JSE in support of capital flow reforms

The Johannesburg Stock Exchange (JSE) has been advocating for exchange control reforms for over a decade, and their efforts have finally paid off with the inclusion of three significant reforms in the Medium-Term Budget Policy Statement. Valdene Reddy, Director of Capital Markets at the JSE, discussed these reforms and their implications for investors and the South African economy in an interview with CNBC Africa. The first reform involves standardising the treatment of inward listed instruments. Currently, only equities are classified as domestic for institutional investors. The proposed reform would expand this classification to include derivatives, ETFs, and debt instruments. This change would provide institutional investors with a broader range of investment opportunities on the exchange, enhancing diversification and product selection for investors looking at the JSE. The second reform focuses on granting permission to list non-ZAR denominated instruments. This reform would address the high demand for offshore instruments in the South African financial market, opening up opportunities for investors to access non-ZAR denominated assets locally. This move is expected to create a more competitive financial landscape in South Africa and attract a diverse pool of investors. The third reform pertains to collateral for derivative exposure. While this may sound technical, it is a crucial step in laying the foundation for a more robust financial ecosystem in South Africa. By introducing collateral requirements for derivative trades, the JSE aims to enhance risk management practices and create a more secure environment for investors. Reddy noted that these reforms are not only significant for the JSE but also hold great potential for the South African economy as a whole. By modernising exchange controls and aligning them with international standards, South Africa can enhance its attractiveness as an investment destination, drive economic growth, and promote job creation and skills development in the country. The road ahead may involve navigating technical details and operational challenges, but the JSE remains optimistic about the positive impact these reforms will have on the investment landscape in South Africa. With a broader range of products, increased investor confidence, and a more competitive financial market, South Africa is poised for growth and development in the coming years.