An update on B-BBEE schemes and JSE BEE segment listings

An update on B-BBEE schemes and JSE BEE segment listings 600 400 Tamela

The JSE Black Economic Empowerment (BEE) segment currently consists…

The JSE Black Economic Empowerment (BEE) segment currently consists of just three broad-based BEE listed schemes – MTN Zakhele Futhi, Sasol Inzalo, and Vodacom’s YeboYethu. This is despite the fact that the segment was launched by the JSE back in 2011 to allow for the listing of BEE securities by issuers that met the basic criteria for such a listing. In fact, between 2011 and 2015, Sasol Inzalo was the only scheme listed on the JSE, even though a proliferation of B-BBEE schemes opted to trade over the counter (OTC) on bespoke trading platforms.


The JSE’s lack of success was perhaps owing to its gearing towards institutional investors instead of B-BBEE scheme investors, where the minimum investment amount is around R2 000 – nowhere near enough to attract stockbroker interest or involvement. The JSE system is also specifically designed for unrestricted and freely tradable shares that are accessible to all investors. This is the exact opposite to the OTC platforms at the time, which had the flexibility to accommodate a range of trading restrictions, amongst them being that trades could only take place between black people or entities, and limits being placed on a maximum percentage shareholding per person.

The OTC platforms – often set up and facilitated by the companies themselves – thus offered flexibility the JSE lacked. They provided accessible, subsidised and affordable online and call centre infrastructures, and were able to provide their services in most South African languages. In contrast, in order to trade on the JSE, BEE participants had to first open share accounts with stockbrokers (who were also responsible for the verification of the BEE status of the participant), which are not always geared to trade in B-BBEE schemes. Stockbroking accounts also attract monthly maintenance fees that simply weren’t affordable to a BEE investor with small infrequent trades.

Regulatory landscape changes

The proliferation of OTC platforms came to a halt in 2014 when, following a period of public consultation, the Financial Sector Conduct Authority (FSCA) issued a final directive in July 2014 requiring companies using OTC platforms to:
• change their operating models such that they no longer rendered the functions of an exchange; or
• list on a licensed stock exchange; or
• apply for an exchange licence in accordance with the Financial Markets Act; or
• obtain an appropriate exemption from the FSCA.

This led directly to a number of changes in the stock exchange market – it opened the JSE to direct and licensed competition for the first time in almost six decades, with new stock exchanges licensed to cater for the companies trading OTC, such as ZAR X, Equity Express and 4AX. In addition, A2X was licensed, with a focus on attracting secondary listings of large JSE companies. The JSE also agreed to amend its BEE segment listings requirements.

2015 JSE amendments come into play

In 2015, MTN Zakhele and its advisers made proposals to the JSE to further amend the BEE segment to accommodate the listing of a broader range of B-BBEE schemes. The key amendment was to introduce an alternative mechanism to list and trade BEE securities, i.e. where the applicant issuer’s securities are listed and traded pursuant to the use of a verification agent. This moved the onus of verifying the BEE status of a B-BBEE scheme participant from the stockbroker to a company-appointed agent. The verification confirmation could then be used by stockbrokers to open a share account.

This change simplified the trading, custody and administration regime for the majority of shareholders by removing the responsibility for conducting BEE verification in respect of each buyer or transferee from JSE stockbrokers, Central Securities Depository Participants (CSDPs) and other market participants.

Trading in B-BBEE schemes remains cumbersome

Subsequent to the 2015 amendments, Sasol Inzalo and Vodacom YeboYethu listed on the BEE segment using the verification agent method. Even though the current segment is an improvement, trading is still cumbersome and the experience of scheme

March 2021
An update on B-BBEE schemes and JSE BEE segment listings participants is uneven across B-BBEE schemes. This is due to the requirement for black shareholders to be verified for each B-BBEE scheme by the verification agent before the person can open share accounts with the company-appointed broker or a broker of their choice.

Share accounts opened by a company-appointed broker are also often restricted to trade only that company’s shares, with the rationale being that issuers do not want to subsidise the share accounts of other schemes. Finally, the trading experience for B-BBEE scheme participants is dependent on the company-appointed service provider, some of which do not provide any ability to submit individual trades online, but instead bulk trades through a call centre and place them as a bulk order onto the JSE trading engine.

Sounding the call for further amendments

It is our belief that the JSE BEE segment is ripe for a universal verification platform whereby B-BBEE scheme participants, irrespective of the scheme, are verified once and thereafter are able to trade in any share listed on the BEE segment of the JSE or indeed, on any of the other stock exchanges. The JSE, as the largest of South Africa’s stock exchanges, is at a vantage point to coordinate and implement these enhancements.

This would also drastically reduce the administrative requirements placed on a client and significantly improve the B-BBEE scheme participant experience over the current arrangement, where the various service providers and onboarding methods are not aligned or integrated in any way.

How we can help

Given Tamela’s involvement in the 2015 JSE amendments and knowledge of listings requirements, as well as our experience in BBBEE schemes trading and listings, we can provide valuable input into the changes required to facilitate central verification initiative and assist companies to design and implement B-BBEE schemes and list on their selected stock exchange to facilitate trade of their B-BBEE schemes.
For more information, please contact Sydney Mhlarhi, 0828523366 /

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