JSE plans overhaul to encourage smaller listings

The exchange intends to split its main board into two — what it called a Prime Segment and a General Segment — as part of efforts to streamline regulations to better suit the needs of smaller firms, JSE said in a statement.

Key reforms proposed for the general segment include granting more flexibility in issuing shares, removing fairness opinions for certain transactions, and simplifying financial reporting requirements.

“It is crucial for us to take all necessary measures to encourage inbound investment and boost confidence among local and international investors,” said Andre Visser, director of issuer regulation at the JSE. “This restructured environment will likely attract more investment and retain current listings, enhancing the overall health of our capital market.”

South Africa’s main stock exchange has been losing listings as companies grapple with difficult regulatory and funding conditions, making it less attractive to raise capital through initial public offerings. The FTSE/JSE Africa All Share Index currently has 122 companies, down from 143 at the start of 2022 and 165 in 2012, according to data compiled by Bloomberg.

Public feedback on the latest proposal is open until May 20, 2024, and the plans require approval from the Financial Sector Conduct Authority.

Here are some details from the JSE’s plan:

• Introducing more flexibility through a general authority to issue shares for cash without shareholders’ approval, which may serve as a catalyst for capital raisings, subject to a prescribed limit and other safeguards like pricing parameters
• Removing fairness opinions for related party transactions/corporate actions with more emphasis being placed on shareholders’ approval, disclosure and the corporate governance processes applied
• Removing of the preparation of pro forma financial information with more emphasis being placed on a detailed narrative explaining the impact on the transaction/corporate action on the financial statements
• Introducing larger percentage ratios for category one transactions
• Introducing larger percentage ratios for small related party transactions with more emphasis being placed  on disclosure and the corporate governance processes applied
• Introducing more flexibility to undertake repurchases of securities
• Introducing more flexibility on financial reporting by removing the preparation of either condensed financial statements or annual financial statements/summary financial statements within three months. Listed companies will only be required to prepare an annual report within four months