JOHANNESBURG – A consolidated view of the TOP 100 companies on the JSE as of December 31 reveals black south Africans hold at least 21% ownership. Of this, 9% is held directly, mostly through empowerment stakes and 12% through mandated investments such as pension funds, life insurance, unit trusts and exchange traded funds.
This is according to the third study on black ownership on the JSE, commissioned by the stock exchange and compiled by Chandler & Associates. The study examined data from 15m share ownership records. The Top 100 companies listed on the JSE were used as a proxy for the total market, as they make up 88% of the total market capitalisation.
In terms of the consolidated view:
34% was foreign (2011 36%)
22% was domestic non BEE (10%)
21% was domestic unmeasured (33%)
21% was domestic BEE (19%)
2% was SA government (2%)
Research team head Trevor Chandler clarified that there can’t be a strict comparison with last year’s data as the research was done incrementally – there was just more data researched this year and as such there’s been an increase in ownership.
He believes that a large part of the unmeasured portion is likely to be held by black South Africans, which means this 21% figure is understated. It’s also conservative as black economic interest was assumed to be zero in the records assessed, where it couldn’t be proved that pension schemes had black beneficiaries or that black people had life insurance policies or unit trusts.
He clarified that ‘non-BEE’ refers to all those who don’t qualify under BEE, rather than just whites.
Who owns the top 100 (adjusting for duplicated capital)?
- 40% local mandated (institutional investors: ie pension funds, life insurance, unit trusts, bank deposit-holder funds, medical schemes, various other collective structures)
- 34% foreign investors
- 24% local direct investors
- 2% SA government
He qualifies that the 2% government ownership, doesn’t include the largest single investor -the government pension fund – which is included in the 40% local mandated (instructional investors).
Of the mandated investors (the 40%):
- 46% were non BEE
- 29% were BEE
- 25% were unmeasured. He explains that it’s logistically difficult to get to all 3 000 registered pension funds in SA and a multitude of small investment schemes. As such the biggest ones were analysed first and a 80/20 principle applied to review the market as a whole. Anecdotal evidence suggests it’s fairly similar in demographic to the 75% measured.
An interesting finding was that black participants in pension schemes are typically younger than whites.
Also, the longer people are employed the more value they accumulate in pensions, life insurance and unit trusts. He reckons that black participants in these schemes are generally younger when they start these policies than their white counterparts; as such they are likely to accumulate more value as opposed to whites.
Of the 24% direct investors (domestic, BEE consortia, 171 000 individuals that invest):
- 47% were unmeasured
- 37% were BEE
- 16% were non BEE
Overall, these 171 000 individual investors own under 4% of the market. Of these individuals, 44 000 black individual investors were identified.
Explaining the 47% unmeasured, he said the financial system isn’t structured to keep demographic records. “Lots of private investment schemes are private by nature and don’t disclose who their shareholders are.” However, he says anecdotal evidence suggests that at face value the majority of the 47% is likely to be non-black.
When the team applied the Department of Trade & Industry’s suggested methodology in the BEE codes (where certain categories of ownership are excluded such as foreign ops and government, as investors are deemed neither black nor white), the ownership levels and therefore voting rights rise to 33% by value.
Rather, a “formal methodology” developed by a qualified team of experts in this area” was used. The research methodology was reviews by BEE verification agencies Aqrate and Empowerlogic and an external audit firm. This is reportedly the only study to have its methodology verified.
He added that this research provides a solid baseline for future measurement.
Who pays, and benefits?
Chandler says that the average pension scheme holder is subsidising (the majority of) BEE transactions and whereas before “the usual suspects” benefitted, it’s now more broad-based with communities benefitting and staff involvement increasing in BEE transactions.
As the data shows, foreign investor ownership declined from 36 to 34% from December 2010/11 and this is thought to have continued into 2012. Foreigners were effective net sellers in the market over the last year in the study. This is reportedly a common consequence of volatility and shows risk-aversion behaviour as a result of the global financial crisis, where investors move to more developed jurisdictions.
JSE head of investor relations Michelle Joubert said it might also be a result of an asset class shift. She told Moneyweb that this was a global trend rather than aimed at South Africa. She said it was evident on the JSE that foreign investors were moving from equity into bonds – a less risky asset class.