JSE has proved it is anti-fragile

Foreword

The JSE has proved, through the storm of the pandemic, that it is anti-fragile

Foreword

When the COVID-19 pandemic hit us, we had to quickly and radically change the way our business operated, and even the way we lead our lives. Months later, the storm of infection is upon us, and we are still searching for new and better ways to cope.

Fortunately the JSE was well-positioned to manage the extraordinary volatility that hit the global economy. From the onset, our focus was to keep trading and to provide uninterrupted service to issuers and investors alike. At the same time, we had to provide relief for the most vulnerable companies, those small cash-constrained businesses that were most sensitive to the financial distress caused by the lockdown and the pandemic itself.

Our first step was to extend payment terms, on a case- by-case basis, of between three and six months, with no interest charged. Secondly, we decreased trading fees in small, mid-cap and BEE companies listed on the JSE AltX and BEE Board for the rest of 2020. We continued paying monthly retainers to our small and medium suppliers, while also increasing the cash disbursements from 33% to 50% of trading fees given back to emerging stockbrokers on the JSE’s enterprise development programme. These brokers are 51% black-owned and they are a key part of our transformation strategy. All this has been aimed at stimulating further liquidity and supporting the vital SME growth sector in our increasingly strained economy.

We acted swiftly when the pandemic began, and we have proven to be anti-fragile in this critical time. We adapted quickly, due – in very large part – to the resilience shown by our staff, working under extreme pressures that none of us had ever encountered before. It is becoming evident that this is not a temporary situation, and I am incredibly proud of the resilience of the team and the way our people continue to innovate and thrive in this challenging ongoing space we find ourselves in.

Global markets have grown back since their sell-off in March, and the FTSE/JSE All Share Index has followed, recovering more than 45%. SA bonds saw renewed interest from foreign investors who were net purchasers in the month of June, despite losing our investment-grade rating and ejection from the FTSE World Government Bond Index . Our exchange offers a diverse range of asset classes that typically counterbalance over a cycle; trading on many world-class dual-listed companies as well as popular rand hedges. Our local asset-management industry buttresses our markets, filling the vacuum of liquidity left when international investors exit during risk-off markets.

Looking ahead, our goal is now to transition from short-term durability to moving forward in the medium- and long-term post-COVID world. Sustainability and adaptability are key drivers of this transition. Sustainability is a non-negotiable imperative for our country with its staggering levels of inequality, giving us the highest Gini coefficient in the world. This inequality needs to come to an end. The legacy of discrimination under decades of apartheid must be overcome. The opportunity for a reset brought about by COVID-19 gives us a unique opportunity to do so.

I represent the JSE and, indeed, SA as co-chair of the UN-sponsored Global Investors for Sustainable Development Alliance. The alliance has a two-year mandate to shift our direction towards long-term sustainable development. Already we have seen how quickly the global reliance on fossil fuels can be altered, with a positive effect on the ecosphere. The challenge of climate change is even more pressing when we consider that the African continent is likely to be hardest hit by climate change, with millions of people displaced and forced into conflict over water, food and a habitable environment.

We must ensure that we build back better for the generations to come. The first step is to get behind the UN 2030 Agenda and work towards its Sustainable Development Goals. The lockdown has shown us we can do it; in our efforts to contain the infection curve we have flattened the emissions curve. We need to forge ahead with new technologies and changed mindsets; our planet demands it, and our people should insist on it.

The global economy has the means and growing desire to affect such change though redirecting financial flows towards sustainable and socially responsible investment strategies. Interest in environmental, social and governance (ESG) investments has jumped from 71% in 2015 to 85%. There is a growing inflow of money into such funds, and many are outperforming their broader market benchmarks.

At the JSE we are consciously expanding our ESG platforms, not only as investment opportunities, but also as a deep commitment to our country, our continent and our children’s future. We didn’t know what to expect when this virus hit, but we have learnt now that we have a real chance to build a better country, that serves more of its people, while contributing towards a sustainable world. This is the only way.

Leila Fourie
JSE Group Chief Executive Officer
July 2020