Thursday, October 22, 2020

Capital markets are proving a viable financing option

The recent developments at the Botswana Stock Exchange coupled with the existing favourable financing opportunities offered by the local capital market continue to make a compelling case for the country to finance projects with potential to further boost productivity and economic growth.

The publicised record breaking trading turnover that was registered on the local bourse last week Thursday is seemingly demonstrative of the extent to which activities in the capital markets can be used to contribute meaningfully to the economy. The capital market offers funds to entities, both in the private and public sector, which ultimately benefit the economy through the provision of among others infrastructure, health and education facilities.   

Botswana Stock Exchange (BSE) announced its highest volume of trade which came close to half a billion mark at P494.3 million in the history of trading on the local bourse. Trading in the stock exchange reflects the buying and selling of shares, which by measure of this record breaking trading indicates the ease with which such transactions can take place on the bourse. This in extension is an indication of the efficiency of BSE to enable transactions, as is the common gauge for the effectiveness of a bourse. This proven effectiveness could therefore be used to demonstrate the ability and capability of the stock exchange as a platform of raising funds. 

According to BSE the significant volumes of trade that resulted in the record numbers came from New African Properties (NAP) at P457.3 million, Sefalana at P33.8 million and Letshego at P1.6 million. According to the Motswedi Securities weekly financial markets highlights for the week ending 17 June 2016, NAP proved to be a major mover. “The property company, which boasts Riverwalk Mall amongst its holdings, traded over 156 million shares on Wednesday, the biggest trade on one stock on the BSE. In the process the stock leaped 13 thebe up, to close the week 10.6% on a ytd basis, the largest move this week,” cites Motswedi weekly report. 

It seems property companies were on the up move as the report also highlights that another property giant Turnstar continued its three week gaining streak indicated by a 4 thebe rise for the week.   

The Stanbic bank Botswana economic review cites that a breakdown of the total debt indicates that the external debt is 16.3 percent whilst the internal debt is only 6.5 percent of Gross Domestic Product (GDP). The low debt ratio is indicative of the significant potential, particularly internally, the country has to borrow to finance its projects. The combination of the robustness of BSE with the low debt ratio of the country puts Botswana in a favorable position to finance its projects.

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