From the CEO

From the CEO

The pace of change in which all of us operate is accelerating. The IMF expects the global economy to expand by 3.4% year-on-year in 2017 and that emerging and developing economies will also fare better and continue to exceed growth rates across the developed world.

Of course, the outlook for global economies is likely to be volatile and could very easily be affected by issues as diverse as the new political dispensation in the US as it takes shape; the key drivers of China’s growth; and the fate of the Eurozone and broader EU, with both France and Germany bracing for elections in 2017 and facing disruption as Britain negotiates its exit from the EU.

The GDP outlook for SA pins growth at 0.8% year-on-year, only slightly ahead of its relatively dismal 2016 performance. This type of growth rate, however, makes it very difficult to address the significant socio-economic challenges that we face as a country.

Against this background, domestically we anticipate continued political noise – especially in the lead-up to the ANC leadership elections; continued low growth rates leading to increasing dissatisfaction in the rate of change from the economically marginalised; increased competitive noise as new licences are granted in our industry and recent entrants start to operate; continued financial regulatory developments, both as twin peaks legislation begins to be implemented and as national regulators drive further towards global regulatory compliance; increased corporate activity and innovation among our global exchange peers and specifically in the post-trade and the information services areas, putting pressure on the products and services we need to provide to service our clients properly; and continued acceleration in technological innovation.

So how does this translate to the exchange and our clients? 2016 was a year of hard work in an environment of uncertainty in a number of areas – not only for the JSE but also for business in general. That said, the JSE team made good use of the year by laying a sound foundation for the challenges and opportunities ahead.

We are delivering on our strategic objectives and therefore well on the way to building a world-class and completely integrated multi-product exchange.

The JSE has a central and crucial role to play in corporate SA, both in operating a world-class environment that stakeholders can trust and by using its voice to enable and support a robust and informed discourse at critical moments in our country. To this end, we very much appreciated the opportunity to partner with government and with some of our largest listed companies and clients to promote the SA investment case. We will continue this engagement throughout 2017, as we are not yet out of the woods and need to work hard towards truly inclusive growth that benefits all South Africans.

SA’s overall rating in the WEF’s Global Competitiveness Index improved in the 2016/17 rankings to 47th from 49th in 2014/15 and from 52nd in 2012/13. The financial sector and corporate governance continue to be strengths for SA and we have top three global rankings in the following categories: strength of auditing and reporting standards; protection of minority shareholders’ rights; and financing through the local equity market. We are number two in financial services meeting business needs and soundness of banks, as well as number three in efficacy of corporate boards and regulation of securities exchanges.

These accolades demonstrate how globally relevant and competitive our financial sector remains. As a country, we should be focused on how to leverage these competitive strengths as part of the strategy to build inclusive growth.

Turning to the JSE: in 2017 we will focus strongly on our post-trade services, where we intend to expand our clearing and ancillary post-trade services; and information services, where we plan to build our index and market data businesses and establish a robust valuations business.

As always, there is always more to do to provide easier and broader access for our clients: investing in faster and more secure technology (as we are doing in replacing our derivatives trading and clearing technology); introducing new instruments and products for investors and members (as we did in implementing the equity market enhancements in September 2016); ensuring regulation is both appropriate and enabling (as one can see in the new approach taken in King IV); and bringing down costs (as we did in reducing BDA costs to clients by 20% and zeroing fees for option delta trades) will continue to be our ongoing focus.

So, I wish you all strength as you tackle the challenges and opportunities the year brings. We would be delighted to partner with you as you do this.

Nicky Newton-King
Chief Executive Officer, JSE

January 2017
Image: Ricardo Lategan