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New stock exchanges are attracting investors

An overview of the current banking and financial services sector in Gauteng Province, South Africa.

The decision by pharmaceutical giant Aspen Pharmacare to conduct a second listing on one of South Africa’s newest exchanges, A2X, suggests that the timing of the people behind the latest trend in the country’s financial services sector was spot on.

A2X has attracted nearly 20 companies in a wide range of sectors in less than two years, with a primary focus on secondary listings. Patrice Motsepe’s African Rainbow Capital is an investor in A2X.

Of the four new exchanges, Equity Express Securities Exchange (EESE) trades in Black Economic Empowerment (BEE) while ZARX and 4AX are targeting companies that are not listed elsewhere. ZARX has agricultural holding companies like TWK and Senwes among its first clients.

The JSE is the world’s 19th biggest exchange and nearly 400 companies are listed on the JSE or AltX, the JSE-owned exchange for smaller companies. The JSE also offers other investment options.

In 2017 Tyme Digital received a licence to run a bank. By early 2019, TymeBank was available in 500 Pick n Pay and Boxer stores and more than 50 000 customers had a TymeBank account. Tyme stands for Take Your Money Everywhere and refers to the fact that the bank does not have a branch network. The bank is targeting the lower-income segment and promises speedy transaction and approval times.

African Rainbow Capital began as the venture’s BEE partner but in 2018 bought out the Commonwealth Bank of Australia. The banking licence is the first to be issued since Capitec was granted a licence by the South African Reserve Bank in 1999.

Second to market among the country’s new banks was Discovery Bank, which officially launched in March 2019. Discovery Bank will apply the behavioural model it uses in its health business to reward good financial behaviour. The Discovery group is already a giant on the JSE (market value of R83-billion) with a wide range of products and services that give it access to millions of customers.

Life insurer MMI Holdings is entering a partnership with African Bank to enable it to start taking deposits and loaning money.

Gauteng’s Treasury has completed a feasibility study on establishing a provincial state bank. This would enable funding to be made available for the many infrastructure projects that are planned in the medium and long-term for Gauteng, together with making loans available for the SMME and township enterprise sectors.

For many decades, South Africa had a retail banking Big Four – Standard Bank, Nedbank, Absa and First National Bank. All of them have a strong presence in the province, but they have recently been joined by Capitec Bank as a major player in the retail market. It merits inclusion in a new retail “Big Five”, with Standard Bank, Absa, FNB and Nedbank. In terms of assets, the five biggest banks are Standard Bank, FirstRand (which owns FNB), Absa (part of Barclays Group Africa), Nedbank and Investec. According to the Reserve Bank, this group had 89% of market share in 2015.

The Chartered Institute of Government Finance, Audit and Risk Officers (CIGFARO) advises institutions, trains it members in public finance and promotes the interests of professionals in the public sector. It also develops and assesses qualifications and advises tertiary institutions on the requirements for courses.

The financial-services industry contributes 21% to the province’s gross domestic product. Africa’s largest stock exchange and the head offices of many banks and investment houses in Gauteng.

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