The Botswana Stock Exchange together with the Botswana Bond Market Association (BBMA) on Tuesday held the bond market conference media briefing, a precursor to the bond market conference which will be held on the 6th of October under the theme “The Bond Market- A pillar of the economy”.
Mr. Thapelo Tsheole, Chief Executive Officer of BSE, said the conference is organised by the BSE in conjunction with the BBMA in efforts to draw attention to a market which largely operates under the radar. The bond market has been eclipsed by the equity market and exchange traded funds, consequently the BSE and BBMA aim to propel the bond market to reach and exceed the levels of growth witnessed on the equity market. Mr. Tsheole highlighted that the bond market is relatively illiquid yet they appreciate the fact that it has grown modestly over the years.
“As at the end of 2015, the bond market accounted for 7.5% of Gross Domestic Product (GDP), a modest improvement from 7.2% in 2009. Liquidity amounted to 8.5% in 2015 compared to 5% in 2009. Currently, the total bond market capitalisation is close to a quarter of the total domestic equity market capitalisation. The number of issued bonds has risen phenomenally since the late 1990’s at which time there were only 3 bonds in comparison to 39 bonds listed on the BSE, by 15 different issuers, at present,” he said before adding that this year they are expecting historic issuances after attracting big names to the Botswana market.
In 2010, the BSE placed the bond market under scrutiny to try and understand the challenges facing the development of the bond market in the country. The study concluded with a report that underlined the Botswana Bond Market Development Strategy. The strategy was later to be driven by a committee put together by the BSE and relevant stakeholders, and part of the tasks was establishing the BBMA which was formally registered in September 2013. Mr. Tsheole said the BSE has since undertaken numerous initiatives contained in the Botswana bond Market Development Strategy such as formulation of standard bond pricing conventions bond pricing formulas in 2012 and the introduction of bond indices. Moreover, he said this year they have deliberately sought to promote the visibility of the BBMA by hosting the conference together.
“As most of you agree, bond markets are an integral part of the development of any economy. Therefore, the theme of this conference “the Bond Market- A Pillar of the Economy” is cognisant of the important role the domestic bond market has played in the development of Botswana, both in the public and private sector. Further, the theme and the agenda of the conference underscore the potential of the bond market to continue to support economic growth in a more robust manner,” he said.
According to the BSE, the primary objective of the conference is to bring together relevant stakeholders and participants in the bond market to engage in discussions on a wide range of topical issues covering 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. Furthermore, the conference will provide an opportunity to evaluate the status of the Botswana’s bond market and to make commitments to reforms and practices that can unlock the potential and the liquidity of the bond market. The conference is expected to forge relationships between domestic and international stakeholders in the bond market for purposes of capacity building, benchmarking and harmonization of debt market related developmental strategies.
Stanbic Bank Botswana, which is the main sponsor of the conference, said it was only natural for them as a bank to partner with the BSE and BBMA in the upcoming conference given the bank’s heavy presence in lead arranging and trading of bonds in the secondary market.
“We have done a lot as Stanbic Bank in Botswana and Standard Bank Group within the debt primary markets space in Sub-Saharan Africa and for us this is just really an extension of where we think we are significant and where we also believe our relevance actually lies. So it made absolute sense to create that connectivity with the Botswana Bond Market Association as well as with the BSE so that we can actually showcase our capabilities and cement our efforts,” said Mr. Sheperd Aisam, Stanbic Bank Botswana Head of Corporate and Investment Banking, who will also serve as one of the moderators at the conference.
Mr. Aisam says as diamond sponsors, they have been given a larger role at the conference and with their authority on the subject matter, they will share insights on where they think the bond market is going and where the market should go, while also moderating during sessions. The recently promoted Mr. Aisam said the theme for the conference could not have been better selected as they also have vested interest in the growth of the economy. He reiterated that the core mantra of Standard Bank is ensuring that Africa realises its potential hence the theme creates that alignment with their purpose.
Mr. Aisam said as Botswana celebrates its 50th independence, they should look back and reflect on what independence really means to them, citing that the country has done well to earn itself good stature in financial markets due to the conducive environment it has enabled for private businesses. He said such stature is reflected by the country’s strong foreign currency and equally strong sovereign credit. Mr. Aisam however warned that the country has not tapped in its full potential to propel its economic growth through various tools such as the bond market which can feed the healthy appetite for credit.
“The Bond Markets, in particular, have facilitated a lot of the basics in terms of monetary policy intervention; mopping excess liquidity, funding government deficits and providing a stable and long term source of funding for corporate and governments, bridging the gap where corporate institutions and lenders stop. Remember as corporate institutions we have got limited appetite for the long term space and limited appetite for complex infrastructure development just purely because our nature of funding is just that short,” he revealed.
Mr. Aisam lauded the BSE and other regulatory bodies such as Bank of Botswana for ensuring stability in the financial sector. He reserved his praises for the capital markets which he says have done well over the years and covered the basics really well, enabling and creating opportunities for the corporate issuances and government issuances and actually helping financial institutions grow the economy over the years.
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The recent study on youth entrepreneurship in Botswana has identified difficult access to funding, land, machinery, lack of entrepreneurial mindset and proper training as serious challenges that continue to hamper youth entrepreneurship development in this country.
The study conducted by Alliance for African Partnership (AAP) in collaboration with University of Botswana has confirmed that despite the government and private sector multi-billion pula entrepreneurship development initiatives, many young people in Botswana continue to fail to grow their businesses into sustainable and successful companies that can help reduce unemployment.
University of Botswana researchers Gaofetege Ganamotse and Rudolph Boy who compiled findings in the 2022 study report for Botswana stated that as part of the study interviews were conducted with successful youth entrepreneurs to understand their critical success factors.
According to the researchers other participants were community leaders, business mentors, Ministry of Trade and Industry, Ministry of Youth, Gender, Sport and Culture, financial institutions, higher education institutions, non-governmental institutions, policymakers, private organizations, and support structures such as legal and technical experts and accountants who were interviewed to understand how they facilitate successful youth entrepreneurship.
The researchers said they found that although Botswana government is perceived as the most supportive to businesses when compared to other governments in sub-Saharan Africa, youth entrepreneurs still face challenges when accessing government funding. “Several finance-related challenges were identified by youth entrepreneurs. Some respondents lamented the lack of access to start-up finance, whereas others mentioned lack of access to infrastructure.”
The researchers stated that in Botswana entrepreneurship is not yet perceived as a field or career of choice by many youth “Participants in the study emphasized that the many youth are more of necessity entrepreneurs, seeing business venturing as a “fall back. Other facilitators mentioned that some youth do not display creativity, mind-blowing innovative solutions, and business management skills. Some youth entrepreneurs like to take shortcuts like selling sweets or muffins.”
According to the researchers, some of the youth do not display perseverance when they are faced with adversity in business. “Young people lack of an entrepreneurial mindset is a common challenge among youth in business. Some have a mindset focused on free services, handouts, and rapid gains. They want overnight success. As such, they give up easily when faced with challenges. On the other hand, some participants argue that they may opt for quick wins because they do not have access to any land, machinery, offices, and vehicles.”
The researchers stated that most youth involved in business ventures do not have the necessary training or skills to maintain a business. “Poor financial management has also been cited as one of the challenges for youth entrepreneurs, such as using profit for personal reasons rather than investing in the business. Also some are not being able to separate their livelihood from their businesses.
Lastly, youth entrepreneurs reported a lack of experience as one of the challenges. For example, the experience of running a business with projections, sticking to the projections, having an accounting system, maintaining a clean and clear billing system, and sound administration system.”
According to the researchers, the participants in the study emphasized that there is fragmentation within the entrepreneurial ecosystem, whereby there is replication of business activities without any differentiation. “There is no integration of the ecosystem players. As such, they end up with duplicate programs targeting the same objectives. The financial sector recommended that there is a need for an intermediary body that will bring all the ecosystem actors together and serve as a “one-stop shop” for entrepreneurs and build mentorship programs that accommodate the business lifecycle from inception to growth.”
Botswana Housing Corporation (BHC) is said to have recorded an operating surplus of P61 Million, an improvement compared to the previous year. The housing, office and other building needs giant met with stakeholders recently to share how the business has been.
The P61 million is a significant increase against the P6 million operating loss realized in the prior year. Profit before income tax also increased significantly from P2 million in the prior year to P72 million which resulted in an overall increase in surplus after tax from P1 million prior year to P64 million for the year under review.
Chief of Finance Officer, Diratsagae Kgamanyane disclosed; “This growth in surplus was driven mainly by rental revenue that increased by 15% from P209 million to P240 million and reduction in expenditure from P272 million to P214 million on the back of cost containment.” He further stated that sales of high margin investment properties also contributed significantly to the growth in surplus as well as impairment reversals on receivables amounting to P25 million.
It is said that the Corporation recorded a total revenue of P702 million, an 8% decrease when compared to the P760 million recorded in the prior year. “Sales revenue which is one of the major revenue streams returned impressive margins, contributing to the overall growth in the gross margin,” added Kgamanyane.
He further stated professional fees revenue line declined significantly by 64% to P5 million from P14 million in the prior year which attributed to suspension of planned projects by their clients due to Covid-19 pandemic. “Facilities Management revenue decreased by P 24 million from P69 million recorded in prior year to P45 million due to reduction in projects,” Kgamanyane said.
The Corporation’s strength is on its investment properties portfolio that stood at P1.4 billion at the end of the reporting period. “The Corporation continues its strategy to diversify revenue streams despite both facilities management income and professional fees being challenged by the prevailing economic conditions that have seen its major clients curtailing spending,” added the CEO.
On the one hand, the Corporation’s Strategic Performance which intended to build 12 300 houses by 2023 has so far managed to build 4 830 houses under their SHHA funding scheme, 1 240 houses for commercial or external use which includes use by government and 1 970 houses to rent to individuals.
BHC Acting CEO Pascaline Sefawe noted that; BHC’s planned projects are said to include building 336 flat units in Gaborone Block 7 at approximately P224 million, 100 units in Maun at approximately P78 million, 13 units in Phakalane at approximately P26 million, 212 units in Kazungula at approximately P160 million, 96 units at approximately P42 million in Francistown and 84 units at approximately P61 million in Letlhakane. Emphasing; “People tend to accuse us of only building houses in Gaborone, so here we are, including other areas in our planned projects.”