In a webinar on Thursday, finance veteran Paul Miller referred to the “delisting” crisis afflicting the JSE, which has picked up pace since 2010. In 2023 to date, there are expected to be 27 delistings and only six listings across all of South Africa’s exchanges.

Not only has the number of delistings been in steady decline, but the proportion that involves capital raising has also been in decline. (See charts.) 

The lack of deals on this front is ultimately a big deal. It is robbing South African savers of investment opportunities and the economy of one of the fuels that power innovation.

“I distilled what I thought the problem was into two broad categories,” Miller told the webinar. “One was the change in the stockbroking industry, and there the fundamental change is that it has been bifurcated. We now have wealth managers who would far prefer their clients to put their money into modelled portfolios that effectively mimic any of the portfolios that you would get in any of the large financial services institutions.

“Alternatively, they’d like you to go to a low-cost, low-service security trade platform. So we have wealth managers and then electronic platforms. Falling between the cracks is what has happened to the role that stockbrokers used to fulfil between companies and direct investors.”

To fill that gap, Miller — who has written extensively on the subject, including for this publication — decided to launch Utshalo, a Zulu and Xhosa verb meaning “to plant”.

The focus is on primary investment and the company will act for issuers offering or placing shares in the primary market, or other sellers in the secondary market.

The aim, according to the presentation delivered in the webinar, is “to encourage participation and access to primary capital raising, and liquidity generally; by connecting issuers and sellers with direct investors in a modern, regulatory compliant, digital, low-friction way; and thereby address the declining role of South African public markets.”

General offers of shares for cash with accelerated book-builds — a method by which a company prices the shares of an initial public offering — are included in the bouquet. The services will be paid for by the issuer, not the investor.

This is a unique service in South Africa that follows paths blazed in Australia and elsewhere.

South Africa has a problem with public listings, and the falling number of them on the JSE is one of the measurements of the overall decline of the country under the weight of a collapsing state. Policymakers seem to be taking scant notice and doing little about it.

This means the private sector needs to step up to the plate and innovate. The problem has long been identified. Solutions are required, and hopefully, this and other initiatives can help to address it. DM