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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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Pan-African risk advisor Minet Group and Botswana’s Africa Lighthouse Capital acquire Aon Botswana

21st May 2021
Pan-African-risk-advisor-Minet-Group-

Strategic partnership offers inherent benefits of global knowledge, African insights, and local expertise and commitment

Minet Group and Africa Lighthouse Capital today announced that they have received regulatory approval and fulfilled all requirements to acquire Aon’s shareholding in Aon Botswana, and consequently will begin the process to rebrand to Minet Botswana.

Minet Group is a well-known and trusted pan-African risk advisory firm and Aon’s largest Global Network Correspondent and has been rapidly expanding its African footprint since 2017 through the acquisition of operations from global professional services firm Aon in Kenya, Lesotho, Malawi, Mozambique, Namibia, Tanzania, Uganda, and Zambia.   Minet has been delivering world class products and services across Africa for over 70 years.

Africa Lighthouse Capital (ALC) is a leading Botswana citizen-owned private equity firm focused on investing in Botswana companies and propelling them into regional champions, with over BWP 500 million in funds under management.

The new entity will be rebranded to Minet and will inherit deeply rooted respect by its clients for their innovative and locally relevant solutions, responsiveness, and efficient processes. Furthermore, it shall have the benefit of consistency in leadership and staffing, with Barnabas Mavuma, previously Managing Director of Aon Botswana, continuing to lead the business as the MD supported by the local management team.

 “The addition of Minet Botswana to our growing African network affirms our belief in the great opportunities for growth that Africa offers, driven by rising consumer demand, huge investment in infrastructure and quick adoption of new technology,” says Joe Onsando, CEO at Minet Group.

“This transaction significantly adds to the diversity and skills base of our team and will have a positive impact on the range of products and services we provide. Our Correspondent agreement with Aon gives us access to global expertise and data driven insights and uniquely positions us to deliver risk advisory solutions that reduce volatility, thus driving improved performance for our clients. This is a very exciting time to be Minet in Africa.”

“The significantly increased Botswana citizen shareholding effected by this transaction gives rise to an exciting era of local market focus and growth for Minet Botswana,” says Bame Pule, Founder and CEO of Africa Lighthouse Capital.  “We intend to work with Minet Botswana’s local management team to further localise the business in terms of product development, while at the same time investing in local skills development and business development.  We look forward to this exciting journey, which will result in a significantly enhanced service offering for Minet Botswana’s clients.”

Consequently, and similar to the other members of the Minet Group, Minet Botswana becomes an Aon Global Network Correspondent, retaining its access to Aon’s resources, technology, and best practises, combined with the benefit of independent, local agility. This transaction furthermore significantly increases local shareholding, enabling operations to become even nimbler and better positioned to unlock new and existing growth opportunities.

Clients of Minet Botswana will experience continuity of product and service delivery standards in the short term. In the near future, they can expect an enhanced offering that combines agility with technology and product innovation, tailormade for their specific needs.

Together, Minet and ALC bring a sound understanding of local market conditions, strong governance, and an established track record in the region. These qualities, combined with Aon’s global capabilities and expertise, will bring clear benefits for clients.

This transaction vastly increases citizen ownership with shareholders who are going to be active in the business. The transfer of equity interests in Botswana to investors with local and regional expertise, presence and commitment will allow the businesses to move quickly in line with market movements, and to introduce products that are tailored to the local market.

“Minet’s commitment and drive to incessantly adapt to changing market conditions, and to innovate to meet the unique insurance demands of the African continent, while maintaining the high standards customers have come to expect – Onsando concludes – will continue to grow and give Minet a powerful competitive edge within the African market”.

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Africa scores $285 Billion IMF deal

21st May 2021
IMF-Managing-Director-Kristalina-Georgieva

French President Emmanuel Macron received 21 Heads of state and government officials from Africa during the recent summit on the Financing of African Economies that focused on Africa to take full advantage of the tectonic shifts in the global economy and the call for a joint effort for financial and vaccination support for the continent.

President Emmanuel Macron stressed that “Most regions of the world are now launching massive post-pandemic recovery plans, using their huge monetary and fiscal instruments. But most African economies suffer the lack of adequate capacities and such instruments to do the same. We cannot afford leaving the African economies behind.

We, the Leaders participating to the Summit, in the presence of international organizations, share the responsibility to act together and fight the great divergence that is happening between countries and within countries.

This requires collective action to build a very substantial financial package, to provide a much-needed economic stimulus as well as the means to invest for a better future. Our ambition is to address immediate financing needs, to strengthen the capacity of African governments to support a strong and sustainable economic recovery and to reinforce the vibrant African private sector, as a long-term growth driver for Africa.”

For her part, International Monetary Fund (IMF) Managing Director Kristalina Georgieva highlighted that “there is urgency to focus on financing Africa. Last year, the pandemic-caused recession shrank the GDP of the Continent by 1.9 percent – the worst performance on record. This year, we project global growth at 6 percent, but only half that 3.2 percent for Africa.” Adding that Africa needs to grow faster than the world at 7 to 10 percent to meet the aspirations of its youthful populations, and become more prosperous and more secure.

Georgieva revealed that the price tag on the shot is estimated to be “$285 billion through 2025. Of this $135 billion is for low-income countries. This is the bare minimum. To do more – to get African nations back on their previous path of catching up with wealthy countries – will cost roughly twice as much. These are large numbers. They may seem out of reach. But to quote Nelson Mandela: impossible until it is done.”

The main areas of interest to achieve this include; first, end the pandemic everywhere, 40 percent of the population of all countries is targeted to get vaccinated by the end of 2021, and at least 60 percent by mid-2022.

Second, bilateral and multilateral development financing grants and concessional loans ought to go up. Over the last year, the IMF have swiftly ramped their financing for the Continent, including providing 13 times their average annual lending to sub-Saharan Africa. And are working to do much more. The IMF has also received support to increase access limits so they can scale up their zero-interest lending capacity through the Poverty Reduction and Growth Trust.

The IMF has also devised exceptional measures. Their membership backs an unprecedented new allocation of Special Drawing Rights (SDR) of $650 billion, by far the largest in their history. Once approved, which is intended to be achieved by the end of August, it will directly and immediately make about $33 billion available to African members. It will boost their reserves and liquidity, without adding to their debt burden.

Over the course of the last year, the IMF has built experience in facilitating the on lending of SDRs – thus managing to triple their concessional lending capacity as a result.

The Third being, actions at home. According to Georgieva “a crisis is an opportunity for transformational domestic reforms that increase domestic revenue, improve public services, and strengthen governance. For instance, digitalization can improve tax administration and revenue collection, and the quality of public spending. And with radical transparency, Africa can tap into new sources of finance – such as carbon offsets.

There is ample scope for countries to encourage private investment, including in social and physical infrastructure. New IMF research, published today, highlights that domestic and international investors could provide at least 3 percent of GDP per year of additional financing by the end of this decade.”

Reforms of international taxation can also support Africa’s growth. For a long time, the IMF has been in favor of minimum corporate tax rates to reduce the race to the bottom and tax avoidance. And they strongly support an international agreement on digital tax, something France has been a leading voice for. It is important to secure fair distribution of tax revenues, so they can contribute to closing Africa’s financial gap.

Georgieva called on to each and every one to step up. Reminding the attendees that from history they are all familiar with what a shock of this magnitude can do if not countered forcefully and effectively.

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Indian COVID-19 variant hits Botswana diamond sales

20th May 2021
Indian-Covid--19-variant-hit-rough-diamonds-sales---De-Beers-

De Beers’ Group, the world’s number one diamond producer by value, this week attributed the downfall of its sales for the fourth cycle week to the second wave of the Covid-19 variant (B.1.617.2) which was first discovered in India.

Diamond trading conditions have been hit by the Covid-19 crisis in India which is a major cutting and polishing centre for the world’s diamond trade.

The outbreak of the new variant has led to a humanitarian crisis with 280, 284 fatalities of the disease reported.

The London headquartered company said the sales in its fourth cycle fell to $380m (about P4.1 billion) down from $450m (about P4.8 billion) in the third cycle though it was higher than the fifth cycles of last year when the group shifted only $56m (P600 million).

De Beers emphasized that they continued to implement a more flexible approach to rough diamond sales during the fourth sales cycle of 2021, with the Sight event extended beyond its normal week-long duration.

The De Beers group Chief Executive Officer (CEO), Bruce Cleaver said the company continues to see robust demand for diamond jewellery in the key US and China consumer markets.

“However, the scale of the second wave of Covid-19 in India, where the majority of the world’s diamonds are cut and polished, has led to reduced midstream capacity and subsequently lower rough diamond demand, during what is already a seasonally slower time of year for midstream purchases,” said Cleaver.

Meanwhile Botswana health officials have confirmed the new Covid-19 variant in Botswana. The Ministry of Health and Wellness -through a press statement- informed members of the public that the variant (B.1.617), was confirmed in Botswana on 13th May 2021.

According to Christopher Nyanga, spokesperson at the Ministry, this followed a case investigation within Greater Gaborone, involving people of Indian origin who arrived in the country on the 24th April 2021.

Moreover the World Health Organization (WHO) recently announced that the Indian Covid-19 variant was a global concern, with some data suggesting that the variant has “increased transmissibility” compared with other strains.

The India variant (B.1.617.2) – is one of four mutated versions of the coronavirus which has been designated as being “of concern” by transitional public health bodies, with others first being identified in Kent, South Africa and Brazil.

Nevertheless when speaking at Bank of America Global Metals and Mining conference, Anglo American Chief Executive Officer, Mark Cutifani said the company portfolio is increasingly tilted towards future enabling products and those that need to decarbonise energy and transport in order to meet consumers’ needs – from home appliances, electronics and infrastructure, to food and luxury goods.

“We see material opportunity for Anglo American to continue to set itself apart in terms of the performance of our diversified business, further enhanced through sector-leading 25% volume growth over the next four years, led by copper and the platinum group metals,” said Cutifani.

“Most importantly, as the supplier of such critical materials, it is the duty of our industry to ensure that in everything we do, we act responsibly and deliver enduring value for our full breadth of stakeholders, including our planet.”

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