The JSE’s announcement earlier this month that it would terminate the listing of Nutritional Holdings’ securities is not, on the face of it, that significant. The company appeared to be in a world of distress and no serious investor would be sorry to see it go.

What is significant is that it marks the 25th JSE delisting for the year, and the 27th from all SA’s public markets. This exceeds the JSE’s 24-company delisting streak of 2021, with a few weeks left to run. This is not quite the one-in-10 companies as predicted earlier this year, but there are also at least four delistings already locked in for early next year (Onelogix, Etion, Mediclinic, Distell) and a further nine probable delistings waiting in the wings, along with 17 companies currently suspended from trade where most are unlikely to ever have their suspensions lifted.

On the flip side, there have been just six new listings so far in 2022, of which four were on the JSE, with one more to come as Zeda scrapes in just before Christmas.

The other significant milestone that has been surpassed is that, after multiple years of net delistings, South Africa will end the year with less than 300 publicly listed companies — the lowest number in probably more than three-quarters of a century.

What is most telling is not that there are a lot of delistings, as delistings are a natural part of the public market life cycle, but rather the almost complete dearth of new arrivals raising primary capital when listing, outside the temporary blip of capital raisings by Real Estate Investment Trusts in the mid-2010s.

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What listings there have been were mostly technical by nature — unbundlings, demergers and secondary listings by introduction, for example. The last true IPO, with a genuine offer to the public, is often quoted as being Telkom’s listing way back in 2006. This should be something policymakers at the National Treasury are concerned about, but with the myriad other problems the country faces, it is unlikely that it has the intellectual bandwidth to do so.

What is strange is that the organised financial services industry — those custodians of South Africa’s savings industry — are not even the slightest bit concerned. This is because through practice and regulation and for their own convenience, they are now only interested in investing savers’ money in the largest and most liquid 100 to perhaps 120 listed companies.

The institutional investment industry has made great strides in the past two or three decades in lobbying for regulatory and specifically tax advantages that have allowed them to displace personal stock portfolios with their own institutional funds, managed for among some of the highest total retail fund management fees in the world. This has effectively crowded out individuals, reduced the diversity of investors, and resulted in a market where nothing outside the top 120 or so companies matter.

With just 11 financial services groups managing in the region of 90% of all South Africa’s savings, the trend towards institutionalisation looks to continue, bringing with it the inevitable bias in favour of size and liquidity. And with there being very little the JSE or other market operators can do, and no appreciation from policymakers that incentives are required for the smaller end of the market, the delistings trajectory definitely looks to continue in 2023. BM/DM