JSE Listed Firms Characterise SA Economy - CCRED


The structure of the South African economy is characterised by large firms with significant amounts of retained profits, high levels of concentration and skewed patterns of ownership, says Thando Vilakazi, senior economist at the Centre for Competition, Regulation and Economic Development (CCRED).

Following its research, CCRED found that firms listed on the Johannesburg Stock Exchange (JSE) have an important role to play in economic growth and industrialisation in South Africa.

“Given the current debates on structural economic transformation, understanding firms’ investment decisions is important to see how policy levers can be designed to influence the investment decisions made by large companies to yield more inclusive, competitive and innovative development outcomes,” Vilakazi said.

The research found it was difficult to claim there was an investment strike amongst SA’s biggest companies, which would imply joint action by the companies. However, the assessment shows that while real investment had increased from the early 2000s to around 2008, it has levelled out since then at around 10% of real GDP on average.

Corresponding data reported by listed companies confirms that firms were not investing as much as they could have been as reserve accumulation increased from R242 billion to R1.4 trillion between 2005 to 2016.

“This illustrates that lack of investment in South Africa is not only as a result of a lack of savings, as reserves are high, but could be explained by other factors such as low return on investments and uncertainty relating to the financial crisis at the time, and political issues in South Africa more recently,” said Vilakazi.  

“This is a worrying trend as it shows business is not re-investing in growth of the economy.”

The research further found that since 2000, high levels of internationalisation of large businesses in South Africa have led to a significant number of large firms in South Africa with cross-listings or considerable operations outside South Africa.

“For instance, eight of the top 10 companies listed on the JSE in 2017 are cross-listed on other stock exchanges.  Together these companies accounted for 54% of the total JSE market capitalisation.  Of the entire Top 50 firms, 23 are cross-listed, accounting for 65% of total JSE capitalisation,” Vilakazi said.

Vilakazi added that when accounting for internationalisation, cross-listing, and the extent of operations actually in South Africa, the remaining 377 firms account for a mere 35% of the total JSE market capitalisation.

“These firms represent the ‘Real JSE’. Measuring black ownership needs to take into account levels of internationalisation and whether companies owned by an increasing number of black South Africans actually have operations in South Africa. Increasing black ownership and industrial development support for companies with significant operations in South Africa should matter most given they can contribute to investment, employment and productive growth domestically,” concluded Vilakazi.