According to Duarte da Silva, managing director of Northbound Processing and chairman of Element Investment Managers, South Africa's capital markets are headed for a dangerous tipping point unless policymakers, asset managers and market participants act to restore confidence in domestic equities.
In a scathing assessment delivered during a television interview, de Silva said he had written an open letter to the financial community and business leaders out of deep concern over the health of the Johannesburg Stock Exchange and the wider public market ecosystem. Their central warning: The continuing wave of delistings, coupled with a growing preference among local asset managers for offshore exposure, is hollowing out the country's listed market.
While delisting is a global phenomenon, de Silva argued that this trend is more pronounced in South Africa and has serious consequences for the local economy. He described the JSE, once a powerful engine for capital formation and corporate growth, as being in increasing danger of becoming little more than a “post office” for companies whose primary operations, revenue base and strategic focus are overseas.
The comments reflect widespread disappointment with the market structure today. Many of South Africa's largest listed names may retain domestic roots or local quotations, but they are increasingly global businesses with limited operational dependence on the South African economy. In da Silva's view, this weakens the exchange's role as a platform for financing domestic growth companies.
He acknowledged that slow economic growth and weak policy outcomes have undoubtedly weakened South Africa's appeal as an investment destination. But he said the problem could not be explained by macroeconomic conditions alone. He argued that a large part of the challenge is that South African institutional capital has not adequately supported South African listed equities.
That dynamic has created a negative spiral, he said. Investors cite weak market performance and low liquidity as reasons to allocate more funds abroad, yet the liquidity crunch is made worse by the withdrawal of local capital. The result is a self-reinforcing cycle in which fewer companies choose to list, more companies delist, and the market becomes progressively less attractive to both domestic and foreign investors.
A key point in da Silva's criticism is Regulation 28, which regulates retirement fund asset allocation. He particularly pointed to increasing the offshore allocation limit from 30% to 45% in 2022, a move that was widely welcomed by the investment industry at the time. Da Silva said this change would have far-reaching consequences that may have been underestimated.
In their assessment, the high offshore limit, coupled with the prevalence of inbound-listed global stocks in South Africa's benchmark indices, has made it possible for asset managers to build portfolios with effectively full exposure to international markets. He argued that, local businesses are left looking for growth capital with fewer domestic funding options and are pushed towards either private capital or offshore listing.
Da Silva was careful not to argue against offshore diversification altogether. Instead, he said a balance must be struck between chasing returns for pension savers and maintaining a commitment to the domestic economy from which these savings originate. They framed it as part of a broader agreement: retirement wealth benefits from tax incentives offered within South Africa, and it creates at least some obligation to support local capital formation.
The stakes extend beyond portfolio construction. According to da Silva, foreign investors are unlikely to inject capital into South African equities if local investors appear reluctant to do so themselves. Using a simple analogy, he compared the market to a row of restaurants, most of which are full and one standing empty. In that environment, he asked, why would a foreign investor choose an empty space if domestic partners are signaling a lack of conviction?
This perception problem matters because foreign investors typically assess South Africa through an emerging market lens, weighing macro fundamentals such as growth, policy credibility and market depth. If those concerns are heightened by visible local disintegration, the country's relative attractiveness deteriorates further.
Da Silva also stressed the real-economy implications of the shrinking exchange. Delisting not only reduces the number of companies on the board; They weaken the market's ability to finance future growth businesses. He pointed to edtech as an example of the kind of company that had benefited from an active public market in earlier decades. Starting from a modest market capitalisation, the education group was able to repeatedly raise capital and transform into a major business with the support of local investors, he said.
He suggested that model was becoming difficult to replicate. Historically, the JSE was created to channel risk capital into early-stage mining enterprises. Today, da Silva said, the market is less willing to support emerging growth stories or exploration-style risk, instead preferring mature, predictable businesses. In his view, this represents a serious loss of economic dynamism.
He also issued a warning to South Africa's asset management industry. If increasing amounts of capital are managed for offshore exposure, he said, clients may eventually ask why that capital needs to be managed from Johannesburg or Cape Town. In other words, a continued move away from domestic markets could ultimately weaken not only the exchange, but also the long-term relevance of local fund managers.
Despite the seriousness of his diagnosis, da Silva said his intervention was not intended to spread fear. Rather, he framed it as a call to confront a difficult problem before drastic policy responses emerged. In particular, he warned that if voluntary support for domestic investment continued to decline, pressure could build for fixed assets – a policy path he described as deeply problematic, particularly in an environment where corruption risks remain high.
Da Silva said there may still be ways to rearrange the system, including how future retirement contributions that benefit from tax incentives are treated. He said Finance Minister Enoch Godongwana acknowledged that changes to offshore limits may have been a mistake, but argued that mere recognition is not enough without a credible effort to address the consequences.
For now, da Silva's message is that South Africa are not yet beyond rescue, but time is running out. The country still has institutional depth, a sophisticated savings industry and strong foundation of historic exchanges. The question, he suggested, is whether those forces can be mobilized before erosion becomes irreversible.