The Johannesburg Stock Exchange is the biggest exchange of its type in Africa and one of the world’s leading markets for stock trading, having been in operation for over 120 years.

As with all leading stock exchanges, it is possible to trade indices of the JSE, representing different categories of stock, but the JSE Top 40 Index is the best-known JSE index and is considered to be the most representative index of all. It includes 40 of the top companies on the exchange, ranked by market capacity, which together make up as much as 80% of the market capacity of the JSE.

Whether you are hoping to invest in JSE Top 40 companies or you just want to boost your trading and investing strategy, it is a good idea to understand which companies make it into the top 40, what business sectors they operate in and how influential they are.

The top two

The sectors banking and financial services, technology and telecommunications, and basic resources combined produce over half of the companies in the Top 40, but neither of the top two belong to these industries. British American Tobacco (BAT) and Compagnie Financière Richemont are the two largest companies in the Top 40 and are some way ahead of the rest of the field.

BAT is one of the world’s top five tobacco companies, owning a host of popular brands and controlling around 10% of the global cigarette market. It has had a presence in South Africa for over 100 years and nine of its total of 44 factories are based in Africa.

Compagnie Financière Richemont does not have the same long history as BAT, but this Swiss company, which was created in 1988, has grown to become the second largest luxury goods provider in the world, serving customers through its own retail outlets and franchised premises.

Mining and basic resources

Mining and basic resources companies may not make it into the top tier of the Top 40 companies, but this sector, with a total of nine companies, makes the biggest contribution to the index.

Impala Platinum Holdings is the highest rated in terms of market capacity. A holding company that operates several mining brands within Africa, it produces platinum, copper, cobalt and nickel, and dates back to 1966, when it was first established as a Union Corporation subsidiary.

Other leading companies in this sector include Kumba Iron Ore Limited, which is the world’s fourth-largest iron ore producer, AngloGold Ashanti, which is responsible for around 7% of the total global gold production and has eight mines in South Africa, and African Rainbow Minerals, which produces platinum, iron ore, copper, coal and gold, with operations in South Africa, the DRC and Zambia.

Banking and finance giants

The top 10 of the Top 40 companies make up around 60% of the Top 40 Index’s market cap, and three of them are in the banking and financial services sector. In fact, FirstRand Bank and Standard Bank are often to be found in the top five companies on the JSE Top 40, reflecting the status of South Africa and Johannesburg as centres of banking activity on the continent.

FirstRand Bank is licensed by the Reserve Bank of South Africa and dates back to the 1970s when it was solely an investment bank. Since then, it has become one of the biggest financial operators in the world and provides banking, investment and insurance products to customers in eight African nations, including South Africa, Botswana, Nigeria, Zambia and Ghana.

Its main Top 40 rival is Standard Bank. Based in Johannesburg, Standard is the biggest lender in Africa and its history can be traced back to 1862, when it was a subsidiary of a UK bank. A global operator, Standard also has a presence in Asia, Europe and both North and South America.

The rest of the Top 40

Telecommunications and technology also have strong representation in the Top 40, which is not surprising, given the ongoing expansion of mobile usage across Africa. Tech company Naspers, along with telecoms operators Vodacom and MTN, are all consistently in the top 10. Other companies represented in the Top 40 include chemical company Sasol and well-known retailers Shoprite and Woolworths, as well as Mondi, which is a paper and packaging company, and packaged goods seller Tiger Brands.

Summary

The JSE is at the heart of Africa’s financial economy and its Top 40 Index represents the full extent and range of South African economic power, featuring some of the world’s biggest companies.