BUSINESS MAVERICK: Interview
Nation-building is high on new JSE chief’s agenda
Nobody understands the concept of contagion – when economic outcomes are exponentially increased irrespective of the underlying science – better than the JSE’s new CEO, Leila Fourie. It was the subject of her PhD thesis. Sentiment, it seems, counts.
Rock climbing, whether it’s up the legendary Totem Pole in Tasmania, a high-altitude ice climb in Russia or the magnificent Africa Edge on Table Mountain, requires physical agility, mental strength and laser-sharp focus. Compromise any of these areas and you could put your own life, as well as that of your climbing partner, in danger.
Others would baulk at the challenge, but when she is free of work and the commitments of life, Leila Fourie, the new CEO of the JSE, can be found on a rock face, pushing herself to her limit. In fact, she recently celebrated her 50th birthday suspended on a rope in a place where only eagles rest.
Chatting over an informal breakfast in Cape Town, this focus becomes apparent. Fourie knows the JSE well, having returned to the organisation as a director between 2012 and 2016. Her new role began officially on 1 October and she hit the ground running, which was fortunate, because “there was no time” for learning the ropes.
Around the world, countries are facing economic and political headwinds, whether from the latest US-Chinese trade spat, Brexit or Middle Eastern instability. This makes companies reticent to deploy capital, perpetuating the low-growth climate that many countries find themselves trapped in.
Investors, as a result, are on a search for yield, which leads them to emerging markets. “South Africa must work to attract these flows,” says Fourie.
Her sense of urgency is heightened by the fact that a recent rebalancing of the MSCI Emerging Markets Index saw the inclusion of Saudi Arabia, and November’s rebalancing will see China play a more prominent role in the index. As a result, South Africa’s weighting will reduce, which is “not good”, because many investors are passive investors and simply follow the index.
Attracting capital flows to South Africa is essential if the country is to achieve decent growth, she says.
Having just returned from a JSE-organised investor roadshow to the US, Fourie is aware of investor concerns about South Africa.
“They want to know how we will address the low growth trap; how we will avoid the fiscal cliff and what government is doing about SOEs.
“They are also worried that the government is too concerned about consensus building.”
Investors, she adds, might ironically see the SAA strike as a positive signal.
That’s because the government has not intervened to prevent the strike and has allowed SAA management to consider the previously unimaginable – retrenching some 900 staff.
But then she adds: “I’m not here to give commentary. I have my own tasks to focus on.”
She has three objectives for the JSE:
- Co-creation and partnerships for growth;
- Rebuilding trust and resilience; and
- Nation-building and contributing to the national agenda.
In the face of slow economic growth, fewer listings and investor apathy, the JSE must diversify its revenue streams, which it will do inorganically and organically.
To this effect, the JSE has agreed to acquire 74.8% of Link Market Services SA, the second-largest share register business in the country.
Providing data services to clients will also receive more focus – from independent evaluations to pre-and post-trade analytics, she says.
The JSE should also become a leader in sustainable development.
The exchange already has a green segment for the listing of bonds that will help cities and towns transition to a low-carbon economy. It plans to introduce a sustainable development bond, which could be used to finance housing or other social infrastructure, she says. And a blue bond – to finance water infrastructure – is also being considered.
Fourie is co-chair of the Global Investors for Sustainable Development Alliance, a global group of 30 people who aim to unlock long-term financing for the world’s sustainable development goals and facilitate a movement away from the current focus on short-term returns.
The other SA CEO on this group is Investec head Fani Titi.
These are among the ideas that Fourie plans to use to market the JSE more aggressively to investors. Most of the JSE’s off-shore trade is from the US, UK and Europe, but this hasn’t been the best year, with equity outflows of about R90-billion. As a result, she is looking East.
“We can see growth potential in South-East Asia and possibly mainland China. These markets are increasingly investing outwardly, and I think the time is right.”
Aside from the obvious advantage of opening up new markets for the JSE, Fourie believes that investors from the East might be less herd-like than the West – although she is far too diplomatic to express that sentiment directly.
“It’s about rebalancing our investment flows so that if we [South Africa] do find ourselves on the point of a crisis, the reaction of the South-East Asian investment community, which tends to have a longer-term view, may be different.”
In its attempt to stimulate cross-border flows, the JSE will not move alone, but will work with partners, like data providers.
“We tend to be seen as a virtual monopoly. We want to shift this image and work with our clients to create value – everyone gains in the process.”
Fourie is also cognisant of the damage that the Steinhoff fraud, among other shenanigans, has done to the JSE. “We have work to do to rebuild our reputation,” she says.
One way is simply to listen more and engage regularly with its clients.
The other way will see an enhanced focus on regulatory issues and attention paid to the operational resilience (cybersecurity and uptime) of the organisation, which has lagged in the last year.
Already, changes have been made to the equity listing requirements, and soon changes will be made to debt listing requirements. This will increase transparency, which is important given that SOE debt is listed on the exchange. So, for instance, the new regulations mean more disclosure around politically connected individuals, loans to material parties and procurement policy.
“I’m mindful of not over-regulating. It is difficult to legislate for fraud – it’s a case of finding the right balance between requirements that enhance integrity versus those that enable growth.
“Capital formation is crucial for our economic growth – it weighs heavily on me.”
With this in mind, the JSE is using artificial intelligence to develop a social listening tool, which will help the organisation keep one ear closer to the ground. Of course, how it acts on that information is where the rubber hits the road.
But the thing that Fourie is passionate about, and which persuaded her to leave her job in Australia for a period, is the role the JSE can play in nation-building.
“We have a unique role to play. It’s a question of putting our best foot forward.” BM