While there is rife speculation on the abrupt drop of giant retailer Choppies shares few days ago, the Chief Executive Officer of Botswana Stock Exchange Limited(BSEL) Thapelo Tsheole has seen the bright side. Choppies is estimated to have lost about P1.7 billion in value following the drop in share price.
When addressing journalists just after BSEL’s 5th Bell Opening Ceremony, Tsheole said there was a lot of interest by investors on Choppies and many were demanding information, a positive thing according to him. Choppies’s fall in share price has also been marred by a lot of speculation and controversy with some alleging that the increase in stock is because of the entity’s allegations of money laundering and fraud. Tsheole said they saw the allegations in media platforms and remain just that, “allegations will remain allegations”. Meanwhile experts believe the fall of Choppies emanated to the entity’s failure to release financial results.
“The interesting thing is that at least now we are seeing a lot of activism among the shareholders which is what we have always encourage. A lot of people sometimes who own shares have a tendency to sit back thinking that the stock exchange is there to do something for them,” said Tsheole.
Tsheole revealed that even though they are practically owners of entities, investors tend to only ask questions when share prices fall, like the current case of Choppies. The BSEL said some even contact him but mistake BSEL’s role by asking the stock exchange “to save Choppies investors” especially when share prices fall drastically like in the case of Choppies. Some even want BSEL to investigate Choppies money laundering, according to Tsheole, the role to investigate such financial crimes rests with serious crime units or relevant authorities that deals with such lawlessness.
“Our role is not to investigate fraud or money laundering but to facilitate that listed entities complies in terms of the listing rules that any material information that could potentially affect the value of the shares is out to the investors,” said Tsheole. Tsheole also explained that BSEL does not control share prices but only offers a platform for trading shares.
Also to provide sufficient information on a listed entity to avoid some people who would use privilege information to their advantage when taking investment decisions, said Tsheole. The BSEL chief also stated that the stock broker’s role is to ensure that everyone has equal opportunities to sufficient, quality or privilege information when taking any decision to trade.
THE DOUBLE EDGED SWORD OF FALL OF PRICE
Tsheole explained to journalists this week that the drop in shares of Choppies should not only be seen in the negative as some would see the positives. He said in the realities of the market or the game of stock exchanges, when prices fall some sees hope and buy shares while the prices are still low while others see gloom and walks out of.
Tsheole also said the speculation of Choppies going down because it is involved in controversies may be a tact used by those who wish to see the retailer’s price go down so that they can take it by hostile takeover. He hinted that probably Choppies has many rivals as it traverses Southern Africa to mark its footprint, giving completion to older retailers who may come with other tactics of taking the local supermarket down.
While he confirmed that they are currently giving Choppies a hard time to release share and that they are also hitting it with charges, Tsheole lauded the giant retailer that “it is a credible company and a big brand and it has expanded into Africa and giving those big South African companies competition.”
Tsheole also said Batswana are in a panic mode maybe because of their familiarity with Choppies as the common local retailer, but fall of shares have happened many times in the history of stock markets. He gave example of giant social network Facebook whose stock fell drastically earlier this month due to involvement in a ‘data theft’ scandal. He said it is the reality of the game that some lose badly in the stock market while some see big opportunities.
THE SHARE PRICE REBOUND
Choppies’ share price fell as much as 85% on Tuesday morning after the Botswana-based food retailer said it would miss a deadline to publish its financial results for the year to June. The group, which is reportedly in a dispute about its shareholding structure in Zimbabwe, said "a number of matters requiring the attention of the board and management, which may impact materially on the results, are being considered.
"The possible reporting impacts of these matters have not yet been finally and fully determined," the company said in a statement, adding it would miss the reporting deadline of September 30 2018. The group said its profit after tax would fall by at least 20%, though it could not yet quantify the decline. Choppies’ shares closed 73% lower on the Botswana Stock Exchange and 72% lower at 46c on the JSE.
The group, which operates across Southern and East Africa, listed on the JSE in May 2015 at R4.90 per share. The Choppies shares were trading again on wednesady and were on a rebound, trading at 65thebe after dropping to 40 thebe on Tuesday.
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”