Speculation about the classification of five of the biggest JSE-listed companies has been laid to rest by a paper published yesterday by the Treasury as part of the Budget Review.
The paper deals with the regulation of foreign exposure for institutional investors. Anglo American, BHP Billiton, SABMiller, Old Mutual and Investec, which are based abroad, will continue to be treated as domestic companies.
The big five’s shares all declined on the JSE yesterday, with BHP Billiton sliding the most, its shares were 2.5 percent down to close at R271.50.
The big five make up 9 percent of all shares traded on the JSE, according to the local bourse, 11 percent of the total number of trades and 24 percent of all value traded on the JSE. The companies have historic roots in South Africa but listed abroad in the late 1990s and early 2000s to gain greater access to foreign capital.
Any change to the classification system would be forward looking and would not affect the current status of non-resident shares with a domestic classification on the JSE.
The Centre for Research into Economics and Finance in Southern Africa’s paper comes in the wake of exchange control regulations, which are to be replaced by a prudential framework for institutional investors.
The JSE said: “National Treasury’s classification of listed companies – as domestic or foreign inward listings – is important as it determines the manner in which South African investors, particularly institutions, are able to invest in listed companies.”
JSE chief executive Russell Loubser said: “The exchange supports Treasury’s gradual relaxation of exchange controls and recognises the significant steps taken in this regard over the past number of years.”
However, the Treasury paper argues that the classification of foreign companies with listings on the JSE as domestic assets weakens the framework for the prudential regulation of foreign exposure.
Loubser said the JSE had detailed conversations with the Treasury about this topic over the years and would “engage with Treasury on the most appropriate way to classify other foreign companies with listings on the JSE”.
“It is important that finality is reached, so that South Africa is able to attract more foreign listings into South Africa so that South Africans can use South African infrastructure to diversify their investment portfolios and so that the country can play a meaningful role as a gateway for investment into African markets.”
Stake holders have until the end of April to comment. - Ethel Hazelhurst