How JSE-listed companies are defying domestic growth constraints

Recent returns on the JSE have mainly been driven by a handful of precious metal miners, sending the JSE All Share Index to all-time high levels and, to a large degree, masking the general economic lethargy that domestic-focused companies and consumers face.

Given growth constraints and challenges faced by domestic-oriented JSE-listed companies, the ability to deliver meaningful and peer-leading growth has become more critical than ever. Despite these headwinds, several local champions are demonstrating that companies with multiple (and sustainable) growth levers can not only survive but thrive, consistently outperforming market expectations and being appropriately recognised by the market in the form of premium valuations and generous shareholder returns.

While external factors can have a material impact on company fundamentals (and share price performances), in our view, the most attractive and sustainable company growth drivers are within the scope of management’s control.

Market share gains in competitive sectors deliver a clear path to success

Top-line revenue growth remains the most direct path to growth, achievable through market share gains, pricing power, or expanding product/service offerings and client bases. Retail giant, Shoprite, has excelled at this, having achieved an impressive sixth consecutive year of market share gains in its recently released full-year results, despite operating in an intensely competitive environment.

Perhaps no company better illustrates the power of multiple growth levers than Capitec, which briefly overtook FirstRand in August to become South Africa's largest bank by market capitalisation. Through continued innovation, transparent pricing that consistently beats competitors, and a deep understanding of client needs, Capitec has rapidly expanded its market share to now serve over 24 million active clients.

The bank's success extends beyond traditional banking services. Capitec has proven highly effective in offering value-added services, including prepaid utilities and cellphone services, insurance products, and, more recently, business banking solutions. This diversification strategy has created multiple revenue streams while deepening customer relationships.

The power of pricing and brand heritage

Although global in orientation, luxury goods company, Richemont, showcases how heritage brands can command robust pricing power. The company's jewellery "Maisons," part of its portfolio of prestigious luxury brands, benefits from exclusivity and desirability. Richemont exercised pricing restraint in recent years while competitors pursued more aggressive increases, a strategy that has protected both brand equity and “through-the-cycle” margins.

Innovation as a growth vector

Industry disruption and innovation can create attractive growth opportunities for companies willing to challenge the status quo. OUTsurance, founded in 1998, pioneered the "outbonus" model in South Africa. This innovation has enabled OUTsurance South Africa to achieve what's regarded as among the highest underwriting margins globally.  The company has subsequently been able to apply learnings from South Africa into a successful expansion in the Australian insurance market.

Astute acquisitions drive expansion

Growth doesn't always need to be purely organic in nature. Global food services company, Bidcorp, demonstrates how acquisitions can drive expansion when executed with discipline and focus. The company has consistently completed approximately 5-10 acquisitions annually while maintaining strict criteria around strategic fit and cultural alignment. Crucially, Bidcorp has preserved its entrepreneurial culture and avoided a dilution of returns that often plagues acquisitive companies.

Growth through operational excellence 

Company earnings’ (and dividend) growth need not necessarily be driven by top-line growth alone. Companies and their management teams may be able to deliver meaningful earnings growth through margin improvements, thereby benefiting from operational gearing. In the four years preceding the 2025 financial year, AVI grew revenue at an average annualised rate of 5%. Through continual reinvestment in efficiency gains and effective pricing, the company has delivered consistent growth in margins and ultimately grown earnings at a four-year average annualised rate of 10%. This operational excellence demonstrates how management teams can create shareholder value even in constrained growth environments.

Strategic Capital Allocation

Share repurchases represent another powerful tool for enhancing per-share value growth. Naspers and Prosus have become prime examples of this strategy in action. Since initiating their share buyback program in 2022, both companies have now repurchased 28% of shares in issue, delivering net asset value (NAV) accretion while helping to narrow the discount at which both trade relative to their underlying NAV.

The Path Forward

Whether through market share expansion, pricing optimisation, innovation, strategic acquisitions, operational improvements, or smart capital allocation, JSE-listed companies and their management have growth levers at their disposal. Examples such as Capitec, OUTsurance and Shoprite underscore the fact that even in a constrained growth environment, JSE-listed companies may still access and execute multiple growth strategies that, if successfully executed, will attract premium valuations and deliver superior returns.

Stonehage Fleming Global Equity Management South Africa director, JP du Plessis

Disclaimer. Investors should seek an investment advisor. This column is a point of view and cannot be considered investment advice.  

*** The views expressed here do not necessarily represent those of Independent Media or IOL.

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