The JSE is entering a new era as it leverages its wholly owned venture JSE Private Placements (JPP) to build a future-fit capital market delivering a seamless digital marketplace that matches private debt and equity issuers with investors.
The JSE, which has been working on the development of the unit since 2019, announced on December 13 that the newly minted JPP had secured its financial services provider (FSP) licence, unlocking an opportunity for the JSE to enter the private equity and debt market in South Africa and across the continent.
By the end of March, the platform had R5-billion ready for deployment and one project already under way.
The strategic decision to broaden its revenue stream by entering the private equity and debt market is in response to a shift in capital formation that has been emerging over the past decade.
JSE capital markets director Valdene Reddy says that there has been a global trend away from public markets to private markets, which show phenomenal growth in capital formation and allocation.
“By launching JPP, the JSE is providing an alternative to raise capital, through either private equity or private debt, which stands alongside our public market space,” she says, noting that the firm is strongly focused on national agenda objectives, such as small and medium-sized enterprise (SME) development and infrastructure funding.
“Infrastructure has been a huge focus of the South African economic recovery agenda. In fact, globally and for most emerging markets, that is a pivotal area for growth,” she tells Engineering News & Mining Weekly during a video interview at the JSE in April.
As the JSE worked to respond to the demand for alternative capital raise through private placement, the exchange entered into a strategic partnership through an equity investment into UK fintech company Globacap Technology to progress a digital private placements platform and registry services.
Globacap’s unique distributed ledger technology allows digital registrar services to be reflected in real time.
Leveraging the technology provided by Globacap, JPP offers services to private entities looking to raise debt or equity through an automated and digitalised platform, connecting private companies and issuers directly to investors and enabling private capital formation in a more transparent, efficient and accessible manner.
JSE head of deals and origination Sam Mokorosi says that investors and issuers each outline their ambitions, investment criteria, target markets, requirements and budgets, besides others, to enable potential matchmaking.
With an end-to-end solution, deployed over time, the history of previous placements and deals can be tracked, providing extensive visibility.
“Essentially, this is probably one of the first of its kind with such a breath of its solutions. It is both private equity and private debt; it is a digitalised solution and it is easy to use,” adds Reddy.
Since obtaining an FSP licence, JPP has already attracted about R5-billion that is ready for deployment to fund deals in mining, renewable energy, health, construction and technology startups, besides others.
JPP went live with the first deal – the development of a private hospital in Musina, in Limpopo – at the end of March, says Mokorosi.
“We are excited to partner with the developer to help raise the required capital. The developer is currently looking for R140-million, half of it debt, and the equity is coming through JPP.”
After going live, JPP has attracted strong appetite from potential investors, particularly in the space of renewable energy, housing, student housing and hospital projects.
“We have seen such a tremendous response from all sorts of different types of SMEs and infrastructure developers. This talks to the fact that this is a product that has been needed for a really, really long time.”
Reddy explains that JPP aims to become an ecosystem that provides real-time visuals of the deal and its parameters, while providing more choice, enhanced visibility and direction on where the opportunities are for investors and issuers.
“It also gives you ease as we standardise certain processes.”
The JSE is working on streamlining processes and, as the platform and the marketplace matures, a database, history and track record can be built.
“We really thought about being future fit from a technology perspective. We want ease of use and digital efficiency,” Mokorosi outlines.
“If we are going to rebuild the South African economy post Covid-19, SMEs and infrastructure are critical, and so those are the two focus points that we have made for JPP.”
Alongside appetite for energy, gas-to-liquid and toll road projects, the platform has also attracted interest from the rest of the continent, including the Democratic Republic of Congo, Lesotho and Botswana.
“That infrastructure need across the continent is something that we are hoping to make an impact on,” he says.
“We are sitting on a continent that has north of $150-billion infrastructure need and a funding gap. We are ripe for growth; there are various sectors and various industries that this could respond to,” Reddy comments.
“The potential for infrastructure across the continent has to be double underlined,” Mokorosi adds, noting the need to rebuild following the flooding in KwaZulu-Natal, alongside the need for power and water infrastructure, roads and airports and infrastructure in rural areas, besides others.
“We are so encouraged by all those developers that have come to us saying they want to raise capital so that they can roll out infrastructure.”
He notes that mining has been another point of interest, along with good demand for battery-related minerals as investors eye participation in the battery and electric vehicle revolution.