Mandisi Mpahlwa, deputy minister of finance, was the key speaker at the STRATE’s annual conference last week. He predicted that South Africa’s capital markets were likely to become more active in the wake of pending higher economic growth rates.He pointed to strong gains in domestic business confidence reflected in the 20% first quarter surge in the RMB/BER business confidence index and the 4,2% fourth quarter 2001 increase in gross domestic fixed investment (GDFI).Mpahlwa said that GDFI growth was expected to average 5,6% in 2003-2005, while fixed capital formation by government was forecast to rise by 7,7% in 2002, advancing to nearly 9% in 2003.CPIX inflation was expected to reach an upper turning point of around 8,8% by September before subsiding.
Against this background, said Mpahlwa, the role of STRATE, as a facilitator for trading on the JSE, was crucial. He welcomed complete dematerialisation through STRATE as “the dawn of a completely new era … The constraints or limitations of the physical transfer of millions of share certificates no longer define trading in South Africa’s equity markets.”
He compared the efficiency gains realised through dematerialisation with the efficiency gains of e-mail versus conventional postal services. “The boundaries have been totally redrawn; the sky is the limit.”
In addition to efficiency gains, Mpahlwa stressed that STRATE has substantially reduced the risk of trading in the South African market. “Settlement risk is a major factor influencing the competitiveness of our markets.”
Further, STRATE had contributed to substantially improved market liquidity.
“The efficiency and risk reducing gains that STRATE has made possible are compounded by the broader market deepening that has occurred.
“This is perhaps the most fundamental contribution that STRATE has made to the development of South Africa’s capital markets.”