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Championing stronger Bond Market

Stanbic Bank Botswana, in a bid to support greater growth of the bond markets, will sponsor the inaugural Bond Market Conference to be held on 6th October 2016. Stanbic Bank will serve as the Diamond Sponsor for the highly anticipated event. The first of its kind conference is the birth child of the Botswana Stock Exchange (BSE) and the Botswana Bond Market Association (BBMA), with a view towards bringing together relevant stakeholders to engage in discussions around developing and nourishing the bond markets.

Said Stanbic Bank Botswana Head of Corporate & Investment Banking, Mr. Sheperd Aisam, who will serve as one of the Chairs of the Conference, “We are honoured to come on board as the Diamond sponsor for such a prestigious and meaningful platform as this.  Our excellent business pedigree in lead arranging, bookrunning and trading of Bonds in secondary market saw it only natural for a partnership with the BSE and BBMA. Our involvement is buttressed by a strong and growing Corporate & Investment Banking (CIB) franchise which continues to play a pivotal role in the advancement of the local bond market. The bank acknowledges its fiduciary duty to the development of our financial markets and national economy. As Stanbic Bank Botswana, our 24-year presence in Botswana has seen strong growth in this space, and this is supported by further expertise through Standard Bank Group, allowing us to demonstrate our wealth of insight and experience in the bonds markets. We are passionate about working with our fellow stakeholders to grow and develop the bonds market to its full potential.”

Bond markets have been a stable and reliable source of long term financing for both governments and corporates in Botswana and the world at large, serving as a mechanism for the transformation of savings into financing for the real sector, thus addressing longer tenor funding gap that banks may not be able to participate in.  This conference serves as a platform at which to forge relationships between domestic and international stakeholders in the bond market, allowing for capacity building, benchmarking and harmonisation of debt market related developmental strategies. In addition, the Conference will work to create value for members of the BBMA with a view to solicit continuity of their support towards the bond market strategies of the BSE and BBMA.

“We look forward to informative discussion and learning from key stakeholders in this space, including but not limited to: Government and Ministerial officials, Central Bank, Custodians, Corporate Issuers, Development Finance Institutions, Asset Management Institutions, and Legal Consultants.” Additional delegates will include Corporate Finance Advisors, Regulatory Authorities, Treasury Departments, Pension Funds, and Brokers. “These are valued partners and stakeholders of Stanbic Bank, and their contribution remains paramount to the growth of the bond markets and our wider economy. Working together to achieve this mutually beneficial, singular objective, is vital, and platforms such as this inaugural conference are a welcomed opportunity to gain greater traction in this regard.”

Amongst some of the topical issues to be addressed during the conference are: the building blocks of a robust bond market, opportunities for infrastructure funding through the bond market, promoting an efficient regulatory environment, efficiency and liquidity of the secondary market, and developing the repo market. Anticipated participants and speakers will include representatives from African Development Bank (AfDB), Standard & Poor’s Ratings Services, Botswana Insurance Fund Management (Bifm) and the BSE.

 

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Botswana on high red alert as AML joins Covid-19 to plague mankind

21st September 2020
Botswana-on-high-alert-as-AML-joins-Covid-19-to-plague-mankind-

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.

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Finance Committee cautions Gov’t against imprudent raising of debt levels

21st September 2020
Finance Committe Chairman: Thapelo Letsholo

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.

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Gov’t Investment Account drying up fast!  

21st September 2020
Dr Matsheka

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”

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