Black South Africans hold at least 17% of the Top 100 Companies listed on the Johannesburg Stock Exchange, claims a study released by the Johannesburg bourse yesterday.
Commissioned by the JSE and conducted by Trevor Chandler of Chandler & Associates the study is yet to assess 32% of the JSE listed shares. “With 32% of the equity yet to research, we believe that the ownership figure is actually understated,” said the CEO Russell Loubser. “We also anticipate that the black economic interest will climb in future”.
“In a country undergoing economic transformation, it is important to have empirical data about black investment on the JSE,” said Loubser. “The exchange has the records needed for meaningful research, as we carry out, clear and settle trades. We believe that this research gives South Africa a basis from which black ownership can be measured in future.
The JSE said the 17% black ownership includes 8% held directly, mostly through empowerment stakes, and 9% through mandated investments, such as pension funds and unit trusts.
The study added that last year’s assessment revealed that black South Africans held 8% of the Top 100 companies through direct investment. This year, researchers found that the 8% through direct investment remains constant and that black South Africans also hold a further 9% of shares in Top 100 companies through mandated investments.
Mandated investors do not select shares themselves, but gain exposure through life offices, pension funds, unit trusts or exchange traded funds.
The research is being done in phases due to the extremely time-consuming nature of the analysis. This year, the researchers had to wade through ten million share ownership records to assess half the shares owned through mandated investments. (The other half still needs be researched, meaning that the total number of shares held by black investors through mandated funds is likely to increase in future studies.) Verification agency AQRate confirmed the findings by checking the data against pension fund statistics, company annual reports and other records to ensure accuracy.
Given that the Department of Trade and Industry (DTI) is central in the country’s formulation of BEE codes, the researchers applied the DTI’s suggested methodology. Using the calculation method suggested in the DTI BEE codes, certain categories of ownership are excluded as the investors are deemed to be neither black nor white. The DTI excludes shares held by the State and Treasury shares (2% of all shares in the Top 100 companies in 2011). In addition cross holdings between listed entities (11%) were excluded to avoid double counting. DTI also suggests subtracting shares to the value of foreign operations held by groups with offshore assets (27%).
This year, therefore, only 60% of shares can be acquired by black or white South Africans. This boosts the percentage held by black South Africans. According to the DTI method, black South Africans hold 17% of 60%, or 28% of all available shares.
“More black South Africans own shares through mandated investments than through BEE deals,” says Chandler. “By number, middle class black South Africans are the main beneficiaries of mandated investment. This is achieved with no gearing – pension funds, life insurance policies and collective investment schemes do not carry debt.”
This, says Chris van Wyk of AQRate, means that the market complies with generic codes 2017 targets, in aggregate. “The BEE Codes require 25% black ownership by 2017. Currently black people own at least 28%. Moreover, with 32% of total market yet to be analysed, the actual black ownership figure is likely to be higher.”
The JSE said as encouraging as the data appears, much still needs to be done to achieve an equitable landscape.