South Africa’s main stock exchange will probably continue haemorrhaging listings over the next year as companies grapple with onerous regulatory and funding conditions, making it less attractive to raise capital through initial public offerings.

“The macroeconomic environment is not particularly conducive to raising capital in South Africa,” Kevin Brady, the CEO of A2X, one of the top stock exchanges in the country, said in an interview on Wednesday. “The regulatory requirements to have a primary listing are quite burdensome, from cost, to time, to compliance departments, particularly for the smaller companies, which are the ones we are seeing delisting.”

South Africa’s primary stock exchange operator, JSE Ltd, has seen a steady decline in the number of listed companies, with the FTSE/JSE Africa All Share Index currently featuring 136 companies, down from 143 at the start of 2022 and 165 in 2012.

Small companies are also struggling to keep up with the regulations imposed on listed entities, according to Brady.

“We have swung the pendulum too far on regulation and investor protection and we haven’t spent enough time on, how do we grow this market,” he said.

The JSE has proposed changes to its listing framework, as it seeks to stem the delisting trend, and draw in more listings. Among the proposals is a review of the free-float requirement and allowing companies listed in other African exchanges to access the JSE via depositary receipts.

But even with upheaval, A2X still expects to double the number of listings on its exchange, and increase its market share over the coming year. The bourse recorded a 66% jump in the number of companies listing in 2021, lifting the number of companies that are available for trading to 93, including 18 of the biggest companies in South Africa.

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Brady says the company plans to increase that number to as much as 150 by the end of 2024. The exchange is also planning to attract more of the country’s biggest stockbrokers, the top 10 of which make up 90% of trading volumes, as it seeks to double its trading activity in the next year.

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“We are only 3% of the existing market,” Brady said. “So, if we can get the 3% and double it to 6% because we are a small player in a big pond, we can still achieve growth even if the markets are getting a lot of headwind.” — Khuleko Siwele and Adelaide Changole, (c) 2023 Bloomberg LP