Economy of South africa
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ECONOMY
The economy of South Africa is the largest of all the economies of Africa. It accounts
for 24% of Gross Domestic Product in terms of PPP & is ranked as an upper-middle
income economy by the World Bank.
South Africa has an advantage in the production of agriculture, mining and
manufacturing. It has shifted from a primary and secondary economy in the mid 20th
century to an economy driven primarily by the tertiary sector in the present day which
accounts for an estimated 65% of GDP or $230 billion in nominal GDP terms.
The countrys economy is diversified with sectors including mining, agriculture and
fishery, vehicle manufacturing , food-processing, clothing and textiles,
telecommunication, energy, financial and business services, real estate, tourism,
transportation, and wholesale and retail trade.
The unemployment rate is over 25% which is very high & there is limited access to
economic opportunities and basic services by poor people.
The high levels of unemployment and inequality are accepted by the government
and these issues, and others linked to them such as crime have a negative effect on
employment. Crime is considered a major or very severe constraint on investment by
30% of enterprises in South Africa, putting crime among the 4 most frequently
mentioned constraints.
South Africa, has struggled through the late 2000s recession, and the recovery has
been largely led by private and public consumption growth, while export volumes and
private investment have yet to fully recover. The long-term potential growth rate of
South Africa under the current policy environment has been estimated at 3.5%. Per
capita GDP has been growing by 1.6% a year from 1994 to 2009, & by 2.2% over
the 200009 decade.
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HISTORICAL STATISTICS
This is a chart of the trend of South Africa's gross domestic product at market prices
estimated by the International Monetary Fund:
Table 1.1
YearGDP, USD
billion
US Dollar Exchange
in early January
Unemployment
rate
Per Capita
Income, % of USA
1980 80.547 0.8267 Rand 9.2 22.6
1985 57.273 2.0052 Rand 15.5 9.8
1990 111.998 2.5419 Rand 18.8 13.1
1995 151.117 3.5486 Rand 16.7 13.2
2000 132.964 6.1188 Rand 25.6 8.5
2005 246.956 5.6497 Rand 26.7 12.4
2010 363.655 7.462 Rand 24.9 15.5
2015
(f'cast)510.937 22.8 18.0
http://en.wikipedia.org/wiki/International_Monetary_Fundhttp://en.wikipedia.org/wiki/International_Monetary_Fund -
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FINANCIAL MARKET
Financial Market can be classified into different categories depending on the
characteristic of the market or instrument used to create categories. Securities
created by institutions in the markets normally pay an interest on the nominal amount
(the amount shown on the certificate or contract).
The interest-bearing securities market is split into the money market and the capital
market, based on the term to maturity (the term left to redemption of the debt) of the
securities.
The capital market is the market for the issue and trade of long-term
securities.
The money market is that of short-term securities.
When goods such as financial instruments are traded in a market, there are certain
differences between transactions done in these markets. The differences in
transactions in the financial markets can be categorised in different categories, two
of which are the following:
The timing difference between the closing of the transaction and the delivering
of the goods or settlement of the transaction
The difference in certainty that the other party will honour the transaction.
In the spot market, the closing of the transaction and the delivery of the goods take
place simultaneously or within a short-term time span prescribed by the specific
market. Uncertainty about delivery from the other party is very limited otherwise no
transaction would take place.
The forward market is the market where a transaction is closed in the present, and
the settlement of the transaction and the delivery of goods are in the future. The
delivery date and the price are determined at the closing of the transaction. Because
of the time lapse between the closing and the settlement of the transaction, the risk
that one of the parties might not be able to deliver at the settlement date is higher
than in the spot market.
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The futures market is similar to the forward market, except that in the futures
market, the risks of settlement and quality of the product are addressed. The same
transaction as in the forward market would be closed, with the addition of the
standardisation of the amount of goods, the quality of the goods and guarantee (by
an exchange) of the payment of the price and delivery of goods or cash settlement of
the difference.
MAJOR INSTITUTIONS IN THE SOUTH AFRICAN FINANCIAL MARKETS
A sophisticated financial services sector consisting of lenders, borrowers, financial
intermediaries, financial instruments and financial markets, has different institutions
participating in these markets.
Certain intermediaries in the financial markets take on deposits as principal. These
intermediaries are called deposit-taking intermediaries. Examples of such
intermediaries are:
South African Reserve Bank (SARB) (deposits from selected clients)
Private banks
Land and Agricultural Bank SA Post Office Limited.
There are other intermediaries operating in the market, who only manage funds on
behalf of clients as an agent for the client. They do not take on deposits, but bring
together the borrower and lender with similar needs regarding amount, term and rate
of the transaction. Such an intermediary is called a non-deposit-taking intermediary.
Examples of these intermediaries are:
Unit trusts
Insurers
Pension and provident funds
Finance companies.
Other institutions and interest groups in the market do not participate in the trading of
instruments as principal traders but perform functions such as supervision of
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activities, regulation of the markets, provision of trading facilities, etc. Examples of
these institutions and groups are:
The Johannesburg Stock Exchange
The South African Futures Exchange
The Bond Exchange of South Africa
The Supervision Department of the SARB
The Financial Services Board.
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GOVERNING BODIES IN SAS FINANCIAL MARKET
SOUTH AFRICAN RESERVE BANK
The South African Reserve Bank (SARB) performs all central banking functions. The
SARB is independent and operates in much the same way as Western central
banks, influencing interest rates and controlling liquidity through its interest rates on
funds provided to private sector banks.
Quantitative credit controls and administrative control of deposit and lending rates
have largely disappeared. South African banks adhere to the Bank of International
Standards core standards.
One of the functions of the SARB is to co-operate with the Ministry of Finance in
formulating and implementing monetary and exchange rate policy. The SARB also
acts as banker to the government and other banks and thus plays an important role
in the markets as decisions concerning interest rates of the SARB affect all
institutions in the market. Other important functions of the SARB include:
Issuing of bank notes and coins
Supervising the countrys gold and foreign exchange reserves. In this
function it plays an important role in maintaining a stable exchange rate
Supervising registered banks
Settlement of claims and payments between banks
Lender of last resort for the banks.
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FINANCIAL SERVICES BOARD
The Financial Services Board (FSB) is the government of South Africa financial
regulatory agency responsible for the non-banking financial services industry in
South Africa. It is an independent body that supervises and regulates the financial
services industry in the public interest. This includes the regulation of the
biggest stock exchange in Africa the Johannesburg Stock Exchange.
The functions of the Financial Services Board
The Financial Services Board (FSB) was constituted by the Financial Services Board
Act, 97 of 1990 (the Act). The functions of the board are:
1) To supervise the compliance with laws regulating financial institutions
and the provision of financial services;
2) To advise the Minister on matters concerning financial institutions and
financial services, either of its own accord or at the request of the
Minister; and
3) To promote programs and initiatives by financial institutions and bodiesrepresenting the financial services industry to inform and educate users
and potential users of financial products and services.
The FSB is a unique independent institution established by statute to oversee the
South African non-banking financial services industry in the public interest. The
FSBs mission is to promote sound and efficient financial institutions and services
together with mechanisms for investor protection in the markets.
The executive officer of the FSB is the Registrar of Pension Funds, Registrar of
Friendly Societies, Registrar of Long-Term Insurance, Registrar of Short-Term
Insurance, Registrar of Stock Exchanges, Registrar of Financial Markets, Registrar
of Collective Investment Schemes and the Registrar of Financial Services Providers.
Of importance is that the FSBs purpose is to serve the public interest, not the private
interests of market participants.
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Structure of the FSB
The FSB is governed by a Board of eight members. It performs its functions through
its various departments. The FSB supervises such institutions and services in terms
of 16 Parliamentary Acts, which entrust regulatory functions to the Registrar of Long-
and Short-term Insurance, Friendly Societies, Pension Funds, Collective Investment
Schemes, Capital Markets (Stock Exchanges and Financial Markets.) Those
functions resort in the office of the Executive Officer acting with other members of
the executive and heads of the various departments
The FSB regulates the following industries:
1) Insurers- Short term
- Long term
- Re-insurers: short and long-term
- Lloyds Correspondents
- Other Credit agents
2) Friendly Societies
3) Retirement Funds
- Non-exempt funds
- Exempt funds
4) Collective Investment Schemes
- Collective investment schemes in securities other than property shares
(Management companies Portfolios)
- Collective investment schemes in property (Management companies
Portfolios)
- Collective investment schemes in participation bonds
- Declared collective investment schemes
- Foreign collective investment schemes
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5) Capital Markets
- Stock broking member firms
- Financial instrument dealers
Members of (SAFEX) South African Futures Exchange
Members of BESA (Bond Exchange of South Africa)
6) Financial Intermediaries and Advisers
- Investment managers
- Linked investment service providers
- Insurance brokers
- Other financial services intermediaries
7) Insider Trading
8) Nominee Companies
To the extent that nominee companies are required to be approved in terms of
legislation supervised by the FSB
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FinancialMarket
Money Market
Instruments
Paying Interest
Negotiable
Certificates of
Deposit
Govt. Stock &
Short-Term
Interest Rate
Instruments
Instruments
Issued at
Discount
BankersAcceptance
Treasury Bills
Commercial
Papers
Land Bank Bills
Capital Market
Interest Rate
Securities
Zero - Rated
Cupon Bonds
Asset - Backed
Bonds
Johannesburg
Stock Exchange
Main Board
AltX
Bond MarketBond Exchange
of South Africa
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MONEY MARKET AND INSTRUMENTS
Introduction
The money market is the market where liquid and short-term borrowing and lending
occur. In financial market terms, the purpose of money market is issuing and trading
of short-term instruments. The instruments with a term to maturity of three years or
less are normally classified as money market and defined as liquid assets by the
authorities.
Trading in the market
In South Africa money market instruments is not operated through an exchange, butthrough informal telephone trading and OTC (over the counter) trading. Electronic
form of trading is less used and still physical trading documents are used in market.
Instruments in the Market
There are 2 types of instruments issued and traded:
1) Instruments which pay interest on invested amount, where interest is paid withthe redemption amount at redemption date. Sometimes Interim interest is
paid. Instruments in this category are:
a. Negotiable certificates of deposit (NCDs)
b. Short-term government stock
c. Interest rate instruments issued by private sector (maturity-less than 3
years)
2) Instruments that are issued at a discount on the nominal value and do not pay
interest. Such Instruments are:
a. Bankers' acceptances (BAs)
b. Treasury bills (TBs)
c. Commercial paper
d. Land Bank bills
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Negotiable Certificates Of Deposit (NCDs)
This is a certificate issued by a bank for a deposit made, attracts a fixed rate of
interest that payable with the amount. NCDs are issued in multiples of R1 million.
The name of the owner does not appear on the document as it is bearer. The NCD
will contain the name of the issuing bank, date of issue, date of redemption, amount
of the deposit, maturity value, annual interest rate paid on the deposit.
Current Rates of NCDs (as on 06-12-2012)
Time Period Closing Rates
3 Months 5.13
6 Months 5.38
12 Months 5.55
Government Stock and Other Short-Term Interest Rate Instruments
These instruments are normally issued for long-term periods with more than one
interest payment.
Bankers' Acceptances
It was invented to suit the needs of a party requiring temporary finance to facilitate
the trading of specific goods. The party needing would approach investors, the
investors or lenders would then lend in exchange for a document stating that the
debt would be paid back on a certain date in the short-term future. The amount paid
back by the borrower would have to be more than the amount advanced by die
lender. The difference is known as the discount on the nominal amount.
A bank acceptance can be described as an unconditional order in writing, addressed
and signed by a drawer, to a bank which signs and becomes the acceptor, promising
to pay a certain amount of money at a fixed date, to the bearer or holder of the
document.
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Commercial Paper and Other Discount Instruments
It refers to short-term unsecured promissory notes issued by corporate companies
with a high credit rating. These are also issued on a discount basis such as
BAs. The risk involved will be higher than that of Bas as it is unsecured, so the
issuing institution must be financially strong and sound. Theseinstruments would be
issued and traded at a higher discount.
Treasury Bills
Treasury Bills are short-term debt obligation of the central government of South
Africa and are allotted through auction. The South African Reserve Bank has 91 day,
182 day, 273 day and 364 day Treasury Bills. They are issued on tender basis.
Current Tender Rates (as on 06/12/2012)
No. of Days of TB Tender Rates
91 day 4.93
182 day 5.00
273 day 5.00364 day 4.90
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CAPITAL MARKET
Introduction
The capital market is the market for the issue and trading of long-term securities.
The term in this instance is measured as the term to maturity of the security and in
order to be classified as a capital market instrument, the term to maturity should be
longer than 3 years. During the trading of these instruments, the securities traded
are informally classified into short-term, medium-term and long-term securities
depending on their term to maturity. Where the term to maturity of the instrument is
up to five years, the security is classified as a short-term capital market instrument.Where the term to maturity is five to ten years, the security is classified as medium
term, and where the term to maturity is more than 10 years, the security is known as
long-term.
The primary market is the market for the first issue of securities. This issue is
normally done by means of a public issue or by private placement. The secondary
market is the market for trading securities once they have been issued. The
secondary market has a big influence on the issues in the primary market, as the
market rate is determined in the secondary market. Issues in the primary market at
below market rate, determined in the secondary market, would be issued at a
discount on the nominal value of the instrument. If the volumes traded in the
secondary market are high it could be an indicator that an excess of long-term
money is available in the market, and it may thus be an opportune time to issue new
securities into the market by means of the primary market. Therefore, if the liquidity
in the secondary market is high, chances are that new issues would be more
successful than in an illiquid market.
Instruments
Instruments issued and traded in the capital market in South Africa have certain
characteristics like: term to maturity, interest rate paid on the nominal value, interest
payment dates, nominal value of issue. Following are the instruments:
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1) Interest Rate Securities
The interest paid on the nominal amount of capital market securities (called
the coupon rate) appears on the certificate received by the holder (the
investor) of such a security. Most securities are issued at a fixed coupon rate
such as the Eskom 168 (E168) security that is issued at a coupon rate of
11%. Certain securities are, however, issued at a variable coupon rate,
where the coupon rate is then linked to a well-known interest rate such as the
prime overdraft rate or the 90-day BA rate.
Capital market securities are physical certificates and the issuer of the
security keeps a register of owners. This register is used by the borrower topay interest to the lender on the interest payment dates indicated on the
certificate.
2) Zero-Rated Coupons
Long-dated zero-rated coupons are capital market instruments issued by
borrowers of money. These instruments do not earn interest on the capital
amount invested by the lender, and are therefore issued and traded at adiscount on the nominal value, similar to discount instruments in the money
market such as BAs and treasury bills. Yield on zero-rated coupon bonds is
normally linked to the market rate on long-term investments.
3) Asset-Backed Bonds
A bond can be issued to fund this asset where an asset represents cash
inflow stream such as a normal loan or investment. The bond income is then
derived or backed by the income stream of the asset.
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CENTRAL DEPOSITORY OF SOUTH AFRICA - STRATE
Since its inception over ten years ago, STRATE Ltd is proud to be the licensed
Central Securities Depository (CSD) for the electronic settlement of financial
instruments in South Africa. STRATE's core purpose is to mitigate risk, bring
efficiencies to the South African financial markets and improve its profile as an
investment destination. Strate is aligned to international best practices and
continually strives to ensure operational excellence and provide enhancements for
the good of the Southern African financial markets.
STRATE handles the settlement of a number of securities including equities and
bonds for the Johannesburg Stock Exchange (JSE) as well as a range of derivativeproducts such as warrants, Exchange Traded Funds (ETFs), retail notes and tracker
funds. It has now added the settlement of money market securities to its portfolio of
services. It provides services to Issuers for their investors in terms of the Companies
Act and Securities Services Act (SSA), 2004.
MISSION, VISION & OBJECTIVES
VISION
We are the leading independent South African provider of innovative post trade
products and services. We facilitate risk management, enabling transparency and
efficiencies for the financial markets. We are globally recognised for the confidence
we inspire in our financial markets.
PURPOSE
STRATE's purpose is to provide post trade services for the securities market,enabling end-to-end pragmatic, reliable, innovative solutions that facilitate the
management of risk and the realisation of value for all stakeholders.
STRATEGIC OBJECTIVES
To be profitable;
To be stakeholder centric;
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To ensure operational excellence and the effective management of risk while
driving innovation and market best practise; and
To be a learning organisation enabling Corporate and Personal growth
HISTORY OF STRATE:
Equities:
The successful introduction of the Johannesburg Equity Trading (JET) system in the
1990's highlighted the deficiencies in the JSE's paper-based settlement system.
STRATE was introduced to the market to facilitate the dematerialisation and
electronic settlement of the equities market. Shares were no longer traded on an
open-outcry trading floor and this contributed to a massive leap in the number oftrades each day.
Back-office support services were incapable of handling this increase in daily
transactions efficiently in a paper-based environment. The transition to an efficient
electronic settlement system has increased market activity and has improved the
international perception of the South African market by reducing settlement and
operational risk in the market, increasing efficiency and ultimately reducing costs.
Accordingly, by heightening investor appeal, STRATE enables South Africa to
compete effectively with other international markets, and not just those of emerging
markets.
Bonds:
Prior to the 1990s, bond trading in South Africa took place via a trading floor or a
screen and telephone system with both parties agreeing on prices and amounts to
be bought and sold. With the growth in turnover and value, settlement risks also
grew. In 1989, the bond market participants (consisting of banking groups, large
issuers, stockbrokers and a number of major financial institutions and intermediaries)
formed a voluntary association called the Bond Market Association (BMA) to
facilitate the development of a self-regulated bond market exchange.
That same year, the major clearing and bond settlement banks and the Reserve
Bank created UNEXcor with the express purpose to develop an electronic settlement
system using a CSD. The same shareholders got together to form CD Limited in1991. In May 1994, UNEXcor was appointed as the Clearing House for the South
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African bond market. The first full electronic settlement through UNEXcor and CD
took place on 26 October 1995. In 2003, UNEXcor merged with STRATE to become
South Africas only CSD.
MONEY MARKET:
An initiative was established by a number of market participants to address the
electronic settlement of money market securities. The Money Market Forum was
established and a Blue Print was issued in 2002 for the dematerialisation of money
market securities. UNEXcor was awarded the system development contract and
following the STRATE/UNEXcor merger, STRATE assumed the responsibility for the
delivery of this project. In conjunction with extensive market consultation, STRATE
developed the Business Requirement Specification documents.
Tata Consultancy Services (TCS) was employed on behalf of STRATE to develop
the code for the project. Successful market scripted testing of Version 1 was
completed in October 2008 and Rand Merchant Bank issued the first electronic
security to STRATE via FirstRand Bank in November 2008. In April 2009 the Money
Market Securities System code enhancements were effected and market participants
commenced testing immediately thereafter. The South African market implementedthe electronic settlement of newly issued money market securities in the latter half of
2009.
FEATURES AND BENEFITS
The features and benefits of STRATE emerge from the variety of advanced,
technological features and business principles incorporated in STRATEs underlying
software, South African Financial Instruments Real-time Electronic Settlement
system (SAFIRES) for equities, and the Bonds and Money Market System for these
securities respectively.
SAFIRES is an adaptation of the Swiss Settlement system, SECOM, which has been
providing investors with secure and efficient settlement since 2000. The features of
STRATEs systems are numerous and each provides a very significant, risk-reducing
benefit to the South African financial market.
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ELECTRONIC CUSTODY OF SECURITIES
Shareholding is recorded electronically by each of the Participants and collated at a
Participant level within STRATE for equities and bonds. In the money market
environment the custody of shares occurs in a Securities Ownership Register (SOR).
These electronic records provide issuers with the register of investors for the
dematerialised portion of their register.
The records of the Participants are reconciled daily with the records kept by
STRATE, where the total balance of dematerialised securities is kept. Investors
receive regular statements which take the place of share certificates. This is in direct
contrast to the paper settlement environment where risks of lost, forged or stolen
documents abound. Naturally, the costs associated with the replacement of such
documents are also eliminated under STRATE.
SECURITY OF STRATES SYSTEMS
The electronic record of shareholding in STRATE is subject to extensive controls.
This is thanks to the sophisticated encryption and authentication in the coding of the
software where the security of the electronic records has never been compromised.
Furthermore, STRATE utilises the renowned Society for Worldwide Interbank
Financial Telecommunications (SWIFT) network for the relay of electronic
information. SWIFT is a network owned by the major banks in the world and
therefore the provider of choice for all major financial institutions, globally. This is
one of the most secure network in the world with consistent 99% up-time since its
inception.
As one of the highest users of the SWIFT network globally, STRATE also provides
SWIFT network services to other financial institutions and large corporates in South
Africa. This provides a cost effective mechanism for them to utilise the SWIFT
network without having to contract directly with SWIFT.
ELECTRONIC SETTLEMENT OF TRANSACTIONS
At the point of settlement, the electronic records are updated real-time via book
entry. Settlement via book entry is both secure and efficient. It is no longer
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necessary for the seller to submit his share certificate to his broker for further
submission to the Transfer Secretary who issues a new certificate in the name of the
buyer. This manual process was risky, administratively burdensome and time
consuming.
ROLLING SETTLEMENT
Rolling settlement refers to a settlement environment in which transactions
(securities and funds) become due for settlement a set number of business days
after trade. In South Africa, rolling settlement has been introduced on a T+5 basis for
equities, a T+3 basis for bonds and a T+0 basis for money market securities (where
T= trade date). Rolling settlement represents a significant departure from the
account period methodology employed in the past by the equities market whereby
trades of any given week were settled from Tuesday of the following week. Investors
know when their trade will settle and can plan/ budget accordingly. The account
period methodology of the paper-based settlement environment operated on an
indefinite basis; some transactions remained unsettled for months. As every day is a
trading day, under STRATE every day is also a settlement day.
CONTRACTUAL SETTLEMENT
Investors obtain the assurance that their transactions settle on the specified
settlement day. The appropriate cash and securities accounts are debited/ credited
on settlement day and the risk of delayed settlement and loss of earnings is
significantly reduced.
SIMULTANEOUS FINAL IRREVOCABLE DELIVERY VERSUS PAYMENT
(SFIDVP)
STRATE is proud to be amongst the CSDs to have achieved true Simultaneous,
Final, Irrevocable, Delivery versus Payment (SFIDvP) in Central Bank funds. This
has been achieved with the use of the Continuous Batch Processing Line (CBPL)
functionality for equities, the Continuous Processing Line (CPL) for bonds and the
Real-Time Line (RTL) for money market securities in the National Payment System
at the Central Bank.
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In terms thereof, payment obligations must be provided for in the South African
Multiple Options System (SAMOS) system before the settlement run can be
commenced. With the implementation of a netting model for on-market equities
transactions, settlement efficiency within STRATE has been maximised through
netting of securities at Safe Custody Account (SCA) level and funds at Participants
level. Further efficiencies are provided to the market through a gross settlement
model for bonds and money market securities.
CONNECTIVITY THROUGH SAMOS
In 1998, the South African Reserve Bank granted STRATE permission, to integrate
its settlement processing directly with their own SAMOS system. The main benefit
that SAMOS brings to the South African financial markets is that it provides for final
and irrevocable payment.
Similarly, STRATE provides the investor with contractual settlement and finality of
ownership transfer for all instruments settled. By synchronising securities ownership
transfer through STRATE with cash payment through SAMOS, the market is able to
provide local and international investors with SFIDvP, as explained above. SAMOS
provides for final and irrevocable payment settlement, while STRATE provides the
investor with real-time settlement and finality of ownership transfer.
By making the SAMOS settlement infrastructure available for the settlement of
financial market transactions, the Reserve Bank has greatly boosted the capability
and competitiveness of the South African financial markets. The interdependence of
these two systems is in line with the worldwide drive towards consolidation and the
resultant economies of scale.
ACCURACY OF THE REGISTER
The electronic register is updated on a T+5 basis for equities, a T+3 for bonds and
T+0 basis for money market securities when the simultaneous transfer of securities
and funds takes place. This means that all trades are reflected on the register of
investors for dematerialised securities in the STRATE environment as there are no
outstanding securities transactions.
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Listed companies wishing to obtain an accurate record of their investors find
themselves in a far more efficient position in the STRATE environment.
ELECTRONIC EXECUTION OF CORPORATE ACTIONS
STRATE executes all Corporate Actions events for the market, many of which are
processed electronically. The benefits of STRATEs Corporate Actions model cannot
be underestimated given the significant risk reduction and cost savings in the
Corporate Action arena. For example, interest, dividends and proceeds are credited
to the clients' accounts directly with the electronic execution of Corporate Actions
occurring in a quick and secure manner. Payments are transferred electronically with
same-day value eliminating the costs and risk associated with cheque payments.Issuers and investors therefore benefit from a dramatically increased level of
efficiency and cost effectiveness and the most importantly, the elimination of market
claims.
INCREASED MARKET REGULATION
STRATE is the regulator of the CSD Participants and the JSE regulates qualifyingbrokers, under the authority of the Financial Services Board (FSB). The regulation of
the market players is significant as CSD Participantss and qualifying brokers act as
agents for investors and have a statutory and contractual duty to protect the records
of the investor in the electronic environment. Investors gain the peace of mind that
all business processes associated with electronic settlement are regulated by
STRATE.
As illustrated by the examples above, the key features of electronic settlement
contributed to a massive reduction of risk in the South African market. This increases
South Africas standing as an investment destination for international investors which
undoubtedly provides a significant boost to both trading and liquidity.
Internal Controls & Management
The efficiency of the control environment at STRATE is fundamental to the
successful operating of the CSD on a day-to-day basis and is built on the effective
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integration of a number of interrelated components. This starts essentially with the
governance structure within which STRATE operates, where the tone at the top is
set by the Board of Directors, a number of purpose-driven internal and external
committees, a dedicated senior management team and the regulatory oversight of
the Financial Services Board (FSB).
The internal control framework forms part of the overarching enterprise-wide risk
management framework which has, as one of its core imperatives, the identification,
evaluation and treatment of risks (both internal and external) that may prevent the
depository from achieving its corporate objectives.
A comprehensive structure of control activities permeates all levels of the
organisation, directed and supported by clearly defined policies and procedures
which are designed to guide staff in the execution of their duties. Continuous
monitoring of these control activities helps ensure that weaknesses and/or
deficiencies are identified simultaneously and that these are escalated appropriately
and that corrective action is taken without delay.
Supporting this structure is a communication strategy which is designed to provide
decision-makers with the right information, at the right time to make the rightdecisions.
Risk Management
Enterprise Risk Management (ERM) at STRATE comprises:
The Risk Management function;
Business Continuity Management (including Disaster Recovery);
Information Security; and
The Internal Audit program which uses a combination of external (inter alia
Pricewaterhouse Coopers) and independent internal resources (Process
Assurance)
The ERM Division effectively co-ordinates and manages the overall risk
management program for STRATE by:
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1. Assisting each division within the company to identify, assess and measure
risks according to the probability (or likelihood) of occurrence and the potential
impact that the identified risk may have. A process-based ERM framework
which is linked to STRATE's strategic objectives has been defined for this
purpose;
2. Assisting divisions in undertaking an initial assessment of the effectiveness of
relevant controls identified to mitigate the specific risks. These assessments
drive regular risk reporting through the Management Team to the Audit and
Risk Committee and ultimately the Board of Directors who measure risk
exposure against pre-determined risk tolerances and the management actions
being taken to bring specific risk exposures back to within acceptable levels oftolerance;
3. Identifying risk-based focus areas for independent review in terms of the
Internal Audit plan;
4. Coordinating a comprehensive risk review in respect of each and every new
product/service under development by STRATE; and
5. Ensuring that all system enhancements/changes are channeled through an
effective Change Advisory Board and that the underlying Change Control and
Release Management processes are followed in accordance with a defined
and documented System Development Life Cycle (SDLC). A risk review is
undertaken of each change / enhancement to ensure a comprehensive
understanding of the likely impact and that the necessary /appropriate
controls have been incorporated prior to implementation.
Business Continuity Management
The Business Continuity Management (BCM) program at STRATE is managed by
The ERM Division which:
1. Oversees the establishment and maintenance of:
o Effective business continuity plans which are capable of supporting all
core business activities of the depository;
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o Identifying areas of weakness and, in conjunction with the relevant
business resources, developing and testing appropriate business
continuity capabilities;
2. Provides effective co-ordination of all BCM testing to ensure that identified
plans are, in fact, capable of supporting the relevant service and/or
function and that the recovery time and point objectives can, indeed, be
met; and
3. Promotes awareness and preparedness across the organisation and with
those parties with whom STRATE has direct interfaces such as its
Participants, the JSE and the Central Bank.
In recognition of its role in the South African financial services industry, STRATE has
been particularly mindful of the obligation to ensure state-of-the-art preparedness
across all of its key services. Recent enhancements to the STRATE network, and
the introduction of high levels of virtualisation across these services, ensure that
disruptions are kept to a minimum and that recovery from disruptions can be
effected with a minimum delay - often without any impact on downstream users.
International Benchmarks & Standards
The introduction of electronic trading, clearing and rolling, contractual, settlement
significantly enhanced the appeal of South Africa as an investment destination. This
required the adoption of a number of common standards and benchmarks which had
already been identified in other, leading, markets around the world.
STRATE has been guided by organisations such as the International Organisation
for Securities Commissions (IOSCO) and the Group of 30 (G30) in the establishment
of a world class facility. The adoption of these standards has proven invaluable to
the South African market and has greatly enhanced our ability to reduce (and even
remove) barriers which have previously existed in respect of our securities industry.
The ability to capitalise on desirable characteristics of products and services (such
as, inter alia, quality, reliability and efficiency) which have been identified elsewhere
has led to the timely sharing of key technological advancements and good
management practices in an industry which is inherently reliant on sound practices.
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It is, however, imperative that we continue to protect an environment which is built
on the promotion of level playing fields which ascribe to the highest standards for
entities providing custody and settlement services. Solutions to common problems
and areas of innovation can be quickly disseminated around the world and provide
an ideal opportunity for fairer trade across legislative boundaries.
STRATE has, as one of its core objectives, the aim to drive global best practices and
develop value added opportunities for itself and the South African market
infrastructure as a whole. We pursue this objective by serving as a catalyst for new
thinking in a rapidly changing environment.
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JOHANNESBURG STOCK EXCHANGE
Johannesburg Stock Exchange is the only stock exchange in South Africa. It is one
of the largest stock exchanges as per the market capitalization.
The Johannesburg Stock Exchange (JSE) was formed to create an orderly market
for the optimal allocation of capital resources in the country. The JSE was initiated in
response to among others, the demand for capital to develop the goldmines. The
JSE is the 19th largest formal capital market in the world based on market
capitalisation and offers a means of raising capital to companies, government and
semi-government bodies, acting as a primary market. It also acts as a secondary
market where shares and equity securities are bought and sold.
The JSE belongs to and is governed by its members but, through their use of JSE
services and facilities, these members are also customers of the exchange. Many of
its members also trade in bonds through the bond exchange (BESA) and financial
futures through the futures exchange (SAFEX). Traditional options are traded on an
OTC basis, although some standardised options have been listed on certain
exchanges.
The main function of the JSE is the raining of primary capital by re-channeling cash
resources into productive economic activity, thus building up the economy while
enhancing job opportunities and wealth creation. As mentioned previously, it also
acts as a secondary market and liquidity is perhaps the most important objective of
any stock exchange. The success with which the primary market fulfils its function of
raising new investment capital is, among other elements, dependent upon the
liquidity in that market. A listing on the JSE enables companies to raise capital forexpansion and for the financing of new business. To the person in the street it
represents, in the medium to long term, a means of investment in the corporate
companies of a country. The capital appreciation from holding shares over a period
of time often exceeds the rate of inflation. For those who are knowledgeable about
the performance of selected shares, speculative buying and selling may be
appealing, but the risk is high.
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1) Ordinary shares
Shares with voting power, representing one vote per share, and earning
dividends if the profit is sufficient
2) N-shares, A-shares and B-shares
These shares often have different rights compared to ordinary shares, for
instance, different voting power. They often have less voting power than
ordinary shares and are issued to raise additional capital without affecting
control of major shareholders
3) Preference shares, convertible preference shares, cumulative
preference shares, redeemable preference shares and debentures
These are securities normally without voting power but with a preference to a
dividend or interest above the ordinary shares
4) Nil paid letters
Company may give existing shareholders the first right to buy the new shares
issued in proportion to the shareholding if it wants to raise additional capital.
For this right, a letter is issued which is called a nil paid letter (NPL). This
letter can be sold in the market.
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HOW TO LIST ON JSE
The JSE operate 2 markets:
The Main Board; and
AltX
MAIN BOARD
The principal requirements for a Main Board listing include:
A subscribed capital of at least R25 000 000;
Not less than 2,50,00,000 equity shares in issue; A satisfactory audited profit history for the preceding three financial years, the
last of which reported an audited profit of at least R8 000 000 before taxation
and after taking account of the headline earnings adjustment on a pre-tax
basis.
It must be carrying on as its main activity, either by itself or through one or
more of its subsidiaries, and independent business which is supported by its
historic revenue earning history and which gives it control over a majority of itsassets, and must have done so for the period covered by paragraph 4.28(c);
If it is a company with a majority of its assets invested in securities of other
companies listed on the JSE it must satisfy the "Criteria for listing" for
investment entities detailed in paragraphs 15.3 and 15.4;
20% of each class of equity securities shall be held by the public; and
The number of the public shareholders in respect of of listed securities shall
be at least: (i) 500 for equity securities, (ii) 50 for preference shares; and (iii)
25 for debentures.
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ALTX
In addition to the requirements set out above, an issuer wishing to apply for a listing
on AltX must comply with the following requirements:
The applicant issuer must appoint a Designated Adviser ("DA")
The applicant issuer must have share capital of at least R2 000 000
The public must hold a minimum of 10% of each class of equity securities and
the number of public shareholders shall be at least 100;
The directors must have completed the ALTX Directors Induction Programme
or must make arrangements to the satisfaction of the JSE to complete it;
The applicant issuer must appoint an executive financial director and the DA
must be satisfied (and submit confirmation in writing to the JSE ) that the
financial director has the appropriate expertise and experience to fulfill his/her
role
The applicant issuer must produce a profit forecast for the remainder of the
financial year during which it will list and one full financial year thereafter
The applicant issuer's auditors or attorneys must hold in trust 50% of the
shareholding of each director and the DA ("relevant securities") in such
applicant issuer from the date of listing, and a certificate to that effect must be
lodged with the JSE by the issuers auditors or attorneys.
At least 25% of the directors must be non-executive.
Methods of Obtaining Listing
A listing can either be via the front or back door.
A) FRONT DOOR LISTING
A front door listing takes place either by means of an:
introduction,
private placing or a
a public offer, in conjunction with the issue of a prospectus or a pre-listing
statement.
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1. An Introduction
This is suitable where the company does not need to raise capital and has a
sufficiently wide public spread of shareholdings. It is the quickest and
cheapest means of listing, as there is no offer to the public and minimum
formalities are required.
2. A Private Placing
This has proved to be the most common method of obtaining a listing. In this
instance, shares in the company are placed or offered to prospective
shareholders through private negotiation. Usually this will be done through a
sponsor or a merchant bank.
3. A Public Offer
This method requires the production of a prospectus which must be approved
and registered with the Registrar of Companies. The public will have a certain
period of time within which to submit their applications and payment. The
company will have to decide on the basis of allocation if there is an
oversubscription. If the offer is over-subscribed, the company earns interest
on the payments received until the date of refund. This increase may be used
to offset the costs of the offer.
THE PROSPECTUS / PRE-LISTING STATEMENT
When a company applies for a listing, it must produce a pre-listing statement
containing certain prescribed information concerning the company, its
business and its prospects. While the pre-listing statement may promote
investment in the company's shares, it is not an invitation to the public to
subscribe for shares, but rather aimed at enabling potential investors to make
an informed investment decision regarding the company's shares. If the pre-
listing statement contains a public offer, it will also have to comply with the
prospectus provisions contained in Section 148 and Schedule 3 of the
Companies Act. The pre-listing statement will largely be drafted by the
corporate advisor, the directors of the company accept full responsibility for
the accuracy of its content.
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B) BACK DOOR LISTING
A back door listing takes place either by means of:
cash shell or
a reverse listing.
1. Cash Shell
A listed cash shell company acquires a viable business, either for cash, or for
the issue of additional shares in the cash shell company. A cash shell is a
listed company whose assets consist entirely or mostly of cash or shares
because it has disposed of all, or a substantial part of its business.
2. Reverse Takeover
A listed company acquires a larger but unlisted company or business. This
results in a change of control of the shareholding of the listed company, and
also requires the publication of a listing statement.
In a reverse takeover, a compatible listed company will acquire the unlisted
company with the purchase consideration being paid by the issue of new
shares in the listed company. These new shares must be sufficient in number
and value to ensure that the shareholders have a controlling interest in the
listed company after the issue of new shares.
THE TIMING OF THE LISTING
Two factors, that is, the condition of the market and state of the company would
determine the date of entering the market. Listing is generally risky when the
markets are declining and the company should possess sound financial position and
systems that can comply with the JSE's financial disclosure requirements.
THE ISSUE PRICE
(i) Estimated Market Price
The value of the securities can be arrived at by using various methods like the
potential dividend yield, price/earnings ratio, discounted cash flow analysis
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and net asset value or a combination of these and other methods. Also the
returns of listed securities of the sector in which the company intends to list
with similar risk profile should be considered.
(ii) The Discount to Market Price
In order to attract investors to subscribe to the shares of the company, they
should be issued at reasonable discount of 15% to 20% to the estimated
market price. This would not only protect the company against decline in
share prices on exchange but would also ensure a price rise if the market
price was estimated correctly.
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Requirements And Checklists
Listing Requirements Main/Africa Board AltX
Share capital R25 million R2 Million
Profit history 3 years None
Pre-tax profit R8 million N/A
Shareholder spread 20% 10%
Number of shareholders 300 100
Sponsor/DA Sponsor Designated advisor
Publication in the press Compulsory Voluntary
Number of transaction categories 2 (threshold 25%) 2 (threshold 50%)
Annual listing fee
0.04% of average
market capitalization
with a minimum of
R33545 and a
maximum of
R170440.55 (including
VAT).
R27189.25
(including VAT)
Education requirements N/A
All directors toattend Directors
Induction
Programme
http://www.jse.co.za/Item%20not%20found:%20%5BLibraries%5Dffdec978-dec4-4ea6-9087-9700d754bb2dhttp://www.jse.co.za/Item%20not%20found:%20%5BLibraries%5De78103ca-fa07-4640-9a74-5119b1822762http://www.jse.co.za/Item%20not%20found:%20%5BLibraries%5De78103ca-fa07-4640-9a74-5119b1822762http://www.jse.co.za/How-To-List/AltX.aspx#diphttp://www.jse.co.za/How-To-List/AltX.aspx#diphttp://www.jse.co.za/How-To-List/AltX.aspx#diphttp://www.jse.co.za/How-To-List/AltX.aspx#diphttp://www.jse.co.za/How-To-List/AltX.aspx#diphttp://www.jse.co.za/How-To-List/AltX.aspx#diphttp://www.jse.co.za/How-To-List/AltX.aspx#diphttp://www.jse.co.za/Item%20not%20found:%20%5BLibraries%5De78103ca-fa07-4640-9a74-5119b1822762http://www.jse.co.za/Item%20not%20found:%20%5BLibraries%5Dffdec978-dec4-4ea6-9087-9700d754bb2d -
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THE LISTINGS PROCESS
APPOINTMENT OF PROFESSIONAL ADVISORS:
If a company wants to apply for listing on JSE, it should consult and appoint
competent and experienced professional advisor.
SPONSOR:
To be able to list on the main board of JSE, appointment of a sponsor is
compulsory. The sponsor acts as a liaison between JSE and the company
and has to advise and see whether the company is suitable for listing and the
listing requirements are met or not. It has to look after the application of listing
and submission of listing documents to JSE.
CORPORATE ADVISOR:
It is advisable that the company appoints a corporate advisor (usually
corporate finance divisions of stockbrokers, merchant banks or auditing firms).
Their functions often overlap with that of the sponsor. Their main
responsibilities include advising the company on the method of listing in
case of placing and public offer, arranging for placing and underwritingrespectively; advising for the size, terms, timing and pricing of the offer,
market conditions and the potential demand for the company's shares;
coordinating the listing process; drafting the listings documentation, with the
assistance of the company and the company's legal advisor, accountant and
sponsoring broker; take steps to generate demand for the company's shares.
LEGAL ADVISOR:
It is advisable to appoint a competent legal advisor. The main responsibilities
of the legal advisor is to assist the company in drafting - the listing documents
to ensure that all legal requirements are met; necessary agreements in case
of underwriting or placing and preparing share option schemes for the
company.
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ACCOUNTANT:
Appointment of an independent registered accountant and auditor is
compulsory for listing on JSE, to report about the profits and the financial
position of the company over the previous three years in the prospectus or
pre-listing statement.
TRANSFER SECRETARIES:
Companys register of members, issue of share certificates, registration of
transfers and mailing of companys circulars are to be taken care of by the
Transfer Secretaries.
STRATE:
For the dematerialisation shares to be registered, the company must be
approved as STRATE eligible in terms of the Central Securities Depositary
Rules.
PUBLIC RELATIONS CONSULTANT:
Public relations consultants assist in promoting a positive image of the
company before a listing.
TECHNICAL ADVISOR:
Appointment of Technical advisors is mandatory in the case of listing of
mineral companies on JSE, for report on the company and its exploration
and/or mining activities to be included in the prospectus or pre-listing
statement.
PRINTERS:
To print the share certificates and prospectus or prelisting statement, the
company should contract with a firm of printers.
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COSTS ATTACHED TO THE LISTING
The cost of listing of a company depends on a number of factors and will be
influenced by the companys objectives and way of functioning of company.
In addition to creation duty, issue duty, stamp duty on transfer of shares,
underwriting fees, bank charges, and brokerage, after listing, the company also has
to pay an annual listing fee (in February of each year except the year of listing).
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SOUTH AFRICAN FUTURES EXCHANGE
The South African Futures Exchange (Safex) consists of a financial markets
division (equity derivatives) and an Agricultural Markets Division (AMD) - agricultural
derivatives.
The measures of the financial markets division have grown from R3.4 million at its
formation in 1990 to R69 million at June 1997. Safex experienced a growth of 10.36
million contracts during the 1996/97 financial year, a year-on-year increase of 35
percent.
AMD was formed in 1995 and by 30 June 1997, the net reserves amounted to R3.2
million compared with the original operating forecast of R1.4 million.Safex has kept abreast of developments in the world financial markets, and
continues to make steady progress despite intensifying competition from
international derivative exchanges and over-the-counter alternatives. The Safex
reserves have grown sufficiently to allow a significant reduction in the fees it levies
per future or options contract. Consequently, all fees were reduced by 50 per cent in
1997 and the changes on allocated trades were removed.
The Exchange is directed by an executive committee consisting of up to 11 elected
members all with full voting rights, and an additional non-voting nominated people
that the executive appoints. Policy decisions are made by the committee and carried
out by a full-time management team headed by the CEO.
The Exchange is governed by members, but through their use of the exchange
services, they are also its clients. The exchange is a Self Regulatory Authority and
exercises its regulatory functions in terms of the Financial Markets Control Act, 1989
and its rules. The Exchange, in turn, is supervised by FSB.
Equity Derivatives Market
The Equity Derivatives market provides a platform for trading Futures and/or
Options. Futures and Options are derivative instruments which derive their value
from an underlying instrument.
On-Exchange trading provide clients with transparency, eliminates counterparty risk,
and as the Exchange we are an Independent source for price discovery.
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The regular administration of margins prevents participants from accumulating large
unpaid losses, which could impact on the financial position of other market users
(systemic risk). Such margining systems do not exist in over-the-counter (OTC)
markets.
The protection and safeguarding of clients interests are of utmost importance.
Regulation, therefore, plays a crucial role in this regard with the Equity Derivatives
market being overseen by the Financial Services Board and controlled in terms of
the Securities Services Act. Certain regulatory activities include the registration of all
members and clients, strict financial requirements for members and regular
inspection of members records and procedures.
Commodity Derivatives Market
The Commodity Derivatives Market provides a platform for price discovery and
efficient price risk management for the grains market in South and Southern Africa.
More recently, the Division also offers derivatives on precious metals and crude oil.
Commodity markets have existed for many centuries and were the first to innovate
contracts in which to manage price risk. The use of derivative instruments throughfutures and options contracts, provide market participants with the ability to manage
their price risk in the underlying physical market. By trading on a formal exchange
which connects buyers and sellers, not only is price discovery achieved in a
transparent fashion, but all transactions are guaranteed through the derivatives
clearing structure.
Producers and users of agricultural commodities who hedge their price risk are
thereby limiting their exposure to adverse price movements. This encourages
increased productivity in the agricultural sector as farmers and users are able to
concentrate their efforts on managing production risks. Production risks associated
with variables such as the weather, farm/production management and seasonal
conditions.
The physically settled commodities rely on warehouse receipts to facilitate thedelivery process. The warehouse receipts are utilized by financial institutions who
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offer financing to clients who own the receipts. Derivative contracts also enable
institutions to fund input costs to producers who hedge their price risk and in so
doing encourage sustainable production.
The cash settled commodities, like gold and crude oil, reference highly liquid
international markets for the final cash settlement value thereby providing all
participants with the assurance that the local settlement price is not open to any
abuse.
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BOND EXCHANGE OF SOUTH AFRICA (BESA)
The bond market, along with the money market, is a financial market; however,
whereas the money market is designed to supply liquidity in exchange for short-term
securities, the bond market supplies liquidity for long term securities. Bond markets
are often without a centralised exchange system, and transactions/trades are
completed in an over-the-counter fashion. Bond market liquidity is generally provided
by dealers who commit risk capital to trading activity.
In the bond market, the counter party to an investor/investment fund who/which
either purchases or sells a bond is almost always not another investor, but a bank or
securities firm acting as a dealer. The bank or firm assumes some risk in the process
as the market value of the bond might decrease before the dealer is able to sell it to
another investor/investment fund.
The vast majority of bonds are bought and traded by institutions like central banks,
insurance companies, banks, and investment funds like sovereign wealth funds and
pension funds. There is nothing to deter individual investors from purchasing and
owning bonds, however. Individuals are more likely to own and trade and stocks as
the stock market is more liquid than the bond market despite the fact that bond yieldsare often better than stock dividends.
The South African bond market is a leader among emerging market economies. In
2008, local debt securities totalled R825 billion (nominal), and the bond market
traded a volume of just over R19 trillion.
South Africas domestic bond market is dominated by government issued bonds, and
does in fact have a centralised exchange known as the Bond Exchange of South
Africa Limited (BESA). BESA is an independent, licensed exchange, and after
demutualisation in 2002, is constituted as a public company.
The bond exchange has been mandated to operate and regulate the long term debt
securities and interest rate derivatives markets in South Africa. BESA aims to build
the local capital market by providing a variety of platforms and services to meet the
demands of securities market participants (issuers, traders and investors). BESA
also acts as a direct regulator of the domestic bond market, and operates according
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to the parameters set out by the Securities Services Act of 2004, and is further
committed to follow its own guidelines that have been sanctioned by South Africas
Financial Services Board (FSB).
The Bond Exchange of South Africa is also dedicated to protect both traders and
dealers through the implementation of best practice standards, and regulates the
conduct of issuers and traders by surveillance and enforcing quality controls through
the mechanism of minimum disclosure standards.
Turnover
The South African bond market is a leader among emerging-market economies.
Turnover reported on BESA in 2008 reached a record R19.2 trillion. Given listed debtsecurities of R825 billion nominal, overall market velocity in the local market was 23,
up from 17.7 reported in 2007. However, when offshore OTS trades are included,
turnover velocity for the year was 29, up from 24 in 2007.
The local bond market is still dominated by securities issued by the South African
government, with local government, public enterprises and major corporations
accounting for the rest of the debt issuers active in the market. The number of
borrowers and listed bonds as well as the market capitalisation have all risen sharply
at December 2008 BESA had listed some 1,102 debt securities, issued by 100
sovereign and corporate borrowers, with a total market cap of R935 billion.
Turmoil in global financial markets and conditions in the domestic economy in 2008
rendered the expansion of the primary bond market difficult. Notwithstanding this,
bond listings on BESA grew by 5.6% on the previous year, albeit the slowest rate of
growth since 2002. The bulk of this growth (37%) can be attributed to the increased
issuance of commercial paper by corporates as well as increased issuance by state
owned enterprises. Central government listings still accounted for the bulk of listings
on the Exchange.
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INVESTING IN SOUTH AFRICAN FINANCIAL MARKETS
OPPORTUNITIES FOR BRICS NATION
The BRICS nations (Brazil, Russia, India, China and South Africa) have a joint
initiative known as 'BRICSMART', launched in the year 2012. BRICSMART
involves trading in derivatives in the exchanges of BRICS nations which
include, Brazilian BM&FBOVESPA, the Russian MICX-RTS, the Hong Kong
Exchanges and Clearing Ltd (HKEx), the Johannesburg Stock Exchange
(JSE) from South Africa and the Bombay Stock Exchange (BSE) from India.
This initiative allows access to investors of each country to the other
participating exchanges through a broker in the home country. Trading is
done in local currency and is not subject to exchange controls. BRICSMART
is an ideal way for investors to take the advantage of these emerging
economies, with their increasing economic power.
INDIAN DEPOSITORY RECEIPTS
Companies listed on JSE can issue Indian Depository Receipts to raise funds
from the Indian market. Thus, investors in India can invest in the South
African financial market through this medium. The investors get all the rights
of the share holders except the rights of attending annual general meetings
and voting on resolutions.
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CONCLUSION
Emerging economy; India is now eying towards over sea markets for catering its
financial needs and also support its investment decision. Any Indian company when
looks towards the foreign market, either to invest or procure funds, easiness in the
process is the thing which makes any foreign market more attractive and visible.
As far as South Africa is looked upon, the process for any Indian company either to
invest or satisfy its financial need is not a joyful journey as its market watch dog, to
larger extent, has maintained a fence over protecting its market and making it hassle
for Indian companies to get money or to invest it.
However, the capital market provides some kind of flexibility to Indian investors who
want to invest in companies listed on JSE. This includes both, the Main Board and
the AltX. The medium of investment though unclear, what has been clearly identified
is that there is no foreign registration process, no withholding taxes and no foreign
ownership limits for foreign investors, and this obstructs the way for sub continent
company in their way.
The capital market of South Africa provides India, opportunities to trade in the
derivatives market of JSE through BRICSMART. The companies listed on JSE if opt
for raising funds from the Indian market, the Indian investors can invest through
Indian Depository Receipts.
The concept of dual listing proposed by the Government of South Africa is to allow
equity trading, between Indian and South African Stock Exchanges, of those
companies that are listed on either of the stock exchanges. Here also a road block isthere as only those Indian companies, which are listed on stock exchanges in India,
are allowed to list on JSE i.e., they have to apply for dual listing. Also, the concept of
dual listing, would require the GOI to review and revise the Foreign Exchange
Management Act.
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BIBLIOGRAPHY
Book:
Understanding South African financial markets, author C. Van Zyl, 3 rd edition,
January 2009.
Links:
October 09, 2012
http://www.business-standard.com/india/news/indian-depository-receipts-
faqs/390215/
http://rbidocs.rbi.org.in/rdocs/Notification/PDFs/APDIR5220709.pdf
http://www.lexvidhi.com/article-details/indian-depository-receipts-idrs-some-
faqs-406.html
http://www.jse.co.za/Libraries/JSE_-_How_to_List_-
_Guideline_to_Listing_on_the_JSE/Guidelines_to_Listing_on_the_JSE.sflb.a
shx
http://www.jse.co.za/How-To-List.aspx
http://www.jse.co.za/Libraries/JSE_-_How_to_List_-
_Guideline_to_Listing_on_the_JSE/Guidelines_to_Listing_on_the_JSE.sflb.a
shx
http://www.southafrica.info/business/investing/help/jse-
investors.htm#.UMBXQuRfG0d
http://mg.co.za/article/2012-03-29-jse-provides-new-international-investment-
options
http://en.wikipedia.org/wiki/Indian_Depository_Receipt
http://mg.co.za/article/2012-03-29-jse-provides-new-international-investment-
options
-
7/30/2019 Economy of South africa
46/46
October 6, 2012
http://www.southafrica.info/business/economy/development/idc-
040912.htm#.UG_lI5hhx0o
http://www.moneymarket.co.za/Top-20-Money-Market-Funds.aspx
http://www.southafrica.info/business/investing/
http://www.southafrica.info/business/trends/
http://www.southafrica.info/business/investing/opportunities/jse-
020812.htm#.UG_hR5hhx0o
http://www.southafrica.info/business/economy/sectors/financial.htm
October 10, 2012
http://www.jse.co.za/Libraries/JSE_-_Regulatory_Environment_-
_Rules_Directives_-_JSE_Equities_Rules/1_JSE_Equities_Rules.sflb.ashx
http://www.jse.co.za/Markets/Equity-Derivatives-Market.aspx
http://www.jse.co.za/Markets/Commodity-Derivatives-Market.aspx
http://en.wikipedia.org/wiki/Bond_Exchange_of_South_Africa
http://www.bondexchange.co.za/south-africa
http://en.wikipedia.org/wiki/South_African_Futures_Exchange
http://www.strate.co.za/default.aspx
October 15, 2012
http://www.resbank.co.za/Research/Rates/Pages/CurrentMarketRates.aspx
http://wwwrs.resbank.co.za/WebIndicators/Definitions.aspx?DataCategory=C
MRMMR
htt // fi i l k t j l /3 d diti / i t d ti l /t bill