30 January 2009
South Africa’s JSE Limited will in February launch the Africa Board, a new trading segment on the exchange’s main board featuring top companies from across the continent, in a bid to increase interest and investment in African companies.
According to the stock exchange, the decision came about after it was continually approached by foreign investors looking for ways to diversify their portfolios; the Africa Board was conceived as offering the best value.
“Only companies classified as African by the South African Reserve Bank will list of the board, and a company is African if it is domiciled in Africa,” the JSE’s Maureen Dlamini told BuaNews this week.
“If a company is based outside Africa, but the majority of its activities are geographically located in Africa, then it [also] qualifies as an African company.”
She added that an African company already listen on an exchange in its home country could still apply for a listing on the JSE’s Africa Board.
Qualifying criteria for companies wishing to list on the Africa Board include being accredited by the World Federation of Exchanges, as well as having subscribed capital of at least R500-million.
Foreign clients, including investors from within Africa, are able to trade on the Africa Board through local brokers, or alternatively through JSE member brokers, Dlamini said.
For ‘Africans to invest in Africa’
Dlamini said the establishment of the Africa Board was not primarily done to coax investors back to Africa, as 40% of the JSE already consisted of foreign investors.
Rather, the board was established to give Africans the chance to invest in profitable African companies, allowing “Africans to invest in Africa”.
Pension is a massive industry in South Africa and Africa, and the Africa Board gives pensioners and those with a bit of money behind them the chance to invest in Africa’s top companies.
Benefits for listed companies
While emerging markets have traditionally been seen as riskier than developed markets for investors, the stock performance and market value changes between the two markets reveal quite a different story, Dlamini believes.
The benefits to African companies listed on the board include increased trading hours and greater exposure, increased liquidity, improved product offerings, strategic positioning for the rest of Africa, and favourable listing requirements, fees and obligations.
There are currently nine companies on the JSE which qualify to move onto the Africa Board, and as of 19 February, the Africa Board already has one listed company from Africa on the exchange.