Growth and Strategies of Large and Leading Firms - Top 50 Firms on the Johannesburg Stock Exchange

Abstract

The orientation and investments of large and lead firms can shape the patterns of industrial development and growth in a country. It is thus important to understand the investment decisions of large firms and how they relate to policy in terms of building productive capacity in the South African economy. This study assesses the investment decisions and strategies of the largest 50 firms listed on the Johannesburg Stock Exchange (JSE) (by market capitalisation) as they relate to industrial development in South Africa. The assessment is based on an analysis of publically available annual reports and announcements for listed firms.

A key finding is that while there has apparently been considerable changes in the composition of the top 50 the very large firms (in the top 20) have largely retained their positions ranked by market capitalisation. The assessment also shows that while firms have shown significant profitability, they have retained significant portions of profits within their organisations. The majority of the retained profits are being held as reserves as opposed to being reinvested such that total reserves held stood at R1.4 trillion by 2016. Investments that have been undertaken largely comprise expenditure on replacement capital and mergers and acquisitions, rather than expansionary expenditure. There is a high degree of internationalisation by South African firms, with the majority of merger and acquisition deals being concluded outside South Africa.

Keywords: JSE, investment, ownership

JEL Classification: D21, D22, E22, G34, L25, O12, O16, O25