Sunday, May 16, 2021

Brokers welcome corporatisation of BSE

Botswana Stock Exchange (BSE) Deputy Chief Executive Officer, Thapelo Tsheole has welcomed privatisation of the local bourse as a step in the right direction that will allow for flexibility of operations.

“This is a similar evolution that has happened all over the world. We will now operate just like any other private company, accountable to shareholders and able to source funding from shareholders,” he said.

In December last year, parliament passed the BSE transition bill and paved the way for the bourse to be registered as a private company and transformed into a commercial entity. At the time, Finance Minister Ken Matambo told parliament that incorporation of the BSE will enable it to operate on a more commercial basis, enter into strategic alliances and exploit opportunities for development of Botswana’s capital markets. Under the new dispensation, government will retain a 51 percent stake in the new company while the remaining 49 percent will be availed to investors, including stock brokers and asset managers.

The decision was met with scepticism from some players in the market, who expressed fears of possibilities of conflict of interest, especially since the new company will also be allowed to list on the local bourse. Others also expressed fears that the new entity, which will have shareholding from, among others stock brokers and asset managers, will throw caution out the window and gun for profits instead of protecting the interests of individual investors.

However, Tsheole said the corporatisation of BSE was in line with international trends as it has happened in more established stock exchanges.

“The BSE was established by an act of parliament and has always been owned by government. We raised funds from buying and selling of shares and government supplemented our expenses. But things have changed. Other exchanges have transformed into commercial entitles to facilitate more efficient operations,” he said.

He further explained that the BSE will now be able to source financing from other shareholders instead of depending on government. However, Tsheole explained that BSE will still be regulated by the Non-Bank Financial Institutions Regulatory Authority (NBFIRA). He also reassured investors that the transition will have no impact on trading as the same trading and listing rules will still apply. Tsheole also ruled out any possibilities of conflict of interest, saying the regulator will always be there to provide oversight and protect the interests of investors.

“There is a difference between BSE the company and the stock exchange. The bourse is just a platform for trading by companies that are listed,” he said.

The same sentiments were shared by Garry Juma, Head of Research at Motswedi Securities, who said privatisation will allow other players to own the BSE and facilitate easy and effective decision making without undue government influence.

“We know that sometimes decisions at state owned enterprises need cabinet and parliament approvals. This will not be the case at BSE and such a scenario will facilitate efficiency,” he said.

Juma added that the 49 percent that will be in the hands of private investors will reach international investors and expose BSE to international markets and thus improve liquidity.
The corporatisation of stock exchanges has always been met with scepticism. The Johannesburg Stock Exchange (JSE), for example, was demutualised and incorporated as JSE Limited, a fully fledged corporate, and eventually listed on its own bourse in 2005. Since then, the JSE has grown to become the largest stock exchange in Africa and one of the top 20 bourses in the world, with a market capitalisation of 1,007bn as at end-2013.

However, the phenomenon of demutualising and listing raised concerns about the exchanges’ ability to function as their own regulator, especially since they were transforming into “for-profit” entities. As with the BSE, there were also concerns of conflicts of interests. In the case of the JSE, oversight and regulation were strengthened as well as certain specific requirements relevant to its listing application and practical supervision.

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