always. Leila Fourie is the CEO of the Johannesburg Stock Exchange.
LEILA FOURIE: Thank you.
