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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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Banking on Your Terms: Exploring the World of Self-Service Banking

23rd February 2024

In today’s digital age, banking is no longer just about visiting a branch during business hours. It’s about putting you, the customer, in the driver’s seat of your financial journey. But what exactly is self-service banking, and how do you stand to benefit from it as a customer?

Self-service banking is all about giving you the power to manage your finances on your terms. Whether you want to check your account balance at midnight, transfer money while on vacation, or deposit cash without waiting in line, self-service banking makes it possible. It’s like having a virtual branch at your fingertips, ready to assist you 24/7.

This shift towards self-service banking was catalyzed by various factors but it became easily accessible and accepted during the COVID-19 pandemic. People of all ages found themselves turning to digital channels out of necessity, and they discovered the freedom and flexibility it offers.

Anyone with a bank account and access to the internet or a smartphone can now bank anywhere and anytime. Whether you’re a tech-savvy millennial or someone who’s less comfortable with technology, you as the customer have the opportunity to manage your finances independently through online banking portal or downloading your bank’s mobile app. These platforms are designed to be user-friendly, with features like biometric authentication to ensure your transactions are secure.

Speaking of security, you might wonder how safe self-service banking really is. Banks invest heavily in encryption and other security measures to protect your information. In addition to that, features like real-time fraud detection and AI-powered risk management add an extra layer of protection.

Now, you might be thinking, “What’s the catch? Does self-service banking come with a cost?” The good news is that for the most part, it’s free. Banks offer these digital services as part of their commitment to customer satisfaction. However, some transactions, like wire transfers or expedited bill payments, may incur a small service fee.

At Bank Gaborone, our electronic channels offer a plethora of services around the clock to cater to your banking requirements. This includes our Mobile App, which doesn’t require data access for Orange and Mascom users. We also have e-Pula Internet Banking portal, available at https://www.bankgaborone.co.bw as well as Tobetsa Mobile Banking which is accessible via *187*247#. Our ATMs also offer the flexibility of allowing you to deposit, withdraw cash, and more.

With self-service banking, you have the reins of your financial affairs, accessible from the comfort of your home, workplace, or while you’re on the move. So why wait? Take control of your finances today with self-service banking.

Duduetsang Chappelle-Molloy is Head: Marketing and Corporate Communication Services

 

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Botswana records over P6 billion trade deficit

7th February 2024

Botswana has recently recorded a significant trade deficit of over P6 billion. This trade deficit, which occurred in November 2023, follows another deficit of P4.7 billion recorded in October of the same year. These figures, released by Statistics Botswana, highlight a decline in export revenues as the main cause of the trade deficit.

In November 2023, Botswana’s total export revenues amounted to P2.9 billion, a decrease of 24.3 percent from the previous month. Diamonds, a major contributor to Botswana’s exports, experienced a significant decline of 44.1 percent during this period. This decline in diamond exports played a significant role in the overall decrease in export revenues. However, diamonds still remained the leading export commodity group, contributing 44.2 percent to export revenues. Copper and Machinery & Electrical Equipment followed, contributing 25.8 percent and 10.1 percent, respectively.

Asia emerged as the leading export market for Botswana, receiving exports worth P1.18 billion in November 2023. The United Arab Emirates, China, and Hong Kong were the top destinations within Asia, receiving 18.6 percent, 14.2 percent, and 3.8 percent of total exports, respectively. Diamonds and Copper were the major commodity groups exported to Asia.

The Southern African Customs Union (SACU) received Botswana’s exports worth P685.7 million, with South Africa being the main recipient within SACU. The European Union (EU) received exports worth P463.2 million, primarily through Belgium. Australia received exports worth P290 million, while the United States received exports valued at P69.6 million, mostly composed of diamonds.

On the import side, Botswana imported goods worth P9.5 billion in November 2023, representing an increase of 11.2 percent from the previous month. The increase in imports was mainly driven by a rise in Diamonds and Chemicals & Rubber Products imports. Diamonds contributed 23.3 percent to total imports, followed by Fuel and Food, Beverages & Tobacco at 19.4 percent and 15.0 percent, respectively.

The SACU region was the top supplier of imports to Botswana, accounting for 77.7 percent of total imports. South Africa contributed the largest share at 57.2 percent, followed by Namibia at 20.0 percent. Imports from Asia accounted for 9.8 percent of total imports, with Diamonds, Machinery & Electrical Equipment, and Chemicals & Rubber Products being the major commodity groups imported. The EU supplied Botswana with imports worth 3.2 percent of total imports, primarily in the form of Machinery & Electrical Equipment, Diamonds, and Chemicals & Rubber Products.

Botswana’s recent trade deficit of over P6 billion highlights a decline in export revenues, particularly in the diamond sector. While Asia remains the leading export market for Botswana, the country heavily relies on imports from the SACU region, particularly South Africa. Addressing the trade deficit will require diversification of export markets and sectors, as well as efforts to promote domestic industries and reduce reliance on imports.

 

 

 

 

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Business

Business sector optimistic about 2024

7th February 2024

The business sector in Botswana is optimistic about the year 2024, according to a recent survey conducted by the Bank of Botswana (BoB). The survey collected information from businesses in various sectors, including agriculture, mining, manufacturing, construction, and finance, among others. The results of the survey indicate that businesses expect trading conditions to improve in the first quarter of 2024 and remain favorable throughout the year.

The researchers found that firms anticipate improvements in investment, profitability, and goods and services exported in the fourth quarter of 2023 compared to the previous quarter. These expectations, combined with anticipated growth in all sectors except construction and real estate, contribute to the overall confidence in business conditions. Furthermore, businesses expect further improvements in the first quarter of 2024 and throughout the entire year.

Confidence among domestic market-oriented firms may decline slightly in the first quarter of 2024, but overall optimism is expected to improve throughout the year, consistent with the anticipated domestic economic recovery. Firms in sectors such as mining, retail, accommodation, transport, manufacturing, agriculture, and finance are driving this confidence. Export-oriented firms also show increased optimism in the first quarter of 2024 and for the entire year.

All sectors, except agriculture, which remains neutral, are optimistic about the first quarter of 2024 and the year ending in December 2024. This optimism is likely supported by government interventions to support economic activity, including the two-year Transitional National Development Plan (TNDP) and reforms aimed at improving the business environment. The anticipated improvement in profitability, goods and services exported, and business investment further contributes to the positive outlook.

Firms expect lending rates and borrowing volumes to increase in the 12-month period ending in December 2024. This increase in borrowing is consistent with the expected rise in investment, inventories, and goods and services exported. Firms anticipate that domestic economic performance will improve during this period. Domestic-oriented firms perceive access to credit from commercial banks in Botswana to be relaxed, while export-oriented firms prefer to borrow from South Africa.

During the fourth quarter of 2023, firms faced high cost pressures due to increased input costs, such as materials, utilities, and transport, resulting from supply constraints related to conflicts in Ukraine-Russia and Israel-Hamas. According to the survey report, the firms noted that cost pressures during the fourth quarter of 2023 were high, mainly attributable to increase in some input costs, such as materials, utilities, and transport arising from supply constraints related to the Ukraine-Russia and Israel-Hamas wars. “However, firms’ expectations about domestic inflation decreased, compared to the previous survey, and have remained within the Bank’s 3 – 6 percent objective range, averaging 5.4 percent for 2023 and 5.4 percent for 2024. This suggests that inflation expectations are well anchored, which is good for maintenance of price stability,” reads the survey report in part.

However, firms’ expectations about domestic inflation decreased compared to the previous survey, and inflation expectations remained within the Bank’s objective range of 3-6 percent. This suggests that inflation expectations are well anchored, which is beneficial for maintaining price stability.

In terms of challenges, most firms in the retail, accommodation, transport, manufacturing, construction, and finance sectors considered the exchange rate of the Pula to be unfavorable to their business operations. This is mainly because these firms import raw materials from South Africa and would prefer a stronger Pula against the South African rand. Additionally, firms in the retail, accommodation, transport, and mining sectors cited other challenges, including supply constraints from conflicts in Russia-Ukraine and Israel-Hamas, as well as new citizen economic empowerment policies that some firms considered unfavorable to foreign direct investment.

On the positive side, firms highlighted factors such as adequate water and electricity supply, a favorable political climate, an effective regulatory framework, the availability of skilled labor, and domestic and international demand as supportive to doing business in Botswana during the fourth quarter of 2023.

Overall, the business sector in Botswana is optimistic about the year 2024. The anticipated improvements in trading conditions, supported by government interventions and reforms, are expected to drive growth and profitability in various sectors. While challenges exist, businesses remain confident in the potential for economic recovery and expansion.

 

 

 

 

 

 

 

 

 

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