What’s behind a company’s choice to delist from the JSE?

A friendlier business environment and the release of spectrum would encourage large companies to invest in SA again: David Shapiro.

NOMPU SIZIBA: JSE-listed African Oxygen, also known as Afrox, which produces and supplies liquified petroleum gas, is to be bought up in its entirety by American-German group, Linde. Linde already owns just over 50% of Afrox’s stock and is now going for the entire balance. It’s offering shareholders R21.18/share, which is a substantial premium on the stock’s 30-day volume-weighted average price of R17.21 as at the middle of October. Once the deal goes through, Linde is set to delist Afrox from both the Johannesburg Stock Exchange and the Namibian Stock Exchange. This is a negative development for the Johannesburg Stock Exchange, with the number of companies listed with them diminishing at an alarming rate.

Well, to discuss what’s significant about this latest development, I’m joined on the line by David Shapiro, the deputy chairman at Sasfin Securities. Thanks very much, David, for joining us. So, if all goes according to plan, Afrox is going to be delisted from the JSE after over half a century of being listed on the JSE. Why is this a big negative for the JSE? And, of course, it won’t be the first company to delist in recent times, will it?

DAVID SHAPIRO: No, we’ve seen a series of smaller businesses delisting, and I can understand it from a management point of view. I think, first of all, Linde is the owner of the businesses – it owns just over 50% – and I don’t think has got any other listed subsidiaries globally. So there might be a reason that they want to do it. I think when you’re a large international company running a listed subsidiary, it does require a huge amount of time, and there are a lot of compliance issues.

But there’s a bigger issue, Nompu, which is that this is a manufacturing business, or closely aligned to manufacturing. And one of the reasons that that we’ve seen the non-performance of this business has been because of where the economy goes. And so many of the large businesses have come back because of the demise of mining.

I was just going through it this morning, and thinking of my history on the JSE.

A lot of mines were almost ecosystems around which you had a lot of industries; and every time you close a shaft, you close a business, even if it is a small engineering business aligned to it or just down the road from a mine shaft – and the people would send equipment there for repairs and so on.

On a broader scale, I think, as mines have closed down, a number of industries that were aligned to them have also come under pressure.

So, as the heavy metal side of our economy has slowed, these kinds of businesses have suffered. We’ve seen Hulamin, also ArcelorMittal, we’ve seen Reunert and businesses like theirs, which are cable, mainly electric cables and so on.

That’s one part of it. And I think another part that we have to understand is that investment has gone. In other words, we are losing the culture where private individuals become involved in individual shares. In other words, where people buying individual [shares], what do they do now? If you go to a financial planner or an advisor, they put you into a unit trust or an ETF.

NOMPU SIZIBA: Tracker funds.

DAVID SHAPIRO: And those tracker funds tend to focus on the top end of the market because they track an index. Those indices are made up of big businesses. So smaller businesses at the bottom end just tend to fall out and become ignored. They don’t get followed by an analyst. And if you’re not followed by an analyst, there is no one to recommend the share. You don’t want to go and do a whole lot of homework. So there are a whole lot of reasons, not unique to the JSE, I think unique to general stock markets. But South Africa has been particularly hard-hit by that.

NOMPU SIZIBA: It said that since the year 2000 there are now about 250 fewer companies listed on the stock exchange. So one of the prospects for the JSE going forward, then, one would think that many companies would want to get listed to access funds to build up their businesses post-Covid, but the costs and the regulations and everything would probably put them off.

DAVID SHAPIRO: You tapped on why we do have a stock exchange. That’s the reason. We don’t have stock exchanges so we are going to do derivative products, because you can’t have a derivative product if you haven’t got an underlying share or an underlying index. So this country was built and owes its historical success to the stock exchange.

The Johannesburg Stock Exchange was opened in 1886. And it really was a market to raise funds, to fund the development of gold mines and associated indices, particularly mines. We have gold mines, platinum mines and coal mines, you name them. We have nickel mines, copper mines – you name it. That was the reason. So you had a market where you could raise equity capital, and we somehow lost it. I’ve lived through a number of periods where huge money is being raised.

I joined after the 1969 boom, which was a massive boom. A number of industrial companies came in 1987, I think in 1995, the time of the World Cup and everything. Small businesses that we didn’t know came to the market. A nice year, but we might’ve seen an end to it. It’s absolutely imperative that we promote that kind of share ownership and get that going.

NOMPU SIZIBA: How are we going to change the culture then, David? Because, like you say, the big institutional investors will only go for your high-ticket stocks and then your small to medium enterprises won’t get the attention that they deserve.


No. It’s something that the stock exchange itself [needs] because it’s their survival that’s at risk.

They can say we are getting enough business from institutions, from high-frequency trading, from derivative trading, and so on, but you can’t do that without small businesses. When we study the JSE, if you look at Discovery, which is a success, it came on as a small business. Today it’s a massive business. I was talking at lunchtime to Sibanye, to Neal Froneman, I was in a webinar with him and I mean, Sibanye started off as a very small business. Today it has a market cap of R160 billion ……. It could never have survived or prospered without the JSE.

If you go through other businesses – I lived alongside Bidvest, which came to the market in 1988 as a company. I don’t think it had a market cap of more than R20 million. When it delisted it was significantly more. Companies like Capitec, these are all businesses that I have seen grow dramatically. They probably grew at a time that was almost pre-ETFs or pre in a product and unit trusts, some things like that. But you need businesses like that, and you need companies to support it.

Their only business of magnitude that has come recently – and I might be getting it wrong – has been Dis-Chem, and that’s a few years ago. We need Dis-Chems every day, every month. it was a big private business that went to the market. But we need a lot more like that to attract individuals to the markets.

NOMPU SIZIBA: How tall a feat is that – what you’re saying that needs to happen? How tall a feat is it, given that there is a lot of anti-South African investment sentiment, and people looking to invest offshore?

DAVID SHAPIRO: I think perhaps the biggest area would be mining. We still have an array, and we still have a huge amount of opportunities in the mining industry. I think that remains it. But I think government needs to change plans, as well, to have a more friendly environment around here that will allow foreign capital to come or even local capital to start developing the mining industry, because once you get a mining industry thriving, you get industries around that, or that develop around it. So we’ve got to get back to something around that.

The other one is spectrum. Once you release spectrum and you start to get IT businesses coming through, application companies coming through, which will start to attract people.

NOMPU SIZIBA: Because we do have a lot of people who are very smart and have come up with great ideas here in South Africa, but then they go offshore and sell them there.

DAVID SHAPIRO: Dead right. Absolutely right, because they feel that there’s more to be done there –  even Prosus. Why did Prosus go to Amsterdam? Because it believes that it will be able to raise money there. There’s more money available for it and there are more opportunities there. So you’ve got to start creating those opportunities here.

I just feel particularly sad – Afrox in the eighties and nineties was one of the top companies. If I’m not mistaken, it was always winning awards. I think it might’ve even won the Business Times Top 100 Companies. I’m trying to think that far back. It certainly was an influential business.

NOMPU SIZIBA: Yes. One of the reasons that they cite for withdrawing, or deciding to delist, is the fact that the stock really was just moving sideways. It wasn’t doing very well at all. And yet I would have thought – given that its underpin is LPG, liquified petroleum gas, which is basically an energy of the future – that people would be interested to invest in it because that area has yet to grow.

DAVID SHAPIRO: You’re 100% right. That is an attraction, but a lot of their products are used for welding and for engineering, for mining, for heavy-metal stuff. We’ve gone backwards in that respect. There’s been no investment in infrastructure here. There’s been no capital invested in the company, or capital projects. So that’s one of the reasons as well.

I started off saying a lot has to do with the direction of the economy that has led to this, or to the non-performance. I mean, you can pick up ArcelorMittal, Nampak, Hulamin. There are some businesses that were big spanky businesses years ago that are just going for a song, simply because of the way things have gone here.

NOMPU SIZIBA: That was David Shapiro, the deputy chairman at Sasfin Securities.



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The JSE is minute in size and situated in a politically unstable socialist / communist country run by corrupt crooks.

How much of your portfolio should be “risked”? Will you ever get the relevant reward?

If it was not for pensions and reg 28 etc. there would much less of the JSE surviving.

The goose is cooked.

In short : Far to many hassles and hurdles , future reward most likely shrinking. Story of the economic destruction of SA by the ANC Commies.
A better loot for some !

David has more experience than most, and it shows!

Twenty years ago small companies could list and even the big institutions had their own analysts that covered virtually every share on the JSE. Granted, some of them did not know the difference between a retailer that sold computers and a software company, treating both as Tech!!

Company boards had to spend a lot of time explaining their business and strategy (and explain to some analysts that deferred revenue is not a debt….). several of those analysts went on to become C-levels in very large fund managers and investment holding companies, which is truly frightening!!!

Nowadays, a significant shareholder in a small to medium company that has no need to raise cash or need listed equity for M&A must have rocks in their head to remain listed. It would probably be easier to raise alternate finance after spending quality time with your core bank.

Good read, notably the last paragraph. Thank you

Well said Johan and what I comment on is tongue in cheek. Your example is perfect for a company that needs the finance to improve their business; not for private shareholders to list and be able to dispose of 1 000’s of shares they received for next to nothing and make a good fortune. The “funds” that buy these shares are nowhere near as demanding or discerning as your core bank so all sorts of puffery can take place in JSE listed companies; bonuses paid and executives walk off with fortunes while the company crashes and burns its shareholders.

Just look through the JSE’s listed construction companies over the last 10 years or so. Which executives walked away poor from the mangled wrecks of their companies? I say none.

Fact is globally, listing is cyclical.
Rationalise your opinion all you want.

There were howls of derision when I tried to warn local investors about the forthcoming slow-moving implosion of the JSE more than seven years ago. I often go back to those comments and the snide and spiteful comments about these warnings. I even had other financial advisors calling me a” financial pornographer, a click baiter trying to attract attention. And those were the nice comments.
Well, 5 years later, and most pure JSE-equity funds have made zero returns while some have lost investors between 10 and 30% over the period. Even a vanilla-type offshore asset swap fund would have returned 15-18% per annum over the same period of time.
Every now and then I read articles on MW where some local fund managers try–out of desperation- to raise some capital from the unsuspecting or gullible public.
Heck, two years ago one of our largest asset managers forecast the JSE to be the best market going forward.
Most pension funds, RA’s and preservation funds are now 20-30% behind inflation over the past 5 -7 years. And there is very little I can see that will change this situation around. It’s partly global economics (commodity cycle) and partly local business-unfriendly practices. Sadly, SA does not generate wealth anymore and investors have been forced to look elsewhere.

Harsh but true.

In my travels I always try meet up with South Africans abroad, having witnessed not only investors pull out of SA but families leave and live an medium income lifestyle elsewhere in the world.

In a recent visit, I met a Saffa who earns the equivalent Rand value of R18,000.00 a month Lifestyle, he saved up and moved his family. They live in a high rise apartment and despite the tough laws of the country they are Safe and can Save a little money every month, i asked if he would ever go back the answer being quite clear as NO, when i ask why he replied he said that that there is no future for his children and no chance of him being able to retire.

This is a the same story I get from every Saffa that i meet up with.

Investors talk with their money, People talk with their feet and Socialists talk with their lies.

One simply has to look at any ranking and you will find SA Inc somewhere near the bottom unfortunately.


Myself and everyone i know with high net worth have moved their assets out of RSA inc .The next to go will be properties .The cANCer cannot organize a square hole in the ground without being corrupt

I did some research on companies delisting a few years ago.

Larger companies delist because they merge with or are acquired by other listed companies (domestic or foreign), or because they are wanting to report their earnings in USD, EUR or GBP
Mid size companies and smaller, promising companies are often acquired by private equity firms looking for investments, or alternatively are merged with other listed companies.
Smaller companies usually delist as they are in breach of requirements or are under liquidation.(quite common, given the economic environment in South Africa)

The acquisition will mean that there is no real reason for Afrox to remain listed in SA. Funding can be acquired elsewhere (Linde is already listed on Xetra and NYSE) and interest rates are very low in Europe/USA.

Last I checked, the JSE was ranked something like 19th in the world by market cap, and 2nd in terms of market cap as a % of GDP. So it is not really that small. The issue is the concentration of most of that market cap in the Top 40, and smaller companies are often ignored.

The real problem here is a low growth environment, untenable labour laws, a regressive education system, and very poor short sighted policy decisions.

Regulation is a tricky one.. You want it to help protect your assets, but the cost of it has increased by far too much and the quality of these services (e.g. audits) has been on the decline for years now.

David makes a tantalising reference to spectrum but leaves us up in the air as to the current state of play and likely future developments. More detail and more clarity, please.

End of comments.



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