Botswana Stock Exchange Limited this week released their Market performance report for the six month period from 1st January to 30th June 2019. One of the major highlights from the Thapelo Tsheole led Exchange Market is the low figures recorded on the equity Market front.
The performance analysis in this space indicates that turnover was comparatively low with respect to trading activity and liquidity. As at 30 June 2019, the BSE has recorded a turnover of P866.9 Million from a volume of 257.4 Million shares traded. During the same period in 2018, the BSE had registered a turnover of P1, 084.7 Million and a total volume of 411.6 Million shares traded.
During this period, the top 3 traded companies in terms of value, on a year to-date basis were the currently delisting Safaris outfit Wilderness Holdings at P282.3 Million, Botswana Insurance Holdings Limited (BIHL) at P120.6 Million while local brewer Sechaba Holdings came in at P114.9 Million. In 2018 Half year 1, three companies accounted for 74.1%. For half year 2019 the three top companies combined turnover closed the six month at only 59.7% mirroring an improved contribution to turnover by companies in 2019 relative to 2018.
Of the poorly performed companies during the period under review, Standard Chartered Bank Botswana share price decreased by 50.0% followed by Tlou Energy and SeedCo which declined by 48.7% and 45.5% respectively. FNBB share price gained the most during the period, increasing by 12.2% followed by Letlole and Sechaba share prices which increased by 5.1% and 2.8% respectively. Of the 35 companies listed including the Serala OTC registered BBS Limited on the Exchange, 6 experienced a share price increase, 19 registered a share price decline and share prices of 10 companies ended the period flat.
Trading of local companies listed on Botswana Stock Exchange comparatively improved during the first half of 2019. This is depicted by Domestic Company Index (DCI) figure of 2.9 % depreciation compared to a steeper decline of 5.2% during the same period in 2018. According to Stock Market performance report on the Foreign Company Index (FCI) front figures depreciated by 0.4% on a year to date basis in 2019 compared to a decline of 0.2% over the same period in 2018. As at 30th June 2019, the DCI Total Return Index (DCTRI) had depreciated by 0.2%
When gauging companies on Investor contribution to equity market, figures indicates that during the first half of 2019, local companies contributed 58.7% to total turnover compared to 60.1% in the corresponding period in 2018. Furthermore local individuals contributed 4.7% of total turnover recorded during the period 1 January to 30 June 2019 in comparison to 3.5% in the corresponding period in 2018.
Trading in Exchange Traded Funds (ETF) was relatively low in the first half of 2019 compared to the same period in 2018. The value of units traded decreased in the year to date period to P62.0 Million compared to P186.9 Million in the corresponding period in 2018, whereas the number of units traded decreased from 2.0 Million units in 2018 and 0.58 Million units in 2019. “From a return perspective, the ETFs performed well in comparison to the equities.” Reads the report.
The NewGold, NewPlat and NewFunds ETFs gained 10.6%, 4.5% and 7.7% respectively.The Bond market experienced a slowdown in trading activity compared to the same period in 2018. BSE says the value of bonds traded during the year-to-date period was P523.8 Million compared to P755.7 Million traded during the same period in 2018.
At its first bond auction of 2019 on 1 March 2019, Bank of Botswana (BoB) offered additional tranches of BW013 allotting additional P137 Million, while BW014 was reopened and additional P335.0 Million allotted. The Treasury Bill was allotted an additional P350 Million. At its second auction of the year conducted on 31 May 2019, BW007 ,BW014 , BW015 were reopened and allotted additional P150 Million ,P227 Million ,P100 Million respectively In addition, a Treasury Bill was reopened and issued with an additional P300.0 Million.
During this first 6 months period of 2019 Botswana Stock Exchange registered two bond listings in being the RDCP001 at P47.35 Million, and CGL001 at P128.51 Million. On the back of this Government bonds’ re-openings and new corporate issuances, the market capitalization of listed bonds increased to P15.8 Billion compared to P14.6 Billion as at the same period in 2018.
When gauging against other strategic benchmark market BSE reports that its selected exchanges the Johannesburg Stock Exchange All Share Index and the MSCI Emerging Market Index realized positive returns during the first half of 2019, appreciating by 12.2% and 9.6% respectively. On the other hand, the SEMDEX and the DCI depreciated by 4.1% and 2.9% on a year-to-date basis respectively.
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.
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.
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”