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Standard Bank launches palladium exchange traded fund in South Africa, gold and platinum funds will follow

Out-Law News | 25 Mar 2014 | 10:03 am | 1 min. read

Standard Bank Group (SBG) is today launching South Africa's first listed palladium exchange traded fund (ETF) on the Johannesburg Stock Exchange.

SBG said that in addition to the ‘AfricaPalladium’ ETF, aimed at investors “taking a long-term view”, it expects to list the ‘AfricaGold’ and ‘AfricaPlatinum’ ETFs at the start of next month.

SBG’s head of global structuring Johann Erasmus said the ETF market in South Africa is valued at an estimated 60 billion rand (ZAR) [about $5.5bn] – and the introduction of its three ETFs to the local market will offer “alternative investment options that are also competitively priced”.

Erasmus said: "The ETFs invest directly in palladium, gold and platinum respectively and track the rand prices of the metals. This allows investors to invest in liquid listed instruments and because of the security structure that each ETF has the investor has no issuer risk or risk of exposure from the other commodities held in the ETFs. Investors gain direct exposure to the commodities, investing in physical palladium, gold and platinum, which are held in vaults.”

The three ETFs will be treated as local assets and have no exchange control implications for investors, SBG said. Following the ETFs' debut on the Johannesburg Stock Exchange, SBG plans to launch the instruments in other jurisdictions.

SBG was the first bank to list local exchange trade notes (ETNs) on the Johannesburg Stock Exchange in 2010, with the launch of ETNs that track the performance of gold, platinum, palladium and silver followed by the Africa Equity ETN.

According to South Africa’s government, the Johannesburg Stock Exchange is the world's 19th largest exchange. With a market capitalisation of $929bn as of the end of 2012, the exchange is also the biggest on the continent.

The African Development Bank’s manager for regional integration and trade, Moono Mupotola, has said African nations can “benefit immensely from well-regulated derivatives commodity exchanges – which in turn could provide a useful tool for Africa’s development”.

South Africa’s finance minister Pravin Gordhan said last month that investment into Africa had reached the equivalent of around $3.4bn a year and, in a range of industries, is the second largest developing country investor on the continent.