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Analysis > Interviews

MEETING with Thapelo Tsheple

Anna Lyudvig
May 20, 2021, 5:48 p.m.

Word count: 1390

On the occasion of the Africa Financial Industry Summit, Anna Lyudvig spoke with Thapelo Tsheple, CEO of Botswana Stock Exchange to discuss investment products, IPOs and why Botswana is an ideal destination for investment.

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On the occasion of the Africa Financial Industry Summit, Anna Lyudvig spoke with Thapelo Tsheple, CEO of Botswana Stock Exchange to discuss investment products, IPOs and why Botswana is an ideal destination for investment.

Anna Lyudvig (AL): Please tell us about Botswana Stock Exchange (BSE) and your market capitalization.

Thapelo Tsheple (TT): The Botswana Stock Exchange is Botswana’s sole stock exchange given the responsibility to operate and regulate the securities market. The formation of the BSE can be traced back to 1989, when it was then known as Botswana Share Market (BSM). At that time there was no formal stock exchange in Botswana and the BSM traded as an informal market. At the time, there were only five listed entities with a single broking firm i.e. Stockbrokers Botswana Ltd (SBB), which was also charged with facilitating trading on the exchange.

In September 1994, the legislation to transform the BSM into a full exchange was passed by Parliament paving the way for the establishment of the Botswana Stock Exchange (BSE) where trading opened in November 1995. In March 1998, Ernst and Young took the full administration of the BSE. With effect from July 2001, a full time Chief Executive Officer was appointed with the aim of making the BSE completely independent. In April 2003, the BSE discontinued the secretarial role of Ernst and Young Botswana to become a fully independent entity.

Historically, the exchange was owned by its members (stockbrokers), through ownership of Proprietary Rights, and the Government of Botswana through the provision of subventions. Government and brokers have played critical roles of developing various facets of the capital markets. The BSE’s demutualization process commenced on the 1st of December 2015 and was completed with the conversion, on the 2nd of August 2018, from a member owned, not-for-profit, entity to a for-profit public company limited by shares under the Companies Act. The BSE is owned by the Government of the Republic of Botswana, the four stock brokerage firms and the members of staff of the BSE.

The BSE is an Affiliate of the World Federation of Exchanges (WFE), a Partner Exchange of UN’s Sustainable Stock Exchange (SSE) initiative, a member of the African Securities Exchanges Association (ASEA), a member and Secretariat of the Committee of SADC Stock Exchanges (CoSSE) and a Recognized Stock Exchange under the UK’s Her Majesty Revenue and Customs (HMRC).

At present, instruments that can be listed on the BSE include Equities, Debt and Exchange Traded Funds (ETFs). The BSE is pivotal to Botswana’s financial system, and in particular the capital market, as an avenue on which government, quasi- government and the private sector can raise capital and thus is host to a broad range of companies doing business in Botswana and across the world, including multinational companies. These companies represent a wide range of economic sectors; being Agriculture, Banking, Financial Services, Wholesaling & Retailing, Tourism, Energy, Mining & Materials, Property & Trust, Security and Telecommunications.  As at the end of 2020, there were 32 listed companies comprised of 24 domestic companies, eight foreign companies across the various boards and there was one registered company on Serala OTC Board. Further, there were 43 listed bonds and three ETFs at year end.

The BSE is governed and regulated through various laws and statutory bodies that include the Companies Act, the Securities Act and the Non-Bank Financial Institutions Regulatory Authority. The BSE, as a public limited company, is also governed by its Constitution.

For regulating the affairs of the members (stock brokers), the BSE utilizes the Members Rules which provide, as the main objective thereof, “to operate a Stock Exchange in Botswana with due regard to the public interest to maintain fair and efficient dealing in securities for the protection of investors and regulate the affairs of members.”

In addition, the Exchange has a set of Listings Requirements which provide the pre-listings and post-listings requirements to be observed by the issuers of listed securities. BSE has different Listings Requirements governing the different types of securities e.g. Debt, Equities and Exchange Traded Funds (ETFs). The emphasis is to make sure that issuers disclose adequate information to the public and investors to facilitate informed investment decision making.

Our total Equity Market capitalization is P390.5bn.

AL: There were no IPOs on the BSE in 2020. Are there any planned IPOs for this year?

TT: Yes, there were no IPOs in 2020, however we have done a lot of work engaging prospective issuers on the listing value proposition and we are optimistic that we can get an IPO in 2021.

AL: Are there any new investment products in the works?

TT: Yes, we are working on the introduction of Global Depository Receipts and issuers have already shown interest. We are currently finalizing the GDR rules and they will go through the channels of approval.

AL: What’s your view on Botswana as an investment destination?

TT: Botswana is an ideal destination for investment because of the following reasons:

  1. No Exchange Rate Controls - Botswana does not have restrictions on the inflow and outflow of currency and this makes the country the ideal destination to raise capital and expand to the rest of the world;
  2. Macro-Economic Fundamentals - Botswana has strong macroeconomic fundamentals that positively affect the economy at-large. Monetary policy in Botswana has an increasing focus on the goal of price stability and a framework for forecasting inflation, which has been stable overtime;
  3. Political Environment - Botswana has a stable political environment with a multi-party democratic tradition that dates back to 1966 when the country first held its general elections. The last electoral cycle was held in 2019.
  4. Abundant Capital - Botswana enjoys an abundant capital from pension funds that seeks instruments to invest in. In 2019 total fund assets stood at P92 Billion with 60.5% of that invested offshore and 39.5% invested onshore, while 14.3% is invested in Botswana companies’ primary listed on the BSE. The allocation supports the notion that there a lot of capital chasing too few assets, which reinforces the advantage of raising capital through the BSE.
  5. Efficiency at the BSE - The BSE has a young agile team that is experienced to work with prospective issuers from the time when companies are interested to list. The BSE is always available to make presentations to prospective issuers and observes the strict timelines in engaging with companies following the submission of an application.

AL: Does COVID-19 affect prospects for attracting investors and capital? 

TT: Yes, as shown by the numbers when the pandemic hit in 2020, turnover levels went down. As theory and experience have shown during crisis periods, investors tend to be conservative with their investments and they react by postponing their investment decisions or withdrawing their investments. On the other hand, as companies feel the brunt of the pandemic, the exchange remains a viable option for prospective issuers and current issuers to raise capital from the market.

AL: What kind of feedback have you been getting lately from foreign investors? Is there one particular sector that interests them more than the others?

TT: What we have observed from the start of the pandemic is that foreign investors were selling, however owing to the abundance of capital, local investors were buying. What we have seen throughout the pandemic is enhanced due diligence on the market as investors wanted to take a position regarding the effects and readiness by markets on the COVID-19 pandemic. We are happy that our market has remained resilient and we look forward to recovery when the time comes.

AL: What is or could be a game changer for local stocks? 

TT: The game changer will be to ramp up issuers and investors education; reviewing the regulatory environment to mimic the aspirations of the market; and enhanced technology products that will promote market information and access to buying;

AL: What change would help launch the market into its next growth phase?

TT: Introduction of more retail products to promote liquidity; privatization of state owned enterprises; and elimination of structural impediments that stifle growth;

AL: What do you see as the key challenges for the BSE and other African stock markets in the medium to long term?

TT:  Market harmonization and integration with other African countries i.e. currency; trade facilitation between African countries is still difficult; and competition with other exchanges in other parts of the world.

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