Photograph — Agri-Business Zambia

Botswana Stock Exchange Limited (BSEL) is looking to increase its equity and bond listings through a comprehensive plan, which also involves spreading its product offerings into special vehicles such as Global Depository Receipts (GDR).

The 20-year-old market – Africa’s third-largest by capitalization – has 34 listed entities and 49 bonds with most of the existing companies listed across various platforms including venture capital and a Small and Medium Enterprises (SMEs) offering. The objective is to grow its listed companies to 45 and its bonds to at least 50, by 2021.

To achieve its goals, the bourse will be carrying out a publicity and financial literacy campaign targeted at potential listees, pension funds, and private companies holding capital. Ordinary members of the public, most of whom shy away from participating in the local market, will also be reached.

More so, the awareness campaign is backed by world-leading infrastructure that will support the programmes offered. This includes an automated trading system installed by the London Stock Exchange (LSE) and a state-of-the-art Central Securities Depository.

While this infrastructural capacity amongst other factors would go a long way in attracting more listings from the government and the private sector, BSEL Chief Executive, Thapelo Tsheole, pointed out that should the market remain shallow, the biggest challenge would be the “under-utilisation of this capacity as a result of poor uptake of instruments and services by the investing community.”

“My plea is that we all pull our weight from our various points towards the evolution and sufficient development of this market,” Tsheole wrote in the stock exchange’s annual report for 2018.

Together with the issue of lack of depth and poor uptake of services by the investing community, there has been an extended fall of yields on the BSEL, which poses as a threat to the bourse’s expansion plan. For instance, the flagship Domestic Companies Index (DCI), which hosts 24 companies representing the best of local sectors, has seen its market capitalization steeply depreciate in the past few years.

Data made available by the East African shows that the DCI’s total capitalization in the past five years peaked in 2015 at $4.7 billion but by 2018 had dropped to 3.9 billion. Analysts attribute the plunge to difficult trading conditions for listed entities. 

Also, reduced earnings by most listed companies saw the DCI shed 11.4 percent in value last year, compared with a 5.8 percent loss in 2017. Although most of the loss in 2018 was on the back of a 76 percent drop in the Choppies’ share price on September 28, after the regional grocer failed to submit its financial results for the year ended June 30, 2018.

For this year, recent statistics show a loss of 3.34 percent for the DCI for the first half of 2019 to June 30, dashing any hopes that the five-year downward trend would end soon. As noted by analysts from Stockbrokers Botswana in a research update, most stocks lost ground between April and June 2019, with the biggest losers shedding almost half of their value.

It was further explained that liquidity remains tight and the lifeline of trading volumes and turnover has been bulky transactions occurring every so often such as delistings. Market capitalization came down to $3.8 billion, down from $3.9 billion in December 2018, driven by the decline in the share price of 19 companies. 

Despite the gloomy picture, however, the Botswana stock exchange is taking comfort in the fact that dividend pay-outs have remained attractive amid share price drops. “To the delight of the investors, companies maintained attractive dividend payouts with a dividend yield of 5.5 percent in 2018 versus 5.1 percent in 2017,” Tsheole noted.

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