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JSE interims: elevated volatility and pandemic results in lower revenue

‘The All-Share index is up over 16% year to date, so we’ve seen tremendous growth’: CEO Leila Fourie.

FIFI PETERS: Well, for most of us the markets have felt extremely volatile this year. Results from the JSE show that market swings haven’t been as bad as they were at the onset of the pandemic in 2020. This has, however, led to a drop in revenues for Africa’s largest exchange, with its first-half profits also falling.

Read: JSE interim results to June 30, 2021

JSE CEO Dr Leila Fourie joins the show to review the numbers. Leila, thanks so much for your time. It doesn’t feel like there was reduced volatility this year with the swings that we’ve continued to see. From hitting records, the JSE (has been) dialling back on those gains, but your numbers don’t lie and your numbers are down. So does this mean that the boost that the pandemic gave to you last year is largely out of the system?

LEILA FOURIE: Fifi look, the JSE All Share index is up over 16% year to date, so we’ve seen tremendous growth and we certainly have seen volatility. But when we compare this to last year this time, that volatility was of an order of magnitude unprecedented.

Although our market revenues are down by 8% in the equity market – and that’s a reflection of the market value because we are very correlated with the market value – when we compare ourselves to 2019, we’re up 15% on both trading volumes and values. So if you were tightening your seat belt this year, you were correct because we are volatile. It’s all a game of relativity. We’re just not quite at the edge of the extreme, as we were last year this time.

FIFI PETERS: Yes. It has been nauseating at times, even with that seat belt on, Leila. But just in terms of the way forward now and what your rate of profit growth looks like and where the growth comes from, can you fill us in on that detail?

LEILA FOURIE: Well, the JSE has very strong cash conversion, and that is inherent in the strength of the business. We have a healthy balance sheet which is reflective of how resilient the business is, particularly through a crisis.

So we are building a platform for growth and, despite everything that’s going on, we are very clear about the transformation that we need in the organisation. We are moving forward with our revenue diversification, and also understanding how the organisation is going to look.

So we invested R200 million year to date in growth initiatives; R43 million of that was in capex.

We invested R74 million in Globacap, which is a London-based fintech invested in a distributed ledger technology. And we invested R75 million buying out minorities in the Link Market Services business that we bought last year. In addition, we also acquired the Investec Share Plan Services. So we are focused on growth areas.

Sustainability is another one, and we have a very targeted and very specific plan to grow the business.

FIFI PETERS: What we have seen lately is a number of big deals being announced – Imperial’s pending buyout by DP World, and Standard Bank’s buyout of Liberty, among other things. But what will result if these deals cross the finish line is the targeted companies being de-listed from the JSE. Is this potentially another revenue drain for you in future and, if so, what are your plans to plug the gaps?

LEILA FOURIE: Well if you look at our market cap, [it] has consistently grown over the years and the purpose of the exchange ultimately is to create an opportunity for capital formation, and then to grow investors savings.

All of these deals that you’ve mentioned are going to unlock shareholder value, so shareholders will certainly walk away a lot more enriched and prosperous than they were when they first invested.

Once that happens, we look for new companies – and South Africa is an important growth node. We’re an entrepreneurial business. De Beers has come and gone, yet the exchange continued to grow. We had a number of companies moving their domicile – the ‘London Five’ (Anglo American, BHP Billiton, SABMiller, Old Mutual and Investec) in the sort of late nineties and early two thousands. And yet the exchange continues to grow.

So we certainly can and will see companies being taken out. South Africa is undervalued relative to its NAV, and there is a bit of a country overhang. However, the policy certainty and the growth initiatives that are being put forward by government – most recently around state-owned enterprises and corruption and energy transformation – do create a lot more certainty and they improve the business confidence. And so that will create an attractiveness factor that will crowd in more companies wanting to list.

We’re also looking at launching a private marketplace which will be designed for the SME and the infrastructure markets. Those are very important growth nodes for our country and very important capital-formation growth nodes.

FIFI PETERS: It sounds like it’s a new venture, taking on the newly established stock exchanges head-on. Is this a direct competitor?

LEILA FOURIE: Our SME initiative is very much of a national agenda initiative, and we will look to collaborate and work with any parties that are in market. We see ourselves as a distribution network. We’ve also got very, very long and well-established credentials in overseeing markets, in providing resilient and secure and safe marketplaces, and we really just want to leverage that and we would be very happy to work with all parties. And yes, it is a competitive and growing space and competition is a good thing because it creates growth and innovation.

FIFI PETERS: Okay. Leila, thank you so much. We’ll leave it there. I think we will speak a lot more about that SME initiative and the uptake that it receives. But we’ll leave it there. Thanks so much for your time this evening. That’s JSE CEO, Dr Leila Fourie.

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Your predecessor left you with an overstaffed company and not only that, too many were / are overpaid, misplaced & have no possibility of adding any value. The result is that you have a giant bureaucracy on your hands that has now become an impediment to any progress.

All these wonderful things you want to do is nothing but a dream and you will never implement or achieve anything with what you have got. In addition, your payroll is ridiculous relative to your revenue stream.

It is time to cut out all this media stuff and do the unpleasant stuff – you need to get rid of the underperformers & replace them with people with the appropriate experience & knowledge.

I recently had interaction with some of the JSE designates. Very few of these representatives came across as to be representing a dynamic business environment. In my opinion those in specific, did not reflect and is not supporting the dynamics of the Group CEO? The JSE could be of great gain in having focussed startegy and in support of developing SA?

Long term, the JSE is as dead as a dead thing.


You keep skirting the fundamental problem that the JSE (and SA) is confronted with and that being Government policies are throttling the economy and ultimately the potential for listings on the JSE.

Who in their right mind will invest in SA / on the JSE when confronted by BEE, Labour Laws (and the resultant labour attitude & behaviour), corruption …… and so it goes on.

You are in a position of influence so show some gumption TELL the Government (publicly) what their policies are doing to the economy & ultimately the impact on the JSE.

I so agree with you here, Jomba.

I add that the general environment for business in SA has become punitive- it discourages the very innovation and flexibility/ agility that are required for entrepreneurs and enterprises to incubate and blossom.

We seem to celebrate the sloppy and slack and frown upon the well run and slick.

This insecure, insular, corrupted punitive model needs a complete overhaul.

Incentivise and reward innovation and development initiatives from whatever quarter(s) they emerge and celebrate when they do.

Administer the mundane in an efficient manner.

So much more enthusiasm and integrity needed from those bestowed with the secure day to day admin/ government jobs than we have seen.

I find Leila’s remarks over the numerous delistings this past year naive with a touch of shallow profanity to sting the wound.

Companies not mentioned- like Afrox and (proposed) Bell being bought out at values that may be nominally higher than their listing prices (ages and ages ago) is besides the point.

These shares have, 2 or 3 years prior to this one, traded at nearly double the values.

Insiders, owners and cartels are being given the opportunity to buy entities at prices way below their NAV’s, thanks essentially to non-market related effects of this ongoing COVID event.

This is clearly at the expense of long-term investors who have stayed with the companies through thick and thin hoping to build up value. The JSE should put a harness on these shenanigans and stick up for qualitative investors a lot more.

At least until market conditions begin showing a return to something approximating “Normal”.

The family jewels are being looted as we speak!

End of comments.





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