One of the most exciting projects we have worked on in the last 12 months has been a series of investor webinars allowing retail investors the opportunity to interact with the management teams of JSE and ZAR-X listed businesses.
For those who follow the South African listed equity market, you will know that one of the biggest challenges that the industry faces is a lack of coverage of businesses that fall outside the top 100 on the JSE while the ZAR-X is still in its infancy in terms of retail investor adoption.
We wanted to play our part in developing the retail investor ecosystem in South Africa and set out to interview the management teams at some of the businesses that didn’t always get media or analyst coverage.
On the JSE front, we hosted the likes of Afrimat, Renergen, Purple Group, Capital Appreciation, 4-Sight Holdings and Calgro M3 while Dale Capital Group and Orion Real Estate represented the ZAR-X.
These are some of the learnings we had from this series:
Retail investors want to engage
We often hear that there isn’t a retail investor culture in South Africa but we would beg to differ. The EasyEquities team are now reporting over 860 000 clients on their platform and we could regularly attract between 100 and 200 investors to the sessions and if management teams can work out how to engage this investor base, it represents a very real catalyst for their share prices.
Management teams need to get better at telling their story
Executives like Stefano Marani (Renergen) and Charles Savage from Purple Group have embraced social media and been open to engaging in discussions with retail investors on platforms like Twitter. In the South African context, they are more the exception than the rule.
While not every CEO is / will / or should be as charismatic as Elon Musk management teams like those behind Purple and Renergen invest a lot of time and energy inviting shareholders to see their operations, meet their people and create an engaging story behind their business.
The competition for investor capital and attention is fierce: Retail investors can just as easily put their money in Tesla or a Section12J as they can in Purple – if your intention is to build wealth through share price appreciation, then invest some time and energy here.
Staff and suppliers want to be shareholders
While they may not carry the same perceived weight or importance as asset managers and other institutional investors, we were quite surprised by the number of staff who registered for the sessions and how often key suppliers would also enjoy engaging with the management teams.
It might sound like a “soft” element but the events of 2020 have highlighted for many people just how dependent they are their employers or key clients for long-term sustainability.
By creating an investor mindset amongst these key stakeholders, you make them part of the highs and lows of your business.
International investors haven’t written off South Africa
One of the surprising stats out of our analytics was that almost 20% of the delegates who registered were from outside of South Africa. Destinations included Mauritius, US, UK, Portugal, Australia, Canada and China.
It is too simplistic to say that foreign investors are not interested in South African equities – we need to get better at marketing our value proposition.
It’s not just about the numbers
Many listed South African businesses are very one-dimensional in how they engage their shareholder base. Every 6 months they roll out their financials results and they say “we [hopefully] made some money here” and “here is your [if you’re lucky] 1% dividend yield because the operating environment is uncertain and our share price has gone nowhere”.
For us, it was fascinating to see the number of organization who were nervous about participating because they were uncertain about the questions that might come up or even asking us if they can vet the RSVP list before going ahead with their presentation.
While we are happy to acknowledge that they operate in a regulated environment, there is a concern that executives err to far on the side of caution.
Ultimately, our approach to the South African small and mid-cap equity markets need to be reimagined.
Venture capital funds, fractional investing and increased offshore allowances mean that local investors have a plethora of opportunities and the entire ecosystem needs a re-think on how it drives investor activity.