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Motsepe’s ARC takes stake in prospective JSE competitor

Secures 20% of aspirant exchange A2X.

Following shortly on the news that African Rainbow Capital (ARC) is planning to list an investment holding company later this year, the company founded by billionaire Patrice Motsepe announced that it has concluded a deal with aspirant new stock exchange A2X.

ARC has taken an initial 20% in A2X, with an option to increase its holding to 25% once A2X has secured its exchange licence.

“We see tremendous potential in this opportunity and we are proud to be able to bring broad-based black controlled capital to an initiative that will fundamentally bring effective competition in an industry traditionally dominated by one player,” Motsepe said in a statement. “Ultimately, competition drives market efficiencies and this benefits all users, including individual investors and pensioners.”

A2X’s model is to offer a second market for trading shares that have a primary listing on another exchange. In other words, it will look to attract issuers that are primarily already listed on the JSE and aim to compete on cost and efficiency.

A2X’s CEO, Kevin Brady, said that the deal with ARC gives them the backing of a significant and credible BEE partner that will help take the company forward. But it also gives it access to a team of notable individuals, including the former CEO of Sanlam, Johan van Zyl and former CEO of Sanlam Investments, Johan van der Merwe, who are co-CEOs of ARC.

“Having access to such a wealth of experience and contacts can only help us to develop the exchange,” Brady told Moneyweb. “We can really utilise the experience in the ARC team to help us build this business. We’ve always wanted to do the right empowerment deal and we’ve been lucky to find such partners.”

Van der Merwe was also enthusiastic about the potential of the deal.

“With ARC’s industry relationships, this investment will help unlock significant opportunities for A2X,” he said. “We are excited to play a role in building an alternative stock exchange in South Africa with strong BEE credentials.”

ARC is the first outside shareholder to take a stake in A2X, which gives it meaningful influence.

Brady added that A2X remains positive that it could be operating before the end of 2017.

“We are optimistic of being granted a licence by the Financial Services Board within the next month or two, and then we are looking at a six month implementation timeline,” he said. “So we have targeted the end of the year to go live, hopefully around October or November.”

He added that A2X has already been in discussion with companies that may want to list.

“We’ve had numerous confidential discussions with issuers and sponsors and have received wonderful support,” Brady said. “However we obviously need a licence to convert that from support to action, and that is going to be our challenge in the implementation period. But we’re comfortable that we can secure a handful of the right kinds of listings we are looking for. We would like to have 10 to 15 listings to go live.”

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