How to Invest on the Johannesburg Stock Exchange

South Africa is far and away the most economically developed of African states, and, as such, will likely be the continent’s economic gateway for the foreseeable future.

Truth be told, however, the Johannesburg Stock Exchange (JSE) isn’t exactly the most bullish of markets these days. The MSCI South Africa Index has sunk more than 13% over the past 12 months after accounting for depreciation of the nation’s currency, the rand. In fact, the market is now at its lowest point in nearly two years.

But this isn’t necessarily bad news for value investors. Falling prices mean an increasing number of bargains are on offer. Earnings multiples are dropping and dividend yields are rising.

And because the Johannesburg Stock Exchange is one of the most sophisticated in the world, investors can scoop up these deals with a click of their mouse. The market’s accessibility and convenience make it an ideal place for new Africa investors to get their feet wet.

Here’s how to get started.

Comparison Shop South African Stockbrokers

Your first step is to open an account with a South African stockbroker.

Dozens of stockbrokers facilitate trades on the JSE, but only 12 offer online share trading to individual investors.

Online trading platforms are still relatively new to Africa, and they’re not a necessity to invest successfully there, but I find them more convenient. So, I limited my broker research to those that offer them.

I sent an email to each one, asking them if they catered to foreign investors, how much of a deposit they required to open an account, what documentation was required, and for a copy of their fee schedule.

Five of the brokers confirmed that they do take foreign clients and responded to my questions within three business days. I’ve listed them below with their minimum initial deposit amounts, monthly administration fees, and my calculation of the cost of a hypothetical ZAR20,000 trade through each one.

Broker Minimum Initial Deposit Monthly Admin Fee Fees and taxes on ZAR20,000 (roughly $2,000) share purchase
Anglorand Securities $50,000 ZAR121.46 (roughly $12.00) ZAR270.96 (roughly $27.00)
Imara S.P. Reid None ZAR20.83 (roughly $2.00)  ZAR285.96 (roughly $28.00)
Nedbank Online Trading  None (but does charge ZAR250.00 account opening fee) ZAR33.50 (roughly $3.00)  ZAR200.96 (roughly $20.00)
PSG Online None ZAR40.00 (roughly $4.00) ZAR240.96 (roughly $24.00)
Sanlam iTrade  ZAR1,000.00 (roughly $100.00) ZAR50.00 (roughly $5.00) or monthly brokerage in excess of ZAR300.00 (roughly $30.00) ZAR235.96 (roughly $23.00)

As you can see, commissions and fees are pretty comparable across all five brokers, but Anglorand requires a much larger deposit than its peers.

[Be aware that, for South African residents, value added tax is added to many of the above items. If you are not a South African resident, you should not be charged value added tax (VAT). If you do much trading, this can be a significant charge as it amounts to 14% of brokerage and fees. So keep an eye on your trading statements and ask your broker to refund any VAT should it appear.]

Discretionary vs. Non-Discretionary Accounts

Note that some of these brokers offer discretionary accounts. Discretionary accounts give brokers the authority to make trades in your account without the consent of the account holder. They typically are managed in a way that the broker believes is the best way to achieve the investment objectives and acceptable levels of risk that you specify. It’s like having your own personal portfolio manager. You might want to consider this option if you aren’t interested in doing your own investment research.

I’m a bit of a control-freak, so I personally prefer non-discretionary accounts. I want to make my own investment decisions and don’t like the idea that a broker could buy or sell my shares without my permission. If you’re at all like me, make sure you open a non-discretionary or “execution only” account.

Photo by Henti Smith

Photo by Henti Smith

What Documentation Will You Need?

To open an account be prepared to provide the following:

  • Certified copy of your passport
  • Bank details (i.e. a canceled check or a certified copy of a recent bank statement)
  • Copy of a recent utility bill showing your physical address (not older than three months)
  • Signed letter to your broker stating that you are not registered with the South African Revenue Service for tax in South Africa (some brokers may require your Social Security number)

You will also need to fill out a form or three for the broker that you’d like to open a trading account with. Here’s a rundown as to what else is required by each one.

  • Anglorand requires completion of a 12-page trading mandate (only the first six are necessary for non-discretionary accounts) and a three-page particulars schedule.
  • Imara SP Reid’s application is a 14-page monster. Fortunately, individual investors who wish to manage their own accounts can skip many of the sections.
  • Nedbank, PSG Online, and Sanlam iTrade all offer nifty online registration applications. Find Nedbank’s here,PSG’s at this link, and Sanlam iTrade’s right here.
How to Fund Your Brokerage Account

After opening your trading account, your broker will provide you with its bank details so that you can fund your account and begin buying shares. The most efficient way to do this is via wire transfer. If you haven’t sent an international wire before, I suggest that you take your broker’s bank details to your local bank branch and ask them to walk you through the process. They’ll make sure that your funds arrive securely. Note that most US banks charge about $25 for outgoing international wires.

Making a Trade

The actual process of making a trade varies depending on the broker you use, but from what I’ve seen their trading platforms look pretty intuitive. You simply buy and sell shares in a similar way that you would through an ETrade or TDAmeritrade account.

Collecting Dividends

In my experience, collecting dividends paid by your South African stocks is a piece of cake. If you bought the shares through an online broker, your dividends will deposited directly into your trading account. You can then decide whether to bring the cash back home or to reinvest them in the market.

Clear as Mud?

Do you have questions about investing on the Johannesburg Stock Exchange that we haven’t covered here? If so, let’s hear them in the comments!

Related Reading

The Case for Investing in South Africa
How to Invest on the Nigerian Stock Exchange

Comments

  1. Michael Abrahams says:

    Ryan,
    If one is willing to sacrifice on line trading for ease in setting up or in liquidating the account, one could trade on the JSE through Schwab or many other retail brokers. It is very straightforward using Schwab in the US: assuming you have funds in an account, just call their international desk and they can execute on the JSE. I have had good experiences with them on the JSE (and other more obscure exchanges).
    Mike

    • Thanks, Mike! I had forgotten that Schwab will execute trades there. Have you used them on any other African exchanges? How much is the commission for JSE trades?

      -Ryan

  2. JP Batiste says:

    This post was very informative , simple and quick info that a young investor like myself can understand.

  3. Hi,

    Besides Investors Europe, are there any other brokers located in Canada that trade on the JSE, online?

    Victor

    • I’m not aware of any, Victor, but that doesn’t mean they don’t exist. Are there any other Canadian investors out there who can help with this question?

  4. Hi Ryan

    I noticed that you have not mentioned any of the other banks in SA, like Absa, Standard Bank and FNB. They all advertise online share trading, and if I’m not mistaken Standard Bank offered this feature on its website around 2005. Are they not proper brokerage houses also?

    I am in the process of selecting a broker and am looking for the best deal, but also the best quality in terms of charting/technical analysis.

    Thanks

    • Hi Burhaan,

      You’re correct. They all do offer online share trading, but I didn’t include them in this article because they didn’t respond to my emailed questions. It could be that I just slipped through the cracks. The brokers listed in the article all responded promptly and helpfully, so I thought they deserved a specific mention.

      Good luck on the search and keep us posted on which broker you ultimately find to be the best for your needs!

      Ryan

  5. Hi Ryan
    I would like to know if you would advise a student who does not get a monthly income to buy shares. Won’t the costs of maintaining your shares or account (let’s say they do not do well) overwhelm you?

    • Great question, Lewis. You’ve touched on one of the biggest dilemmas in personal finance. Young people have the most to gain from investing because they have the most time to allow their investments to grow. Unfortunately, young people also (generally) have the least amount of money available to invest.

      While the cost of maintaining a brokerage account is typically quite small, there is no guarantee that your investment will increase in value over any given time period. Just look how the Johannesburg Stock Exchange has performed this year. It’s down 11% in US$ terms. That means $1000 invested at the beginning of the year is now worth just $890 – a loss of $110.

      So, what to do? I usually suggest that you pay off all high-interest debt (anything with an interest rate above 10%) before even considering investing in the stock market. This could be a credit card at Truworths or a furniture loan from Lewis. Maybe a car or school loan.

      Why pay off debt first? Because paying off debt is a GUARANTEED way to reduce your expenses. Stocks, on the other hand, are NOT guaranteed to increase in value.

      Let’s suppose that you receive a gift of R1000 from your family. Let’s also suppose that you have R1000 worth of debt at an electronics store that carries an interest rate of 20%. This means that you are paying R200 worth of interest charges on that debt every year. If you paid the debt off, you would essentially be earning R200 — a return of 20%. If you decided to invest the gift in the stock market instead, the value of your investment would have to increase more than 20% that first year in order for it to be a better use of your money than paying off the debt. Is it possible that this could happen? Yes. Is it very likely? No. Take the guaranteed return by first eliminating your debt.

      The other thing you should do before investing in stocks is to save up an emergency fund that is equal to at least six months of your living expenses (housing, food, transport, medical, school, etc.). Open a bank account and save up that cash for a rainy day. If your family should no longer be able to support you, or you are unable to find a job, that emergency fund can give you some breathing room while you look for a new source of income.

      Only after you have done both of these things should you even consider investing in the stock market. And then I would advise you to invest for the long-term. Plan to invest for at least five years and preferably much longer. Start by investing in a diversified fund, like a unit trust, to reduce your risk. Then as your knowledge of investing grows, you might want to start investing small amounts in individual companies that you know well.

      I hope this hasn’t totally frightened you! It’s great to begin investing in stocks at a young age, but pick the low-hanging fruit first. Reduce debt, open a savings account, and build a six-month emergency fund.

      All the best!
      Ryan

  6. Siyabonga says:

    Hi Ryan,
    I am a student with little monthly income, but debt-free. I wanna know how can i invest , how to find a broker, with how much money can be my capital(R5OO monthly income). I use Standard Bank by the way.

    Kind regards,
    Siyabonga

  7. Hi Ryan,

    Thanks for the article – quite informative!

    I’d like to ask about the reverse of your article – how does a south african citizen / resident go about investing in a company thats listed on the Toronto stock exchange?
    Are there “DIY” (eg online) options? what are the regulations / where would I find out about them? what are the costs etc.

    Thanks!
    Kind Regards,
    Shannon.

  8. I would like to ask am a student and am 19 years of age in zimbabwe and am a Zimbabwean. I would love to invest in JSE. How do I get to invest in the JSE and what’s the minimum amount that I can invest.

    • Hi Jonathan,

      As far as I am aware, Zimbabwean citizens are permitted to open trading accounts on the JSE. You can simply follow the instructions in the article above.

      Many JSE brokers do not require a minimum deposit amount, but they will charge a monthly administration fee to keep your account open. This fee ranges from $2 to $12 per month.

      Happy investing and let us know if you run into any trouble!
      Ryan

      • bothwell says:

        I would love to invest in JSE. How do I get to invest in the JSE and what’s the minimum amount that I can invest.

        Thanks!
        Kind Regards
        Bothwell

  9. Good day Ryan,

    I have a question….Me and my father are using the anglo rand trader platform, we covered basic things such as the interface, drawing lines, studying candles and analysing possible strategies. I would like to know if there is a website or any media we can identify strong trading markets since we do this maybe 2 hours a day, we want to make it most affective to learn..and by the way, great site!!

  10. I jst received an invitation from stock market college here in Lesotho stating that they mediate between me and the JSE, can I trust them with my money? I really want to get started to invest with the JSE, how can you advice I get started?

    • Hi Thandy, Ho joang? I’m afraid I’m not familiar with the stock market college in Lesotho. I would advise you to try to open an account with one of the brokers listed in the article. I’m pretty sure they will open an account for citizens of Lesotho.

      Keep us posted!
      Ryan

  11. This really really informative, thank you so much. God bless. :)

  12. Good day Ryan

    Great, informative article, im still new at this and the Rand seems to be at its weakest so
    I just need to find out, is it advisable to start investing when the currency (rand/ZAR) is weaker or when it is stronger?.

  13. Hi Ryan

    I’m a young professional who wants to start investing in the stock market. A colleague has told me about satrix and that they offer minimum risk for investors. Is it safe in this day and age with our economy being so weak to start investing and is satrix a good choice for a beginner like me?

    Regards
    Warren

    • Hi Warren,

      Your colleague is steering you in a sound direction, in my view. Satrix offers a number of ETFs and unit trusts which help diversify your risk while keeping costs low.

      There’s not a lot of great economic news coming out of South Africa these days, but it’s important to take a long-term view. I’d advise that you invest a small, set amount at regular intervals (monthly or quarterly) in a diversified unit trust while you get your feet wet.

      Satrix offers two well-diversified unit trusts that you might consider (http://www.satrix.co.za/products/unittrusts.aspx). The Balanced Index Fund is diversified across South African and foreign stocks, bonds, and property. The MSCI World Equity Index invests in the world’s largest companies, including Apple, Exxon, Google, and Microsoft and has very little exposure to the South African economy.

      Hope this helps and keep us posted on how things go for you!
      Ryan

  14. I own some South African shares, listed on the JSE, the certificates were issued in South Africa, can I trade them through a Canadian broker?

  15. Dee wright says:

    If u have shares in a company that company was deregistered. Could you advise what happens to the moneyyou have invested inthe company.

  16. Ndumiso says:

    Can u pls recommend a good stock trading trainer i may find around durban,trusted one.really want to do day trading

    • Thanks for your question, Ndumiso.

      I don’t recommend day-trading. It is high risk and high stress. Very much like gambling.

      Your odds of making money in stocks are best when you focus on the fundamentals of the underlying business. Think of yourself as an owner, and buy a business that is profitable, with low debt, and that is easy to understand. Then hold on to the shares and let the business work for you.

      All the best!
      Ryan

  17. Ryan, thanks so much for posting! I was wondering how to make such investments as Bonds and CD’s (if available) with different FI’s in Africa…? Is there an institution in particular that you recommend? Are there brokers that you can recommend. Is the process the same as it is here in the US? For example, we can walk into the B of A (without a broker) and open a CD or Bond.

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