SA’s secret weapon: JSE #1 in WEF table for 5th successive year

JSE chief executive Nicky Newton-King (47) has been a fixture at the JSE for the past 14 years. Her succession to the hot seat was well planned – serving as Russell Loubser's deputy for seven years before taking the reins when he retired in at the end of 2011. An erstwhile member of the World Economic Forum's Young Global Leaders, she knows the esteem with which WEF ratings are held globally. So fully appreciates the JSE's honour of securing the top spot in 2014's Global Competitiveness Ratings for the fifth successive year. In this interview on CNBC Africa's Power Lunch today, the farm girl from the KZN Midlands explains how her team is working on making it six in 2015; and offers some advice for those gloomy about the nation's poor overall performance in the latest report. – AH

ALEC HOGG: Welcome back to Power Lunch. The Johannesburg Stock Exchange is South Africa's leading light on the World Economic Forums' Global Competitiveness Report. The Exchange ranked first for effectiveness of regulation and supervision, and third for the financing through the local equity market.   Now, remember there are 144 countries that are surveyed, South Africa, overall, comes a rather dreadful 56^th, just falling and falling but not the JSE. Nicky Newton-King, the CEO of the JSE is with us. It's nice to have some good news on a Friday.

NICKY NEWTON-KING: It's nice to have good news any time and especially in a global, competitiveness survey, and where the country itself is showing some significant signs of weakness. For us to be able to perform like that is, I think is it's an important part of building investor confidence and maintaining investor confidence, in what we do.

ALEC HOGG: How do you get there? How do you get to number one in the world, in the regulation, first of all, and then we'll go onto raising of funds?

NICKY NEWTON-KING: Well, as you know, the survey comes from them surveying our clients, essentially, the South African market environment, and I think that's quite important. It's equivalent, as I was saying to my team of people actually, of commending the police for the manner in which they actually provide security. Because our Regulatory Team provides policing, security, and the manner in which companies are listed and which market operates. So what this is, is our clients saying, "We do that in a manner that is appropriate, they have confidence in it," and you do that by being consistent, by having rules at the right level, and by being transparent about how you've applied them.

ALEC HOGG: When you go on road shows around the world, is this relevant ? Can you show it up in lights?

NICKY NEWTON-KING: It is relevant because what investors look for is an environment which they can trust, which really operates the same way all the time, so we're competing for investment Dollars with Kazakhstan. So we have to show that we're different. We have an incredible businesses here. We operate in quite a stressed environment, we know that, with its own challenges, and yet, we operate a marketplace, where people can get in and out of the investments, they choose, without having to worry about the marketplace. It is actually really, important to them.

ALEC HOGG: And being number one now, for five years in a row?

NICKY NEWTON-KING: That's quite a…

ALEC HOGG: How do you keep it going? Do you suck up to your potential voters?

NICKY NEWTON-KING: No, what you do, in fact, is you keep looking at your regulations and you keep saying, 'are they appropriate'. The fact that you have a Rule Book is really, not the issue. Its 'are those rules pitched at the right level and applied', so that people actually live to those rules, and we've actually just…for instance this year, completely revamped our listing's requirements. Removing whole soaves' of rules, to make it easier for people to actually, operate their businesses, but in a responsible manner, and so it's those sorts of tweakings that actually makes a difference to how it feels, for clients to be in this marketplace.

ALEC HOGG: We're seeing a few new listings but given these kind of results, you'd expect maybe…maybe not a flood but a lot more.

NICKY NEWTON-KING: Well, I hope that we are going to be…this causes people to look again. The reality is the people come to the market when they need capital to do things that are going to help them to grow. If they are operating in an environment, in an ecosystem, and in an economy, which is stressed, it's more tricky for them to find those occasions where it's appropriate to raise capital. But we come number three in the world, for the ease of raising capital, so there's money around. There's a marketplace which can make that happen, and so I certainly hope that when people look for funding of, essentially their dreams, that they actually think, 'JSE as a potential place', rather than just other vendors of funding.

ALEC HOGG: Because that's what a Stock Exchange is about, isn't it?

NICKY NEWTON-KING: Yes.

ALEC HOGG: It's a way to raise capital for capitalism, for entrepreneurship and then to be able to trade in the money that you are giving to that company?

NICKY NEWTON-KING: Absolutely if you haven't got a primary market, which is the raising of capital, then you've got nothing to trade. It's like a supermarket; you need products on your shelf. Our companies are the products on the shelf, and then you need to have a trading environment, where people can actually do that very cost effectively and securely and we work hard on both of those.

ALEC HOGG: Number three in the world on the raising of capital, and well, if we just look in the last couple of weeks, well the last couple of months, Steinhoff raising R18bn and Woolworths R10bn. These are big numbers, even in global terms.

NICKY NEWTON-KING: I know, yes, big numbers but they are being, easily raised there is money, for the right opportunities and if people can hear about the right opportunities and transact easily in them, they'll come to the marketplace to do that, because we are not the only place to go and raise the capital from. They could go to the banks. They could go private equity, so we're competing for a share of that capital raising but our first-half year results actually showed that capital raising was up more than double on last year, so I'm not surprised really that we're rising in that level.

ALEC HOGG: Why is it not clicking to Africa? We're talking to the whole of Africa, now there'll be people sitting maybe in Kigali just celebrating Rwanda's improvement in its regard.

NICKY NEWTON-KING: Sure.

ALEC HOGG: Why would they not come to the JSE, as an Exchange, which is the best in the world, certainly in this area?

NICKY NEWTON-KING: We're starting to get more attention from African issuers, but it is slow and we've chatted about that from time-to-time. The reality is that if you are in a local market, you will first want to see, 'can I get what I need from my local market', and if you're at a certain size, I think you could be tempted to look at other markets. And if you do that, would you look at London, relative to the JSE? Actually, from a regulatory perspective, a cost perspective, we are way ahead of the competitors, in this. I think, really the distinguishing factor is, 'share of heart'. Do people really, so people are very, in many parts of the Continent, actually have second homes in London, they…it's a very, real part of their lives. I think that's actually quite an interesting challenge for us. The Africa can consort for Africa, and we are starting to get a lot more enquiries in that regard, so let's see.

ALEC HOGG: Have you got a longer-term strategy in that regard?

NICKY NEWTON-KING: We've got a number of things we've tried over many-many years; to really unlock opportunity in the Continent but it's not 'unlock opportunity' for the JSE. It's for the issuers, and it's for the people who trade on the JSE primarily and if that works, then it will be good for us, as a company. Those sorts of opportunities would include, for instance, creating product that we would list in South Africa and list on another market. Could you imagine trading Nigeria's top companies in an ETF in South Africa in Rands? It gives you access to Nigerian companies; you trade it here, in Rands, with your local allowance. Can you imagine Nigerians then trading the top 40 in Naira? I mean this is really giving and increasing the scope of product on the supermarket shelf. I think that's a particularly interesting opportunity for us.

I don't think opportunities for buying exchanges are really…they'd have to be pretty, good reasonably priced, exchanges are not at the cheap-end of the PE spectrum and so it's much more about cooperation on product and on technology.

ALEC HOGG: The Nigerian guys were here. I know they walked around the floor, from the Nigerian Stock Exchange a couple of months ago. Have you made much progress? Or was that a little bit of a slip that you were telling us about the top 40 ETF's in trading on both markets?

NICKY NEWTON-KING: No, we've been talking to them actively, about how do we actually create a product, and we've been working on it, actually quite hard for a while but what we really want to…well, what we'll focus on then is that we've got regulations. We have 70-odd listings or ETFs already listed. We're used to that. Nigeria is getting an index provider, is building their ETF regulations, so even if the management teams are completely ad idem about the product we're trying to create, actually making it happen takes a lot longer. But we are making good progress and I think we'll see some things.

ALEC HOGG: Nicky, you can talk now from a position of authority because in this report, you are number one and number three in the two areas that you need to concern yourself with, but then you look at the country as a whole and we have the wooden spoon in two areas, a very, scary area in education.

NICKY NEWTON-KING: For sure.

ALEC HOGG: How do you get involved? Your predecessor, Russell Loubser, talks about drift, and how the country has been drifting, what's your take on all of this?

NICKY NEWTON-KING: So it's a complicated analysis really. The first is that having the wooden spoon is, from a sustainability perspective, for this country a serious problem. We can be number one. I hire accountants, engineers, people with MBAs, lawyers; people, generally have two degrees before they even get into our door. I am not going to have a pipeline of people to hire that will keep us at the top end of the global competitiveness, if education is at the wooden spoon. So we have a vested interest, just as ourselves, let alone the country, in getting that converted. So what do you do? You have to engage with the policy makers to make the real implications of being at the bottom properly understood and internalised. Then you've got to also look at what you, as an institution do, to actually help get more product into the pipeline.

We created a BEE Trust. The dividends and JSE has a whole lot of JSE shares in there.   The dividends on that Fund, black students going to do economics and law, so that they can then come into the JSE over time, and now we're starting to see the products of those starting to do internships here, so it's a virtuous circle. But the reality is that actually, there are a lot of people thinking quite constructively about the challenges in this country. I had a fascinating meeting with the Premier of Gauteng yesterday. You just get the feeling; this is someone who gets it. Now, we need to get it and delivery.

ALEC HOGG: Nicky Newton-King, Chief Executive of the Johannesburg Stock Exchange, and I think that last point is really the critical one, the key one. There are a lot of people in South Africa who are trying hard. Who are working at it, who are focusing, who are putting in the building blocks, sometimes though, they seem to be invisible because the news headlines always hit us on the margin. Well, let's take a look right now, at how the global, emerging, and Asian markets are performing, ahead of the U.S. jobs numbers that come out later today.