Race ratio for investors on the JSE starts to equate

According to a recent press release from the Johannesburg Stock Exchange (JSE), black South Africans hold at least 23% of the JSE Top 100 listed companies.

White South Africans were found to hold about 22% of the JSE Top 100, while foreign investors hold approximately 39%.
Since 2011, black economic interest on the JSE has risen from 21% to 23%. JSE CEO Nicky Newton-King explained: “The shareholder analysis over this period demonstrates that economic transformation is taking place.”

Which investments are more popular?

According to the report, mandated investments are the most popular form of investment funds on the JSE for both black and white South Africans, with mandated investments accounting for “37% of total investment into the JSE’s Top 100 companies.”

A mandated investment is when an individual saves through a retirement fund or a unit trust scheme and the fund invests in the market.

Newton-King elaborated: “The individual is the beneficiary of the investment but doesn’t actually set up the investment account and do the investing him or herself.”

On the other hand, a direct investment is when an individual or a group sets up an account with a broker and trades directly on the market.

The reports focuses on sectors rather than on specific companies.

Trevor Chandler, chairman of Alternative Prosperity and leader of the research team, believes that broken down by industry, financials contribute the most towards BEE economic interest values.

The researchers observed that BEE performance tends to do well where industries have significant reliance on sales to government, where BEE plays a role in the granting of business licenses and where sectors have made commitments in terms of sector codes.

The rise in investment

Newton-King said: “Whilst the level of economic interest by black South Africans is linked to our country’s history, the low level of direct participation on the exchange by all South Africans is also linked to generally low financial literacy and related savings. South Africans are often tentative about investing directly on the market.”

However, the most South Africans in formal employment save through their retirement funds, which are the biggest South African investors on the stock market.

The largest of these being the Government Employee Pension Scheme (GEPF) whose members include most civil servants other than those working for municipalities.

Reasons to research

“The biggest reason the researchers found for increased black economic interest is that those in formal employment are gradually and consistently growing their investment strength through their retirement savings,” added Newton-King.

Furthermore, Newton-King highlights that the financial services industry is working to improve financial literacy.
“For example the JSE runs directed capital educational programs in schools and universities and to the general public. We are also gearing up to promote the tax free savings accounts for South Africans recently launched by National Treasury, due to kick off in 2015. We believe this will be an important route to encourage more individual saving and investment through the stock market.”