Debate on black JSE ratio heats up

Zuma refuses to back down

ECONOMIC transformation is evading South Africa if the controversial debate around how much of the JSE is owned by black people is anything to go by.

The debate was sparked by President Jacob Zuma who said in his reply to the State of the Nation address that black ownership of the JSE stood at 3 percent.

This prompted the JSE to fire off a response the following day and said, without naming Zuma, black ownership of the bourse was at least 23 percent of the Top 100 companies as at the end of 2013.

White foreign investors hold about 39 percent.

The JSE said a further 16 percent, which was still to be analysed, would probably include a mix of shareholder demographics, including black South Africans.

The study was done by black economic empowerment (BEE) advisory group Alternative Prosperity for the JSE.

It said the biggest proportion of investment funds of both black and white South Africans was held through mandated investments.

“Retirement funds are the biggest South African investors on the stock market, the largest of these being the Government Employee Pension Fund Scheme, whose members include most civil servants other than those working for municipalities.”

However, Zuma hit back and said he stood by his assertion that black ownership of the JSE stood at 3 percent.

He said this was based on the measure used by the National Empowerment Fund (NEF) to assess black ownership and control in the economy, which relied on the work done by Who Owns Whom.

The NEF said on Friday that it welcomed the acknowledgement by the JSE that “insofar as the investment that black South Africans have directly in listed JSE entities, we concur that it is approximately 3 percent”.

It said the statement was read out on the Consumer News and Business Channel (CNBC) Africa.

NEF chief executive Philisiwe Mthethwa said in order to assess the extent of direct black ownership and control in the economy, the NEF used the market capitalisation of the JSE as a proxy, given the availability of its information in the public domain.

She said in accordance with legislation, unlisted share ownership was not publicly disclosed and, therefore, black control over private companies could not be measured conclusively.

“In the view of the NEF, the legitimate and effective method of measuring black ownership and control on the JSE is by assessing direct ownership and control, which is the equity that vests directly with black companies or individuals, broad-based groups or community trusts, as well as employee share ownership schemes.”

Mthethwa said the principle of ownership and control meant that black shareholders had direct representation on the boards of the listed companies as directors.

The black directors were then able to drive and influence the strategic direction, policies and cash flows of the company, Mthethwa added.

This was the destination and the role that meaningful transformation aspired to achieve, she said.

“It is therefore misleading to use indirect shareholding, which includes mandated investments such as institutional pension fund managers, private equity funds and savings funds, which amount to 23 percent, as a measure of blackowned equity on the JSE.

“The passive shareholding methodology is, therefore, not a true indication of the level of transformation in the country,” Mthethwa added.

Ajay Lalu, the managing director at BEE strategy consultancy Black Lite, said he agreed with Zuma.

“The methodology the JSE is using tends to overstate black ownership by including indirect ownership and excluding foreign ownership,” he said. “We should be asking what the effective black ownership of the JSE is and this is what President Zuma was