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Black South Africans hold an estimated 66.55% of the locally owned capital on the Johannesburg Stock Exchange (JSE), compared with 33.45% held by white South Africans. That estimate excludes foreign investors and uses the broad definition in the Broad-Based Black Economic Empowerment Act, which includes black, coloured, and Indian South Africans.

Estimating the racial breakdown of the ownership of the JSE requires a number of steps and assumptions. The first is to understand that roughly a third of the JSE is foreign owned. That share needed to be stripped out of the analysis.

A second step is to understand that the JSE is owned by various types of investors. Individuals who buy shares directly are one such type. The state through its pension fund is a second type. Then there are private financial institutions and pension funds that invest in the JSE. The share that each type of investor holds of the market needed to be calculated.

Thereafter it was necessary to estimate, based on what we know about the structure of the broader economy, what share of the beneficiaries of those types of investors were probably black, or probably white.

The final ownership estimates hinge on the accuracy of those estimates, but even where the analysis tested different high and low points, it found that the ultimate conclusions remained comfortably within a band that placed black ownership somewhere between the low 60 percentiles and the low 70 percentiles.

How the local market breaks down, and who owns each piece

1. The Public Investment Corporation(PIC) owns roughly 20% of local JSE shares. This is the money that the government invests on behalf of the country's civil servants. The Department of Public Service and Administration's own employment records put black representation at around 90% of government staff. We therefore calculated that the PIC contributed roughly 18 percentage points to black ownership of the local JSE (90% of 20% of the JSE equals 18%).
2. Private funds own roughly 44% of local JSE shares. This is private-sector pension and provident fund money. The working assumption that we settled on is that South Africa's black middle class (we have separate estimates of the size and growth of the middle class), accounts for something between 40% and 60% of the beneficiaries behind this money. Taking the midpoint of 50%, we therefore calculated that private funds add roughly 22 percentage points to black ownership of the local JSE.
3. State holdings own roughly 3% of local JSE shares. This refers to shares held directly by government and state-owned entities, separate from the PIC pension money discussed above. The main example is the Industrial Development Corporation, a state-owned development finance institution with direct stakes in listed companies such as Sasol. This analysis assumes that these holdings are 90% black-beneficial as this is roughly the share of the national population that is black. We therefore calculated that state holdings add roughly 2.7 percentage points to black ownership of the local JSE.
4. Individual shareholders own roughly 3% of local JSE shares. Direct retail share ownership has historically skewed white, reflecting who has had the disposable income and financial-market access to invest directly. This analysis assumes that between 40% and 50% of these individual shareholders are black. Taking the midpoint of 45%, we therefore calculated that individual shareholders add roughly 1.35 percentage points to black ownership of the local JSE.
5. Everything else, close to a third of the local market, around 30%. This catch-all chiefly covers Black Economic Empowerment (BEE) ownership structures, where a block of shares in a company is set aside for black shareholders or trusts and held for a fixed number of years, typically financed by debt repaid out of dividends, before beneficiaries can sell. This category also includes other holdings that don't sort cleanly into the categories above. Assumed 70% to 80% black-beneficial, reflecting that most of what sits here is BEE-related empowerment stock by design. Taking the midpoint of 75%, we therefore calculated that this category adds roughly 22.5 percentage points to black ownership of the local JSE.

Add the black contribution from each bucket, and the total lands at 66.55% black and 33.45% white.

We tested the limits of that estimate by pushing the ownership estimates down to their lowest plausible levels, and up to their highest plausible levels, in order to stress-test the accuracy of our 66.55% number. The chart below shows how we did that by developing what we called a conservative case, a central case, and a generous case.

The lowest we could make the black ownership rate was around 60%. The highest we could make it was just over 70%. As a consequence, we are relatively confident that the 66.55% estimate is a fair judgment.

At a certain level, the data suggest that South Africa has made more progress, in terms of the ownership of the economy, than some of the doom-y analysis suggests. Certainly, claims that nothing has changed in the country over 30 years are false. On a per capita basis, of course, that statement can be qualified and our initial estimates, that we will write a second report on, reveal the implications of a South Africa demonstrating a multi-generational, established white middle class, read against the still emerging black middle class, read against the high levels of black unemployment.