SA business titans have come together to draft proposals intended to expand SA’s capital markets and fuel job creation, drawing inspiration from the UK’s capital markets industry taskforce, which is driving London’s largest capital market reform in decades.
JSE CEO Leila Fourie will chair the bid, dubbed Operation Phumelela, which was launched on Friday. Also known as the SA financial sector competitiveness taskforce, Operation Phumelela will be tasked to “develop research and mobilise resources to improve onshore capacity and engage government regarding regulatory development”.
Other members of Operation Phumelela include Nedbank chair Daniel Mminele, Old Mutual CEO Iain Williamson, Remgro CEO Jannie Durand, PSG Capital chair Johan Holtzhausen, Bowmans chair Ezra David, ENS chair Michael Katz and Vuyo Ntoi, who chairs the Southern African Venture Capital & Private Equity Association.
Fourie told Business Day the taskforce’s tenure was open-ended, though steering committee members had committed to an initial period of two years.
“Proposals will develop over time, with initial concepts to be tabled for discussion within the next two months,” she said.
“We are, though, conscious that policy development needs time for consultation on the part of government, and that government has a timetable that is driven by the annual budget process. The budget has historically been the time to announce policy changes,” Fourie said, adding there was no reason SA could not be a leading emerging markets hub for sustainable finance.
SA’s capital markets, anchored by the JSE, are regarded as the most developed in Africa, with the country also ranking highly on other measures of financial market depth such as private credit as a percentage of GDP, demonstrating that consumers have access to a range of financial instruments.
The Absa Africa financial markets index 2024, released a month ago, shows that while SA is still a cut above the rest of the continent in market development, other countries are making great strides. Mauritius, Namibia and Botswana rank highest on market transparency, tax and the regulatory environment; pension fund development and the macroeconomic environment, respectively.
Competitiveness
One of the main tasks of Operation Phumelela will be to ramp up the competitiveness of SA as a preferred investment and capital raising destination.
The intention is to enhance an ecosystem that will support everything from fund managers to law firms, to manage and support investors from across the world who are active in the region, as well as to facilitate regional manufacturing, mining and agricultural exports.
The Treasury welcomed the establishment of Operation Phumelela. “The financial sector is both a key catalytic sector which enables broader economic activity, as well as a significant sector in and of itself. Improving its competitiveness and effectiveness is an important and long-standing policy objective,” deputy director-general Christopher Axelson said.
“We welcome this initiative, which will create a sounding board for government-initiated reforms in capital markets as well as provide a mechanism for the sector to engage Treasury as we seek to drive efficiencies to deliver sustainable economic growth,” he said.
Fourie said after discussions it was decided not to have government officials in the taskforce, but that there would be a serious interface with the government. “We have agreed with the National Treasury that we will invite representatives to attend engagements with the taskforce when there are proposals and research to share. We expect these will allow for feedback and engagement, leading to constructive and well-developed proposals,” she said.
“Note, however, that the taskforce will also develop research and proposals for the industry itself. There are several potential initiatives that could improve competitiveness within the existing regulatory environment. Also, it will be important that the industry build the infrastructure necessary to deliver services that may be enabled by future regulatory changes.
“We have discussed inclusion in the taskforce, but the view was taken that it is appropriate to have an arms-length relationship to ensure that the government is able to exercise appropriate independence in considering proposals.
“However, we have agreed that there will be good channels of communication from both sides,” Fourie said.
The 137-year-old JSE has faced a delistings headache, which has seen the number of companies listed on the bourse fall by half over the past two decades. To arrest this the exchange, which still has a market capitalisation north of R15-trillion, has split the main board into two segments, tailored to meet the needs of large corporations and smaller firms.
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