Download Attracting Foreign Investment

ATTRACTING FOREIGN
INVESTMENT
Presentation by Geoff Rothschild
Director: Corporate Marketing &
Communications
21 November 2003
1.
www.jse.co.za
The NEPAD Initiative
How Project Thusanang
promotes the development of
Stock Exchanges in Africa
2.
www.jse.co.za
Project Thusanang
PAB Market Development Forum
3.
www.jse.co.za
Introduction
4.
www.jse.co.za
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
5.
www.jse.co.za
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
6.
www.jse.co.za
Progress to date
ASEA’s AIM
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
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
COSSE’s AIM
By the year 2006
COSSE Exchanges will
be an integrated real
time network of
national securities
markets within the
SADC community
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
7.
www.jse.co.za
Progress to date
A number of significant steps have been taken in generating
co-operation between Africa’s Exchanges:
 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
Considerable momentum has already been established in bringing Africa’s
Exchanges closer together
8.
www.jse.co.za
Progress to date
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
“An integrated real-time
network of national
securities markets within
the SADC community”
July 2003:
“Project Thusanang” is launched
N
Lu
Zim
SA
GH
Its aims:
 An agreed conceptual model for the development of an integrated realtime network of the national securities markets within SADC
 An agreed approach for the fulfillment of Project Thusanang’s
objectives
9.
www.jse.co.za
Project Thusanang participating
Exchanges
Mauritius (SEM):
Ghana (GSX):
Market cap (2002): $1,324m
Market cap (2002): $382m
Value traded: $59m
Value traded: $11m
Listed companies: 40
Listed companies: 24
Zambia (LuSE):
Market cap (2002): $231m
Value traded: $2m
Listed companies: 11
Existing JSE-LSE
relationship (LSE-hosted
trading platform and
information dissemination
system, linked by
dedicated trans-Atlantic
cable)
10.
Zimbabwe (ZSX):
Market cap (2002): $11,689m
Namibia (NSX):
Market cap (2002): $201m
Listed companies: 77
Value traded: $129m
Listed companies: 13
Source: African Stock Markets Handbook (2003)
Value traded: $131m
www.jse.co.za
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 “PanAfrican 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
Phase 1 – Feasibility
/ Planning and Analysis
 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 2 - PAB
 Differences in Listing Requirements
allowed
 Standard listings requirements on the PAE
 Procedural differences tolerated for
primary market regulation / full home
exchange autonomy for secondary
market regulation and surveillance
 Standardised regulatory procedures, with recourse
to COSSE body, for PAE-listed stocks Exchanges
trade off JSE SETS trading platform on independent
“functional segments”
 Exchanges trade off JSE SETS trading
platform on independent “functional
segments”
 Functional segments retained
 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
11.
Phase 3 - PAE
www.jse.co.za
 “Pan-African Exchange” (PAE) functional segment
added to SETS, listing stocks meeting PAE listings
requirements
 Cross-country clearing and settlement capability for
PAE stocks
Conceptual Model – Phase II
Namibian Stock Exchange
Ghana Stock Exchange
Zimbabwe Stock Exchange
Lusaka Stock Exchange
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)
12.
www.jse.co.za
Conceptual Model – Phase III
Investors Investors Investors Investors
Investors Investors Investors Investors
Investors
Members
Members
Members
Trading
Clearing
Settlement
Zimbabwe Stock Exchange
New Market
JSE Infrastructure
Exchanges
Board
JSE Infrastructure
13.
Ghana Stock Exchange
Members
Information
Dissemination
New Market
Exchanges
Pan African
Namibian Stock Exchange
Lusaka Stock Exchange
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
www.jse.co.za
Conceptual Model Summary by
Area
FUNCTIONAL AREA
PHASE I
Trading
Secondary market
surveillance & regulation
Clearing & settlement
Information dissemination
Infrastructure & connectivity
14.
Feasibility and Planning and
Analysis for Phase II
Listings & primary market
regulation
PHASE II
PHASE III
• Listings requirements differences allowed
• Procedural differences in regulation allowed
• Optional use of SENS for communication of pricesensitive company information
• Standard listings requirements on the PAB
• Standardized regulatory procedures, with
recourse to COSSE body, for PAB-listed
stocks
• 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
• 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
• Creation and transmition of clearing information to
settlement agent
• Cross-country clearing and settlement
capability for PAB stocks
• Provision of FTSE indices
• Variety of options to leverage off JSE’s information
dissemination capability
• Alignment of data strategy across Exchanges
• Leased-line, ISDN or internet connectivity
• ASP-based solution recommended
• Leased-line, ISDN or internet connectivity
• ASP-based solution recommended
www.jse.co.za
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.
15.
www.jse.co.za
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:
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–
–
–
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16.
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
www.jse.co.za
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:
–
–
–
–
–
–
–
–
17.
Intent
Negotiations
Consultation
Role of Facilitating Exchange
Responsibilities of Participating Exchanges
Accession of Other Exchanges
Expenses
Termination of Heads of Agreement
www.jse.co.za
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
Feasibility
Phase II
Planning
& Analysis
Design
Development
Testing
Deployment
Programme Management; Business Case; Stakeholder Management
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.
18.
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.
www.jse.co.za
Prove the
solution prior to
deployment.
Roll out the
solution in the
production
environment.
Go
Live
Possible Implementation Approach
A phased approach would be adopted for the proposed implementation,
with the sequencing of releases possibly based on the migrationreadiness of each of the respective exchanges
Eg: Zimbabwe
(ZSE)
Eg: Zambia
(LuSE)
Eg: Mauritius
(SEM)
19.
Eg: Ghana
(GSE)
Cross exchange feasibility and planning and analysis
6 Months
12 Months
18 Months
Release 1
Release 2
Release 3
Release 4
www.jse.co.za
24 Months
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.
2 weeks
Mobilise
Project
Prepare for site
visits
2 weeks
2-3 weeks
Define ZSE business
model & assess impact
Define SEM business model &
assess impact
Define LuSE business
model & assess impact
Define GSE business model &
assess impact
3 weeks
Assess impact on JSE/ LSE
Develop detailed implementation plan for Phase II
Develop business case for Phase II
Communication and stakeholder management
Project management
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
20.
www.jse.co.za
Project Team Structure
Project Director
John Burke (JSE)
Steering Committee
Project Management
1 x JSE
Busa Mkhize (Accenture)
John Burke (JSE)
4 x Exchanges’ Reps
Raj Makanjee
SME
Raj Makanjee (Accenture)
Leila Fourie (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.
21.
www.jse.co.za
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
22.
www.jse.co.za
JSE - NEPAD : An update
The JSE involvement in the NEPAD business group –
an update:
– Start
– Focus
– Deliveries
23.
www.jse.co.za