Quick Facts

• Small Cap Index includes companies with market value below R1 billion
• Index gained 25.1% in 2024, beating large cap shares
• You need minimum R5 to start with some platforms
• Higher growth potential but also higher risk
• Must use FSCA-registered brokers only

What is the JSE Small Cap Index?

The JSE Small Cap Index (code J202) is a group of smaller companies listed on the Johannesburg Stock Exchange.

Think of it as a collection of new or smaller businesses. These companies have just started showing good results. They now list on the JSE to raise money for growth.

Small Cap means: Companies with total value below R1 billion. This is much smaller than big companies like Capitec or Shoprite.

The Small Cap Index represents 96% to 99% of all JSE Main Board companies. It shows how these smaller companies perform as a group.

Good news: In 2024, small cap shares gained 25.1%. This beat large cap shares which only gained 8.9%.

How Small Cap Companies Work

Why small companies list on JSE:

• They need money to grow bigger
• They want to become more well-known
• They plan to expand their business
• They need capital for new projects

What makes them different:

• New to JSE: Most are recently listed
• Growing fast: They can double in size quickly
• Less stable: Prices move up and down more
• Not well known: Many people never heard of them

Important rule: No single small cap company can make up more than 15% of the index. This protects investors from one company failing.

✅ How to Invest in Small Caps

You have three main ways to invest in small cap companies:

Option 1: Buy Individual Small Cap Shares

Choose specific small companies you believe will grow. You pick which shares to buy.

Best for: People who research companies and understand risk.

Option 2: Buy ETFs that Include Small Caps

ETFs (Exchange Traded Funds) own many companies. They spread your risk across the whole market.

Example: Satrix Capped All Share ETF includes large, mid and small cap companies.

Option 3: Use a Full-Service Broker

A broker chooses investments for you. They give advice and manage your money.

Popular Platforms in 2025

Platform	Minimum	Best For
EasyEquities	R5	Beginners with small amounts
Clarity by Investec	No minimum	Zero monthly fees
FNB Share Builder	R10	FNB bank customers
Satrix	Varies	ETF investors
ABSA Stockbrokers	R5,000	Serious investors

Step-by-Step: How to Start

1. Choose a platform from the list above
2. Visit their website or download their app
3. Register with your ID and proof of address
4. Complete FICA documents (bank statement, ID)
5. Deposit money using EFT or debit card
6. Search for small cap shares or ETFs
7. Place your first buy order
8. Keep your proof of purchase for tax

⚠️ Costs and Fees You Must Pay

Important: All platforms charge fees. These fees reduce your profit. Know all costs before you invest.

Brokerage Fees (When You Buy or Sell)

Platform Type	Fee Percentage	Minimum Fee
EasyEquities	0.25%	None
Clarity by Investec	0.2% (spread)	None
Traditional brokers	0.4%	R120

Other Mandatory Costs

• Securities Transfer Tax (STT): 0.25% when you buy shares
• STRATE Settlement Fee: 0.005787% (minimum R10.19, maximum R73.49)
• Investor Protection Levy: 0.0002% on all trades
• VAT: 15% on brokerage and STRATE fees

Monthly Admin Fees

• EasyEquities: R0 per month
• Clarity: R0 per month
• Traditional brokers: R75+ per month plus VAT

Total Cost Example

Requirements to Start Investing

Who Can Invest?

• You must be 18 years or older
• You must be a South African resident or citizen
• You need a South African ID or passport
• You need a South African bank account

Documents You Must Have

Document	Why Needed
South African ID or passport	Prove your identity
Proof of address (within 3 months)	Confirm where you live
Bank statement (within 3 months)	FICA requirements
Tax number	SARS tax compliance
Banking details	To transfer money

Proof of address can be:

• Municipal rates bill
• Electricity bill
• Water bill
• Bank statement with your address
• Lease agreement signed by landlord

FICA Compliance

All brokers must verify your identity. This is called FICA (Financial Intelligence Centre Act).

You cannot invest until FICA is complete. This usually takes 1-3 working days.

Minimum Investment Amounts

• EasyEquities: R5 minimum
• Clarity: No minimum
• FNB Share Builder: R10 minimum
• Traditional brokers: R5,000+ minimum

⚠️ Tax You Must Pay

Important: You pay tax on money you make from shares. Keep all records for SARS.

1. Dividend Withholding Tax

When a company pays dividends, 20% tax is taken automatically. You receive 80% of the dividend.

2. Capital Gains Tax (When You Sell)

When you sell shares for profit, you pay capital gains tax.

How it works:

1. Calculate your profit (selling price minus buying price)
2. Subtract R40,000 annual exemption
3. Include 40% of remaining profit in your taxable income
4. Pay tax at your normal tax rate

Maximum effective rate: 18% for individuals

Important Tax Rules

• Keep records of all buy and sell transactions
• Keep proof of fees paid
• Declare capital gains on your tax return
• R40,000 exemption applies per tax year
• Tax year runs from March to February

Where to Get Help

• SARS: 0800 00 7277 or www.sars.gov.za
• Tax practitioners: Find registered tax consultants
• Your broker: Can provide transaction history

⚠️ Risks and Dangers of Small Cap Investing

Warning: Small cap shares are risky. You can lose all your money. Never invest money you cannot afford to lose.

Main Risks

Economic Risks

• Load shedding: Power cuts hurt small businesses badly
• Interest rates: Small companies borrow money to grow
• Rand weakness: If they import goods, costs go up
• Economic slowdown: People buy less, companies earn less

How to Reduce Risk

1. Spread your money: Buy shares in 5-10 different small companies
2. Do research: Read company reports and news
3. Think long-term: Hold shares for 3-5 years minimum
4. Only invest spare money: Money you do not need for 5 years
5. Watch your investments: Check company news monthly
6. Set stop-loss: Sell if share drops 20% from your buy price

🚨 Investment Scams to Avoid

CRITICAL WARNING: Investment scams cost South Africans billions every year. Mirror Trading International alone stole R8 billion from victims.

Common JSE Investment Scams in 2025

Red Flags – Signs of a Scam

Red Flag	Why It’s Dangerous
Guaranteed returns	No investment guarantees profit
Must act now	Pressure tactics are scam signs
Pay upfront fee	Real brokers never ask for fees before FICA
Contact via WhatsApp/Telegram	Legitimate companies use official channels
Secret opportunity	Real investments are public knowledge
Cryptocurrency payments	Used to hide criminal tracks
Not FSCA registered	Illegal to give investment advice without license

How to Protect Yourself

1. Check FSCA register: Visit www.fsca.co.za or call 0800 110 443
2. Use official websites: Type broker website yourself, do not click links
3. Never share PIN or password: No broker needs these
4. Verify caller identity: Hang up and call back on official number
5. No upfront fees: Do not pay before FICA is complete
6. Get everything in writing: Email confirmations and contracts
7. If it sounds too good to be true, it is

✅ Safer Alternatives to Small Cap Shares

If small cap shares are too risky for you, consider these safer options:

1. JSE Top 40 ETF

Invest in the 40 biggest JSE companies. Much more stable than small caps. Examples: Satrix 40, CoreShares Top 50.

2. Balanced Unit Trusts

Professional managers invest your money in mix of shares, bonds and cash. Lower risk than pure shares.

3. Tax-Free Savings Account

Invest up to R36,000 per year with no tax on growth. Choose unit trusts or ETFs inside TFSA.

4. Retirement Annuity

Save for retirement and get tax deduction. Your contributions reduce your taxable income.

Option	Risk Level	Expected Return
Small Cap Shares	Very High	20%+ or -20%
JSE Top 40	Medium	10-15% per year
Balanced Funds	Low-Medium	8-12% per year
Bank Savings	Very Low	5-7% per year

Your Rights as an Investor

Under South African law, you have important rights:

Right to Information

• Broker must explain all fees in writing
• Company must publish financial reports
• You can attend annual general meetings
• You receive voting rights on company decisions

Right to Fair Treatment

• Broker must treat you fairly
• No discrimination based on investment size
• Same share price for all investors
• Your shares belong to you, not the broker

Right to Complain

If your broker treats you unfairly:

1. Complain to the broker in writing
2. Keep copies of all communication
3. If not resolved, contact FSCA
4. You can report to Ombud for Financial Services Providers

Protection Under Financial Markets Act

The Financial Markets Act protects investors from:

• Insider trading (using secret information)
• Market manipulation (artificially moving prices)
• False statements about companies
• Front-running (brokers trading before your order)

Small cap shares can make you money, but they are very risky.

If you decide to invest:

1. Use only FSCA-registered brokers
2. Start small – invest only 5-10% of your savings
3. Choose cheap platforms like EasyEquities or Clarity
4. Consider ETFs instead of single shares
5. Think long-term – hold for minimum 3 years
6. Never borrow money to invest
7. Keep emergency savings separate
8. Watch for scams – verify everything

Remember: Past performance does not guarantee future results. The 25% gain in 2024 may not repeat in 2025.

If you are not comfortable with risk, stick to safer options like balanced unit trusts or tax-free savings accounts.