The Botswana Stock Exchange (BSE) is being fast tracked into a company with limited liabilities to pave the way for it to be demutualised in future, in line with other exchanges in the developed markets, government said this week.
Junior Finance and Development Planning Minister, Charles Tibone, told Southern Africa Private Equity Roundtable at GICC that plans are in motion to revamp the existing capital market laws, including changing BSE from a “statutory body to company”.
“This change will pave way for Botswana Stock Exchange to be demutualised at a future point in time,” he said.
The move follows expert advice offered to government by Edward-Nathan Sonnenberg Consultants in 2007, who called for BSE to be made a private company adding that other legislative pieces need to be harmonized to ensure that all market players are regulated to enhance confidence in BSE.
“We have looked at different (legislative) pieces and came to the conclusion that it should be harmonized.
“One of the most important things is that it should be independent. Independence comes from power and the ability to exercise it,” the consultants said, adding that “in the beginning government can have equity in that company”.
If the BSE takes the move of being a private company it will fall in line with some of the international bourses and may attract private companies ÔÇô including members of the exchange — 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 licencing 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 so that it can get funding,” they added.
The proposed model of government-private sector stock exchange initially started in 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, brokers and research houses to ensure that all members adhere to strict rules.
They said the current system that governs auditors 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, 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 in 2005.
And it was also exposed with the BIHL insider trading in 2003.