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The Green and Red of BSE market performance

The Domestic Company Index (DCI) depreciated by 11.3% in 2016 to close the year at 9,400.7 points, down from 10,602.3 points at the end of 2015. The decline in the DCI in 2016 reversed most of the increase in the index in 2015 where it had appreciated by 11.6%, reveals the Botswana Stock Exchange (BSE) market performance report released this week.


The report shows that the decline in the DCI in 2016 followed a year in which the domestic economy experienced subdued growth which has consequently negatively affected the operational and financial performance of some of the listed companies. “On a quarterly basis, the DCI declined by 3.8% and 1.2% in Quarter 1 and Quarter 2 of 2016 respectively and the downward momentum continued in Quarter 3 and 4 with depreciation of 2.8% and 4.0% respectively. It can be noted from this trend that the depreciation of 11.3% was a result of the consistent and cumulative decline in the DCI on a quarterly basis.”


The BSE report further shows that all the other indices computed on domestic companies recorded negative growth. The Domestic Companies Free Float Index (DCFFI) depreciated by 16.7%, the Domestic Financial Sector Index (DFSI) lost 9.7% and the Domestic Financial Sector Free Float Index (DFSFFI) declined by 16.1%.

 

However, the Foreign Company Index (FCI) closed the year at 1,585.7 points, a marginal increase of 0.8% in comparison to a depreciation of 0.3% in 2015. The Foreign Resources Sector Index (FRSI), which tracks the performance of the mining and minerals companies, closely reflected the growth pattern followed by the FCI, as it grew by 1.1% in 2016 relative to depreciation of 0.4% in 2015. The mining and minerals sector is the largest component in the FCI, hence its noticeable influence on the FCI.


The report explains that the DCI’s decline of 11.3% in 2016 was attributable to the negative performance of the Retail & Wholesaling and the Banking sectors as well as the Financial Services & Insurance and the Information & Communications Technology (ICT) sectors. In aggregate, the four sectors contributed 15.8 percentage points to the depreciation of the DCI. The sectors that contributed positively to the DCI performance were the Property & Property Trust, Energy, Security and Tourism sectors with an aggregate contribution of 4.5 percentage points.


“Historically, the DCI has been heavily influenced by the Banking sector. However, the market capitalisation of the Banking sector relative to total domestic market capitalisation has declined from 46.9% in 2012 to 30.5% in 2016 primarily due to additional listings in other sectors as Retail & Wholesaling and ICT over the years. This has helped to reduce the reliance of the DCI on the Banking sector performance which is ideal given that the index should to a larger extent be representative of the overall performance of all companies listed on the Exchange.”


Other than the decline in the DCI, the BSE report shows that after registering a record turnover of P3 billion in 2015, the BSE realised a turnover of P2.5 billion in 2016. The average daily turnover for 2016 amounted to P10.2 million relative to P12.2 million per day in 2015. The volume of shares traded in 2016 was 778.0 million in comparison to 803.1 million shares in 2015.


“The decline in trading activity could be partly attributable to the adjustment of the brokerage commission structure in April 2016 that introduced a floor of 0.60% on commission charged by Brokers. The BSE will continue to observe the extent to which the change in brokerage commission will affect trading activity going forward, but is thus far of the view that this is not a prominent factor.”


The Financial Services sector contributed the highest to market liquidity on account of the liquidity ratio followed by the Retail & Wholesaling sector. The two sectors contributed 1.88% and 1.34% during the year under review. In respect of the number of shares traded as a percentage of the number of shares listed, the Financial Services sector led the pack as it traded 12.35% of the shares listed in that sector, followed by the Property & Property Trust sector at 9.13%.


According to the report, Letshego continued to dominate the liquidity on the BSE as its contribution to overall volume of shares traded (domestic companies) increased from 34.4% in 2015 to 42.3% in 2016. Other liquid stocks included New African Properties and Choppies which accounted for 20.8% and 12.7% of volume traded respectively.


In terms of investor contribution to equity turnover, the report reveals that local institutional investors (local companies) dominated trading activity in 2016. Trades by local companies accounted for 57.7% of the total turnover whereas foreign companies contributed 32.8% to total turnover in 2016. Local individuals registered an increase from 2.4% to 3.9% between 2015 and 2016 whereas foreign individuals recorded a decline over the same period to account for 1.2% of the turnover in 2016.


The Exchange Traded Fund (ETF) market was a mixture of good and bad fortunes with some ETFs showing improvement while others declined and one remains stagnated in terms of trading. The NewGold ETF which tracks the performance of gold performed well following a great year for Gold Bullion as its price increased on the London market.

 

The dollar price of the Bullion closed 2016 up by 7.3%, in comparison to the 11.0% dollar price loss in 2015. On the BSE, the price of the NewGold ETF increased by 1.8%. Further, the turnover levels of the ETF on the BSE rose from 265,452 units traded in 2015 to 1,019,934 units traded in 2016. Similarly, the value of the NewGold ETF traded increased from P30 million to P137.5 million during the same period. The ETF traded at prices ranging between P116.00 and P142.20 per unit on the BSE.


The NewPlat ETF which tracks the performance of platinum showed resilience as its performance also improved, registering a turnover of P73.0 million and recorded a volume of 688,628 units. The ETF traded at prices ranging between P97.00 and P112.50 a unit and appreciated by 8.1% in 2016 compared to a depreciation of 12.8% in 2015.


There was a decline in the performance of the CoreShares EWT40 ETF (previously known as BettaBeta) as it traded P588,504 from 15,521 units traded. This was a serious drop compared to the record annual turnover of P427.7 million generated from a total of 10.4 million units in 2015. The reduction in trading activity of the ETF was accompanied by 2.7% depreciation in the price of the ETF on the BSE. The ETF traded at prices ranging between P30.85 and P41.82 per unit.


The NewFunds Inflation-Linked Bond Index (ILBI) ETF which became the fourth ETF to be listed on the BSE in 2015 remains stagnated. The NewFunds ILBI ETF tracks an index that consists of Inflation-Linked Bonds issued by the South African Government. This ETF gives investors an opportunity to hedge exposure against RSA inflation because its returns always adjust with inflation. However, the ETF has not yet traded on the BSE. Notwithstanding, the NewFunds ILBI ETF returned 6.6% on the JSE during 2016 which could have translated into a 15.3% return on the BSE.


The BSE market report also shows that in 2016, the BBI (a Composite Bond Index) appreciated by 6.1% whereas the GovI (a Government Bond Index) and CorpI (a Corporate Bond Index) registered returns of 6.1% and 6.2% respectively, adding that this was mainly on account of adjustments to the bond yields on government bonds partly due to the reduction of the policy rate.

 

The 3 indices have all outperformed the monthly average inflation rate of 2.8% during 2016. However, the report says activity in the bond market experienced a decline in 2016 when compared to 2015. The value of bonds traded declined from P858.0 million in 2015 to P483.8 million in 2016. On the brighter side, there was some trading of corporate bonds in 2016 (P37.2 million). This was an improvement when compared to 2015 where corporate bonds had not traded at all.


After a rough year marked by the decline in share prices of  blue chip stocks, and subsequent decline of the DCI, the BSE’s domestic companies’ market capitalisation stood at P46.6 billion as at the end of 2016, in comparison to P50.2 billion in 2015, a reduction of 7.3%. As a result, the ratio of market capitalisation to GDP decreased to 29.6% in 2016 from 34.3% in 2015.

 

Similarly, the ratio of turnover to market capitalization declined from 6.3% in 2015 to 5.2% in 2016. Furthermore, the report reveals that the MSCI Emerging Markets index (MSCI EM) outperformed the other three indices during 2016. The MSCI EM appreciated by 8.6% in 2016. On the other hand, the DCI lost 11.3% while the Johannesburg Sock Exchange All Share Index (JSE ALSI) and the Mauritius Stock Exchange (SEMDEX) lost 0.1% each.

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Gambling Authority tender dangles as a jittery lottery quandary

30th November 2020
SEFALANA MD: CHANDRA CHAUHAN

Lucrative and highly anticipated national lottery tender that saw several Batswana businessmen partnering to form a gambling consortium to pit against their South African counterparts, culminates into a big power gamble.

WeekendPost has had a chance to watch lottery showcase even before the anticipated and impending national lottery set-up launches. A lot has been a big gamble from the bidding process which is now set for the courts next year January following a marathon legal brawl involving the interest of the gambling fraternity in Botswana and South Africa.

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The uncertainty of getting the next meal in Botswana

30th November 2020
uncertainty of getting the next meal

Households representing more than half of Botswana’s population-mostly residing in rural areas- do not know where their next meal will come from, but neither do they take into consideration the quality and/or quantity of the food they consume.

This is according to the latest Prevalence of Food Insecurity in Botswana report which was done for the 2018/19 period and represents the state of food insecurity data even to this time.
The Prevalence of Food Insecurity was released by Statistics Botswana and it released results with findings that the results show that at national level 50.8 percent of the population in Botswana was affected by moderate to severe food insecurity in 2018/19, while 22.2 percent of the population was affected by severe food insecurity only.

According to the report, this translates to 27 percent of the population being food secure that is to say having adequate access to food in both quality and quantity. According to Statistician General, Burton Mguni, when explaining how the food data was compiled, Food and Agriculture Organization of the United Nations (FAO), is custodian of the “Prevalence of Undernourishment (PoU)” and “Prevalence of moderate or severe food insecurity in the population based on the Food Insecurity Experience Scale (FIES)” SDG indicators, for leading FIES data analysis and the resultant capacity building.

“The FIES measures the extent of food insecurity at the household or individual level. The indicator provides internationally comparable estimates of the proportion of the population facing moderate to severe difficulties in accessing food. The FIES consists of eight brief questions regarding access to adequate food, and the questions are answered directly with a yes/no response. It (FIES) complements the existing food and nutrition security indicators such as Prevalence of Undernourishment.

According to the FIES, with increasing severity, the quantity of food consumed decreases as portion sizes are reduced and meals are skipped. At its most severe level, people are forced to go without eating for a day or more. The scale further reveals that the household’s experience of food insecurity may be characterized by uncertainty and anxiety regarding food access and compromising the quality of the diet and having a less balanced and more monotonous diet,” says Mguni.

The 50.8 percent of the population in Botswana which was affected by moderate to severe food insecurity are characterized as people experiencing moderate food insecurity and face uncertainties about their ability to obtain food. These people have been forced to compromise on the quality and/or quantity of the food they consume according to the report on food insecurity.

Those who experience severe food insecurity, the 22.2 percent of the population, are people who have typically run out of food and, at worst, gone a day (or days) without eating. According to the statistics, rural area population experienced moderate to severe food insecurity at 65 percent while urban villages were at 46.60 percent and cities/town were at 31.70 percent. Those experiencing the most extreme and severe insecurity were at rural areas making 33.10 percent while urban villages and towns were at 11.90 percent and 17.50 respectively.

According to a paper compiled by Sirak Bahta, Francis Wanyoike, Hikuepi Katjiuongua and Davis Marumo and published in December 2017, titled ‘Characterization of food security and consumption patterns among smallholder livestock farmers in Botswana,’ over 70 percent of Botswana’s population reside in rural areas, and majority (70%) relies on traditional/subsistence agriculture for their livelihoods.

The study set out to characterize the food security situation and food consumption patterns among livestock keepers in Botswana. “Despite the policy change, challenges still remain in ensuring that all persons and households have access to food at all times. For example, during an analysis of the impacts of rising international food prices for Botswana, BIDPA reported that food prices tended to be highest in the rural areas already disadvantaged by relatively low levels of income and high rates of unemployment,” said the study.

According to the paper, about 9 percent of households were found to be food insecure and this category of households included 6 percent of households that ranked poorly and 3 percent that were on the borderline according to the World Food Programme’s (WFP) definition of food security.

Media reports state that the World Bank has warned that disruption to production and supply chains could ‘spark a food security crisis’ in Africa, forecasting a fall in farm production of up to 7 percent, if there are restrictions to trade, and a 25 percent decline in food imports.

Food security in Botswana or food production was also attacked by the locust pandemic which swept out this country’s vegetation and plants. The locust is said to have contributed to 25 percent loss in production.

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Solid demand for diamonds towards the ‘gift’ season

30th November 2020
Diamonds

Global lockdown have been a thorn in diamonds having shiny sales, but a lot of optimism shows with the easing of Covid-19 restrictions, the precious stones will be bought with high volumes towards festive season. The diamond market is however warned of the resurgence of Covid-19 in key markets presents ongoing risks amid the presence and optimist about the new Covid-29 vaccines.

The latest findings published as De Beers Group’s latest Diamond Insight ‘Flash’ Report, which looks at the impact of the pandemic on relationships and engagements, has revealed that in the US that more couples than ever are buying diamond engagement rings. Bridal sales is mostly the primary source of diamond jewellery demand in recent months, De Beers said.

According to De Beers, interviews with independent jewellers around the US revealed that the rate of couples getting engaged has increased compared with the period when Covid-19 first had an impact in the US in the spring.

“In addition, despite challenging economic times, consumers were spending more than ever on diamond engagement rings – often upgrading in colour, cut and clarity, rather than size. Several jewellers speculated that with consumers spending less on elaborate weddings and/or honeymoons in the current environment, they had more to spend on choosing the perfect ring,” said De Beers.

According to De Beers, a national survey of 360 US women in serious relationships, undertaken in late October in collaboration with engagement and wedding website, The Knot. This survey is said to have found that the majority of respondents (54%) were thinking more about their engagement ring than the wedding itself (32%) or the honeymoon (15%), supporting jewellers’ hypothesis that engagement ring sales were benefiting from reduced wedding and travel budgets in light of Covid-19 restrictions.

When it came to researching engagement rings, online was by far the predominant channel for gaining ideas/inspiration at 86% of consumers surveyed, with 85% saying they had saved examples of styles they liked, according to De Beers. According to the survey, only a uarter of respondents said they had looked in-store at a physical location for design inspiration.

“For many couples, the pandemic has brought them even closer together, in some instances speeding up the path to engagement after forming a deeper connection while experiencing lockdown and its associated ups and downs as a partnership. Engagement rings are taking on even greater symbolism in this environment, with retailers reporting couples are prepared to invest more than usual, particularly due to budget reductions in other areas,” De Beers CEO Cleaver said.

According to De Beers Group, its Diamond Insight Flash Report series is focused on understanding the US consumer perspective in light of Covid-19 and monitoring how it evolves as the crisis evolves. Also, the company said, it is augmenting its existing research programme with additional consumer, retailer and supply chain touch-basis to understand the pain points and the opportunities for stakeholders across the diamond pipeline.

Demand for diamonds is as hard and resilient as the precious stone itself. De Beers pocketed US$ 450 million in its recently held ninth rough diamond sales cycle, and the company says it is more flexible approach to rough diamond sales during the ninth sales cycle of 2020, with the Sight event extended beyond its normal week-long duration.

“Steady demand for De Beers Group’s rough diamonds continued in the ninth sales cycle of the year, reflecting stable consumer demand for diamond jewellery at the retail level in the US and China, and expectations for reasonable demand to continue throughout the holiday season. However, the resurgence of Covid-19 infections in several consumer markets presents ongoing risks,” said De Beers CEO Bruce Cleaver recently.

High expectations are on diamonds being a sentimental gift for holiday season or as the most fetished gift. However the ninth cycle was lower than the eighth which registered US$ 467 million. For the last year period which corresponds with the current one, De Beers managed to raise US$ 400.

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