SA com­pa­nies be­com­ing more for­eign

Finweek English Edition - - Cover - BERNARDT VAN DER LINDE

IN THE LAST SIX YEARS off­shore in­vestors’ net in­vest­ment on the JSE amounted to more than R208bn – more than enough to have bought the fourth big­gest com­pany on our ex­change, Richemont, at a cur­rent mar­ket value of just over R202bn. It is also sub­stan­tially more than the big­gest pri­mary listed com­pany on the JSE, An­glo Plat­inum, with a mar­ket cap­i­tal­i­sa­tion of R181bn.

The ben­e­fits of this for­eign in­vest­ment are de­bat­able. Gov­ern­ment is prefer­ably look­ing for real in­vest­ments in fixed as­sets as the in­vest­ment in stock mar­kets can be very flighty. The slight­est whiff of an emerg­ing mar­ket cri­sis or any SA do­mes­tic is­sue and the snow­ball ef­fect of dump­ing shares, sell­ing rands, de­pre­ci­a­tion of our cur­rency, ris­ing in­fla­tion and in­ter­est rates can be very sud­den and detri­men­tal to the econ­omy.

Ac­cord­ing to the De­cem­ber quar­terly bul­letin of the Re­serve Bank, non-res­i­dents’ net pur­chase of JSE listed shares amounted to R56,5bn. Buy­ing in­ter­est waned in the third quar­ter of 2006 with net pur­chases only at R2,6bn.

For­eign buy­ing sup­ported the mar­ket dur­ing 2005 and 2006 (see graph). This con­trib­uted to the im­prove­ment in the fi­nan­cial ac­count, re­flected in a sur­plus of R35,4bn at the end of Septem­ber 2006, which helped the Rand de­spite the record deficit in the cur­rent ac­count. But the Re­serve Bank noted that “the div­i­dend and in­ter­est pay­ments to non-res­i­dents re­mained strong, buoyed by pos­i­tive profit an­nounce­ments as well as the higher level of the out­stand­ing for­eign debt and non-res­i­dent own­er­ship of South African shares”. This neg­a­tively af­fected the cur­rent ac­count deficit.

In terms of mar­ket cap­i­tal­i­sa­tion, BHP Bil­li­ton, with a his­tory of SA as­sets, is cur­rently the sec­ond big­gest com­pany on the JSE. But only less than half of this GBP 54bn com­pany is listed on the JSE. Only 21,75% of its share­hold­ing is SA based with 1 145 in­di­vid­u­als, 19 banks or nom­i­nees and 12 in­vest­ment trusts mak­ing up the bulk of the 1 197 share­hold­ers. And 21,59% of the shares are held in three nom­i­nee com­pa­nies.

The bluest of blue chip SA com­pa­nies, like An­glo Amer­i­can, SAB and Old Mu­tual, moved their pri­mary list­ings off-shore while re­tain­ing a sec­ondary list­ing on the JSE.

This caused their share­hold­ing to in­ter­na­tion­alise sub­stan­tially, with An­glo Amer­i­can left with lo­cal share­hold­ing of only 26,13% and Old Mu­tual 32%.

In­vestec didn’t opt for any sec­ondary list­ings but re­tained its pri­mary list­ing on the JSE since 1986. An­other pri­mary list­ing on the LSE in 2002 cre­ated a dual listed com­pany struc­ture. A DLC is an ar­range­ment whereby two sep­a­rately listed le­gal en­ti­ties are com­bined into a sin­gle eco­nomic en­ter­prise through con­trac­tual ar­range­ments. Share­hold­ers ef­fec­tively have eco­nomic and vot­ing rights as if they held shares in a sin­gle com­pany. 82% of JSE listed In­vestec Ltd is held by SA en­ti­ties while a size­able 25% of the LSE listed en­tity is also held by SA based par­ties. In­ci­den­tally the Pub­lic In­vest­ment Cor­po­ra­tion is the big­gest share­holder in both en­ti­ties, with 11,4% in Ltd and 6,7% in plc.

Gold shares have al­ways been a favourite with in­ter­na­tional (es­pe­cially USbased) in­vestors. More than half of An­gloGold Ashanti (76%) and Har­mony (57,58%) shares be­long to off-shore share­hold­ers.

51% of An­gloGold Ashanti free float share­hold­ing, ex­clud­ing An­glo Amer­i­can plc’s 41,8% and Gov­ern­ment of Ghana’s 3,4%, is held in North Amer­ica, con­firm­ing their gold bull sta­tus. SA rep­re­sents 24% and the UK 14% with the rest made up of con­ti­nen­tal Europe and the Mid­dle East and Asia Pa­cific.

33% of Har­mony share­hold­ers are based in North Amer­ica and 12% in the UK.

On the other hand, it is quite sur­pris­ing that plat­inum mines – con­sid­er­ing that plat­inum can be seen as a more at­trac­tive pre­cious metal due to its in­dus­trial use in ve­hi­cle cat­alytic con­vert­ers – still

have the ma­jor­ity of their shares in SA. An­glo Plat­inum’s free float share­hold­ing is 56% based in SA.

The com­pany in the top 40 that could claim the “Proudly South African” prize is Pick ‘n Pay Stores, with 97% lo­cal share­hold­ing.

The av­er­age lo­cal share­hold­ing amongst the top 40 com­pa­nies for which in­for­ma­tion was avail­able was 73,4%.

LOCALAL VS IN­TER­NA­TIONAL SHARE­HOLD­ING

FOR­EIGN IN­TER­EST... RIS­ING

SHARE PRICES AND NET PUR­CHASES OF SHARES BY NON-RES­I­DENTS

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