RYK VAN NIEKERK: The Johannesburg Stock Exchange today announced results for its financial year to the end of December. This is actually the management company of the JSE, on which we trade so frequently. It manages the 19th largest stock exchange in the world. Yes, the JSE is number 19 on the list. It has a total market cap of around R22 trillion, and that is close to four times South Africa’s GDP. It’s absolutely a massive bourse.
During the financial year, the JSE’s revenue rose by 3% to R2.5 billion. The headline earnings decreased, however, by 6.6% to R726 million. The exchange declared a dividend of R7.54, and a special dividend of R1/share.
Dr Leila Fourie is on the line. She’s the chief executive of the JSE. Leila, thank you so much for joining me. On the face of it, the results seem very, very strong; a profit of R726 million is not to be sneered at. But it seems as if the JSE may be treading a bit of water. Can you maybe start – what are your main revenue streams?
LEILA FOURIE: On our results we are particularly pleased that Ebitda is flat year on year, because it was off a very high base. Last year our Ebitda was plus-19%. In terms of our main revenue lines we charge based largely on value traded for the trading markets, and that’s in the equities, commodities, derivatives, ethics and bond market. We also charge for clearing and settlement based on value traded, and our BDA or back-office environment is based on volume.
Then of course we have augmented revenue streams in the form of data or information services and registry businesses.
RYK VAN NIEKERK: So you make your money from volumes. The more trades you facilitate, the more money you make, and you don’t benefit from the increases in the clients of the JSE.
LEILA FOURIE: We don’t benefit from that directly. But indirectly, of course, our objective is to enable appropriate and credible price formation. To the extent that that leads to upside benefit for our investors, typically you tend to attract more flows, particularly from international investors.
RYK VAN NIEKERK: How did the volumes of transactions perform during the financial year 2021 compared to 2020?
LEILA FOURIE: Our volumes performed particularly well insofar as value traded goes. Year on year we were up 5% on average daily value traded, and this was largely off the back of the second half of the year, where we saw a number of large event-driven drivers.
In terms of volume traded, we were down 11% year on year, but that was off an extremely high base, which last year was up 18%. You must remember that we are comparing our results on a year-on-year basis based on an unprecedented and extreme year of volatility during the Covid crisis in the prior year.
What also contributed to our revenues, Ryk, was the inorganic acquisition of Link Market Services, which is starting to demonstrate the effectiveness of our diversification strategy.
RYK VAN NIEKERK: I spoke to one of the fund managers recently, and he made the remark that there was a big drive by the JSE and several other asset managers to try and list some foreign ETFs on the JSE to make it easier to invest in international exchange-traded funds and maybe even attract some secondary listings on the JSE from international companies. That didn’t seem to get a lot of traction. Is that still a priority?
LEILA FOURIE: Certainly it’s a priority. It’s not the kind of activity that generates a short-term return. So we did sign an MOU with the Singapore Stock Exchange to accept fast-track listings in the structured-product space. What we have been doing is working with policymakers to advocate for capital or exchange control reform, which would allow ETFs with a foreign underlying to be recognised as local in our local fund managers’ portfolios. So there are multiple areas of focus in growing our listings, and those are two of them.
Another really important area is in the sustainability front, because sustainable capital is the fastest-growing capital in the world. We’ve introduced a number of new products, social bonds, green bonds. We are just about to launch transition bonds, which allow companies to raise finance in the debt market for sustainable purposes.
RYK VAN NIEKERK: Talking about delistings, there is a bit of a trend of delistings on the JSE. It’s not unique to the JSE. I think many bourses around the world are seeing a decline in the number of their listings. We even heard this morning that PSG intends to end its listing. Are you worried about the spate of delistings? I think you had 24 last year.
LEILA FOURIE: We have had a high number of listings. If we look at market cap, our market cap since 1993 has grown 40 times. We are doing a lot in that space. We have a cutting red tape initiative. We are looking at a number of regulatory initiatives to increase interest. We’ve launched a private market in the SME and infrastructure space, and we are working with market participants to attract international listings.
If we look at the pipeline, there are a number of very promising potential listings in the public domain. Coca-Cola Bottling Company is estimated to bring about R90 billion; SWIFTNet, which is from Telkom, about R9 billion; Woodside Petroleum looks to bring a very impressive R240 billion; Premier Foods from Brait is looking at around R17.5 billion; and African Bank potentially R9 billion.
So of course there is a pipeline. What is very important is a more stable macroeconomic environment, both globally and locally, because listed entities are hesitant to list in an uncertain environment.
RYK VAN NIEKERK: Leila, thanks so much for your time tonight. That was Dr Leila Fourie, the chief executive of the JSE.