The decline of listed companies has come despite more trading venues and market participants that have increased competition and innovation, Financial Sector Conduct Authority Commissioner Unathi Kamlana (pictured) said.

• For more financial news, visit News24 Business.

South Africa’s financial regulator warned about the decrease in local listings, saying this raises questions about the depth and vibrancy of public capital markets and about how they can support economic growth.

The decline of listed companies has come despite more trading venues and market participants that have increased competition and innovation, Financial Sector Conduct Authority Commissioner Unathi Kamlana said.

“If fewer firms choose to list, we must ask why,” he said during the FSCA industry conference Wednesday.

From as many as about 850 listings in the mid-1990s, the Johannesburg bourse is now home to about 280 firms. While 80% of the exodus occurred before 2005, according to a study for the Association for Savings and Investment in South Africa, political economy issues — such as a near-stagnant economy, years of governance failures and mismanagement by the state — have contributed to delistings as investors’ risk appetite eroded.

While South Africa’s experience of delistings is not unique, it significantly underperforms stock exchanges in both high-income countries and its emerging-market peers, the study found.

The Johannesburg bourse had an average annual delisting rate of 7.8% from 1993 to 2015, almost double the global mean of 4.1%, the study found. New listings as a percentage of total stood at 4% for the period compared to the global average of 6.8%.

The trend suggests that smaller and less profitable firms are significantly more likely to exit public markets, Kamlana said. This could concentrate market capitalization among a smaller number of larger firms.

“A healthy market is not defined only by the strength of its largest players, but also by its depth, diversity and ability to support firms at different stages of growth,” he said. “We must also remain attentive to whether our capital markets continue to support breadth, inclusion and long-term economic dynamism.”

Work is underway to find ways to arrest the delisting trend, and to make South Africa’s public markets more attractive to attract new entrants, Kamlana said.

A public-private team set up in late 2024 to finding ways to boost finance-sector competitiveness through reforms is looking at options such as modernising exchange controls and improving capital-market liquidity to attract investment and support growth.

Operation Phumelela — which means to succeed in isiZulu — is the name of the task force that includes National Treasury officials and leaders in the finance industry.

“We would take seriously any suggestion that there’s something that looks like a regulatory intervention that could stem the tide, or, in fact, make it more attractive,”Kamlana said in a separate interview. “But of course, we will have to assess what it is.”