Sunday, December 10, 2023

Africa’s capital lies idle – Investment expert

The African continent has been urged to spread its idle capital into Exchange Traded Funds (ETFs) as an opportunity to diversify investment instruments and help manage the liquidity.

ETF Strategist Nerina Visser says there is a lot of capital in Africa but it is lying idle while the greatest challenge is markets lack liquidity and investment opportunities.

“The solution is for African markets to go for Feeder Fund ETFs and unsponsored Depository Receipts,” Visser said this week during a virtual address.

The Feeder Fund ETFs are deemed local assets, the peripheral benefits accrue to local market, and as for the UDRs they are deemed secure, safe and efficient in the sense that they have independent trust structure and do not require approval of the underlying company.  The UDRs rely on disclosures.

It is therefore for these benefits that Visser urged Botswana market in particular to explore opportunities through these two elements on ETFs to increase control of listings on equity market.

“Botswana could Introduce UDRs on the Botswana Stock Exchange to offer local investors access to and participation in the local operations; identify companies operating in the local market, but listed elsewhere and identify gaps in the local investment opportunities and import those from other markets such as in bio-technology and healthcare.  In addition, provide multinational companies a facilitated route to listing on BSE,” she advised further.

Looking at the history of ETFs in Africa, South Africa became the first African country to launch ETFs in December 2000 and currently has 89 ETFs listed on the Johannesburg Stock Exchange with assets of plus/minus R110billion dominated by equities and commodities. Botswana became second to launch ETFs in July 2010. Botswana currently has only three ETFs, all commodities. Nigeria, Namibia and Mauritius which are said to have all benchmarked from Botswana on the ETF investment have 12, 9 and 4 ETF listings in their stock exchanges.

Since the listing of ETFs in 2010, BSE’s Head of Product Development Kopano Bolokwe said it has been very instrumental as it immensely contributed to Botswana’s market development. “We did not export investments as we have been able to localise the money that would have been exported. This has further helped us gain knowledge as we have now developed expertise in the product which was not the case before. Most stock exchanges (eg Ghana, Nairobi, Rwanda) have come to BSE to benchmark on how we have gone about listing the product in their pursuit to introduce the product in their markets,” he added.  When the NewGold instrument was listed in the BSE, Bolokwe said it brought diversity, vibrancy, and helped in revenue generation for market participants.  The NewGold became in 2010 became the most traded in the BSE followed by Letshego, surpassing the equity market.


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