In 2015, 5 November and 1 December turned out to be auspicious dates with regard to the JSE and BEE. The former date saw MTN Zakhele begin trading on the exchange’s empowerment segment while Sasol Inzalo listed just less than one month later. More BEE share ownership schemes are in talks with the JSE about listing, says Brett Kotze, Head of Operations – Clearing & Settlement: Post-Trade Services at the JSE.

‘The BEE segment was actually created in 2011 with the listing of the Sasol BEE shares,’ he says. ‘At the time, the JSE saw the need for a vehicle for BEE shareholders to trade their shares in a transparent and regulated environment.’

In 2011, the JSE changed its listing requirements as well as rules and directives to cater for BEE shareholders, with the requirement that members of the JSE had to verify that the party is BEE-qualified and shareholders had to sign a BEE contract.

They were also required to verify that the party is BEE-qualified, in accordance with the Department of Trade and Industry’s (dti) codes for companies, namely 51% black owned or 51% black controlled using the look-through process.

‘Subsequent to the listing of the Sasol BEE shares, several companies approached the JSE with regard to listing their BEE shares,’ says Kotze.

‘However, issues were picked up in that the companies wanted to apply other criteria, such as their charters or special set-up in terms of their scheme documents.’

Many BEE schemes developed over-the-counter (OTC) trading platforms to trade their shares. But in 2014, the Financial Services Board told these platforms they either needed to be licensed in terms of the Financial Markets Act or change their operating models.

According to Kotze, several companies then approached the JSE to see if the exchange could assist them, at which point it started working with MTN Zakhele.

Sindi Mabaso-Koyana, MTN Zakhele chairperson, says they chose the JSE because it is a world-class institution and SA was rated first in the WEF Global Competitiveness report in terms of the regulation of securities exchanges.

‘It is totally seamless as shareholders can continue to trade through the website or the call centre’

BRETT KOTZE, HEAD OF OPERATIONS – CLEARING & SETTLEMENT: POST-TRADE SERVICES, JSE

MTN Zakhele worked closely with the JSE to set up the empowerment segment in a way that would meet the telecoms company’s particular needs, says Sydney Mhlarhi of Tamela Holdings, corporate advisor to MTN Zakhele, explaining that ‘BEE schemes have requirements that differ from institutional traders who mainly use the JSE platform’.

The JSE platforms are also designed for unrestricted and freely tradeable shares accessible to global investors. ‘This is the opposite to OTC BEE schemes, which have a range of trading restrictions, such as trades can only be between black people or companies; limits on maximum percentage shareholding per person; BEE schemes often have termination dates; BEE schemes are targeted at a broad base of black investors who wouldn’t ordinarily invest in listed shares,’ says Mhlarhi.

The new empowerment segment is structured in a way that keeps the existing OTC platform’s ecosystem in place, while the JSE offers a listing platform and trading system.

‘From a shareholder perspective, it is totally seamless as they can continue to trade through the website or the call centre,’ says Kotze.

The main difference between the new empowerment segment and the previous BEE segment is that the issuer of the BEE shares or their agent is the verification agent, instead of the broker. This allows for the BEE shareholder requirements to be specific to that BEE scheme as opposed to applying the dti codes of 51% owned or controlled, says Kotze, adding that this means both the new and old processes are catered for.

Companies benefit from listing their BEE shares as it provides enhanced liquidity of ownership and price discovery, as well as offering a platform from which to diversify the BEE shareholder base.

Shareholders also benefit through guaranteed settlement and investor protection, as all trading is conducted through JSE member firms regulated by the exchange.

The majority of the BEE shareholders have never had access to the financial markets. By trading through JSE members, they will have access to other financial products, creating financial wealth. ‘Our shareholders are excited about the level of reporting, the liquidity and the transparency trading on the JSE offers them,’ says Mabaso-Koyana.

By Gene Michaelson
Image: Gallo/GettyImages