South Africa's main bourse, the Johannesburg Stock Exchange (JSE), has amended some listing requirements to make it easier for smaller firms to raise capital and meet compliance costs.

The JSE said in a release on April 19 that the changes, a culmination of wide-ranging consultations, will introduce a market segmentation project aimed at the smaller issuers on the main board of the exchange, now with two-tiers - the main board and AltX. 

The proposed segmentation of the main board into the prime segment and general segment aims to provide an "effective and appropriate" level of regulation depending on the size and liquidity of main board companies, whilst also maintaining investor confidence in the market.

“The market segmentation project is set to redefine the regulatory landscape for smaller listed companies on the main board. By introducing segmentation, we are proposing measures that will support the ease of raising capital and undertaking corporate actions by smaller companies whilst maintaining investor confidence through disclosure and appropriate safeguards,” said Andre Visser, the director in charge of issuer regulation.

According to Business Report on April 19, the JSE has seen a "flood" of delistings in recent years, especially among smaller companies which cite the rising costs of listing compliance requirements and the difficulty in raising capital as reasons for exiting the market.

Smalltalkdaily Research investment analyst Anthony Clark said the JSE “must be applauded” for the “leap in the right direction” that the proposals represented.

He told the daily that he recently visited a small listed company that made about $835,350 profit a year, but the cost of annual reports, of auditors and other requirements of being listed came to about $313,600 per year.

Some of the new provisions include introducing more flexibility through a general authority to issue shares for cash without shareholders’ approval, which may serve as a catalyst for capital raisings, subject to a prescribed limit and other safeguards like pricing parameters. 

The JSE is also introducing more flexibility on financial reporting by removing the preparation of either condensed financial statements or annual financial statements/summary financial statements within three months. Listed companies will only be required to prepare an annual report within four months.

The JSE is the largest bourse in Africa and its second oldest after Egypt's.  The 136-year-old market has 442 listings and its market capitalisation is more than $1.36trn.

“As Africa’s largest stock exchange, it is crucial for us to take all necessary measures to encourage inbound investment and boost confidence among local and international investors," said Visser.