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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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Mining production rebounds to pre-Covid-19 levels

12th January 2022
Mining production

The local mining industry is on the rise again, emerging out of the COVID-19 pandemic induced headwinds. 

In 2020 mining operations had to curtail their production in response to plummeting demand across commodity markets. Companies also had to reduce their workforce to comply with COVID-19 protocols such as social distancing in an effort to curb the spread of the contagious plague.

This resulted in low production levels across the sector, however operations are significantly jumping back to pre-COVID-19 output levels albeit another variant that has now surfaced, posing uncertainty for the year 2022.

Just before close of business for the year 2021, Statistics Botswana released the Index of Mining Production, a quarterly measure of output across Botswana’s mining operations and extractive industries.

The Index of Mining Production stood at 95.5 during the third quarter of 2021, showing a year-on-year growth of 31.8 percent, from 72.5 registered during the third quarter of 2020.

The quarter-on-quarter analysis shows an increase of 11.6 percent from the index of 85.6 during the second quarter of 2021 to 95.5 observed during the period under review.

The main contributor to the increase in mining production came from the Diamonds, which contributed 31.2 percentage points.

Gold was the only negative contributor to mining production, at negative 0.4 of a percentage point.

Diamond production increased by 32.2 percent (1.584 million carats) from 4.916 million carats during the third quarter of 2020 to 6.5 million carats during the same quarter of the current year.

The increase was a result of planned strategy to align production with stronger trading conditions.

Similarly, the quarter-on-quarter analysis shows that production registered an increase of 11.6 percent (673 000 carats) during the third quarter of 2021 compared to the 5.8 million thousand carats during the second quarter of 2021.

Botswana’s flagship diamond producer is De Beers – Government jointly owned Debswana, by far the country’ s mining jewel and global leader in rough diamond production.

The other diamond producing operation is Lucara’s 100 % owned Karowe Mine, a relatively small operation but known around the globe for its spectacular diamond recoveries, the likes of which the world has never seen before.

Gold production decreased by 26.9 percent (65 kilograms) during the third quarter of 2021, from 241kilograms during the same quarter of the previous year to 176 kilograms currently

The quarter-on- quarter analysis reflects a decrease of 5.5 percent (10 kilograms) to 176 kilograms during the third quarter of 2021, compared to 186 kilograms in the preceding quarter.

Botswana’s sole gold producer is Galane Gold’s Mupane Mine in North East Botswana, enclaved around the historic gold fields of Francistown.

The decrease in production according to Statistics Botswana was a result of the deteriorating lifespan of the mine. Mupane Gold Mine is currently on a rough run with imminent workers strike over unsatisfactory payments. The impending protests have been heavily endorsed by Botswana Mine Workers Union.

In Sua Pan, the sodium crystals have risen to glory, making Sowa Town great again, Soda Ash production rose by 81.7 percent (29, 312 tonnes) from 35, 883 tonnes during the third quarter of 2020 to 65, 195 tonnes in the same quarter of the current year.

The quarter-on-quarter analysis shows that production went up by 12.5 percent (7, 233 tonnes) during the period under review, from 57, 962 tonnes during the previous quarter.

The increase in production is attributable to the effectiveness of the plant following refurbishment which occurred in the third quarter of 2020.

Salt production went up by 86.1 percent (78, 566 tonnes) to 169, 826 tonnes during the third quarter of 2021, from 91, 261 tonnes during the same quarter of the previous year.

Similarly, the quarter-on-quarter analysis shows that salt production registered an increase of 66.9 percent (68, 050 tonnes) compared to 101, 776 tonnes during the second quarter of 2021.

Botswana’s industrial scale Salt an Soda  Soda Ash producer is Botswana Ash (Botash), a 50-50 partnership between Botswana Government  and South African Chlor Alkali Holdings (CAH) Group.

Coal production increased by 1.0 percent (5, 434 tonnes), from 543, 793 tonnes during the third quarter of 2020, to 549, 227 tonnes in the current quarter.

The slight increase came as a result of the efforts made to meet both domestic and international high demand, particularly that new markets have been identified.

The quarter-on-quarter comparison shows that coal production went up by 13.1 percent (63, 585 tonnes) compared to 485, 642 tonnes during the second quarter of the current year.

Inthe coal space the only operating mines are the privately developed Minergy’s Masama located near Media Village and the wholly Gorvenment owned Morupule Coal Mine.

Copper-Nickel-Cobalt Matte recorded zero production during the period under review. The affected mines are still under provisional liquidation.

Copper in Concentrates and Silver though there has been exportation of Copper by the newly launched Khoemacau Copper Mine since July 2021, the mine has been engaged in preparatory mining activities in readiness for full operations intended for the year 2022.

The preparatory mining operations yielded rewarding outcomes as copper residues realized have been exported since July 2021.

The period between preparatory and full operations is intended to allow the production to stabilize before reporting production output figures.

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Exports plummeted in October 2021

12th January 2022
diamonds

Botswana exports took a knock in October 2021 registering only P4,960.7 million, a 22.1 percent decline from the revised September 2021 value of P6,365.1 million, latest International Merchandise Trade Statistics  have revealed. 

According to this monthly data, released by Statistics Botswana late December 2021 the decline is attributed largely to the reduction in the exportation of Diamonds by 22.6 percent (P1, 264.8 million) from the revised September 2021 value of P5, 608.4 million to P4, 343.6 million.

Though it registered a decline in export figures , the Diamonds group still remained Botswana ‘s biggest exported commodity accounted for 87.6 percent (P4, 343.6 million) of total exports, followed by Copper and Machinery & Electrical Equipment with 3.1 percent (P152.2 million) and 2.6 percent (P131.3 million) respectively.

During the month Asia was the main destination for Botswana exports, having received 65.5 percent (P3, 249.0 million) of total exports. These exports were mainly destined to the UAE and India, having received 28.1 percent (P1, 395.1 million) and 20.4 percent (P1, 011.8 million) of total exports, respectively. Only Diamonds and Copper were exported to the regional block during the October.

Exports destined to the EU amounted to P1, 066.6 million, accounting for 21.5 percent of total exports during the month under review. Belgium received almost all of the exports destined to the regional union, acquiring 21.4 percent (P1, 062.0 million) of total exports during the reporting period. The Diamonds group was the main commodity group exported to the EU.

The SACU region received exports valued at P423.6 million, representing 8.5 percent of total exports. Machinery & Electrical Equipment and Live Cattle accounted for 28.0 percent (P118.6 million) and 14.1 percent (P59.7 million) of total exports to the customs union.

South Africa received 7.8 percent (P386.7 million) of total exports during the month under review more goods entered Botswana in October than the previous month September.

On the other side the value of imports for the month of October clocked P8, 801.5 million, mirroring an increase of 30.5 percent (P2, 056.1 million) over the September 2021 revised figure of P6, 745.4 million.

The increase was mainly attributed to a more than 100 percent (P1, 755.9 million) rise in the importation of Diamonds from the revised September 2021 figure of P1, 616.2 million to P3, 372.0 during the current period.

Diamonds contributed 38.3 percent (P3, 372.0 million) to total imports. Fuel; Food, Beverages & Tobacco and Machinery & Electrical Equipment followed with contributions of 12.3 percent (P1, 086.6 million), 11.7 percent (P1,034.1 million and 10.0 percent (P882.7 million) respectively. Chemicals & Rubber Products contributed 9.7 percent (P856.1 million).

During the month SACU region contributed 61.4 percent (P5, 405.3 million) to Botswana ‘s total imports. The top most imported commodity groups from the customs union were Fuel; Food, Beverages & Tobacco and Diamonds, with contributions of 19.9 percent (P1, 075.1 million), 17.9 percent (P965.0 million) and 16.3 percent (P882.5 million) to imports from the region, respectively.

South Africa contributed 58.8 percent (P5, 176.0 million) to total imports during the reporting period. Fuel, Food, Beverages & Tobacco and Diamonds made contributions of 18.4 percent (P952.3 million), 18.3 percent (P949.4 million), and 16.0 percent (P826.7 million) respectively to imports from South Africa.

Botswana received imports worth P1, 794.2 million from the EU, accounting for 20.4 percent of total imports during October 2021.

The major commodity group imported from the EU was Diamonds, at 89.8 percent (P1, 611.0 million) of all imports from the union. Belgium was the major source of imports from the EU, with a contribution of 18.7 percent (P1, 643.1 million) of total imports during the month of October.

During the month Imports from Asia were valued at P989.5 million, accounting for 11.2 percent of total imports.

The major commodity groups imported from the regional block were Diamonds and Machinery & Electrical Equipment with contributions of 51.9 percent (P513.8 million) and 13.4 percent (P132.6 million) of total imports from Asia.

China and UAE supplied 2.5 percent (P221.3 million) and 2.3 percent (P202.0 million) of total imports during the period, respectively.

Canada supplied imports worth P364.0 million, representing 4.1 percent of Botswana’s total imports during the current period. Imports from Canada were mainly Diamonds, at 99.6 (P362.3 million) of imports from that country.

The rise in imports and decline in exports resulted in a trade deficit of P3, 840.8 million for the month of October.

During the month exports transported by Air were worth P4, 380.1 million, accounting for 88.3 percent of total exports, while those leaving the country by Road were valued at P567.5 million (11.4 percent) while  imports representing 51.7 percent (P4, 554.0 million) were transported into the country by Road.

Transportation of imports by Rail and Air accounted for 24.4 percent (P2, 148.0 million) and 23.8 percent (P2, 098.4 million) respectively.

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Debswana receives African award from Absa for its CEE policy

12th January 2022
Absa

Debswana Diamond Company, Botswana’s flagship mining business recently received an award from Absa Bank Group in recognition of its commitment to economic empowerment across the supply chain.

The 4th Annual Absa Business Day Supplier Development Awards were held in Johannesburg, South Africa on the 18th November 2021.

The awards celebrate companies that are working towards a better African continent through innovative and impactful supplier development initiatives.

The selection process acknowledges and recognizes corporates who go beyond the scorecard to open access, empower SMEs, foster learning, build a community of best practice and encourage a collaborative spirit within their industries and within the communities in which they operate.

Explaining how Debswana scooped the award Absa Bank Botswana Managing Director Keabetswe Pheko-Moshagane said: “At Absa Bank Botswana, we were excited that for the first time since inception, the 2021 awards were extended to include nominations from Sub-Saharan Africa.”

She explained that the judges special recognition awards for Sub Saharan Africa corporates (excluding South Africa) were made under four categories being: commitment to Economic Empowerment across the Supply Chain, commitment to women inclusion in the supply chain, Commitment to localization of the supply chain and lastly commitment to a pioneering supplier development.

“We immediately thought of the transformative and inspiring work that Debswana is doing locally and what the company continues to achieve through its Citizen Economic Empowerment Program,” she said.

Pheko-Moshagane explained that in recognition of this commitment and outstanding leadership Absa nominated Debswana Diamond Company into the competition under the category: “commitment to economic empowerment across the supply chain”, for which the company was selected as the winner.

The Absa Bank Botswana MD hailed Debswana Citizen Economic Empowerment Program as a true example of how the private sector can contribute to rebuilding the economy through and post the Covid -19 pandemic.

“Your commitment to citizen economic empowerment resonates with us at Absa bank, because we are also committed to and passionate about growing Small and Medium businesses as they represent a vital part of our economy,” she said.

In 2017 Absa, launched the Enterprise and Supply Chain Development (ESD) in the local market as a response to address some challenges faced by the SMEs. The main objective of ESD is to unlock lending to SMEs in corporate value chains.

The introduction of the ESD program has streamlined some of the stringent financing requirements like the provision of financial statements, security, historical performance and weak credit ratings.

The relaxation of the financing requirements has therefore enabled the SMEs to execute on the provision of goods or services for the clients and positively impacted their growth.

ESD uses non-traditional bank lending solutions to provide financing to SME’s. Through this program Absa offers 100% finance to Enterprises in corporate supply chains.

Moshagane said this approach has allowed Absa to unlock the opportunities within the large corporate as they are now assured that their suppliers and contractors will be able to deliver and in addition releasing the corporate cash flows.

“We continue to explore various partnership agreements with various corporates to see how best we can assist the SMEs in response to government’s call for Citizen Economic Empowerment by propelling the support of the SMMEs” she said.

Speaking to Absa & Debswana partnership Mrs Keabetswe Pheko-Moshagane said  the relationship thus far has seen Debswana extend contracts to the value of BWP1.2 billion to SMEs on a  joint program, and Absa has financed close to half a billion to these SMEs, some of which would not have ordinarily qualified for funding under normal banking circumstances.

“To date no SME on the program has had its banking or contract facility terminated, which speaks to the commitment on both our ends in ensuring the success of these SMEs”

Receiving the award, Debswana Acting Managing Director, Lynette Armstrong explained that Debswana started its Citizen Economic Empowerment journey with ABSA Bank in 2017, borne out of the realisation of access to finance challenges by citizen owned enterprises.

This partnership, initiated with a deliverable to implement a pilot project at Orapa Letlhakane Damtshaa Mines within the crushing and drilling spaces.

The two projects delivered the desired results in project KPI’s with impeccable safety records with Absa providing the required access to finance that enabled the citizen suppliers to acquire machinery for the projects.

In 2019, Debswana set up the Citizen Economic Empowerment Programme office a factor that accelerated the signing of a MoU in 2020 on access to finance between Debswana and ABSA and in that, ABSA has pledged to avail access to finance totalling an unprecedented BWP1billion over a period of 3 years.

To date, ABSA has financed 23 projects since 2020 at a total impact of BWP1.5 billion pula in Contract amount with more than BWP700 million advanced to citizen suppliers.

These funds enabled citizen suppliers to pay salaries on time, procure machinery in various areas such as drilling and crushing and participate in the recent LTE installation at Jwaneng Mine.

Armstrong said in the coming year 2022, CEEP will see Debswana focused on implementing plans aimed at supporting local manufacturing and local repairs and maintenance.

“This is where access to funding is key as the two areas of local manufacturing and local repairs and maintenance have a potential to create meaningful and sustainable employment in the medium to long term to achieve Debswana’s target of 20 000 jobs by 2024”

She noted that Debswana has committed to heightened efforts of connecting the Youth and Women in the Debswana Citizen Economic Empowerment conversation, capacitation series and participation in the economic opportunities to further, totally involve all possible demographics and diversify the creativity of building sustainable communities and Make Life Brilliant for all, a total commitment of our Debswana Strategy 2024.

The Debswana Acting MD said the recognition of Debswana for its commitment to economic empowerment across the supply chain by is an encouragement to the Debswana – ABSA partnership and “gives us hope to further intensify our efforts to create opportunities for our fellow citizens and support Government’s efforts towards achieving prosperity for all in terms of Vision 2036”

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