Let them eat bread
The JSE needs new-school listings
High-tech IPOs focused on big data, the internet of things, electric vehicles, robotics and biotechnology? Not for us. In South Africa, we are sticking to bread and Coke. The listing of Coca-Cola Beverages Africa was postponed earlier this year, but Premier Group – which controls 24% of the SA bread market – released its pre-listing statement on Tuesday, and could list soon as Christo Wiese's investment group Brait plans to unbundle its biggest holding.
The JSE's newest listing won't be a sexy unicorn. It won't make you rich quickly, and it's not big. Its market value is estimated at between R6.9 billion and R8.9 billion. It will be among the smallest in its sector, which also includes Tiger Brands (R34 billion), AVI (R25 billion) and RCL Foods (R10.3 billion).
Still, Premier is a proper player: it has cornered a third of the SA flour market, and controls almost a fifth of the markets for maize meal, sugar-based confectionery and feminine hygiene products. Its brands include Blue Ribbon bread, Snowflake flour, Iwisa maize meal, Super C sweets, and Lil-lets SA. The group has seen strong growth, despite rocketing input prices and load shedding. In the past six months, its revenue was up almost 24% from a year before, and its EBITDA grew nearly 16%. Unlike those racy tech plays, it plans to pay a dividend from the start.
Premier's JSE entry is welcome. Fidelity Services Group, the largest private security firm in South Africa, is reportedly also considering an IPO, and OUTsurance will have its own listing soon. But these entrants are not game changers for the local investable universe, which is shrinking fast amid the delisting of large companies like Mediclinic and Distell.
Not only that. Fact is, the investment offering on the JSE is pretty old school. While you can get exposure to mobile payment technology and fintech via SA's biggest banks and telecom groups, to really capitalise on the revolution in digital technology and other international innovation, you will have to invest elsewhere. It's a pity - South Africa was the cradle of cloud services (Amazon Web Services) and the revolutionary technology that enabled sending messages from the internet to cellphones (Clickatell).
But for now, as tech shares slump and the crypto crisis takes the gloss off all things intangible, an even greater pity is that there aren't great JSE-listed investment options in the one SA sector set to boom in coming years: renewable energy.
As Warren Buffett famously advised, never invest in a business you don't understand. After 15 years of load shedding and Eskom crises, South Africans now understand electricity almost as well as bread and Coke. Emerging power players may find a particularly receptive investor base in SA. Unfortunately, with all the red tape and regulation, bourses aren't the go-to place to raise capital anymore. The JSE and its competitors must innovate to entice these new players - and help turn South African investors' power pain into long-term profit.
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