The JSE, Africa’s oldest and largest stock exchange, announced the restructuring of its operations that will see it shed 14 percent of its workforce by the end of the year as it adapted to technological changes.
JSE chief executive, Nicky Newton-King, said in a statement on Friday that the company was restructuring against the backdrop of South Africa’s low economic rate, ratings downgrades and low business confidence and as exchanges were adapting to fast paced technological changes.
Newton-King said the cost cutting would see the technology expenditure cut by a minimum of R70million over two years.
It said the changes would also involve a reduction in the company’s full time staff complement by 60 people, resulting in annualised cost savings of nearly R170m, to be fully realised from 2019 onwards.
The JSE made R65m in annualised savings to date through a combination of removing vacancies and reducing discretionary spend, she said.
“If we want to create a building block for future growth we must take some early decisions and there are none tougher than those that involve our people,” she said.
“We looked at all avenues before considering this action. While we appreciate this will be a very difficult time for the affected employees, the newly aligned company will be in a strong position to serve its current and future clients more effectively,” said Newton-King. She said this was preparing the JSE to meet the challenges head-on.
“The fast moving nature of our business requires us to change the way in which we operate so that we are as nimble and as cost effective as possible.
“We cannot do so without significantly rethinking our cost base, our operating model and the way we are structured as a business,” she said.
She also said the restructuring would see the refreshing of the JSE’s IT operating structure to align to best practice.
“At the same time, our large dependency on IT requires that we look at using technology in a more agile manner to support the execution of our business strategy,” Newton-King said.
Geoff Cook, director and co-founder of JSE competitor ZAR X, South Africa’s first additional stock exchange in 60 years, said on Friday it was not surprising that the JSE was restructuring, owing to the high costs associated with its old-world exchange model.
“The JSE model attracts high infrastructure costs and its technology model is inefficient - the market disruption brought about by modern technology is forcing these changes for it to remain relevant,” said Cook.
Global law firm Baker McKenzie’s latest Cross Border Initial Public Offering Index said South Africa’s three domestic listings raised a total of $250m (R3.34billion) in the first half of 2017. This was the highest amount of capital raised by South African companies recorded during the first half of any year since 2012.
A total of 388 companies are listed on the JSE which has a capitalisation of R14.271bn.
Lumkile Mondi, a senior lecturer at the school of economic and business sciences at the University of the Witwatersrand, said the country’s economic problems made it difficult for the JSE to attract listings.