From the Financial Rand and JSE ‘Big Bang’ to Naspers and Steinhoff: Post-Apartheid Markets

In the three decades following South Africa’s first democratic election in April 1994, the Johannesburg Stock Exchange (JSE)—founded in a miner’s tent during the Witwatersrand gold rush of November 1887—underwent a sweeping structural transformation. For more than thirty years under apartheid capital controls and international sanctions, South Africa’s giant mining and financial houses had been trapped inside a siege economy, unable to invest capital abroad and consequently buying up domestic industrial, retail, and media businesses until a handful of conglomerates controlled over 80 percent of the JSE’s market capitalization. Beginning in March 1995, the post-apartheid government of President Nelson Mandela and the South African Reserve Bank abolished the dual-exchange-rate Financial Rand and enacted the November 1995 JSE “Big Bang” deregulation, replacing open-outcry trading on Diagonal Street with the electronic JET order book. Over the next twenty-five years, three dramatic corporate episodes defined the modern JSE: the 1997–2000 exodus of corporate titans led by Billiton, Anglo American, Old Mutual, and South African Breweries to primary listings on the London Stock Exchange; Cape Town media group Naspers’s legendary May 2001 US$32 million venture investment in China’s Tencent; and the December 2017 implosion of retail giant Steinhoff International under a €6.5 billion accounting fraud. ^[1]

March–November 1995: Abolishing the Financial Rand and the JSE “Big Bang”#

First introduced as the “Blocked Rand” after the March 1960 Sharpeville massacre, reformed as the Financial Rand in 1979 on the recommendation of the De Kock Commission, and reimposed in September 1985 after foreign creditor banks led by Chase Manhattan froze South Africa’s short-term debt lines, the dual-currency system was the cornerstone of late-apartheid exchange control. While current-account trade transactions took place at the official Commercial Rand rate, non-residents buying or selling South African shares and bonds had to transact through a separate pool of Financial Rands that traded at a volatile discount of 15 to 40 percent below the commercial currency. Although this mechanism prevented net foreign capital flight from draining the South African Reserve Bank’s gold and dollar reserves, it also deterred institutional foreign portfolio investment and insulated Johannesburg asset prices from global valuation standards. ^[2]

On March 13, 1995, barely ten months after Nelson Mandela’s inauguration, Finance Minister Chris Liebenberg and Reserve Bank Governor Chris Stals abolished the Financial Rand, unifying the South African currency into a single floating rand for non-residents and reopening the JSE to global emerging-market funds. To modernize an exchange still governed by restrictive rules inherited from the colonial era, Parliament enacted the Stock Exchanges Control Amendment Act of 1995, ushering in the JSE’s “Big Bang” on November 8, 1995. ^[3]

Modeled on the London Stock Exchange’s October 1986 deregulation, the November 1995 JSE Big Bang abolished fixed minimum brokerage commissions, permitted dual-capacity trading by broker-dealers, ended the requirement that stockbrokers operate as unlimited-liability partnerships owned solely by South African citizens, and allowed domestic and international commercial and investment banks to acquire 100 percent ownership of JSE member firms. Four months later, on March 8, 1996, the JSE launched the Johannesburg Equities Trading (JET) automated electronic order-driven system (initially licensed from the Chicago Stock Exchange). Within three months, on June 7, 1996, the raucous 108-year-old open-outcry trading floor at 17 Diagonal Street fell permanently silent, and in September 2000 the exchange relocated its headquarters from downtown Johannesburg to Sandton before adopting the London Stock Exchange’s SETS platform in May 2002 and demutualizing into JSE Limited in 2005–2006. ^[4]

The 1997–2000 London Primary Listing Exodus: Billiton, Anglo American, SAB, and Old Mutual#

As the JSE integrated into global capital markets and South Africa’s new competition authorities encouraged the unbundling of apartheid-era conglomerate pyramids, the country’s largest mining and industrial groups lobbied the National Treasury—led from 1996 by Finance Minister Trevor Manuel under President Mandela and Deputy President (later President) Thabo Mbeki—for permission to shift their corporate domiciles and primary stock listings to the London Stock Exchange (LSE) while retaining secondary listings on the JSE. Executives argued that trapped inside a volatile emerging-market currency with high domestic interest rates, South African champions traded at a steep valuation discount relative to global peers and could not raise hard-currency equity to acquire mines, breweries, or financial assets worldwide. ^[5]

In July 1997, the Treasury approved the first major offshore migration when mining house Gencor spun off its base-metals, aluminum, and coal assets into London-listed Billiton plc, which raised US$1.5 billion on the LSE and entered the FTSE 100 Index before merging with Australia’s BHP in 2001 to create BHP Billiton. Over the next three years, the trickle became a historic corporate exodus: ^[6]

• In March 1999, South African Breweries (SAB) moved its primary listing to London to pursue international brewing acquisitions across Europe, China, and the Americas (later becoming SABMiller and ultimately being acquired by Anheuser-Busch InBev in 2016 for over US$100 billion).
• In May 1999, Anglo American plc—founded in Johannesburg in 1917 by Sir Ernest Oppenheimer and for decades the towering colossus of the South African economy—combined with its Luxembourg affiliate Minorco and shifted its primary listing and headquarters to London.
• In July 1999, Cape Town insurance giant Old Mutual demutualized and listed primarily in London, followed in July 2000 by technology systems integrator Dimension Data and in May 2002 by dual-listed banking group Investec.

While the London migrations allowed Anglo American, Billiton, and SAB to finance global expansion, they triggered fierce debate inside South Africa over permanent dividend outflows and the hollowing out of Johannesburg’s corporate headquarters ecosystem—prompting the National Treasury after 2000 to halt further unconditionally approved primary-listing shifts for major domestic champions such as Sasol and Standard Bank. ^[7]

Koos Bekker, Naspers, and the May 2001 US$32 Million Tencent Triumph#

Ironically, the single greatest wealth-creation engine in the history of the Johannesburg Stock Exchange came not from a mining house that moved to London, but from an Afrikaans newspaper and pay-television publisher that stayed headquartered in Cape Town. Founded in Stellenbosch in 1915 as De Nationale Pers Beperkt (Nasionale Pers, later Naspers) to publish the Afrikaans daily Die Burger, the group had diversified in 1985 by launching M-Net, one of the world’s first subscription television networks outside the United States. ^[8]

Appointed chief executive officer of Naspers in 1997—choosing to forgo a fixed salary or cash bonus in favor of share options tied entirely to market value creation—M-Net co-founder Koos Bekker pushed Naspers to invest aggressively in early-stage internet portals across emerging markets during the 1999–2000 dot-com boom. Even as Naspers burned through tens of millions of dollars on failed internet ventures in the United States, Thailand, and China following the March 2000 Nasdaq crash, Bekker’s China operational head, David Wallerstein, identified a struggling Shenzhen-based instant-messaging startup named Tencent Inc., founded in November 1998 by Ma Huateng (“Pony Ma”).

In May 2001, at the nadir of the global dot-com bust when venture capitalists were fleeing Chinese technology startups, Naspers subsidiary MIH paid US$32 million to acquire a 46.5 percent stake in Tencent from early backers IDG and PCCW. Powered by its OICQ/QQ messaging platform, online gaming, digital payments, and the 2011 launch of super-app WeChat (Weixin), Tencent listed on the Hong Kong Stock Exchange in June 2004 and grew into one of the world’s largest technology corporations. By 2017–2018, Naspers’s remaining 31 percent stake in Tencent was worth more than US$130 billion—over 4,000 times its original US$32 million outlay—making Naspers the largest listed company in Africa and swelling its weight to roughly 25 percent of the JSE’s All-Share and SWIX indices. Because domestic South African pension funds were forced by single-stock concentration limits to trim their Naspers holdings continuously, Naspers traded at a persistent 30 to 40 percent discount to the market value of its Tencent shares, prompting current management in September 2019 to spin off its international internet assets into Amsterdam-listed Prosus N.V.

December 2017: Markus Jooste and the €6.5 Billion Steinhoff Accounting Scandal#

At the opposite pole of post-apartheid corporate history stood the catastrophic collapse of Steinhoff International Holdings N.V. in December 2017—the largest corporate fraud in South African history. Founded in West Germany in 1964 by Bruno Steinhoff and merged in 1998 with South African furniture manufacturer Gommagomma under charismatic chief executive Markus Jooste, Steinhoff listed on the JSE in September 1998 and embarked on a relentless, debt-fueled global acquisition spree. Buying Conforama in France (2011), Pepkor in South Africa from billionaire Christo Wiese for R62.8 billion (2014–2015), Poundland in the United Kingdom (2016), and Mattress Firm in the United States for US$3.8 billion (2016), Steinhoff moved its primary listing to the Frankfurt Stock Exchange in December 2015 while retaining a primary-equivalent JSE listing and a market capitalization exceeding R300 billion (roughly €22 billion).

Late on Tuesday, December 5, 2017, hours before Steinhoff was scheduled to release its audited 2017 results, the board announced that auditors Deloitte had refused to sign off on the financial statements due to “accounting irregularities requiring further investigation” and that CEO Markus Jooste had resigned with immediate effect. Over the next forty-eight hours on December 6–7, 2017, Steinhoff shares plunged more than 85 percent on the JSE and Frankfurt (ultimately losing 98 percent of their value), wiping out over R200 billion (US$15 billion) in shareholder wealth, including roughly R20 billion held by the Public Investment Corporation (PIC) on behalf of South Africa’s Government Employees Pension Fund (GEPF) and over R50 billion of Christo Wiese’s personal fortune.

A 3,000-page forensic investigation conducted by PricewaterhouseCoopers (PwC) and summarized to investors in March 2019 revealed that between 2009 and 2017, a small group of senior executives led by Jooste had orchestrated €6.5 billion (roughly R106 billion) in fictitious and irregular revenue and asset-revaluation transactions involving three purportedly independent European corporate groupings (the Campion/Talgarth, TG, and Formal Holdings groups) that were secretly controlled or funded by Steinhoff insiders. These fabricated profits were used to inflate the carrying values of loss-making retail subsidiaries and borrow €10.4 billion from international banks and bondholders. After years of creditor debt restructurings and global class-action settlements, Steinhoff International was dissolved and delisted from the JSE and Frankfurt in October 2023. Five months later, on March 21, 2024—the day after South Africa’s Financial Sector Conduct Authority (FSCA) imposed a record R475 million administrative penalty on him and moments before he was due to surrender to the Hawks police unit on fraud charges—63-year-old Markus Jooste died by suicide at Hermanus in the Western Cape.

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