The Botswana Stock Exchange (BSE) is likely to be transformed into a private company with limited liabilities. This follows the recommendations of experts engaged by government to see how the standard of exchange could be enhanced.
At a recent stakeholders’ seminar, the experts from Edward-Nathan Sonnenberg said that “the simple legislative reform” of the exchange would not help without making it more effective. They then recommended that it should be made a company with limited liabilities.
“We have looked at different (legislative) pieces and came to the conclusion that it should be harmonized,” said the consultants. “One of the most important things is that it should be independent. Independence comes from power and the ability to exercise it. It is not clear as to who the owners of the exchange are, hence, there is a need to turn it into a private company, possibly with government having an equity stake.”
If the BSE privatizes, it will fall in line with some of the international bourses and may attract private companies ÔÇô including members of the exchange ÔÇö which are interested in running it.
At the moment, the BSE is controlled by government through the ministry of finance and development planning.
“Presently, BSE has a number of functions such as licensing power and at the same time it is a quasi-government institution and lacks capacity. We feel that it has to comply with some minimum standards of good corporate governance and, under the current structure the good governance structure is not there,” the consultants stated. “The recommendation is to have a company and government must continue to participate to ensure that it gets funding.”
The government- private sector stock exchange model started with the Asian countries of Malaysia and Singapore.
Further, Edward-Nathan Sonnenberg called for the prudential regulation to govern some of the loosely regulated members of the exchange, such as auditors, to ensure that all members adhere to strict rules.
They said under the current system that governs auditors, it is not sufficient and may not instill confidence on potential investor on the exchange.
“There is a need to enhance the skills and manpower at BSE so that they can enforce the rules,” they stated.
For a long time, the BSE has been looked upon as a toothless-dog since it does not have the capacity to inspect its members and the power to take punitive action. Its lack of power came to light with the Afri-Tourism Limited (ATL) debacleÔÇöa Botswana registered company on the venture capital board that imploded two years ago. And it was also exposed by the BIHL insider trading in 2003.
“We also looked at the regulations of take-overs of companies. And we found out that BSE borrows from the London and Johannesburg Stock Exchanges. And in some cases we found that the pieces of legislations from the two exchanges were conflicting or they had changed while on the Botswana side it had not been updated,” they said.
“We need to have the settlement system which is clear, secure and transparent to instill confidence in the investors.”
