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Bond market has potential to diversify economy

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Minster of Investment, Trade and Industry Vincent Seretse says there is a need to grow the domestic bond market as this will go a long way in diversifying the economy.

Speaking during a Botswana Stock Exchange (BSE) Bond Market Conference in Gaborone, the minister said the local bond market is still in its early stages of development hence there is need to take it to another better level.“As we endeavour to diversify the economy from the dependence on diamonds, our pillar of strength that needs to be nurtured and grown further is that of financial market development,” said Seretse. 

As a percentage of the Gross Domestic Product (GDP), the bond market constitutes only 7.5 percent compared to close to 40 percent constituted by the domestic companies in the BSE.

Botswana bond market’s liquidity is still relatively low. “Out of the 39 listed bonds, six are government bonds, in terms of value, government is the major player in the bond market accounting for P7.3 billion out of the P11.0 billion bond market capitalisation,” pointed out Seretse.  He said on the other side of the financial markets, the borrowings or loans and advances from the banking system accounted for a third (33%) of the country’s GDP as at the end of 2015.

Minister Seretse said Botswana has worked her way over the years to gain international recognition from all corners of the globe. “In the process, we have made strides in improving our economic relations and our economic competitiveness, allowing ourselves an opportunity to learn from our counterparts and they benchmark from us,” said Seretse at the conference attended by delegates from South Africa, Swaziland, Kenya among others.

He added that the prudent macroeconomic management of Botswana financial resources can be attributed to the overall impressive scores in the global competitiveness index report which ranked Botswana number 64 out of 140 countries for the year 2015/16.Seretse said despite the upset caused by the global 2008 recession to 2010, Botswana was amongst a few developing economies that recovered relatively faster than other economies from the global economic scourge.

He stated that the government has made significant infrastructure investment in the capital market. Seretse said systems such the Central Securities Depository and the Automated Trading Systems should be optimised by all stakeholders to promote efficiency in the capital market.“I encourage the spirit of collective effort to be sustained and hope it to bear fruits for the interest of the country,” he said at the conference held under the theme, ‘The bond market – a pillar of the economy.’

For his part, BSE Chief Executive, Thapelo Tsheole said worldwide, bond markets are bigger than the equity markets and the cornerstone of every economy.“Whilst the domestic bond market has played a very crucial role of supporting domestic economic growth in various ways, it hasn’t developed at a rate that we have seen in the domestic equity market,” said Tsheole.He said it is this background that continues to compel BSE to develop strategies to unlock the potential and value within the bond market.

The BSE organised the conference in conjunction with the Botswana Bond Market Association, African Development Bank, Stanbic Bank, Bifm, Afena Capital, Investec Asset Management, Allan Gray and Basis Points Capital (BPS).
The Botswana Guardian was the media partner at the business event.

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Gov’t swiftly acts on BMC

Koobonye Ramokopelwa

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Government has moved swiftly to place Botswana Meat Commission under the care of a management firm; the move is meant to put the Commission into shape both operationally and financially.

This was disclosed by Finance and Economic Development Minister, Dr Thapelo Matsheka, further stating the BMC is technically insolvent despite having received nearly P1billion as a bailout in recent times. The new management company will run BMC, which is based in Lobatse starting on the 2020/2021 financial year.

The finance minister made it crystal clear that, the move to appoint a caretaker firm for BMC was made to protect the interests of all stakeholders, including farmers. According to Matsheka, the Minister of Agriculture Development and Food Security, Dr Edwin Dikoloti will provide more details on the BMC changes in due course during his committee of supply speech. Government is also proceeding with the conversion of BMC to a company under the Companies Act following the approval of BMC Transition Bill and subsequent repeal of the old Act.

The repealing of the BMC Act has since eliminated the monopoly of the Commission when it comes to beef and cattle export. The repeal has also enabled government to establish a beef regulator which will be responsible for regulating the beef and the cattle sector. “Another aspect of the transition is the ultimate privatization of BMC.

The objective of the privatization of BMC is, among others, to engage the private sector in the ownership and management of the BMC to achieve operational efficiency and profitability, as well as reduce Government’s future financial commitments in the entity. This would be an important process in the transformation of the beef and cattle sector,” noted Matsheka. BMC which is 100 percent owned by government has been operating with losses for many years due to internal and external challenges such as poor supply and Foot and Mouth Disease(FMD).

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BSE invite companies for CSD project

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Botswana Stock Exchange (BSE) has intentions to implement a new Central Securities Depository (CSD) system by the second quarter of next year.

Authorities at the bourse have already put out a call for companies to perform a post migration data verification and quality assessment from the current depository system to a new depository system set to go live in the first half of 2020.“As part of the project, the BSE is to migrate master data and reference data from the current system to the new CSD system,” said BSE in a statement released this week.

According to BSE, the project will include comprehension of the BSE Data Migration Strategy and Plan and data mapping design and rules, review of the data migration ETL processes, data quality verification completeness, accuracy, consistency, definition and scope of data to migrate. In addition, BSE said it will migrate only active or open transactions in the current system to the new system. The scope of open transactions includes active or running corporate actions, active investor accounts, investor account balances above zero, active participants, active issuers and active instruments.

Meanwhile, BSE Chief Executive Officer, Thapelo Tsheole is on record citing that the new CSD system comes with functionalities such as securities borrowing and lending (SBL), management of the settlement guarantee fund, initial public offering (IPO) processing, e-voting for listed entities, repo management and online investor access.

Commenced in the first quarter of 2019, the project is also an integral element of the ongoing single CSD project pioneered by the Ministry of Finance and Economic Development, Non-Bank Financial Institutions Regulatory Authority and BSE.

The system is also expected to help increase the CSD system ratings by Thomas Murray, an assessment of which will be conducted once the system has been commissioned in early 2020.

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