economy of south africa

7/30/2019 Economy of South africa

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ECONOMY

The economy of South Africa is the largest of all the economies of Africa. It accounts

for 24% of Gross Domestic Product in terms of PPP & is ranked as an upper-middle

income economy by the World Bank.

South Africa has an advantage in the production of agriculture, mining and

manufacturing. It has shifted from a primary and secondary economy in the mid 20th

century to an economy driven primarily by the tertiary sector in the present day which

accounts for an estimated 65% of GDP or $230 billion in nominal GDP terms.

The countrys economy is diversified with sectors including mining, agriculture and

fishery, vehicle manufacturing , food-processing, clothing and textiles,

telecommunication, energy, financial and business services, real estate, tourism,

transportation, and wholesale and retail trade.

The unemployment rate is over 25% which is very high & there is limited access to

economic opportunities and basic services by poor people.

The high levels of unemployment and inequality are accepted by the government

and these issues, and others linked to them such as crime have a negative effect on

employment. Crime is considered a major or very severe constraint on investment by

30% of enterprises in South Africa, putting crime among the 4 most frequently

mentioned constraints.

South Africa, has struggled through the late 2000s recession, and the recovery has

been largely led by private and public consumption growth, while export volumes and

private investment have yet to fully recover. The long-term potential growth rate of

South Africa under the current policy environment has been estimated at 3.5%. Per

capita GDP has been growing by 1.6% a year from 1994 to 2009, & by 2.2% over

the 200009 decade.


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HISTORICAL STATISTICS

This is a chart of the trend of South Africa's gross domestic product at market prices

estimated by the International Monetary Fund:

Table 1.1

YearGDP, USD

billion

US Dollar Exchange

in early January

Unemployment

rate

Per Capita

Income, % of USA

1980 80.547 0.8267 Rand 9.2 22.6

1985 57.273 2.0052 Rand 15.5 9.8

1990 111.998 2.5419 Rand 18.8 13.1

1995 151.117 3.5486 Rand 16.7 13.2

2000 132.964 6.1188 Rand 25.6 8.5

2005 246.956 5.6497 Rand 26.7 12.4

2010 363.655 7.462 Rand 24.9 15.5

2015

(f'cast)510.937 22.8 18.0
http://en.wikipedia.org/wiki/International_Monetary_Fundhttp://en.wikipedia.org/wiki/International_Monetary_Fund


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FINANCIAL MARKET

Financial Market can be classified into different categories depending on the

characteristic of the market or instrument used to create categories. Securities

created by institutions in the markets normally pay an interest on the nominal amount

(the amount shown on the certificate or contract).

The interest-bearing securities market is split into the money market and the capital

market, based on the term to maturity (the term left to redemption of the debt) of the

securities.

The capital market is the market for the issue and trade of long-term

securities.

The money market is that of short-term securities.

When goods such as financial instruments are traded in a market, there are certain

differences between transactions done in these markets. The differences in

transactions in the financial markets can be categorised in different categories, two

of which are the following:

The timing difference between the closing of the transaction and the delivering

of the goods or settlement of the transaction

The difference in certainty that the other party will honour the transaction.

In the spot market, the closing of the transaction and the delivery of the goods take

place simultaneously or within a short-term time span prescribed by the specific

market. Uncertainty about delivery from the other party is very limited otherwise no

transaction would take place.

The forward market is the market where a transaction is closed in the present, and

the settlement of the transaction and the delivery of goods are in the future. The

delivery date and the price are determined at the closing of the transaction. Because

of the time lapse between the closing and the settlement of the transaction, the risk

that one of the parties might not be able to deliver at the settlement date is higher

than in the spot market.


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The futures market is similar to the forward market, except that in the futures

market, the risks of settlement and quality of the product are addressed. The same

transaction as in the forward market would be closed, with the addition of the

standardisation of the amount of goods, the quality of the goods and guarantee (by

an exchange) of the payment of the price and delivery of goods or cash settlement of

the difference.

MAJOR INSTITUTIONS IN THE SOUTH AFRICAN FINANCIAL MARKETS

A sophisticated financial services sector consisting of lenders, borrowers, financial

intermediaries, financial instruments and financial markets, has different institutions

participating in these markets.

Certain intermediaries in the financial markets take on deposits as principal. These

intermediaries are called deposit-taking intermediaries. Examples of such

intermediaries are:

South African Reserve Bank (SARB) (deposits from selected clients)

Private banks

Land and Agricultural Bank SA Post Office Limited.

There are other intermediaries operating in the market, who only manage funds on

behalf of clients as an agent for the client. They do not take on deposits, but bring

together the borrower and lender with similar needs regarding amount, term and rate

of the transaction. Such an intermediary is called a non-deposit-taking intermediary.

Examples of these intermediaries are:

Unit trusts

Insurers

Pension and provident funds

Finance companies.

Other institutions and interest groups in the market do not participate in the trading of

instruments as principal traders but perform functions such as supervision of


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activities, regulation of the markets, provision of trading facilities, etc. Examples of

these institutions and groups are:

The Johannesburg Stock Exchange

The South African Futures Exchange

The Bond Exchange of South Africa

The Supervision Department of the SARB

The Financial Services Board.


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GOVERNING BODIES IN SAS FINANCIAL MARKET

SOUTH AFRICAN RESERVE BANK

The South African Reserve Bank (SARB) performs all central banking functions. The

SARB is independent and operates in much the same way as Western central

banks, influencing interest rates and controlling liquidity through its interest rates on

funds provided to private sector banks.

Quantitative credit controls and administrative control of deposit and lending rates

have largely disappeared. South African banks adhere to the Bank of International

Standards core standards.

One of the functions of the SARB is to co-operate with the Ministry of Finance in

formulating and implementing monetary and exchange rate policy. The SARB also

acts as banker to the government and other banks and thus plays an important role

in the markets as decisions concerning interest rates of the SARB affect all

institutions in the market. Other important functions of the SARB include:

Issuing of bank notes and coins

Supervising the countrys gold and foreign exchange reserves. In this

function it plays an important role in maintaining a stable exchange rate

Supervising registered banks

Settlement of claims and payments between banks

Lender of last resort for the banks.


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FINANCIAL SERVICES BOARD

The Financial Services Board (FSB) is the government of South Africa financial

regulatory agency responsible for the non-banking financial services industry in

South Africa. It is an independent body that supervises and regulates the financial

services industry in the public interest. This includes the regulation of the

biggest stock exchange in Africa the Johannesburg Stock Exchange.

The functions of the Financial Services Board

The Financial Services Board (FSB) was constituted by the Financial Services Board

Act, 97 of 1990 (the Act). The functions of the board are:

1) To supervise the compliance with laws regulating financial institutions

and the provision of financial services;

2) To advise the Minister on matters concerning financial institutions and

financial services, either of its own accord or at the request of the

Minister; and

3) To promote programs and initiatives by financial institutions and bodiesrepresenting the financial services industry to inform and educate users

and potential users of financial products and services.

The FSB is a unique independent institution established by statute to oversee the

South African non-banking financial services industry in the public interest. The

FSBs mission is to promote sound and efficient financial institutions and services

together with mechanisms for investor protection in the markets.

The executive officer of the FSB is the Registrar of Pension Funds, Registrar of

Friendly Societies, Registrar of Long-Term Insurance, Registrar of Short-Term

Insurance, Registrar of Stock Exchanges, Registrar of Financial Markets, Registrar

of Collective Investment Schemes and the Registrar of Financial Services Providers.

Of importance is that the FSBs purpose is to serve the public interest, not the private

interests of market participants.


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Structure of the FSB

The FSB is governed by a Board of eight members. It performs its functions through

its various departments. The FSB supervises such institutions and services in terms

of 16 Parliamentary Acts, which entrust regulatory functions to the Registrar of Long-

and Short-term Insurance, Friendly Societies, Pension Funds, Collective Investment

Schemes, Capital Markets (Stock Exchanges and Financial Markets.) Those

functions resort in the office of the Executive Officer acting with other members of

the executive and heads of the various departments

The FSB regulates the following industries:

1) Insurers- Short term

- Long term

- Re-insurers: short and long-term

- Lloyds Correspondents

- Other Credit agents

2) Friendly Societies

3) Retirement Funds

- Non-exempt funds

- Exempt funds

4) Collective Investment Schemes

- Collective investment schemes in securities other than property shares

(Management companies Portfolios)

- Collective investment schemes in property (Management companies

Portfolios)

- Collective investment schemes in participation bonds

- Declared collective investment schemes

- Foreign collective investment schemes


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5) Capital Markets

- Stock broking member firms

- Financial instrument dealers

Members of (SAFEX) South African Futures Exchange

Members of BESA (Bond Exchange of South Africa)

6) Financial Intermediaries and Advisers

- Investment managers

- Linked investment service providers

- Insurance brokers

- Other financial services intermediaries

7) Insider Trading

8) Nominee Companies

To the extent that nominee companies are required to be approved in terms of

legislation supervised by the FSB


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FinancialMarket

Money Market

Instruments

Paying Interest

Negotiable

Certificates of

Deposit

Govt. Stock &

Short-Term

Interest Rate

Instruments

Instruments

Issued at

Discount

BankersAcceptance

Treasury Bills

Commercial

Papers

Land Bank Bills

Capital Market

Interest Rate

Securities

Zero - Rated

Cupon Bonds

Asset - Backed

Bonds

Johannesburg

Stock Exchange

Main Board

AltX

Bond MarketBond Exchange

of South Africa


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MONEY MARKET AND INSTRUMENTS

Introduction

The money market is the market where liquid and short-term borrowing and lending

occur. In financial market terms, the purpose of money market is issuing and trading

of short-term instruments. The instruments with a term to maturity of three years or

less are normally classified as money market and defined as liquid assets by the

authorities.

Trading in the market

In South Africa money market instruments is not operated through an exchange, butthrough informal telephone trading and OTC (over the counter) trading. Electronic

form of trading is less used and still physical trading documents are used in market.

Instruments in the Market

There are 2 types of instruments issued and traded:

1) Instruments which pay interest on invested amount, where interest is paid withthe redemption amount at redemption date. Sometimes Interim interest is

paid. Instruments in this category are:

a. Negotiable certificates of deposit (NCDs)

b. Short-term government stock

c. Interest rate instruments issued by private sector (maturity-less than 3

years)

2) Instruments that are issued at a discount on the nominal value and do not pay

interest. Such Instruments are:

a. Bankers' acceptances (BAs)

b. Treasury bills (TBs)

c. Commercial paper

d. Land Bank bills


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Negotiable Certificates Of Deposit (NCDs)

This is a certificate issued by a bank for a deposit made, attracts a fixed rate of

interest that payable with the amount. NCDs are issued in multiples of R1 million.

The name of the owner does not appear on the document as it is bearer. The NCD

will contain the name of the issuing bank, date of issue, date of redemption, amount

of the deposit, maturity value, annual interest rate paid on the deposit.

Current Rates of NCDs (as on 06-12-2012)

Time Period Closing Rates

3 Months 5.13

6 Months 5.38

12 Months 5.55

Government Stock and Other Short-Term Interest Rate Instruments

These instruments are normally issued for long-term periods with more than one

interest payment.

Bankers' Acceptances

It was invented to suit the needs of a party requiring temporary finance to facilitate

the trading of specific goods. The party needing would approach investors, the

investors or lenders would then lend in exchange for a document stating that the

debt would be paid back on a certain date in the short-term future. The amount paid

back by the borrower would have to be more than the amount advanced by die

lender. The difference is known as the discount on the nominal amount.

A bank acceptance can be described as an unconditional order in writing, addressed

and signed by a drawer, to a bank which signs and becomes the acceptor, promising

to pay a certain amount of money at a fixed date, to the bearer or holder of the

document.


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Commercial Paper and Other Discount Instruments

It refers to short-term unsecured promissory notes issued by corporate companies

with a high credit rating. These are also issued on a discount basis such as

BAs. The risk involved will be higher than that of Bas as it is unsecured, so the

issuing institution must be financially strong and sound. Theseinstruments would be

issued and traded at a higher discount.

Treasury Bills

Treasury Bills are short-term debt obligation of the central government of South

Africa and are allotted through auction. The South African Reserve Bank has 91 day,

182 day, 273 day and 364 day Treasury Bills. They are issued on tender basis.

Current Tender Rates (as on 06/12/2012)

No. of Days of TB Tender Rates

91 day 4.93

182 day 5.00

273 day 5.00364 day 4.90


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CAPITAL MARKET

Introduction

The capital market is the market for the issue and trading of long-term securities.

The term in this instance is measured as the term to maturity of the security and in

order to be classified as a capital market instrument, the term to maturity should be

longer than 3 years. During the trading of these instruments, the securities traded

are informally classified into short-term, medium-term and long-term securities

depending on their term to maturity. Where the term to maturity of the instrument is

up to five years, the security is classified as a short-term capital market instrument.Where the term to maturity is five to ten years, the security is classified as medium

term, and where the term to maturity is more than 10 years, the security is known as

long-term.

The primary market is the market for the first issue of securities. This issue is

normally done by means of a public issue or by private placement. The secondary

market is the market for trading securities once they have been issued. The

secondary market has a big influence on the issues in the primary market, as the

market rate is determined in the secondary market. Issues in the primary market at

below market rate, determined in the secondary market, would be issued at a

discount on the nominal value of the instrument. If the volumes traded in the

secondary market are high it could be an indicator that an excess of long-term

money is available in the market, and it may thus be an opportune time to issue new

securities into the market by means of the primary market. Therefore, if the liquidity

in the secondary market is high, chances are that new issues would be more

successful than in an illiquid market.

Instruments

Instruments issued and traded in the capital market in South Africa have certain

characteristics like: term to maturity, interest rate paid on the nominal value, interest

payment dates, nominal value of issue. Following are the instruments:


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1) Interest Rate Securities

The interest paid on the nominal amount of capital market securities (called

the coupon rate) appears on the certificate received by the holder (the

investor) of such a security. Most securities are issued at a fixed coupon rate

such as the Eskom 168 (E168) security that is issued at a coupon rate of

11%. Certain securities are, however, issued at a variable coupon rate,

where the coupon rate is then linked to a well-known interest rate such as the

prime overdraft rate or the 90-day BA rate.

Capital market securities are physical certificates and the issuer of the

security keeps a register of owners. This register is used by the borrower topay interest to the lender on the interest payment dates indicated on the

certificate.

2) Zero-Rated Coupons

Long-dated zero-rated coupons are capital market instruments issued by

borrowers of money. These instruments do not earn interest on the capital

amount invested by the lender, and are therefore issued and traded at adiscount on the nominal value, similar to discount instruments in the money

market such as BAs and treasury bills. Yield on zero-rated coupon bonds is

normally linked to the market rate on long-term investments.

3) Asset-Backed Bonds

A bond can be issued to fund this asset where an asset represents cash

inflow stream such as a normal loan or investment. The bond income is then

derived or backed by the income stream of the asset.


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CENTRAL DEPOSITORY OF SOUTH AFRICA - STRATE

Since its inception over ten years ago, STRATE Ltd is proud to be the licensed

Central Securities Depository (CSD) for the electronic settlement of financial

instruments in South Africa. STRATE's core purpose is to mitigate risk, bring

efficiencies to the South African financial markets and improve its profile as an

investment destination. Strate is aligned to international best practices and

continually strives to ensure operational excellence and provide enhancements for

the good of the Southern African financial markets.

STRATE handles the settlement of a number of securities including equities and

bonds for the Johannesburg Stock Exchange (JSE) as well as a range of derivativeproducts such as warrants, Exchange Traded Funds (ETFs), retail notes and tracker

funds. It has now added the settlement of money market securities to its portfolio of

services. It provides services to Issuers for their investors in terms of the Companies

Act and Securities Services Act (SSA), 2004.

MISSION, VISION & OBJECTIVES

VISION

We are the leading independent South African provider of innovative post trade

products and services. We facilitate risk management, enabling transparency and

efficiencies for the financial markets. We are globally recognised for the confidence

we inspire in our financial markets.

PURPOSE

STRATE's purpose is to provide post trade services for the securities market,enabling end-to-end pragmatic, reliable, innovative solutions that facilitate the

management of risk and the realisation of value for all stakeholders.

STRATEGIC OBJECTIVES

To be profitable;

To be stakeholder centric;


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To ensure operational excellence and the effective management of risk while

driving innovation and market best practise; and

To be a learning organisation enabling Corporate and Personal growth

HISTORY OF STRATE:

Equities:

The successful introduction of the Johannesburg Equity Trading (JET) system in the

1990's highlighted the deficiencies in the JSE's paper-based settlement system.

STRATE was introduced to the market to facilitate the dematerialisation and

electronic settlement of the equities market. Shares were no longer traded on an

open-outcry trading floor and this contributed to a massive leap in the number oftrades each day.

Back-office support services were incapable of handling this increase in daily

transactions efficiently in a paper-based environment. The transition to an efficient

electronic settlement system has increased market activity and has improved the

international perception of the South African market by reducing settlement and

operational risk in the market, increasing efficiency and ultimately reducing costs.

Accordingly, by heightening investor appeal, STRATE enables South Africa to

compete effectively with other international markets, and not just those of emerging

markets.

Bonds:

Prior to the 1990s, bond trading in South Africa took place via a trading floor or a

screen and telephone system with both parties agreeing on prices and amounts to

be bought and sold. With the growth in turnover and value, settlement risks also

grew. In 1989, the bond market participants (consisting of banking groups, large

issuers, stockbrokers and a number of major financial institutions and intermediaries)

formed a voluntary association called the Bond Market Association (BMA) to

facilitate the development of a self-regulated bond market exchange.

That same year, the major clearing and bond settlement banks and the Reserve

Bank created UNEXcor with the express purpose to develop an electronic settlement

system using a CSD. The same shareholders got together to form CD Limited in1991. In May 1994, UNEXcor was appointed as the Clearing House for the South


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African bond market. The first full electronic settlement through UNEXcor and CD

took place on 26 October 1995. In 2003, UNEXcor merged with STRATE to become

South Africas only CSD.

MONEY MARKET:

An initiative was established by a number of market participants to address the

electronic settlement of money market securities. The Money Market Forum was

established and a Blue Print was issued in 2002 for the dematerialisation of money

market securities. UNEXcor was awarded the system development contract and

following the STRATE/UNEXcor merger, STRATE assumed the responsibility for the

delivery of this project. In conjunction with extensive market consultation, STRATE

developed the Business Requirement Specification documents.

Tata Consultancy Services (TCS) was employed on behalf of STRATE to develop

the code for the project. Successful market scripted testing of Version 1 was

completed in October 2008 and Rand Merchant Bank issued the first electronic

security to STRATE via FirstRand Bank in November 2008. In April 2009 the Money

Market Securities System code enhancements were effected and market participants

commenced testing immediately thereafter. The South African market implementedthe electronic settlement of newly issued money market securities in the latter half of

2009.

FEATURES AND BENEFITS

The features and benefits of STRATE emerge from the variety of advanced,

technological features and business principles incorporated in STRATEs underlying

software, South African Financial Instruments Real-time Electronic Settlement

system (SAFIRES) for equities, and the Bonds and Money Market System for these

securities respectively.

SAFIRES is an adaptation of the Swiss Settlement system, SECOM, which has been

providing investors with secure and efficient settlement since 2000. The features of

STRATEs systems are numerous and each provides a very significant, risk-reducing

benefit to the South African financial market.


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ELECTRONIC CUSTODY OF SECURITIES

Shareholding is recorded electronically by each of the Participants and collated at a

Participant level within STRATE for equities and bonds. In the money market

environment the custody of shares occurs in a Securities Ownership Register (SOR).

These electronic records provide issuers with the register of investors for the

dematerialised portion of their register.

The records of the Participants are reconciled daily with the records kept by

STRATE, where the total balance of dematerialised securities is kept. Investors

receive regular statements which take the place of share certificates. This is in direct

contrast to the paper settlement environment where risks of lost, forged or stolen

documents abound. Naturally, the costs associated with the replacement of such

documents are also eliminated under STRATE.

SECURITY OF STRATES SYSTEMS

The electronic record of shareholding in STRATE is subject to extensive controls.

This is thanks to the sophisticated encryption and authentication in the coding of the

software where the security of the electronic records has never been compromised.

Furthermore, STRATE utilises the renowned Society for Worldwide Interbank

Financial Telecommunications (SWIFT) network for the relay of electronic

information. SWIFT is a network owned by the major banks in the world and

therefore the provider of choice for all major financial institutions, globally. This is

one of the most secure network in the world with consistent 99% up-time since its

inception.

As one of the highest users of the SWIFT network globally, STRATE also provides

SWIFT network services to other financial institutions and large corporates in South

Africa. This provides a cost effective mechanism for them to utilise the SWIFT

network without having to contract directly with SWIFT.

ELECTRONIC SETTLEMENT OF TRANSACTIONS

At the point of settlement, the electronic records are updated real-time via book

entry. Settlement via book entry is both secure and efficient. It is no longer


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necessary for the seller to submit his share certificate to his broker for further

submission to the Transfer Secretary who issues a new certificate in the name of the

buyer. This manual process was risky, administratively burdensome and time

consuming.

ROLLING SETTLEMENT

Rolling settlement refers to a settlement environment in which transactions

(securities and funds) become due for settlement a set number of business days

after trade. In South Africa, rolling settlement has been introduced on a T+5 basis for

equities, a T+3 basis for bonds and a T+0 basis for money market securities (where

T= trade date). Rolling settlement represents a significant departure from the

account period methodology employed in the past by the equities market whereby

trades of any given week were settled from Tuesday of the following week. Investors

know when their trade will settle and can plan/ budget accordingly. The account

period methodology of the paper-based settlement environment operated on an

indefinite basis; some transactions remained unsettled for months. As every day is a

trading day, under STRATE every day is also a settlement day.

CONTRACTUAL SETTLEMENT

Investors obtain the assurance that their transactions settle on the specified

settlement day. The appropriate cash and securities accounts are debited/ credited

on settlement day and the risk of delayed settlement and loss of earnings is

significantly reduced.

SIMULTANEOUS FINAL IRREVOCABLE DELIVERY VERSUS PAYMENT

(SFIDVP)

STRATE is proud to be amongst the CSDs to have achieved true Simultaneous,

Final, Irrevocable, Delivery versus Payment (SFIDvP) in Central Bank funds. This

has been achieved with the use of the Continuous Batch Processing Line (CBPL)

functionality for equities, the Continuous Processing Line (CPL) for bonds and the

Real-Time Line (RTL) for money market securities in the National Payment System

at the Central Bank.


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In terms thereof, payment obligations must be provided for in the South African

Multiple Options System (SAMOS) system before the settlement run can be

commenced. With the implementation of a netting model for on-market equities

transactions, settlement efficiency within STRATE has been maximised through

netting of securities at Safe Custody Account (SCA) level and funds at Participants

level. Further efficiencies are provided to the market through a gross settlement

model for bonds and money market securities.

CONNECTIVITY THROUGH SAMOS

In 1998, the South African Reserve Bank granted STRATE permission, to integrate

its settlement processing directly with their own SAMOS system. The main benefit

that SAMOS brings to the South African financial markets is that it provides for final

and irrevocable payment.

Similarly, STRATE provides the investor with contractual settlement and finality of

ownership transfer for all instruments settled. By synchronising securities ownership

transfer through STRATE with cash payment through SAMOS, the market is able to

provide local and international investors with SFIDvP, as explained above. SAMOS

provides for final and irrevocable payment settlement, while STRATE provides the

investor with real-time settlement and finality of ownership transfer.

By making the SAMOS settlement infrastructure available for the settlement of

financial market transactions, the Reserve Bank has greatly boosted the capability

and competitiveness of the South African financial markets. The interdependence of

these two systems is in line with the worldwide drive towards consolidation and the

resultant economies of scale.

ACCURACY OF THE REGISTER

The electronic register is updated on a T+5 basis for equities, a T+3 for bonds and

T+0 basis for money market securities when the simultaneous transfer of securities

and funds takes place. This means that all trades are reflected on the register of

investors for dematerialised securities in the STRATE environment as there are no

outstanding securities transactions.


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Listed companies wishing to obtain an accurate record of their investors find

themselves in a far more efficient position in the STRATE environment.

ELECTRONIC EXECUTION OF CORPORATE ACTIONS

STRATE executes all Corporate Actions events for the market, many of which are

processed electronically. The benefits of STRATEs Corporate Actions model cannot

be underestimated given the significant risk reduction and cost savings in the

Corporate Action arena. For example, interest, dividends and proceeds are credited

to the clients' accounts directly with the electronic execution of Corporate Actions

occurring in a quick and secure manner. Payments are transferred electronically with

same-day value eliminating the costs and risk associated with cheque payments.Issuers and investors therefore benefit from a dramatically increased level of

efficiency and cost effectiveness and the most importantly, the elimination of market

claims.

INCREASED MARKET REGULATION

STRATE is the regulator of the CSD Participants and the JSE regulates qualifyingbrokers, under the authority of the Financial Services Board (FSB). The regulation of

the market players is significant as CSD Participantss and qualifying brokers act as

agents for investors and have a statutory and contractual duty to protect the records

of the investor in the electronic environment. Investors gain the peace of mind that

all business processes associated with electronic settlement are regulated by

STRATE.

As illustrated by the examples above, the key features of electronic settlement

contributed to a massive reduction of risk in the South African market. This increases

South Africas standing as an investment destination for international investors which

undoubtedly provides a significant boost to both trading and liquidity.

Internal Controls & Management

The efficiency of the control environment at STRATE is fundamental to the

successful operating of the CSD on a day-to-day basis and is built on the effective


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integration of a number of interrelated components. This starts essentially with the

governance structure within which STRATE operates, where the tone at the top is

set by the Board of Directors, a number of purpose-driven internal and external

committees, a dedicated senior management team and the regulatory oversight of

the Financial Services Board (FSB).

The internal control framework forms part of the overarching enterprise-wide risk

management framework which has, as one of its core imperatives, the identification,

evaluation and treatment of risks (both internal and external) that may prevent the

depository from achieving its corporate objectives.

A comprehensive structure of control activities permeates all levels of the

organisation, directed and supported by clearly defined policies and procedures

which are designed to guide staff in the execution of their duties. Continuous

monitoring of these control activities helps ensure that weaknesses and/or

deficiencies are identified simultaneously and that these are escalated appropriately

and that corrective action is taken without delay.

Supporting this structure is a communication strategy which is designed to provide

decision-makers with the right information, at the right time to make the rightdecisions.

Risk Management

Enterprise Risk Management (ERM) at STRATE comprises:

The Risk Management function;

Business Continuity Management (including Disaster Recovery);

Information Security; and

The Internal Audit program which uses a combination of external (inter alia

Pricewaterhouse Coopers) and independent internal resources (Process

Assurance)

The ERM Division effectively co-ordinates and manages the overall risk

management program for STRATE by:


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1. Assisting each division within the company to identify, assess and measure

risks according to the probability (or likelihood) of occurrence and the potential

impact that the identified risk may have. A process-based ERM framework

which is linked to STRATE's strategic objectives has been defined for this

purpose;

2. Assisting divisions in undertaking an initial assessment of the effectiveness of

relevant controls identified to mitigate the specific risks. These assessments

drive regular risk reporting through the Management Team to the Audit and

Risk Committee and ultimately the Board of Directors who measure risk

exposure against pre-determined risk tolerances and the management actions

being taken to bring specific risk exposures back to within acceptable levels oftolerance;

3. Identifying risk-based focus areas for independent review in terms of the

Internal Audit plan;

4. Coordinating a comprehensive risk review in respect of each and every new

product/service under development by STRATE; and

5. Ensuring that all system enhancements/changes are channeled through an

effective Change Advisory Board and that the underlying Change Control and

Release Management processes are followed in accordance with a defined

and documented System Development Life Cycle (SDLC). A risk review is

undertaken of each change / enhancement to ensure a comprehensive

understanding of the likely impact and that the necessary /appropriate

controls have been incorporated prior to implementation.

Business Continuity Management

The Business Continuity Management (BCM) program at STRATE is managed by

The ERM Division which:

1. Oversees the establishment and maintenance of:

o Effective business continuity plans which are capable of supporting all

core business activities of the depository;


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o Identifying areas of weakness and, in conjunction with the relevant

business resources, developing and testing appropriate business

continuity capabilities;

2. Provides effective co-ordination of all BCM testing to ensure that identified

plans are, in fact, capable of supporting the relevant service and/or

function and that the recovery time and point objectives can, indeed, be

met; and

3. Promotes awareness and preparedness across the organisation and with

those parties with whom STRATE has direct interfaces such as its

Participants, the JSE and the Central Bank.

In recognition of its role in the South African financial services industry, STRATE has

been particularly mindful of the obligation to ensure state-of-the-art preparedness

across all of its key services. Recent enhancements to the STRATE network, and

the introduction of high levels of virtualisation across these services, ensure that

disruptions are kept to a minimum and that recovery from disruptions can be

effected with a minimum delay - often without any impact on downstream users.

International Benchmarks & Standards

The introduction of electronic trading, clearing and rolling, contractual, settlement

significantly enhanced the appeal of South Africa as an investment destination. This

required the adoption of a number of common standards and benchmarks which had

already been identified in other, leading, markets around the world.

STRATE has been guided by organisations such as the International Organisation

for Securities Commissions (IOSCO) and the Group of 30 (G30) in the establishment

of a world class facility. The adoption of these standards has proven invaluable to

the South African market and has greatly enhanced our ability to reduce (and even

remove) barriers which have previously existed in respect of our securities industry.

The ability to capitalise on desirable characteristics of products and services (such

as, inter alia, quality, reliability and efficiency) which have been identified elsewhere

has led to the timely sharing of key technological advancements and good

management practices in an industry which is inherently reliant on sound practices.


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It is, however, imperative that we continue to protect an environment which is built

on the promotion of level playing fields which ascribe to the highest standards for

entities providing custody and settlement services. Solutions to common problems

and areas of innovation can be quickly disseminated around the world and provide

an ideal opportunity for fairer trade across legislative boundaries.

STRATE has, as one of its core objectives, the aim to drive global best practices and

develop value added opportunities for itself and the South African market

infrastructure as a whole. We pursue this objective by serving as a catalyst for new

thinking in a rapidly changing environment.


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JOHANNESBURG STOCK EXCHANGE

Johannesburg Stock Exchange is the only stock exchange in South Africa. It is one

of the largest stock exchanges as per the market capitalization.

The Johannesburg Stock Exchange (JSE) was formed to create an orderly market

for the optimal allocation of capital resources in the country. The JSE was initiated in

response to among others, the demand for capital to develop the goldmines. The

JSE is the 19th largest formal capital market in the world based on market

capitalisation and offers a means of raising capital to companies, government and

semi-government bodies, acting as a primary market. It also acts as a secondary

market where shares and equity securities are bought and sold.

The JSE belongs to and is governed by its members but, through their use of JSE

services and facilities, these members are also customers of the exchange. Many of

its members also trade in bonds through the bond exchange (BESA) and financial

futures through the futures exchange (SAFEX). Traditional options are traded on an

OTC basis, although some standardised options have been listed on certain

exchanges.

The main function of the JSE is the raining of primary capital by re-channeling cash

resources into productive economic activity, thus building up the economy while

enhancing job opportunities and wealth creation. As mentioned previously, it also

acts as a secondary market and liquidity is perhaps the most important objective of

any stock exchange. The success with which the primary market fulfils its function of

raising new investment capital is, among other elements, dependent upon the

liquidity in that market. A listing on the JSE enables companies to raise capital forexpansion and for the financing of new business. To the person in the street it

represents, in the medium to long term, a means of investment in the corporate

companies of a country. The capital appreciation from holding shares over a period

of time often exceeds the rate of inflation. For those who are knowledgeable about

the performance of selected shares, speculative buying and selling may be

appealing, but the risk is high.


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1) Ordinary shares

Shares with voting power, representing one vote per share, and earning

dividends if the profit is sufficient

2) N-shares, A-shares and B-shares

These shares often have different rights compared to ordinary shares, for

instance, different voting power. They often have less voting power than

ordinary shares and are issued to raise additional capital without affecting

control of major shareholders

3) Preference shares, convertible preference shares, cumulative

preference shares, redeemable preference shares and debentures

These are securities normally without voting power but with a preference to a

dividend or interest above the ordinary shares

4) Nil paid letters

Company may give existing shareholders the first right to buy the new shares

issued in proportion to the shareholding if it wants to raise additional capital.

For this right, a letter is issued which is called a nil paid letter (NPL). This

letter can be sold in the market.


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HOW TO LIST ON JSE

The JSE operate 2 markets:

The Main Board; and

AltX

MAIN BOARD

The principal requirements for a Main Board listing include:

A subscribed capital of at least R25 000 000;

Not less than 2,50,00,000 equity shares in issue; A satisfactory audited profit history for the preceding three financial years, the

last of which reported an audited profit of at least R8 000 000 before taxation

and after taking account of the headline earnings adjustment on a pre-tax

basis.

It must be carrying on as its main activity, either by itself or through one or

more of its subsidiaries, and independent business which is supported by its

historic revenue earning history and which gives it control over a majority of itsassets, and must have done so for the period covered by paragraph 4.28(c);

If it is a company with a majority of its assets invested in securities of other

companies listed on the JSE it must satisfy the "Criteria for listing" for

investment entities detailed in paragraphs 15.3 and 15.4;

20% of each class of equity securities shall be held by the public; and

The number of the public shareholders in respect of of listed securities shall

be at least: (i) 500 for equity securities, (ii) 50 for preference shares; and (iii)

25 for debentures.


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ALTX

In addition to the requirements set out above, an issuer wishing to apply for a listing

on AltX must comply with the following requirements:

The applicant issuer must appoint a Designated Adviser ("DA")

The applicant issuer must have share capital of at least R2 000 000

The public must hold a minimum of 10% of each class of equity securities and

the number of public shareholders shall be at least 100;

The directors must have completed the ALTX Directors Induction Programme

or must make arrangements to the satisfaction of the JSE to complete it;

The applicant issuer must appoint an executive financial director and the DA

must be satisfied (and submit confirmation in writing to the JSE ) that the

financial director has the appropriate expertise and experience to fulfill his/her

role

The applicant issuer must produce a profit forecast for the remainder of the

financial year during which it will list and one full financial year thereafter

The applicant issuer's auditors or attorneys must hold in trust 50% of the

shareholding of each director and the DA ("relevant securities") in such

applicant issuer from the date of listing, and a certificate to that effect must be

lodged with the JSE by the issuers auditors or attorneys.

At least 25% of the directors must be non-executive.

Methods of Obtaining Listing

A listing can either be via the front or back door.

A) FRONT DOOR LISTING

A front door listing takes place either by means of an:

introduction,

private placing or a

a public offer, in conjunction with the issue of a prospectus or a pre-listing

statement.


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1. An Introduction

This is suitable where the company does not need to raise capital and has a

sufficiently wide public spread of shareholdings. It is the quickest and

cheapest means of listing, as there is no offer to the public and minimum

formalities are required.

2. A Private Placing

This has proved to be the most common method of obtaining a listing. In this

instance, shares in the company are placed or offered to prospective

shareholders through private negotiation. Usually this will be done through a

sponsor or a merchant bank.

3. A Public Offer

This method requires the production of a prospectus which must be approved

and registered with the Registrar of Companies. The public will have a certain

period of time within which to submit their applications and payment. The

company will have to decide on the basis of allocation if there is an

oversubscription. If the offer is over-subscribed, the company earns interest

on the payments received until the date of refund. This increase may be used

to offset the costs of the offer.

THE PROSPECTUS / PRE-LISTING STATEMENT

When a company applies for a listing, it must produce a pre-listing statement

containing certain prescribed information concerning the company, its

business and its prospects. While the pre-listing statement may promote

investment in the company's shares, it is not an invitation to the public to

subscribe for shares, but rather aimed at enabling potential investors to make

an informed investment decision regarding the company's shares. If the pre-

listing statement contains a public offer, it will also have to comply with the

prospectus provisions contained in Section 148 and Schedule 3 of the

Companies Act. The pre-listing statement will largely be drafted by the

corporate advisor, the directors of the company accept full responsibility for

the accuracy of its content.


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B) BACK DOOR LISTING

A back door listing takes place either by means of:

cash shell or

a reverse listing.

1. Cash Shell

A listed cash shell company acquires a viable business, either for cash, or for

the issue of additional shares in the cash shell company. A cash shell is a

listed company whose assets consist entirely or mostly of cash or shares

because it has disposed of all, or a substantial part of its business.

2. Reverse Takeover

A listed company acquires a larger but unlisted company or business. This

results in a change of control of the shareholding of the listed company, and

also requires the publication of a listing statement.

In a reverse takeover, a compatible listed company will acquire the unlisted

company with the purchase consideration being paid by the issue of new

shares in the listed company. These new shares must be sufficient in number

and value to ensure that the shareholders have a controlling interest in the

listed company after the issue of new shares.

THE TIMING OF THE LISTING

Two factors, that is, the condition of the market and state of the company would

determine the date of entering the market. Listing is generally risky when the

markets are declining and the company should possess sound financial position and

systems that can comply with the JSE's financial disclosure requirements.

THE ISSUE PRICE

(i) Estimated Market Price

The value of the securities can be arrived at by using various methods like the

potential dividend yield, price/earnings ratio, discounted cash flow analysis


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and net asset value or a combination of these and other methods. Also the

returns of listed securities of the sector in which the company intends to list

with similar risk profile should be considered.

(ii) The Discount to Market Price

In order to attract investors to subscribe to the shares of the company, they

should be issued at reasonable discount of 15% to 20% to the estimated

market price. This would not only protect the company against decline in

share prices on exchange but would also ensure a price rise if the market

price was estimated correctly.


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Requirements And Checklists

Listing Requirements Main/Africa Board AltX

Share capital R25 million R2 Million

Profit history 3 years None

Pre-tax profit R8 million N/A

Shareholder spread 20% 10%

Number of shareholders 300 100

Sponsor/DA Sponsor Designated advisor

Publication in the press Compulsory Voluntary

Number of transaction categories 2 (threshold 25%) 2 (threshold 50%)

Annual listing fee

0.04% of average

market capitalization

with a minimum of

R33545 and a

maximum of

R170440.55 (including

VAT).

R27189.25

(including VAT)

Education requirements N/A

All directors toattend Directors

Induction

Programme
http://www.jse.co.za/Item%20not%20found:%20%5BLibraries%5Dffdec978-dec4-4ea6-9087-9700d754bb2dhttp://www.jse.co.za/Item%20not%20found:%20%5BLibraries%5De78103ca-fa07-4640-9a74-5119b1822762http://www.jse.co.za/Item%20not%20found:%20%5BLibraries%5De78103ca-fa07-4640-9a74-5119b1822762http://www.jse.co.za/How-To-List/AltX.aspx#diphttp://www.jse.co.za/How-To-List/AltX.aspx#diphttp://www.jse.co.za/How-To-List/AltX.aspx#diphttp://www.jse.co.za/How-To-List/AltX.aspx#diphttp://www.jse.co.za/How-To-List/AltX.aspx#diphttp://www.jse.co.za/How-To-List/AltX.aspx#diphttp://www.jse.co.za/How-To-List/AltX.aspx#diphttp://www.jse.co.za/Item%20not%20found:%20%5BLibraries%5De78103ca-fa07-4640-9a74-5119b1822762http://www.jse.co.za/Item%20not%20found:%20%5BLibraries%5Dffdec978-dec4-4ea6-9087-9700d754bb2d


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THE LISTINGS PROCESS

APPOINTMENT OF PROFESSIONAL ADVISORS:

If a company wants to apply for listing on JSE, it should consult and appoint

competent and experienced professional advisor.

SPONSOR:

To be able to list on the main board of JSE, appointment of a sponsor is

compulsory. The sponsor acts as a liaison between JSE and the company

and has to advise and see whether the company is suitable for listing and the

listing requirements are met or not. It has to look after the application of listing

and submission of listing documents to JSE.

CORPORATE ADVISOR:

It is advisable that the company appoints a corporate advisor (usually

corporate finance divisions of stockbrokers, merchant banks or auditing firms).

Their functions often overlap with that of the sponsor. Their main

responsibilities include advising the company on the method of listing in

case of placing and public offer, arranging for placing and underwritingrespectively; advising for the size, terms, timing and pricing of the offer,

market conditions and the potential demand for the company's shares;

coordinating the listing process; drafting the listings documentation, with the

assistance of the company and the company's legal advisor, accountant and

sponsoring broker; take steps to generate demand for the company's shares.

LEGAL ADVISOR:

It is advisable to appoint a competent legal advisor. The main responsibilities

of the legal advisor is to assist the company in drafting - the listing documents

to ensure that all legal requirements are met; necessary agreements in case

of underwriting or placing and preparing share option schemes for the

company.


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ACCOUNTANT:

Appointment of an independent registered accountant and auditor is

compulsory for listing on JSE, to report about the profits and the financial

position of the company over the previous three years in the prospectus or

pre-listing statement.

TRANSFER SECRETARIES:

Companys register of members, issue of share certificates, registration of

transfers and mailing of companys circulars are to be taken care of by the

Transfer Secretaries.

STRATE:

For the dematerialisation shares to be registered, the company must be

approved as STRATE eligible in terms of the Central Securities Depositary

Rules.

PUBLIC RELATIONS CONSULTANT:

Public relations consultants assist in promoting a positive image of the

company before a listing.

TECHNICAL ADVISOR:

Appointment of Technical advisors is mandatory in the case of listing of

mineral companies on JSE, for report on the company and its exploration

and/or mining activities to be included in the prospectus or pre-listing

statement.

PRINTERS:

To print the share certificates and prospectus or prelisting statement, the

company should contract with a firm of printers.


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COSTS ATTACHED TO THE LISTING

The cost of listing of a company depends on a number of factors and will be

influenced by the companys objectives and way of functioning of company.

In addition to creation duty, issue duty, stamp duty on transfer of shares,

underwriting fees, bank charges, and brokerage, after listing, the company also has

to pay an annual listing fee (in February of each year except the year of listing).


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SOUTH AFRICAN FUTURES EXCHANGE

The South African Futures Exchange (Safex) consists of a financial markets

division (equity derivatives) and an Agricultural Markets Division (AMD) - agricultural

derivatives.

The measures of the financial markets division have grown from R3.4 million at its

formation in 1990 to R69 million at June 1997. Safex experienced a growth of 10.36

million contracts during the 1996/97 financial year, a year-on-year increase of 35

percent.

AMD was formed in 1995 and by 30 June 1997, the net reserves amounted to R3.2

million compared with the original operating forecast of R1.4 million.Safex has kept abreast of developments in the world financial markets, and

continues to make steady progress despite intensifying competition from

international derivative exchanges and over-the-counter alternatives. The Safex

reserves have grown sufficiently to allow a significant reduction in the fees it levies

per future or options contract. Consequently, all fees were reduced by 50 per cent in

1997 and the changes on allocated trades were removed.

The Exchange is directed by an executive committee consisting of up to 11 elected

members all with full voting rights, and an additional non-voting nominated people

that the executive appoints. Policy decisions are made by the committee and carried

out by a full-time management team headed by the CEO.

The Exchange is governed by members, but through their use of the exchange

services, they are also its clients. The exchange is a Self Regulatory Authority and

exercises its regulatory functions in terms of the Financial Markets Control Act, 1989

and its rules. The Exchange, in turn, is supervised by FSB.

Equity Derivatives Market

The Equity Derivatives market provides a platform for trading Futures and/or

Options. Futures and Options are derivative instruments which derive their value

from an underlying instrument.

On-Exchange trading provide clients with transparency, eliminates counterparty risk,

and as the Exchange we are an Independent source for price discovery.


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The regular administration of margins prevents participants from accumulating large

unpaid losses, which could impact on the financial position of other market users

(systemic risk). Such margining systems do not exist in over-the-counter (OTC)

markets.

The protection and safeguarding of clients interests are of utmost importance.

Regulation, therefore, plays a crucial role in this regard with the Equity Derivatives

market being overseen by the Financial Services Board and controlled in terms of

the Securities Services Act. Certain regulatory activities include the registration of all

members and clients, strict financial requirements for members and regular

inspection of members records and procedures.

Commodity Derivatives Market

The Commodity Derivatives Market provides a platform for price discovery and

efficient price risk management for the grains market in South and Southern Africa.

More recently, the Division also offers derivatives on precious metals and crude oil.

Commodity markets have existed for many centuries and were the first to innovate

contracts in which to manage price risk. The use of derivative instruments throughfutures and options contracts, provide market participants with the ability to manage

their price risk in the underlying physical market. By trading on a formal exchange

which connects buyers and sellers, not only is price discovery achieved in a

transparent fashion, but all transactions are guaranteed through the derivatives

clearing structure.

Producers and users of agricultural commodities who hedge their price risk are

thereby limiting their exposure to adverse price movements. This encourages

increased productivity in the agricultural sector as farmers and users are able to

concentrate their efforts on managing production risks. Production risks associated

with variables such as the weather, farm/production management and seasonal

conditions.

The physically settled commodities rely on warehouse receipts to facilitate thedelivery process. The warehouse receipts are utilized by financial institutions who


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offer financing to clients who own the receipts. Derivative contracts also enable

institutions to fund input costs to producers who hedge their price risk and in so

doing encourage sustainable production.

The cash settled commodities, like gold and crude oil, reference highly liquid

international markets for the final cash settlement value thereby providing all

participants with the assurance that the local settlement price is not open to any

abuse.


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BOND EXCHANGE OF SOUTH AFRICA (BESA)

The bond market, along with the money market, is a financial market; however,

whereas the money market is designed to supply liquidity in exchange for short-term

securities, the bond market supplies liquidity for long term securities. Bond markets

are often without a centralised exchange system, and transactions/trades are

completed in an over-the-counter fashion. Bond market liquidity is generally provided

by dealers who commit risk capital to trading activity.

In the bond market, the counter party to an investor/investment fund who/which

either purchases or sells a bond is almost always not another investor, but a bank or

securities firm acting as a dealer. The bank or firm assumes some risk in the process

as the market value of the bond might decrease before the dealer is able to sell it to

another investor/investment fund.

The vast majority of bonds are bought and traded by institutions like central banks,

insurance companies, banks, and investment funds like sovereign wealth funds and

pension funds. There is nothing to deter individual investors from purchasing and

owning bonds, however. Individuals are more likely to own and trade and stocks as

the stock market is more liquid than the bond market despite the fact that bond yieldsare often better than stock dividends.

The South African bond market is a leader among emerging market economies. In

2008, local debt securities totalled R825 billion (nominal), and the bond market

traded a volume of just over R19 trillion.

South Africas domestic bond market is dominated by government issued bonds, and

does in fact have a centralised exchange known as the Bond Exchange of South

Africa Limited (BESA). BESA is an independent, licensed exchange, and after

demutualisation in 2002, is constituted as a public company.

The bond exchange has been mandated to operate and regulate the long term debt

securities and interest rate derivatives markets in South Africa. BESA aims to build

the local capital market by providing a variety of platforms and services to meet the

demands of securities market participants (issuers, traders and investors). BESA

also acts as a direct regulator of the domestic bond market, and operates according


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to the parameters set out by the Securities Services Act of 2004, and is further

committed to follow its own guidelines that have been sanctioned by South Africas

Financial Services Board (FSB).

The Bond Exchange of South Africa is also dedicated to protect both traders and

dealers through the implementation of best practice standards, and regulates the

conduct of issuers and traders by surveillance and enforcing quality controls through

the mechanism of minimum disclosure standards.

Turnover

The South African bond market is a leader among emerging-market economies.

Turnover reported on BESA in 2008 reached a record R19.2 trillion. Given listed debtsecurities of R825 billion nominal, overall market velocity in the local market was 23,

up from 17.7 reported in 2007. However, when offshore OTS trades are included,

turnover velocity for the year was 29, up from 24 in 2007.

The local bond market is still dominated by securities issued by the South African

government, with local government, public enterprises and major corporations

accounting for the rest of the debt issuers active in the market. The number of

borrowers and listed bonds as well as the market capitalisation have all risen sharply

at December 2008 BESA had listed some 1,102 debt securities, issued by 100

sovereign and corporate borrowers, with a total market cap of R935 billion.

Turmoil in global financial markets and conditions in the domestic economy in 2008

rendered the expansion of the primary bond market difficult. Notwithstanding this,

bond listings on BESA grew by 5.6% on the previous year, albeit the slowest rate of

growth since 2002. The bulk of this growth (37%) can be attributed to the increased

issuance of commercial paper by corporates as well as increased issuance by state

owned enterprises. Central government listings still accounted for the bulk of listings

on the Exchange.


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INVESTING IN SOUTH AFRICAN FINANCIAL MARKETS

OPPORTUNITIES FOR BRICS NATION

The BRICS nations (Brazil, Russia, India, China and South Africa) have a joint

initiative known as 'BRICSMART', launched in the year 2012. BRICSMART

involves trading in derivatives in the exchanges of BRICS nations which

include, Brazilian BM&FBOVESPA, the Russian MICX-RTS, the Hong Kong

Exchanges and Clearing Ltd (HKEx), the Johannesburg Stock Exchange

(JSE) from South Africa and the Bombay Stock Exchange (BSE) from India.

This initiative allows access to investors of each country to the other

participating exchanges through a broker in the home country. Trading is

done in local currency and is not subject to exchange controls. BRICSMART

is an ideal way for investors to take the advantage of these emerging

economies, with their increasing economic power.

INDIAN DEPOSITORY RECEIPTS

Companies listed on JSE can issue Indian Depository Receipts to raise funds

from the Indian market. Thus, investors in India can invest in the South

African financial market through this medium. The investors get all the rights

of the share holders except the rights of attending annual general meetings

and voting on resolutions.


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CONCLUSION

Emerging economy; India is now eying towards over sea markets for catering its

financial needs and also support its investment decision. Any Indian company when

looks towards the foreign market, either to invest or procure funds, easiness in the

process is the thing which makes any foreign market more attractive and visible.

As far as South Africa is looked upon, the process for any Indian company either to

invest or satisfy its financial need is not a joyful journey as its market watch dog, to

larger extent, has maintained a fence over protecting its market and making it hassle

for Indian companies to get money or to invest it.

However, the capital market provides some kind of flexibility to Indian investors who

want to invest in companies listed on JSE. This includes both, the Main Board and

the AltX. The medium of investment though unclear, what has been clearly identified

is that there is no foreign registration process, no withholding taxes and no foreign

ownership limits for foreign investors, and this obstructs the way for sub continent

company in their way.

The capital market of South Africa provides India, opportunities to trade in the

derivatives market of JSE through BRICSMART. The companies listed on JSE if opt

for raising funds from the Indian market, the Indian investors can invest through

Indian Depository Receipts.

The concept of dual listing proposed by the Government of South Africa is to allow

equity trading, between Indian and South African Stock Exchanges, of those

companies that are listed on either of the stock exchanges. Here also a road block isthere as only those Indian companies, which are listed on stock exchanges in India,

are allowed to list on JSE i.e., they have to apply for dual listing. Also, the concept of

dual listing, would require the GOI to review and revise the Foreign Exchange

Management Act.


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BIBLIOGRAPHY

Book:

Understanding South African financial markets, author C. Van Zyl, 3 rd edition,

January 2009.

Links:

October 09, 2012

http://www.business-standard.com/india/news/indian-depository-receipts-

faqs/390215/

http://rbidocs.rbi.org.in/rdocs/Notification/PDFs/APDIR5220709.pdf

http://www.lexvidhi.com/article-details/indian-depository-receipts-idrs-some-

faqs-406.html

http://www.jse.co.za/Libraries/JSE_-_How_to_List_-

_Guideline_to_Listing_on_the_JSE/Guidelines_to_Listing_on_the_JSE.sflb.a

shx

http://www.jse.co.za/How-To-List.aspx

http://www.jse.co.za/Libraries/JSE_-_How_to_List_-

_Guideline_to_Listing_on_the_JSE/Guidelines_to_Listing_on_the_JSE.sflb.a

shx

http://www.southafrica.info/business/investing/help/jse-

investors.htm#.UMBXQuRfG0d

http://mg.co.za/article/2012-03-29-jse-provides-new-international-investment-

options

http://en.wikipedia.org/wiki/Indian_Depository_Receipt

http://mg.co.za/article/2012-03-29-jse-provides-new-international-investment-

options


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October 6, 2012

http://www.southafrica.info/business/economy/development/idc-

040912.htm#.UG_lI5hhx0o

http://www.moneymarket.co.za/Top-20-Money-Market-Funds.aspx

http://www.southafrica.info/business/investing/

http://www.southafrica.info/business/trends/

http://www.southafrica.info/business/investing/opportunities/jse-

020812.htm#.UG_hR5hhx0o

http://www.southafrica.info/business/economy/sectors/financial.htm

October 10, 2012

http://www.jse.co.za/Libraries/JSE_-_Regulatory_Environment_-

_Rules_Directives_-_JSE_Equities_Rules/1_JSE_Equities_Rules.sflb.ashx

http://www.jse.co.za/Markets/Equity-Derivatives-Market.aspx

http://www.jse.co.za/Markets/Commodity-Derivatives-Market.aspx

http://en.wikipedia.org/wiki/Bond_Exchange_of_South_Africa

http://www.bondexchange.co.za/south-africa

http://en.wikipedia.org/wiki/South_African_Futures_Exchange

http://www.strate.co.za/default.aspx

October 15, 2012

http://www.resbank.co.za/Research/Rates/Pages/CurrentMarketRates.aspx

http://wwwrs.resbank.co.za/WebIndicators/Definitions.aspx?DataCategory=C

MRMMR

htt // fi i l k t j l /3 d diti / i t d ti l /t bill

economy of south africa

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