On Monday, May 11, 2020, South Africa’s Johannesburg Stock Exchange (JSE) announced a plan to offer temporary relief to its listed companies in financial distress due to COVID-19 (coronavirus). This would include cutting fees for newly listed companies and extended payment terms.
The stock exchange has also announced that it would grant distressed companies extended payment terms of between three and six months with zero interest plus a 50 percent fee reduction for trading, clearing, and settlement. Companies listed on the JSE AltX and BEE Board would enjoy these benefits for the remaining part of 2020. AltX is the alternative board for smaller companies to raise capital on the JSE.
The new move would be helping to cushion the impacts of the COVID-19 pandemic on businesses listed on the exchange while offering businesses more time for recovery with aims to sustain them.
According to a statement by Leila Fourie, the JSE Group Chief Executive, “the small-cap counters are among the most vulnerable in strained markets.” She further stated that the discounts the JSE is “announcing for these market segments are aimed at stimulating liquidity and supporting this vital growth node of our economy.”
The JSE would also be reducing listing fees by 25 percent for those small companies and AltX companies looking to tap the market to raise secondary capital. This 25 percent cut in listing fee would see more businesses coming on board the JSE, inspiring business growth and accelerating economic activities.
The stock exchange will also increase the number of cash disbursements returned to small and medium stockbrokers that are on the JSE’s Enterprise Development Programme – a scheme introduced by the JSE in 2016 to increase black participation in the exchange. This will also encourage the growth of businesses owned by black South Africans and create a balanced business environment.
In the wake of the pandemic in the Southern African country, the country recorded the highest COVID-19 case in sub-Saharan Africa within 6 weeks. This moved the government to introduced a total lockdown measure to help stem the virus spread in the country. But the lockdown, however, placed economic activities on hold and also caused a strain on businesses leading to an increase in companies filing for business rescue – a local form of bankruptcy protection.
While the temporary relief would be boosting and sustaining operations of it listed companies, it would also be offering unlisted companies a soft-landing to list on the exchange.