This archive report was first published on 9 September 2019.
Established to improve the financial system, enhance liquidity, mitigate risks, and meet the challenges of globalization, South Africa's derivatives market has been a significant contributor to the country's economic growth.
As of 2018, the market's performance was impressive, with a total volume of $251 million in USD. The market comprises two broad categories: options and futures, with a wide range of underlying assets, including warrants, equity futures and options, interest futures and options, agricultural futures and options, currency futures, and fixed income derivatives.
The South African Futures Exchange grew out of an informal market in April 1987, with options contracts introduced in 1992, agricultural futures in 1995, and a functional automated trading system in May 1996.
Four key agencies are involved in South Africa's derivatives market: the Financial Services Board of South Africa (FSB), the Johannesburg Securities Exchange (JSE), the Bond Exchange of South Africa (BESA), and the South Africa Futures Exchange (SAFEX) Clearing company.
The rapid growth of the derivatives market is attributed to South Africa's economic and capital market growth, as well as the deregulation of the agricultural sector, which led to the creation of the agricultural commodities market on the JSE.
South Africa's ease of doing business and protection of minority investors have also contributed to the market's success, making it an attractive destination for foreign investments.
Other African countries can learn from JSE's success and understand that a derivatives market can be a tool to self-insure against volatility of capital flows, reduce over-dependence on bank credit, and improve management of seasonal risks with appropriate regulation and supervision.
