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SRI creates better returns for potential investors – Tsheole

Socially Responsible Investing (SRI) is the incorporation of environmental, social and governance ESG issues into investment decisions and Investment ownership.

It has been regarded as responsible investing based on creating value, mitigating ESG risks and taking of ESG opportunities. SRI generates a measurable, beneficial social and environmental impact alongside a financial return. This was revealed by Botswana Stock Exchange Limited (BSE) Chief Executive Officer, Thapelo Tsheole at the Botswana Resource Sector Conference in Gaborone recently.

He observed that the Schroders Global Investor Study of 2017 indicated that 22 thousand investors in 30 countries will at least have €10 000 in investable assets. The standout results were 78 percent of investors felt sustainable investing was more important than five years ago, 64 percent have increased their sustainable investments over the last 5 years while 75 percent of millennials have increased their sustainable investment over the past 5 years.

During his presentation at the conference, Tsheole said the Sustainable Stock Exchange initiative is a leading proponent of the ESG in global financial markets. He noted that it is a peer to peer learning platform for exploring how exchange in collaboration with investors, regulators and companies can enhance corporate transparency and ultimately performance on ESG issues and encourage sustainable investment.

Tsheole also indicated that the SSE initiative being a driver of the ESG investing into African Frontiers has 14 partners exchange in Africa, where Botswana Stock Exchange joined in 2016. “It is a historic moment for the BSE as we join the sustainable stock exchange initiatives of the United Nations. This comes at an opportune time when the BSE is positioning itself as an international player within global markets"

“Promoting sustainability through robust environmental, social and governance reporting in the capital markets landscape is fundamental to our strategic positioning as we look to attract ESG oriented investment mandates from across the globe. The BSE is pleased to be part of this global network. It is indeed a great learning and networking experience for us," recalled Tsheole.

He highlighted that BSE fulfils its commitment to publish guidance on ESG reporting for its listed companies on reporting environmental, social and governance information to investors. The BSE made the commitment as part of the SSG's campaign to close the gap of ESG disclosure guidance, and they are the 28th exchange to publish such guidance since the beginning of the campaign, and in total there are now over 42 stock exchanges with guidance on ESG reporting, with a further seven having made commitment to do so in future.

Whilst ESG reporting remains voluntary for BSE issues, the availability of guidance will make transparency on ESG issues easier to achieve and should increase the influence of companies choosing to disclose such information. Tsheole further said: "We see this guidance as an opportunity for issues to meet the ever-increasing demands by investors and regulatory bodies in relation to the consistency and depth of corporate reporting.

This tool also enables issues to help investors understand the drivers of, and the risk to, sustainable value creation. On an ongoing, we will monitor the reporting of issues in relation to ESG, so that we develop capacity where necessary and most importantly, develop instruments that publicise and incentivise those that consistently promote ESG reporting as well as undertake sustainability initiatives.

Global sustainable investment reached 22.9 Dollars Trillion US Dollars in 2016, compared with 18.3 Trillion US Dollars, a 25 percent increase. Africa constitutes a small portion of global SRI at 0.02 percent (surveyed countries of South Africa, Nigeria and Kenya). South Africa earned 678 Billion US Dollars, Nigeria 30 Billion US Dollars while Kenya 13 Billion US Dollars.

Proportion globally placed Europe at 52.6 percent, United States of America at 38 percent, Canada 4.7 percent and Australia at 2.3 percent. Tsheole concluded that BSE promotes sustainability among listed companies, adding that their own role is to promulgate rules, enforce compliance, disclosure and reporting. He noted that they also harmonise regional listings requirements.

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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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