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Www.jse.co.za 1.1. ATTRACTING FOREIGN INVESTMENT Presentation by Geoff Rothschild Director: Corporate Marketing & Communications 21 November 2003.

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Presentation on theme: "Www.jse.co.za 1.1. ATTRACTING FOREIGN INVESTMENT Presentation by Geoff Rothschild Director: Corporate Marketing & Communications 21 November 2003."— Presentation transcript:

1 www.jse.co.za 1.1. ATTRACTING FOREIGN INVESTMENT Presentation by Geoff Rothschild Director: Corporate Marketing & Communications 21 November 2003

2 www.jse.co.za 2.2. The NEPAD Initiative How Project Thusanang promotes the development of Stock Exchanges in Africa

3 www.jse.co.za 3.3. Project Thusanang PAB Market Development Forum

4 www.jse.co.za 4.4. Introduction

5 www.jse.co.za 5.5. Objectives  Getting up to speed with recent developments  Providing progress update  Discussing proposed Project Thusanang Phase I approach  Provide Phase I funding options  Discuss JSE involvement in the NEPAD Business Group

6 www.jse.co.za 6.6. Ground Rules  This is an interactive, two-way communication session  Everyone’s opinion counts  The more ideas the better  Think out of the box  No negatives/ judging  Parking lot issues: all issues out of scope will be discussed at a more appropriate time

7 www.jse.co.za 7.7. Progress to date THE AFRICAN STOCK EXCHANGES ASSOCIATION(ASEA) ASEA was incorporated in 1993 in the Republic of Kenya THE AFRICAN STOCK EXCHANGES ASSOCIATION(ASEA) ASEA was incorporated in 1993 in the Republic of Kenya THE SADC COMMITTEE OF STOCK EXCHANGES (COSSE) COSSE was formed in January 1997 as a private initiative within the Southern African Development Community (SADC) framework THE SADC COMMITTEE OF STOCK EXCHANGES (COSSE) COSSE was formed in January 1997 as a private initiative within the Southern African Development Community (SADC) framework To provide a formal framework for the mutual co-operation of stock exchanges in the African region through various processes, encompassing the exchange of information and assistance in the development of member exchanges ASEA’s AIM By the year 2006 COSSE Exchanges will be an integrated real time network of national securities markets within the SADC community COSSE’s AIM Working with ASEA and COSSE, the JSE aims to market African Exchanges, attract investment and identify how to economically benefit the continent, in line with the aims of Nepad

8 www.jse.co.za 8.8. Progress to date  Harmonisation of listings requirements of all COSSE Member Exchanges  The JSE has offered the use of its systems and infrastructure to the other SADC Exchanges  Meeting in Botswana, COSSE Members agreed to draft a multilateral MoU relating to the way forward  Exchanges are signing Memorandums of Understanding (MoUs) to stimulate the sharing of technical skills and information  COSSE members recently participated in an initiative with the UNDP and the NYSE, aimed at the development of Capital Markets in Africa A number of significant steps have been taken in generating co-operation between Africa’s Exchanges: Considerable momentum has already been established in bringing Africa’s Exchanges closer together

9 www.jse.co.za 9.9. Dar es Salaam, 2002:  The JSE tables a proposal to ASEA to facilitate the development of African Exchanges, in line with the initiatives of the SADC Committee of Stock Exchanges (COSSE) Johannesburg, 2003:  COSSE Market Development Forum met to discuss and refine the JSE’s proposed model for the realisation of COSSE’s vision  September: COSSE endorsed Project Thusanang, which would be included on future meeting agendas Its aims:  An agreed conceptual model for the development of an integrated real- time network of the national securities markets within SADC  An agreed approach for the fulfillment of Project Thusanang’s objectives Progress to date July 2003: “Project Thusanang” is launched “An integrated real-time network of national securities markets within the SADC community” N Lu Zim SA GH

10 www.jse.co.za 10. Project Thusanang participating Exchanges Namibia (NSX): Market cap (2002): $201m Value traded: $129m Listed companies: 13 Zimbabwe (ZSX): Market cap (2002): $11,689m Value traded: $131m Listed companies: 77 Ghana (GSX): Market cap (2002): $382m Value traded: $11m Listed companies: 24 Zambia (LuSE): Market cap (2002): $231m Value traded: $2m Listed companies: 11 Mauritius (SEM): Market cap (2002): $1,324m Value traded: $59m Listed companies: 40 Existing JSE-LSE relationship (LSE-hosted trading platform and information dissemination system, linked by dedicated trans-Atlantic cable) Source: African Stock Markets Handbook (2003)

11 www.jse.co.za 11. Project Phases The project effort will be divided into three phases:  Phase 1 will entail the feasibility and planning and analysis for phase 2  Phase 2 will entail leveraging the JSE’s trading platform for participating African exchanges, while retaining the existing separation of markets through the use of functional segments with the creation of a “Pan- African Board” (PAB),  Phase 2 will see the creation of a “Pan-African Exchange” (PAE), introducing deeper integration across countries in the primary and secondary equity markets  Differences in Listing Requirements allowed  Procedural differences tolerated for primary market regulation / full home exchange autonomy for secondary market regulation and surveillance  Exchanges trade off JSE SETS trading platform on independent “functional segments”  Use of Broker Deal Accounting (BDA) to create and transmit clearing information to settlement agent  Variety of options to leverage off JSE’s information dissemination and surveillance capabilities Phase 3 - PAE  Standard listings requirements on the PAE  Standardised regulatory procedures, with recourse to COSSE body, for PAE-listed stocks Exchanges trade off JSE SETS trading platform on independent “functional segments”  Functional segments retained  “Pan-African Exchange” (PAE) functional segment added to SETS, listing stocks meeting PAE listings requirements  Cross-country clearing and settlement capability for PAE stocks Phase 2 - PAB  Focused on Phase II  Determine the viability of the solution by quantifying business and technology elements in a business case Estimate the effort required to implement the solution and to scope activities for each phase Phase 1 – Feasibility / Planning and Analysis

12 www.jse.co.za 12. Conceptual Model – Phase II Each Exchange trading on their own segment on the JSE infrastructure (Currently ZA11 for NSX) Each exchange with its own regulations, own fees, own clearing and settlement and information dissemination capabilities (See grayed out area of information dissemination, clearing and settlement) Lusaka Stock Exchange Namibian Stock Exchange Zimbabwe Stock Exchange Ghana Stock Exchange

13 www.jse.co.za 13. Conceptual Model – Phase III Each Exchange trading on their own segment on the JSE infrastructure with qualifying securities trading on the Pan African Board Issues: Currency Exchange Control Custody Infrastructure Connectivity Pan African Board Lusaka Stock Exchange Namibian Stock Exchange Zimbabwe Stock Exchange Ghana Stock Exchange

14 www.jse.co.za 14. Conceptual Model Summary by Area FUNCTIONAL AREAPHASE IPHASE IIPHASE III Listings & primary market regulation Listings requirements differences allowed Procedural differences in regulation allowed Optional use of SENS for communication of price- sensitive company information Standard listings requirements on the PAB Standardized regulatory procedures, with recourse to COSSE body, for PAB-listed stocks Trading Exchanges trade off JSE SETS trading platform on independent “functional segments” Functional segments retained “Pan-African Board” (PAB) functional segment added to SETS, listing stocks meeting PAB listings requirements Secondary market surveillance & regulation Full Exchange autonomy retained Variety of options to leverage off JSE’s surveillance capability Standardized surveillance procedures, with recourse to COSSE body, for PAB-listed stocks Clearing & settlement Creation and transmition of clearing information to settlement agent Cross-country clearing and settlement capability for PAB stocks Information dissemination Provision of FTSE indices Variety of options to leverage off JSE’s information dissemination capability Alignment of data strategy across Exchanges Infrastructure & connectivity Leased-line, ISDN or internet connectivity ASP-based solution recommended Leased-line, ISDN or internet connectivity ASP-based solution recommended Feasibility and Planning and Analysis for Phase II

15 www.jse.co.za 15. Anticipated Benefits The new market will facilitate:  The creation of a centralised point for the inflow of foreign capital into the continent, encouraging the growth of African markets through the provision of a single access point to capital and liquidity across multiple markets;  Ensure the autonomy of the various Exchanges is retained;  Increase participating Exchanges’ credibility due to conformance to best practice listings requirements, internationally accepted trading methodology, state-of-the-art technology, etc;  Facilitate experience sharing in terms of surveillance and self-regulation;  Facilitate the development of local Clearing and Settlement infrastructures and capabilities;  Facilitate knowledge building;  Provide a facility for participating Exchanges to raise funds; and  Encourage markets that are fair, efficient and transparent with proper Price Discovery and Best Execution.

16 www.jse.co.za 16. Market Development Forum Meeting (24 - 25 July 2003) report back Meeting attendees were representatives of the JSE; NSX; ZSE; LuSE; GSE; and SEM The following key items were agreed upon: –Phase I is to be completed by end of 2003 –Conceptual model to be reviewed and signed off –Develop Heads of Agreement –Evaluate funding options –Ensure buy-in from market participants by each participating Exchange

17 www.jse.co.za 17. Heads of Agreement Heads of Agreement between the participating Exchanges have been drafted, with the aim to have them agreed and signed prior to the project kick-off (Phase I). The following areas are covered in the Heads of Agreement: –Intent –Negotiations –Consultation –Role of Facilitating Exchange –Responsibilities of Participating Exchanges –Accession of Other Exchanges –Expenses –Termination of Heads of Agreement

18 www.jse.co.za 18. Stages within the Project Phases The completion of each high-level phase would follow standard stages of design, development, testing and deployment. Timing would be contingent on the degree of implementation complexity Phase I Phase II DeploymentTesting DevelopmentDesign Planning & Analysis Feasibility Determine the viability of the solution by quantifying business and technology elements in a business case. This is based on a high level business and technical design. Estimate the effort required to implement the solution and to scope activities for each phase. Design the system according to business and technical specifications. Develop the system and business processes according to the design specification. Prove the solution prior to deployment. Roll out the solution in the production environment. Programme Management; Business Case; Stakeholder Management Go Live

19 www.jse.co.za 19. Possible Implementation Approach A phased approach would be adopted for the proposed implementation, with the sequencing of releases possibly based on the migration- readiness of each of the respective exchanges Cross exchange feasibility and planning and analysis Eg: Zimbabwe (ZSE) Eg: Zambia (LuSE) Eg: Mauritius (SEM) Eg: Ghana (GSE) 6 Months12 Months18 Months24 Months Release 1 Release 2 Release 3 Release 4

20 www.jse.co.za 20. Project Approach & Timelines The project approach focuses on defining the overall framework within which the participant exchanges need to operate, understanding the specifics of each participant exchange, and then determining the implementation plan and effort estimates. Mobilise Project Define ZSE business model & assess impact Assess impact on JSE/ LSE Develop detailed implementation plan for Phase II Project management Develop business case for Phase II Communication and stakeholder management Prepare for site visits 2-3 weeks3 weeks 2 weeks Define SEM business model & assess impact Define LuSE business model & assess impact Define GSE business model & assess impact 2 weeks The success of this project is highly dependent on the participation in workshops, during site visits, from key individuals in the following departments within each Exchange: Trading Services; Listings; Surveillance; Clearing & Settlement; Information Dissemination; and IT

21 www.jse.co.za 21. Project Team Structure Project Management 1 x JSE Busa Mkhize (Accenture) Impact Assessment (ZSE & SEM) 2 x Accenture Impact Assessment (LuSE & GSE) 2 x Accenture Implementation Plan & Business Case 4 x Accenture * The implementation planning and the business case development will be conducted by the ZSE & SEM and LuSE & GSE teams. The total number of Accenture resources is 5, including the Project Manager. Project Director John Burke (JSE) Steering Committee John Burke (JSE) 4 x Exchanges’ Reps Raj Makanjee SME Raj Makanjee (Accenture) Leila Fourie (Accenture)

22 www.jse.co.za 22. Project Phase 1 Funding Following up with the US State Department Possibility of participating Exchanges to fund their respective part of total project costs Need to agree on timelines by which the funding issue must be resolved

23 www.jse.co.za 23. JSE - NEPAD : An update The JSE involvement in the NEPAD business group – an update: –Start –Focus –Deliveries


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