JSE welcomes policy reforms announced in MTBPS

CEO Leila Fourie: These reforms will position SA as a competitive investment destination.

On 2 November, the Johannesburg Stock Exchange (JSE) said that it welcomed the National Treasury’s reforms in the capital flow management framework, which was announced in the medium-term budget policy statement (MTBPS).

JSE group CEO Leila Fourie said:

“South Africa has embarked on a process of modernising its exchange control standards in line with international best practice. These reforms will go a long a way in positioning South Africa as a competitive investment destination, opening the door for increased international investment and laying the foundation to securing OECD status for South Africa.”

The JSE has put forward a position paper to policy makers and reported that the exchange control reforms proposals have been progressively received. The paper advocated for three areas of reform, which have been included in the MTBPS:

1. The standardisation of the treatment of inward listed instruments

Under the MTBS proposed reforms, all inward listed instruments on South African exchanges will be classified as domestic. Prior to this, institutional investors were required to treat inward listed equities as domestic, whereas inward listed debt, derivatives and exchange-traded funds were treated as foreign.

2. Permission to list non-ZAR denominated instruments

Previously, all listed instruments in South Africa were required to be listed in ZAR. Multi-currency listings will provide the opportunity for investors to invest in non-ZAR denominated assets in South Africa, rather than externalising capital to enable offshore exposure.

3. Collateral for derivative exposure

Foreign investors currently have to convert to ZAR to post collateral for derivatives exposures. Permitting non-ZAR collateral will improve the competitiveness of South African markets in attracting international investment flows.

JSE director of capital markets Valdene Reddy said: “Not only do the proposed reforms strengthen and enhance South Africa’s capital market’s appeal, they also enable a broader range of products to be issued. The listing on non-Rand denominated instruments, and foreign currency collateral, provides diversification and alternatives for market participants. These reforms would foster better job creation, economic activity and potential tax revenue growth for the country, as the products and assets are managed in South Africa.”