Listing trends in South Africa: Five key themes

The Johannesburg Stock Exchange (JSE) is the largest stock exchange in Africa. It has long been a barometer of economic health and corporate activity in South Africa. Over the years, the JSE has seen various trends in listings, reflecting broader economic conditions, regulatory changes, and shifts in investor sentiment. 

1. Decline in new listings

One of the most notable trends in recent years has been the decline in new listings on the JSE. Several factors contribute to this trend:

• Economic uncertainty: South Africa has faced economic challenges, including slow growth, high unemployment, and political instability. These factors have made companies more cautious about going public.
• Global competition: South African companies now have more options for listing internationally. Exchanges in the United States, Europe, and Asia offer attractive alternatives, often with more liquidity and higher valuations.
• Regulatory environment: The regulatory requirements for listing on the JSE can be stringent and costly. Some companies prefer to stay private or seek alternative funding sources to avoid these hurdles. The JSE has embarked on a simplification project to simplify the listings requirements, using plain language to record concise regulatory objectives, making the requirements easier to understand and apply.

2. Increase in delistings

Alongside the decline in new listings, there has been an increase in delistings. Companies are choosing to delist for several reasons:

Private equity buyouts: Private equity firms have been active in South Africa, buying out public companies and taking them private. This trend is driven by the availability of capital and the desire for more control over company operations.

Mergers and acquisitions: Consolidation in various industries has led to delistings as companies merge or are acquired by larger entities.

Performance issues: Some companies have struggled to meet the performance expectations of public markets and have opted to delist to restructure away from the scrutiny of public investors.

3. Rise of Special Purpose Acquisition Companies (SPACs)

SPACs have gained popularity globally, but in South Africa investors have been slower to embrace SPACs. These "blank check" companies raise capital through an initial public offering (IPO) with the intention of acquiring an existing company. SPACs offer a faster and potentially less costly route to public markets for private companies.

• Attractiveness to investors: SPACs provide investors with an opportunity to invest in private companies at an earlier stage, often with the potential for significant returns.
• Flexibility for companies: For companies, merging with a SPAC can be a more flexible and efficient way to go public compared to a traditional IPO.
• Challenges in South Africa: Some SPACs have struggled to find viable assets to acquire within the timeframes set by the listings requirements, hampering their ability to return capital to investors.

4. Focus on ESG and sustainability

Environmental, Social, and Governance (ESG) factors have become increasingly important for investors and companies alike. The JSE has been proactive in promoting ESG standards and sustainability reporting.

• ESG listings: There has been a rise in listings of companies that prioritize ESG factors. These companies often attract a dedicated investor base that values sustainability and ethical practices.
• Green bonds: The JSE has also seen growth in the issuance of green bonds, which are used to finance environmentally friendly projects. This trend aligns with global efforts to combat climate change and promote sustainable development.

5. Technology and innovation

The technology sector has been a bright spot for the JSE, with several tech companies choosing to list on the exchange. This trend reflects the broader global shift towards technology and innovation-driven growth.

• Tech IPOs: South African tech companies are increasingly looking to the JSE as a platform to raise capital and gain visibility. These companies often operate in high-growth areas such as fintech, e-commerce, and software development.
• Investor interest: There is strong investor interest in tech stocks, driven by the potential for high returns and the transformative impact of technology on various industries.

Navigating the economic landscape

The JSE listing trends reflect a complex interplay of economic conditions, regulatory factors, and evolving investor preferences. While the decline in new listings and increase in delistings pose challenges, the rise of SPACs, focus on ESG, and growth in the technology sector offer new opportunities. As South Africa navigates its economic landscape, the JSE will continue to play a crucial role in shaping the future of corporate activity and investment in the country.

Investors and companies alike must stay attuned to these trends to make informed decisions and capitalize on emerging opportunities. The JSE remains a dynamic and vital part of South Africa's financial ecosystem, adapting to changes and driving growth in the region. Hopefully the JSE’s continued drive to simplify the listings requirements for companies listed on the JSE will also assist with enticing investors to the JSE.