Small to medium enterprises (SMEs) that do not meet the requirements to list on the JSE will have the chance to register for the JSE`s new alternative exchange (AltX) to be launched in October.
To register, SMEs will have to comply with JSE regulations and will only need a share capital of R2 million. However, unlike the JSE, companies will not be required to submit a profit history.
Companies will be required to pay R20 000 to list and a subsequent set annual fee of R20 000. The firm must have a financial director and all directors have to attend a four-day induction course run in conjunction with the Wits Business School in order to educate them about listing requirements.
JSE CEO Russell Loubser says the AltX, a partnership between the JSE, the Department of Trade and Industry (DTI), the Wits Business School and the Institute of Directors, will be the first alternative exchange in Africa for small and medium growing firms.
"All companies start small and we are committed to supporting the burgeoning SME sector of the local economy," Loubser says.
DTI director-general Dr Alistair Ruiters says the aim of AltX is to get a new grouping of talented people into the JSE.
"AltX will market the JSE to SMEs and black economic empowerment (BEE) enterprises, educating them about the capital market, corporate governance and management skills. It will also give those small companies a safe and efficient trading environment to raise capital as well as providing investors with the opportunity to invest in and support SMEs and BEE enterprises," he says.
The DTI has committed to sponsoring AltX for three years with a "substantial amount of money", according to Ruiters.
"The DTI sponsorship will go towards marketing and will subsidise the four-day induction course for directors. While we are still working out the figures, we will commit a large amount of capital over the three-year period to the alternative exchange to make it a credible venture and to assist in promoting black economic empowerment and creating sustainable employment."
AltX manager, Noah Greenhill says AltX will act as a springboard for emerging companies to enter the JSE.
"AltX aims to assist companies in their lifecycle by reducing listing fees and aiding them in complying with listing requirements."
Greenhill says while there will be a larger element of risk on the AltX, there will also be benefits.
"Because many of these companies will be new in the start-up phase of their lives, the risk will obviously be there for both the company and the investor. But where risk is taken, wealth is made. AltX will provide SMEs and BEE enterprises with an avenue to raise capital and enhance the quality of companies by promoting good corporate governance."
Greenhill says education of the investor and organisations listed on AltX will be on ongoing aim.
"We believe that the success of AltX will be based on a philosophy which emphasises relationship management, marketing and continuous education.
"We will run six forums a year around the country to educate the investors about the companies on AltX. Directors will also have a chance to showcase their companies at these events to make the investment community aware of their companies."
Loubser says the venture capital market (VCM) and the development capital market (DCM) will be abolished at some point in the future.
"The VCM and DCM have only been moderately successful and we will be consulting with the SMEs involved in them about their eventual transfer over to AltX."
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