Thursday, September 28, 2023

Botswana’s bond market faring well against Africa’s frontier markets

Despite that Botswana’s bond market remains shallow, it is however considered to be “well placed within the continent.” 

Proffering lessons on what Botswana can assimilate from the Kenya bond market at the recently held Bond market conference, Mwenda M’Marete, Head of Domestic Debt Market Management, financial Market Department, Central Bank in Kenya highlighted examples of activities that have taken place following reformation of the country’s bond market in 2001. According to M’Marete, Kenya’s market unlike countries such as Botswana, South Africa and Nigeria, is an open market which means it is open to all segments of investors and therefore does not yet have primary dealers.

He defined primary dealers as entities that buy directly from government for onward sale to investors. Citing the examples of investors that actively participate in the market, M’Marete listed the involvement of banks at 55 percent with retailers at 3.5 percent. A notable initiative he mentioned is the use of mobile phones and MPESA in assisting the auction bidding process on the bond market. MPESA is a flagship mobile phone-based money transfer and payment system dubbed an iconic fuse symbolic of both innovation and technology. This initiative brings the bond market to the finger tips of people who ordinarily would not consider themselves investors but can also take part in the bond market activities. Trading was automated in 2009, three years earlier than Botswana. 

Kholiswa Zondani, Fixed income Business development Manager at Thomson Reuters delivered on the status of bond markets in Africa and offered wisdom on how Botswana can follow in the footsteps of Kenya and Nigeria. She identified as one of the enablers the clarification of goals as a factor that helped the markets in such countries to get where they are. She also mentioned the collaboration of all entities involved in assisting the development of the bond market as an equally important factor to take into consideration particularly in light of the fact that fostering such a working relationship will bring different priorities into alignment. “Development work takes time, we have to be patient,” she said. The availability of infrastructure was among the factors needed, which Botswana market participants at the conference identified as an advantage that Botswana has. 

Botswana Stock Exchange Chief Executive Officer, Thapelo Tsheole highlighted that although Botswana’s bond market currently has a very small turnover, it however fairs better in comparison to its African counterparts in terms of diversification. To support his remark he cited that the local market which has a total of 39 issued bonds, 33 of which are corporate bonds with the remaining six issued as government bonds. This is in contrast to other markets where the government bonds make up the significant share of issued bonds. In terms of value however, government issued bonds are valued at P7.8 billion whereas corporate issued bonds are valued at P3.8 billion. 


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