Boost for JSE as springboard to Africa

26 October 2011

The National Treasury has announced that local investors will now be able to trade in foreign-domiciled companies listed on the JSE, boosting the status of South Africa’s bourse as a springboard for foreign companies to expand into Africa.

Delivering his Medium-Term Budget Policy Statement in Parliament on Tuesday, Finance Minister Pravin Gordhan announced a relaxing of local listing rules, in terms of which inward-listed companies would be treated as domestic assets rather than as foreign holdings for local investors.

The move will improve South Africa’s position as a financial gateway into Africa.

‘Further boost for reputation of SA’s markets’

Previously, the JSE could not include foreign companies in the exchange’s indices, as local investors weren’t able to buy shares in these companies without restriction.

By limiting the amount of local activity in foreign companies, the old rules limited the JSE’s ability to position itself as an investment destination.

JSE CEO Russell Loubser welcomed Gordhan’s announcement, saying it would provide “a further boost for the reputation of the country’s markets, by enabling the JSE to more aggressively pursue a wider range of investment possibilities.”

The Medium Term Budget Statement said that, while details would be provided by the JSE, prudential institutions would still be required to report their foreign exposures to the regulatory authorities, subject to regulatory criteria.

“This proposal is intended to enhance the ability of the JSE to attract new listings and boost investments into Africa,” the statement said, adding that more work was in progress to modernise South Africa’s foreign direct investment framework.

Facilitating cross-border transactions

Gordhan also announced that steps would also be taken “to simplify procedures and reduce the cost of cross-border money remittances, particularly to neighbouring countries and the rest of Africa.”

The proposals include improving access and competition in cross-border money remittances by removing ownership restrictions on international participation in foreign exchange bureaux.

They also include doing away with the requirement for money remitters to partner with authorised dealers. “Remitters will be regulated as standalone entities, subject to reporting and regulatory requirements,” the Medium Term Budget Statement says.

Added to this, the National Treasury also proposes to amend the cross-border thresholds to reduce red tape, simplify payments mechanisms and eliminate bias between residents and non-residents.

The Reserve Bank is expected to publish details on these proposals as well as those of other administrative reforms.

SAinfo reporter and BuaNews