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The JSE’s Quest For Diversity


The clamour to have black South Africans play a greater role in the economic sphere is as loud as ever. Sandile Luthuli takes an in-depth look at economic redress.
Image: Johannesburg Stock Exchange Image: Johannesburg Stock Exchange

The empowerment of all South African citizens, particularly black South Africans who emerged from a past of political subjugation and economic exclusion, has always been a rallying cry of the democratic South African government.

Through a diligent application of affirmative action, as required by the Employment Equity Act, there has been a marked increase in the black middle class since 1994; and this has benefited the economy as more and more people have attained greater purchasing power. General consensus is that the state needs to push more for economic change. Wiping the stain of apartheid is proving stubbornly hard. Our Gini coefficient is harrowing, making South Africa one of the most unequal societies in the world.

In terms of income, white households earn five times more than black counterparts, according to Statistics SA. No wonder the ruling African National Congress is championing the idea of ‘radical economic transformation’ to fast-track economic change.

The Johannesburg Stock Exchange (JSE) finds itself a marker of economic redress; and the current tendency is for commentators to take a look at the bourse and shake their heads in disbelief about poor black representation in the running of companies listed on the JSE.

Inclusive economic growth

President Jacob Zuma bemoaned poor black representation on the bourse – just like he did in 2015, causing a furore. “The situation with regards to the ownership of the economy also mirrors that of household incomes. Only 10 per cent of the top 100 companies on the Johannesburg Stock Exchange are owned by black South Africans, directly – achieved principally through the black empowerment codes, according to the National Empowerment Fund,” President Zuma said in his State of the Nation Address in February this year.

The JSE agrees that 10% black representation among the top 100 companies is woeful. Zeona Jacobs, Marketing and Corporate Affairs Director at the JSE, says: “The JSE believes that the 10 per cent statistic is low considering the country’s demographics. The aim should be to grow the percentage.”

Transforming the JSE

In late 2016, in a bid to spur economic transformation, the JSE announced that listed companies would be compelled to disclose their Black Economic Empowerment (BEE) records at the end of each financial year. The move, which came into effect in 2017, makes race and gender empowerment a condition of listing on the JSE. If listing on the JSE results in economic benefits, the spoils should be shared widely, by all, the reasoning goes.

The JSE’s requirements on transformation are twofold: one part is focused on “racial diversity disclosure at board level” and the other speaks to mandatory publication of the verified Broad-Based Black Economic Empowerment (B-BBEE) scorecard on a company’s website. “More than 20 years into our democracy, our economy has still not completed its transformation” the JSE noted in a statement at the time.

The JSE’s move was well received by black formations such as the Black Management Forum (BMF). “We would firstly like to thank the JSE CEO, Nicky Newton-King and her team for the engagements that we had with them which ultimately resulted in including race and gender as part of the listing requirements,” BMF President Mncane Mthunzi said.

“This is a great victory for transformation. We believe that these listing requirements for companies to disclose their transformation positions will compel them to take transformation more seriously.”

In addition to promoting ownership, the JSE also believes in impacting the eco-system in which we operate. In 2016, the JSE launched an Enterprise Development Programme aimed at helping emerging black stockbroking firms to grow. As part of the programme, the JSE paid R6 million to qualifying black stockbroking firms. “This money was equal to 33 per cent of the JSE’s equity trading and membership fees that the brokers paid to the Exchange on a quarterly basis,” Jacobs says.

Pushing for compliance

Clearly, the JSE is making meaningful strides towards empowerment and making sure that the bourse is for all.

Dr Mcebisi Ndletyana, political commentator and head of the Political Economy Faculty at Mapungubwe Institute for Strategic Reflection, believes it’s the responsibility of both government and the private sector to ensure transformation takes places at the JSE and that there is a need for “closer government monitoring of compliance with regards to BEE and that there is stricter punishment for a lack of compliance”.

Overall, Ndletyana’s
view is informed by the fear of dire societal consequences if economic redress continues unaddressed. “The private sector also needs to appreciate the political danger if the situation remains untransformed; it casts doubts over the efficiency of a moderate, legislative approach to transformation. If the latter approach doesn’t work, it makes other radical approaches appealing to a broader section of society,” he says.

For him the demand for economic transformation will not disappear. “Injustice was the primary impetus behind the nationalist struggle, and there’s nationalist expectation that the new order should undo the injustice.

“The longer justice is deferred the angrier Africans will become, making it even more likely for populist extra-judicial options to resonate.”

But some commentators are not moved by the entire ownership of the JSE debate. Xhanti Payi, an economist at Nascence Advisory and Research, is one of them. He feels the debate is “shallow and distrating”.

“Investing in the JSE is not necessarily a desirable thing,” says Payi. “[Rather] it’s about owning and running businesses that create value. The JSE is just a platform for capital.”

For Payi, “the question shouldn’t be so much about blacks owning more of the JSE, but actually having enough excess funds to be able to invest across platforms,” he says.

Clearly, the debate is far from over. But the JSE continues to be a barometer of economic redress – whether or not the arguments for and against the move are cogent or not.

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