Botswana Stock Exchange Limited’s effort to grow the domestic stock market continues to attract the attention of observers, helping to bump Botswana’s ranking in financial markets.
The recently released Absa Africa Financial markets places Botswana in second position out of the total 20 African countries assessed. The Absa Africa Financial Markets Index evaluates financial market development in 20 countries, as well as highlighting economies with clearest growth prospects.
The Index assesses countries according to six pillars: market depth; access to foreign exchange; tax and regulatory environment and market transparency; capacity of local investors; macroeconomic opportunity; and enforceability of financial contracts, collateral positions and insolvency frameworks.
The first pillar measures market depth by looking at market capitalization and productivity. According to the report, the average market capitalisation of the 20 countries covered by the index is just 56 percent of GDP; an even lower figure which masks large variations between countries. Botswana has done well in this pillar, coming fifth out of the total surveyed countries.
“Only three countries (South Africa, Botswana and Ghana) have a market capitalisation greater than 100% of GDP, while in 14 countries it is lower than 50%,” said the report.
Thapelo Tsheole, chief executive officer of BSEL, has been resolute in his mission to drive the local bourse to become a robust stock exchange in Africa and a destination for foreign investors looking for safe returns and stability. Since he was appointed CEO in 2015, the BSEL has attracted seven listings, and continues to court businesses to list on the BSEL. Other efforts from the BSEL includes public outreach programmes through radio, open days, and listings conferences, all done to educate mostly local businesses and citizens about benefits of participating in the stock market.
“Several countries are implementing policies to encourage capital market growth. Rwanda, Botswana and Ghana are among the countries introducing measures to bring companies into the formal sector and to encourage them to list on alternative exchanges,” the report noted. “This long-term approach requires providing significant education and training to companies about financial markets and the benefits of listing. Education is one of the principle areas of focus for all countries in this index.”
The BSEL’s determination to get as many local investors involved in the stock market is also in part to improve the domestic bourse’s liquidity. Botswana together with Namibia and Seychelles have been flagged for having large domestic institutional investors relative to domestic listed assets.
“In addition, there is low liquidity in the domestic market as assets are held by long-term buy-and-hold investors, which has lowered these countries’ overall pillar score,” the report said.