The public market continues to see delistings on the JSE and other South African stock exchanges at an alarming rate, says consultancy and research provider AmaranthCX director Paul Miller, with 14 companies already having delisted their shares in the year to date.

Although corporate activity generally picks up in the second half of the year, the large number of delistings that have occurred already puts the local market on track to match or exceed the 27 delistings recorded in 2022, Miller explains in a July 3 note.

Some of the delistings from the JSE in the year-to-date include digital technology company Etion, logistics company Onelogix Group, information and communication technology company Alviva Holdings, coal mining companies Buffalo Coal Corporation and Hwange Colliery, retail and logistics property company New Frontier Properties, healthcare services group Mediclinic International and brewing company Distell Group Holdings.

Miller finds that four additional delistings are locked in and appear certain, including residential property manager Indluplace Properties, retail company Steinhoff, hospital manager Advanced Health and integrated food and fishing company Premier Fishing and Brands.

A further six companies have a reasonable probability of having their shares delisted, but these details are not yet certain.

Another 13 companies are in various degrees of distress and have had their shares suspended from trading. Miller points out that it is unusual for South African companies to return to trading once shares have been suspended and that delisting is normally inevitable.

A recent exception was the return to trading of Mantengu Mining’s shares.

Among the companies with suspended shares are construction group Basil Read Holdings, sugar manufacturer Tongaat Hulett and emerging coal producer Resource Generation.

“We must all be wary of the specious arguments that all is well in South Africa’s public markets, because the gross market capitalisation continues to increase or because the average market capitalisation of the 100 largest companies continues to increase,” Miller warns.

While these are both true, the majority of the gross market capitalisation of the local market is in fact not local, nor is it owned by local investors. These companies also often do not trade locally, he points out.

Miller notes that 100% of companies such as global miners BHP and Glencore, or tobacco manufacturer British American Tobacco, are counted in local statistics as if they were entirely local companies; however, this distorts the averages, as over 60% of the JSE’s gross market capitalisation is now made up of such companies.

This is, however, not the case for index weightings, where market capitalisation is moderated to take into account actual local ownership.

Another gloomy fact is that when companies with a secondary listing on the JSE issue shares to investors in their home markets, sometimes even expressly excluding South African resident investors from the issue, it is counted as equity capital raising on the JSE.

Miller cites the National Treasury as saying that there is nothing to be done in terms of policymaking and the public market, when asked for their reaction to the public market delisting crisis.

He believes South Africa needs policy intervention to breathe life into its public markets, otherwise the delisting trajectory is likely to continue. Miller says policy intervention has helped to save other public markets globally.

The number of listings on the JSE had been decreasing from 665 in the 1990s to 300 as of June last year, which is partly owing to the removal of passive holdings companies, but also the rapid delisting of active companies.

Additionally, actual trade is mostly happening within the top 40 companies, while 90% of all long-term savings assets are being managed by just 11 institutions, which means the public market is highly concentrated overall.

Miller argues that South Africa could have 21 new mining listings if foreign mining companies that already operate in this country were to list on the JSE.

These companies are, however, all listed elsewhere, despite mining, developing or exploring in South Africa. Examples include Sylvania Platinum, TerraCom, Tronox, Bushveld Minerals, Kropz, Petra Diamonds and Diamcor.

He says a prompt from the Mineral Resources and Energy Minister could help trigger these listings.

Miller concludes that South Africa is sleepwalking into a situation where the JSE will have less than 100 listed companies in 20 years’ time.