Principles are funny things. They really do make things easier and better. As we will begin to see happening in the financial markets in South Africa.
I can state this with confidence because ZAR X is the catalyst for the improvement.
Why? Because we are the first stock exchange in this country to introduce a
principles based listings regime. Not just in terms of principles based listing
requirements, but by embedding a principles approach at all levels of strategy
For instance, we believe fundamentally in the principle that financial inclusion is
an imperative for the financial sector and for society as a whole to prosper.
While seemingly altruistic, promoting financial inclusion is simply the right thing to do.
If people are excluded from the means to grow savings and investments, every South
African will ultimately be socially, emotionally, and financially impoverished.
Until now, the financial markets have simply carried on doing things they way they’ve
always been done, effectively entrenching exclusion. No-one could buy shares
without being among a select few who have the means to invest in the markets.
Yes, indirectly, through life insurance and your pension, you could participate in
the wealth of business. But without choice or control. That aside, the majority
of South Africans have neither life insurance nor a pension.
It’s not that the markets cannot be opened up. It’s just that no-one has taken the
initiative until now. As we always ask: Why not?
On principle, we are taking the initiative. We’re enhancing the efficiency and
reducing the administrative burden of the way things are currently done by
introducing a principles based listing regime. It slashes the cost of listing
by 60% initially and 80% on an ongoing basis.
Which means that companies that, sensibly, would have refused to spend the time and
money needed to meet rules based listing requirements now have a viable and
compelling alternative new avenue for raising capital. They will grow and
create jobs and, in the process, broaden the number of people who can afford to
spend R1 000 creating an investment via share ownership.
A principles based approach is a self-fulfilling success story. Everyone wins.
Also, one of the founding elements of a principles based listing regime is that it
focuses on integrity and expertise – the integrity and expertise of business
owners and operators. So, our listing regime can rely on the Companies Act,
among other relevant pieces of legislation, to ensure that issuers operate legitimately
and ethically. We don’t need to impose further criteria or force companies to
be audited by multiple entities.
By focusing on integrity and expertise, we are able to eliminate bloated and unnecessary regulatory structures out of which stock exchange related businesses make money at the expense of ordinary businesses and the average Joe. Funny thing, isn’t it, how principles and integrity actually make things more flexible, more affordable, and much less complex?
In some countries, like Britain, principles based financial operations are supported by legislation that goes back more then 10 years. We’re not there yet, in South Africa. But, by granting a licence to ZAR X, knowing that we would operate on principle at all levels, the Financial Services Board has taken a progressive and determined step out of the old restrictive, rules-based, economy-choking paradigm that has held sway for more than a century. If this is a sign of the approach that will be used in future, broad financial inclusion will very soon be a tangible reality.