NASTASSIA ARENDSE: On the sidelines of the World Economic Forum, which took place in Durban, I caught up with Donna Nemer, who is the director of capital markets at the Johannesburg Stock Exchange, to get her idea on work that the JSE is doing with other stock exchanges in Africa, and how that’s bringing about greater integration from our continent’s capital markets point of view.
DONNA NEMER: As you probably are aware, we have over the past several years increasingly [built] relationships with the stock exchanges across Africa. We have put in place, with many of them, memorandums of understanding whereby we agreed to collaborate on product development, on cross listings, on sharing skills development challenges and things of that sort.
But we’ve moved a step closer in the past year where we have been working together through an association of stock exchanges of Africa, or ASEA, and with the African Development Bank on an initiative that would encourage integration of our markets through auto-routing. A feasibility study has been done and a memorandum of understanding put in place that would in effect create hub in the north, one in the east, one in the west and one in the south.
The stock exchange of Morocco, the Casablanca Stock Exchange, would be the hub in the north, Kenya on the east coast, and Nigeria for West Africa, and South Africa for Southern Africa. What we are hoping to achieve by that is we are…to have orders to trade on the other exchanges, but those orders would be routed automatically through a centralised system to allow easier trading of shares that are issued on each of these exchanges.
NASTASSIA ARENDSE: Because the theme for this World Economic Forum is Inclusive Growth, where are you seeing opportunities to partner with other stock exchanges to play a great role in facilitating that inclusive growth on the African continent?
DONNA NEMER: I think there is more that we can and should be doing around capital markets development in general. And when I look at these themes about inclusive growth, about poverty alleviation, and about the challenges that face us with the emergence of the Fourth Industrial Revolution, the issue becomes very clear that there is probably no area greater than capital markets that can be used as a tool to address all of those issues.
We’ve talked a lot in the past about the need for financial inclusion in the banking sector, but we also need financial inclusion in the capital markets now to allow individuals to have the opportunity to create wealth. Some of that is already happening in the pension reform that’s happening across the continent, South Africa has a very well developed institutional investor platform, an ecosystem.We are seeing that grow more and more across the continent. So I believe that we as exchanges need to be focused on a few things.
We need to find better ways to mobilise capital for small and medium-sized companies. We’ve done that through our AltX offering. Uganda has done the same, using the same name, AltX, and there are other exchanges that are looking at that. But we believe that we need to go smaller than that and create what we’ve been talking about as perhaps a “township exchange”, where really small companies can come and mobilise capital and where individuals can come and invest their savings to try and create wealth.
Now I recognise that there are risks involved in investing in capital market instruments, so we need to make sure that the products are appropriate, and there is appropriate financial education for these investors and they understand the risk.
But I see a tremendous amount of foreigners going into the lottery every week, and people at the casinos, and they are doing that in the hope that they will have an opportunity to generate some wealth. I believe we need to start thinking of how we can mobilise that kind of capital where people can see that there’s an opportunity to participate in the formal organised economy and create wealth out of it. And the real enabler of doing that is going to be to embrace this Fourth Industrial Revolution where we can leverage technology to make it accessible and to make it affordable.
NASTASSIA ARENDSE: Stock exchanges play an important role in creating those opportunities for ordinary Africans or South Africans to participate in the their economies through investing, whatever kind of investing you are interested in. Let’s talk about the work that the JSE does in facilitating that, so that Africans are able to participate in the stock exchange.
DONNA NEMER: There is a lot work that we are doing across several fronts. I think the first thing that we do is we run formal financial education and financial literacy programmes, and we do that across a lot of constituents. We do investment challenges and schools, we offer bursaries, and we participate in public forums where we offer education about investing in the stock market. So there is a lot we are doing there.
We also have an enterprise development initiative where we are working with black [brokers?] to provide capital funding for them, for them to invest in their business and want to grow their client base. We are working with the greater markets in terms of looking at opportunities to include more investors in retail investing. We were also very instrumental in working with National Treasury and other constituents to implement the tax-free savings accounts that are growing in popularity in South Africa.
I think these are the things that we need to be continuing to do. One of the things that we need to focus on more is to look at what channels we can be creating that will allow investors to invest. I think a lot of individuals say ,“I would like to buy shares, but I don’t know how to do it”. We even have people in Sandton in Johannesburg coming off the street and walking into our reception area with their two or three hundred rand, and saying “I’d like to buy some shares”. We need to find a way to accommodate those savers.
NASTASSIA ARENDSE: That was Donna Nemer, the director of capital markets at the Johannesburg Stock Exchange.