The basic principles of the economic construct of “supply and demand” should dictate that institutional and investment fund managers chase low hanging fruits in bourses that offer the highest rate of return, with the least risk exposure for the biggest returns in an economy that is backed by solid fundamentals. So one that has a highly developed financial infrastructure that can facilitate the quick and easy movement of capital and a body of statutes that allows for these daily movements of billions of dollars. So arguably, a short supply of a product or service purchased early enough in sufficient quantities should bear the highest rates of return for the investors, contingent upon variables like timing and market sentiment.
If this were always the case, the total capitalization of the JSE, the Johannesburg Stock Exchange, the biggest bourse in Africa should be valued at twice what it is now. Let us see why this should be so?
- The JSE is the oldest bourse in Africa.
- It is directly plugged into the global financial system to the degree that it accurately mimics the movements and sentiments of its bigger cousins, the New York Stock Exchange and the FTSE.
- It is internationally compliant in every area like its aforementioned cousins, even being one of the first to go digital.
- It has cross-shareholding ownerships and dual listings across many of its Western, first-world partner bourses.
- It is almost exclusively white-owned with a total ownership value of 93% across all its boards.
- It is located in the city of Johannesburg, in what is ostensibly the financial hub of Africa.
- South Africa has the most advanced democracy and democratic institutions in Africa.
- South Africa has since 1994, not defaulted on its debt commitments, and is unlikely to do so in the future.
- The ruling party government, the ANC has a history of almost obsequious compliances with the Bretton-Woods institutions and it enjoys a cosy relationship with the rating agency, Moody’s.
- The JSE is also the most valuable bourse in the world, relative to the size of the South African economy.
So what exactly is the hindrance or hold up to it growing in terms of both attracting newer listings and increasing in overall capital growth and notional value?
In my view, it is the shadow of Apartheid and white supremacist thinking that prevents this type of growth from happening. Let us explain. The South African investment community, dominated as it is by white males still conditioned by “Apartheidesque” thinking hold unusually high liquidity ratios versus equity. This means that large South African corporations subconsciously have a “flight mentality” and this is evident in the piles of cash they hold onto. Their eagerness to move their primary listings over to the Dow or the FTSE, ironically citing greater access to the capital markets and their counterintuitive attitude of neglecting IDI, Internal Direct Investment, whilst expecting FDI, Foreign Direct Investment. This is analogous to you expecting someone else to value your home, a home that you aren’t willing to invest in by applying an annual coat of paint to, conducting regular repairs on, or even cleaning on a regular basis.
It can be argued that our captains of industry don’t trust the very market that produced a fortune for them to start with, but act nervously, constantly wanting to be assured that there are regular flights out of the country and moving billions overseas annually. Last, they moved in excess of R2 Trillion on the advice of an economic terrorist, one Dawie Roodt, who acts against the interests of the country he himself stays in. By the late nineties, almost all of the major listed companies on the JSE had moved their primary holdings overseas, just as democracy dawned, a remarkable display of a lack of faith, not in democracy, but in the managers of that democracy, black politicians, and black people. Conversely, since the advent of democracy in Russia, the economy continues to grow steadily in spite of the genocidal sanctions regime it has to factor in.
Tell me this isn’t a demonstrable show of a lack of faith in the very democracy white business itself advocated and nursemaided?
Therefore, a question to you my good people, which class of people demonstrates a nervous, flighty, suspicious demeanour. Who once enriched just wishes to leave the very place that enriched him, and who suffers under the pathology of wanting to get away, once the deed is done??????
You work out the numbers…