There were just under 700 companies quoted on the JSE in 1999; there are now fewer than 300 on SA’s three exchanges. The proportion of companies delisting constituted just under 6% of all listed companies last year. In numeric terms, 27 companies were delisted in 2023, 24 on the JSE and three when the ZARx closed.

“There is a real danger that the local financial ecosystem will permanently lose the skills and experience required to conduct new listings and capital raisings. Those who have experience are either ageing out or have had to change career paths to survive. We have already seen the number of stockbroking firms decline dramatically, and the remaining ones are unlikely to retain office staff with experience in corporate actions and IPOs if these transactions hardly ever happen,” AmaranthCX head Paul Miller pointed out in a blog.

When you ask the JSE about this, they do offer some caveats. First, it is not the only exchange around the world taking these hits. Many of the European exchanges are losing company listings, and if they are not, like the LSE, the number of new entrants is declining. The LSE had fewer new listings in 2023 than it had in the past six years — but at least it is net positive, unlike the JSE. Euronext, the big joint-European exchange, has seen a small decline recently, but over a longer period it has not suffered like the JSE. 

Why is this happening? The broadest and most obvious reason is a lack of economic confidence. Listing is the tool companies use to expand because it provides access to a large and liquid capital base. If there is little confidence the economy will grow, the desire or the necessity to list for a company to compete more effectively is minimised. The SA economy hasn’t grown meaningfully for more than a decade. That inevitably hurts this IPO market.

The gloominess was of course compounded by the Covid pandemic, although it’s interesting that a lot of other exchanges around the world managed to increase the number of listings through this period.

One other reason is what businesspeople call “a lack of policy clarity”. This is a polite way of saying they worry the government will do something nuts. This has particularly concerned the mining industry, which has been threatened with a set of circular black empowerment requirements which would gradually reduce the value of the non-BEE shareholders to zero. There is also bewildering administrative red tape across multiple sectors, which has resulted, for example, in minimal new mining listings, shocking for a country with the gift of so many resources.

To compare, there were 89 new listings on the Australian exchange, the ASX, in 2022 in the energy and materials sector alone, and an incredible 202 in 2021, the most since 2007, the global boom year for resources companies.

For Europe, the biggest challenge has been the draw of the US exchanges, which are offering such tempting multiples that it’s very hard for an international company to ignore, even one based in Europe. The best illustration of this trend was British technology company Arm Holdings, once described as “the jewel in the crown of British technology”, which decided to list on the Nasdaq last year rather than the LSE. 

The draw of the US as a listing destination is less of a problem for SA’s exchanges; African companies that list in the US struggle to generate a following. West African online store Jumia caused a stir listing on the New York Stock Exchange in 2019 and was looking good in 2021, though it has since faded. But the problem does manifest differently: the US tends to grab potential African listings through acquisition. 

Things are looking up a bit: The JSE says the general pipeline for 2024 is looking healthy and there will be at least one large listing this year, Coca-Cola bottler Coca-Cola Beverages Africa (CCBA), which could have a listing value of around R150-billion, which would put it easily in the top 20 companies on the exchange. 

We will see. Internationally, the IPO market is coming back, so let’s hope it resumes here as well. The JSE is one of SA’s most remarkable institutions and is massively larger than it should be for such a small economy. It deserves to be nurtured. DM