JSE set to become virtual Pan-African exchange: S Africa's biggest stock exchange, the JSE has been given the green light to list companies from other African countries. The advantages can be significant, but so can the disadvantages. Tom Nevin reports.

Author:Nevin, Tom
Position:STOCK MARKETS - Johannesburg Stock Exchange
 
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The exchange control department of the South African Reserve Bank has given the go-ahead for foreign companies to list on South Africa's stock exchanges. The Johannesburg Stock Exchange (JSE) has been encouraged to develop an index to include African firms--those firms that are "domiciled in Africa, or whose activities are geographically located in Africa, or companies domiciled outside Africa but the majority of whose activities are in Africa."

According to Jannie Immelman, the JSE's manager of indices, the bourse is in discussion with market players to gauge levels of interest and need in the indices proposal. Now that African companies can list in South Africa, the JSE can work on cross-border, settlement, disclosure, compliance, clearing and infrastructure issues.

The move widens the domestic investment landscape in important new ways. According to the Reserve Bank announcement, foreign companies that list locally will be allowed to use shares as acquisition currency--in effect, they can use scrip to buy local companies.

Plans for a pan-African exchange, with Johannesburg as the hub, were launched three years ago. Today the JSE's new technology allows it to break the market into different segments, with different trading rules and listing requirements, as it is already doing for AltX, its recently launched small-capitalisation board.

The stock exchanges of Botswana, Ghana, Zambia and Zimbabwe, pioneers in the Africa-wide network, are enthusiastic about the idea of creating a separate segment on the JSE dedicated to shares traded on the African continent.

A single entry for investors into various African shares would deepen liquidity and add weight to the region as an investor destination for foreigners. Russell Loubser, the chief executive of the JSE, says "We hope to create an environment where a Ghanaian investor, for example, can buy stock in a Zimbabwean company from a Zambian shareholder."

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LONG TIME PILOT PARTNER

The JSE's hugely successful partnership with the Namibia Stock Exchange (NSX) provides confidence to the other African exchanges the Johannesburg bourse is hoping to attract to the pan-African Board.

The Namibian Stock Exchange has been using the JSE's trading technology since 1997 and has about 40 listed companies, 90% of whom have dual listings in Windhoek and Johannesburg. The successful relationship with the NSX means that "the JSE would not be regarded with suspicion by the other exchanges, who...

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