Page 87 - Monocle Quarterly Journal Vol 1 Issue 1 Q4

the JSe todAy: toBAcco, BeeR ANd chINeSe textING
the total stock market. Now add British American Tobacco, another ‘sin- tax’ rm, and we have three JSE rms that make up roughly 39 percent of the total stock market value of the JSE.
Even more absurdly, if one then adds Naspers, the next largest company by market capitalisation on the JSE, that fraction goes up to 46 percent. Naspers, in and of itself, is worth interrogating. Of its ZAR 1.0 trillion market capitalisation, more than 80 percent of that value is made up of its investment in Tencent, a Chinese messaging app.
To put that into perspective consider this: e largest four banks in South Africa employ about 190 000 people, whereas Naspers employs only 24 000 people. e Big Four banks are all considered blue-chip shares, yet their total market value, all together, is worth less than Naspers alone.
e party line amongst local and international economists reads some- thing like this: e South African economy is likely to grow sluggishly in 2016 and 2017, a icted by severe electricity constraints and the downturn in the global commodity cycle. Policy uncertainty, labour unrest and resultant investor uncertainty have also undermined SA’s potential growth trajectory in recent years, although South Africa is actively working to ease electricity supply constraints in the longer-term.
What the headline should read is this: Of the ZAR 15 trillion value in the South African equity markets, almost one-half is invested in a beer company, a cigarette company, and in a Chinese messaging app. is is because institutional investors are divesting themselves of South African economic exposure and SAB, BAT and Naspers will provide the investor approximately three quarters diversi ed o shore exposure.
As ironic as it is plain: the image in my head of a childhood spent growing up during apartheid in South Africa – men drinking beer, smoking cigarettes and watching rugby on TV – was accurately prescient of the constituents of the JSE more than thirty- ve years later. My childhood image however has very little relevance to the broader economic reality that exists within South Africa today: a picture of tepid growth, violence, xenophobia, extreme unemployment, cronyism, and a proliferation of mediocrity in all echelons of utilities.
Most importantly however, this contrast between the JSE and the economy displays in the collective investment strategies of just about every investor within the borders of this country, including the State’s own investment arm, a substantial absence of faith in this country.
“Of the ZAR 15 trillion value in the South African equity markets, almost one- half is invested in a beer company, a cigarette company, and in a Chinese messaging app.”
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