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BSE 2019 Q3 report card

Botswana Stock Exchange Limited (BSEL) this week released their 2019 Quarter 3 market performance report. Gauging and analyzing  stock market outcomes for the three quarters  ended 30 September 2019 shows that the  performance of the Domestic Company Index (DCI) improved significantly in the period 1 January to 30 September 2019 compared to the same period in 2018, with a depreciation of 5.0% compared to a depreciation of 11.5% during the same period in 2018.

The Foreign Company Index (FCI) has depreciated by 0.4% and 0.2% on a year -to-date basis in 2019 and 2018, respectively. As at 30 September 2019, the Domestic Companies Total Return (DCTRI) had depreciated by 1.0% compared to a 7.2% decline over the same period in 2018. Equity trading activity closed   the period under review at P1.2069 Billion from 387.5 Million shares traded. During the same period in 2018, the BSE had registered a turnover of P1.2313 Billion and a total volume of 470.7 Million shares traded.

According to the share price performance analysis for the period under review on listed companies, Letlole La Rona share price gained the most during the period, increasing by 21% followed by FNB and Cresta share prices which increased by 12.7% and 10% respectively. On the downside, StanChart share price decreased by 56.1% followed by Tlou Energy and Letshego which declined by 48.7% and 47.5% respectively. Of the 33 companies listed on the Exchange, 11 experienced a share price increase, 14 registered a share price decline and share prices of 8 companies ended the period flat.

During the year to September 2019, local companies contributed 52.3% to total turnover compared to 57.1% in the corresponding period in 2018. Further, local individuals contributed 4.2% of total turnover recorded during the period 1 January to 30 September 2019 compared to 4.4% in the corresponding period in 2018. A significant increase was registered with respect to foreign institutional investors whose trading activity in the period under review increased from 35.5% to 42.4%.

The value of ETF units decreased during the period under review to P180.1 Million compared to P216.2 Million in the corresponding period in 2018, and the number of units traded similarly reduced to 1.3 Million units in 2019 compared to 2.4 Million units in 2018. Notwithstanding, ETFs have performed very well in terms of the returns in 2019 relative to 2018, and well ahead of the equity market.

Gauging the BSE with other stock markets indicates that the Botswana Stock Exchange’s Domestic Companies’ Index (DCI) and the Stock Exchange of Mauritius’s SEMDEX ended the period under review down 5.0% and 4.2% respectively. During this period, the Johannesburg Stock Exchange’s All Share Index (ALSI) and the MSCI Emerging Markets Index were each up 4.0%.

On the Bond market performance fronts trading went down slightly compared to the same period in 2018. The value of bonds traded during the year-to-date period was P1, 427.7 Million compared to P1, 608.6 Million traded during the same period in 2018. Bank of Botswana (BoB) held three (3) bond auctions so far in 2019. At its first bond auction on 1 March, BoB issued additional tranches BW013 closing auction at P137 Million allotted, BW014, closing the auction at P335.0 Million allotted and a Treasury bill which closed the auction at P350 Million allotted.

At its second auction of the year conducted on 31 May, BW007  was opened and P150 Million allotted,  BW014 was also opened with P227 Million allotted, BW015 with P100 Million allotted. In addition, a Treasury bill was reopened and P300.0 Million allotted.  The third auction conducted on 30 August saw the re-opening of the BW013 with P200 Million allotted, BW014 was reopened and P232 Million was allotted, BW015 was reopened   and P250 Million allotted, and a Treasury bill with allotment of P500 Million allotted.

The BSE has listed two (2) corporate bonds so far in 2019, being the RDCP001 at P47.35 Million and CGL001 at P128.51 Million. The market capitalization of listed bonds increased to P16.5 Billion compared to P13.8 Billon as at the same period in 2018 on the back of Government bond re-openings and the new corporate issuances

At the beginning of 2019 the BSEL implemented the new Equity Listings Requirements aimed at providing a comprehensive process of how companies can list their equity securities on the Exchange. The new requirements include improved disclosure requirements across the different boards; provide rules for the listing of investment entities, and Special Acquisition Companies (SACs), among others.

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Botswana on high red alert as AML joins Covid-19 to plague mankind

21st September 2020

This century is always looking at improving new super high speed technology to make life easier. On the other hand, beckoning as an emerging fierce reversal force to equally match or dominate this life enhancing super new tech, comes swift human adversaries which seem to have come to make living on earth even more difficult.

The recent discovery of a pandemic, Covid-19, which moves at a pace of unimaginable and unpredictable proportions; locking people inside homes and barring human interactions with its dreaded death threat, is currently being felt.

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Finance Committee cautions Gov’t against imprudent raising of debt levels

21st September 2020
Finance Committe Chairman: Thapelo Letsholo

Member of Parliament for Kanye North, Thapelo Letsholo has cautioned Government against excessive borrowing and poorly managed debt levels.

He was speaking in  Parliament on Tuesday delivering  Parliament’s Finance Committee report after assessing a  motion that sought to raise Government Bond program ceiling to P30 billion, a big jump from the initial P15 Billion.

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Gov’t Investment Account drying up fast!  

21st September 2020
Dr Matsheka

Government Investment Account (GIA) which forms part of the Pula fund has been significantly drawn down to finance Botswana’s budget deficits since 2008/09 Global financial crises.

The 2009 global economic recession triggered the collapse of financial markets in the United States, sending waves of shock across world economies, eroding business sentiment, and causing financiers of trade to excise heightened caution and hold onto their cash.

The ripple effects of this economic catastrophe were mostly felt by low to middle income resource based economies, amplifying their vulnerability to external shocks. The diamond industry which forms the gist of Botswana’s economic make up collapsed to zero trade levels across the entire value chain.

The Upstream, where Botswana gathers much of its diamond revenue was adversely impacted by muted demand in the Midstream. The situation was exacerbated by zero appetite of polished goods by jewelry manufacturers and retail outlets due to lowered tail end consumer demand.

This resulted in sharp decline of Government revenue, ballooned budget deficits and suspension of some developmental projects. To finance the deficit and some prioritized national development projects, government had to dip into cash balances, foreign reserves and borrow both externally and locally.

Much of drawing was from Government Investment Account as opposed to drawing from foreign reserve component of the Pula Fund; the latter was spared as a fiscal buffer for the worst rainy days.

Consequently this resulted in significant decline in funds held in the Government Investment Account (GIA). The account serves as Government’s main savings depository and fund for national policy objectives.

However as the world emerged from the 2009 recession government revenue graph picked up to pre recession levels before going down again around 2016/17 owing to challenges in the diamond industry.

Due to a number of budget surpluses from 2012/13 financial year the Government Investment Account started expanding back to P30 billion levels before a series of budget deficits in the National Development Plan 11 pushed it back to decline a decline wave.

When the National Development Plan 11 commenced three (3) financial years ago, government announced that the first half of the NDP would run at budget deficits.

This  as explained by Minister of Finance in 2017 would be occasioned by decline in diamond revenue mainly due to government forfeiting some of its dividend from Debswana to fund mine expansion projects.

Cumulatively since 2017/18 to 2019/20 financial year the budget deficit totaled to over P16 billion, of which was financed by both external and domestic borrowing and drawing down from government cash balances. Drawing down from government cash balances meant significant withdrawals from the Government Investment Account.

The Government Investment Account (GIA) was established in accordance with Section 35 of the Bank of Botswana Act Cap. 55:01. The Account represents Government’s share of the Botswana‘s foreign exchange reserves, its investment and management strategies are aligned to the Bank of Botswana’s foreign exchange reserves management and investment guidelines.

Government Investment Account, comprises of Pula denominated deposits at the Bank of Botswana and held in the Pula Fund, which is the long-term investment tranche of the foreign exchange reserves.

In June 2017 while answering a question from Bogolo Kenewendo, the then Minister of Finance & Economic Development Kenneth Mathambo told parliament that as of June 30, 2017, the total assets in the Pula Fund was P56.818 billion, of which the balance in the GIA was P30.832 billion.

Kenewendo was still a back bench specially elected Member of Parliament before ascending to cabinet post in 2018. Last week Minister of Finance & Economic Development, Dr Thapelo Matsheka, when presenting a motion to raise government local borrowing ceiling from P15 billion to P30 Billion told parliament that as of December 2019 Government Investment Account amounted to P18.3 billion.

Dr Matsheka further told parliament that prior to financial crisis of 2008/9 the account amounted to P30.5 billion (41 % of GDP) in December of 2008 while as at December 2019 it stood at P18.3 billion (only 9 % of GDP) mirroring a total decline by P11 billion in the entire 11 years.

Back in 2017 Parliament was also told that the Government Investment Account may be drawn-down or added to, in line with actuations in the Government’s expenditure and revenue outturns. “This is intended to provide the Government with appropriate funds to execute its functions and responsibilities effectively and efficiently” said Mathambo, then Minister of Finance.

Acknowledging the need to draw down from GIA no more, current Minister of Finance   Dr Matsheka said “It is under this background that it would be advisable to avoid excessive draw down from this account to preserve it as a financial buffer”

He further cautioned “The danger with substantially reduced financial buffers is that when an economic shock occurs or a disaster descends upon us and adversely affects our economy it becomes very difficult for the country to manage such a shock”

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