Shining a light on SA’s investor relations sector

• Published date: 14 April 2022
• Publication title: Business Day (Johannesburg, South Africa)

We believed, when initiating this inaugural survey of SA’s investor relations sector, that standards were already high and globally competitive

Obviously, those high standards are not prevalent across the market. This survey attempts to gauge the depth of quality in IR while honouring those who were rated best in their categories through the awards. To do so, we asked those who make use of their services.

SA’s auditing and reporting standards have consistently ranked highly in the World Economic Forum’s Global Competitiveness Index. One IR practitioner said it stood out particularly against other emerging markets and pointed out that South Africans regularly received high rankings in the annual Extel global rankings of IR professionals.

"Many South African IR heads are former analysts (often sell-side), so they know their sector and clients well — though that’s also the case overseas."

The results must be considered in the context that while all JSE-listed companies were included, smaller companies struggle to get coverage by analysts while the top 40 constituents need large IR teams to cope with the huge interest from fund managers and institutional stockbrokers.

The big companies therefore dominate the rankings with the financial and retail sectors showing exceptional quality. The top 10 overall rankings are headed by two banks, Absa followed by Nedbank, with FirstRand in fifth. Transactional Capital in seventh adds to the financial sector’s top 10 weightings. Retailers are also strong with Clicks in sixth and Woolworths in eighth, followed by Mr Price and Shoprite. MTN in third and Afrimat in fourth put the telecoms and mining sector in the race. Here Afrimat must get a special mention as the only mid-cap in the top 10.

Intellidex runs two similar surveys where users of services are asked to rank their service providers: the Top Securities Brokers and Top Private Banks & Wealth Management awards. Both have been running for longer than 10 years and when they started, it’d be fair to say that some of the established stockbrokers and wealth managers were caught napping. What was remarkable was how standards improved year after year — reflected through the increasingly higher rankings provided by their clients on service levels and product quality.

We believe we will see a similar phenomenon in SA’s IR market with some surprising names in the worst-rated group.

Investor relations are important to investor professionals (more than 80% of our respondents said so). There was clear and consistent feedback on their ability to assess investments and maintain exposure to different companies which depended on the overall quality of investor relations.

The core of investor relations is improving the ability of investors to analyse all aspects of a company’s prospects to identify value and opportunity. That improves the efficiency and effectiveness of capital markets overall. That means identifying best practice — and that’s done by talking to the people who matter, the ones making investment decisions — to get their views.

That really was the prime motivation for our survey: to talk to investors so we could put together a comprehensive assessment of SA’s IR sector.

The fieldwork for the survey was done in the fourth quarter of 2021 and its broad design was to ask respondents to name the five companies that provided the best investor relations in the universe of companies they covered, as well as the five worst. We then asked 11 questions relating to each of those companies, ranging from the quality of engagement with senior management, the quality of annual reports and the quality of notes to the financial accounts, presentations, earnings booklets and so on.

The categories of companies covered by respondents include financials, consumer services, consumer goods, industrials, basic...