After nearly 12 decades without one, the Mother City is getting a stock exchange.
The 4 Africa Exchange (4AX) will be renamed Cape Town Stock Exchange at the end of September, CEO Eugene Booysen tells the FM in an exclusive interview.
Though 4AX has been operating as an exchange since 2016, it has struggled to carve out a clear value proposition in a market with several similar-looking and -sounding exchanges. Think of A2X, ZAR X and even the AltX. "With everyone calling themselves ‘something X’ … there was a need to differentiate," says Booysen.
And so 4AX did its research. Most of the listings on the World Federation of Exchanges include the name of a city or country, so anchoring to a financial centre was a must. Not to mention that Cape Town has some brand recognition as a popular tourist destination. And after all, Cape Town was founded as a "trading post" by the Dutch East India Company, considered by many the first listed limited liability venture.
But don’t expect the names of stocks to be called out over a trading floor, or a traditional address like Wall Street. In the digitalised, demonetised 21st century, this exchange is fully cloud-based.
That, however, doesn’t mean it won’t be going after big money.
Cape Town is home to a large part of SA’s asset management community and both Sanlam and Old Mutual are headquartered in the city. Attracting retirement savings to small and mid-cap companies is part of Booysen’s mission.
The sweet spot lies among companies with a market capitalisation of between R100m and R2bn — a sector that Booysen believes is underserved by the JSE due to the costs not only of listing, but of maintaining that ticker on the trading screens.
He sees a total market opportunity of as much as R2-trillion, of which the JSE serves only 15%.
"Too many people don’t understand the role of an exchange in the economy," says Booysen. "It fulfils an important task of capital transformation. If we are serious about igniting job growth in SA … we need to find a way of getting capital to the smaller companies."
Not only equity, but debt too.
The pandemic and the financial squeeze it created for many businesses amplified the need for funding and clearly showed how dangerous it can be to rely heavily on credit lines from banks.
Companies need more than just equity investment, says Booysen. "Their needs extend into working capital solutions, bridging finance and longer-term debt obligations."
With everyone calling themselves ‘something X’, there was a need to differentiate Eugene Booysen
Listing debt has been too expensive for smaller enterprises, so only the big companies have been able to do it effectively in SA. Booysen expects to have his first debt listing this month.
It is part of an offering he calls "investment banking 4.0".
An investment banker himself who spent more than a decade at Barclays and Absa Capital, Booysen is also bullish about the Cape Town Stock Exchange’s registry business.
Not only on its own platform does 4AX provide registry services, it also has nine JSE-listed companies as clients for anything from managing their virtual AGMs and minuting to running underlying share registers.
As an indication of the money to be made, the JSE last year paid more than R200m for a majority stake in registry services firm Link Market Services. To what extent this will eat into 4AX’s business remains to be seen.
Booysen talks of becoming the "Nasdaq of Africa", a bold claim he hopes to realise by attracting listings not only from the technology start-up scene in the City Bowl, Stellenbosch and surrounds, but by getting the exchange to reflect the SA economy more accurately.
He has some ground to cover, as 4AX has only eight equity listings at the moment, worth R7bn in total. But more are coming soon, he says. And he wants to double the number of listings before the end of the year and double them again before the end of next year.
"We have a very healthy pipeline," he says.
Management and staff hold about 7% of 4AX, while the founders retain 20%. The largest shareholder is Arena Holdings owner, Lebashe Investment Group.
Wesgro, the investment promotion agency for Cape Town and the Western Cape, has welcomed the move.
With the Cape styling itself as the tech capital of Africa, Wesgro’s acting CEO, Yaw Peprah, says the stock exchange will provide a platform for existing funders to gain exposure to better investment opportunities.
Peprah says it’s a move that should do wonders to boost medium to large businesses in the province.
Though 4AX’s rebranding to Cape Town Stock Exchange is a new development, it is not the city’s first foray into such an exercise. Early in the previous century a Cape Town stock exchange briefly tried to pick up the slack when the SA War disrupted activity on the Witwatersrand.
But that was before SA was one country. There is, however, a new social media campaign to split the Western Cape from the rest of the country.
Whether slacktivist separatists will find some propaganda value in the idea of a stock exchange in Table Mountain’s shadow is not something Booysen is worrying himself about at the moment.
Lebashe is the main shareholder in both the CTSE and Arena Holdings, which owns the FM
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