Friday, December 4, 2020

Retail investors critical for economic growth and development

Bona Life Chief Executive Officer Regina Vaka-Sikalesele, who is also former Chairperson at the Botswana Stock Exchange (BSE), once said in an interview that the behaviors of individuals in a country form the manner in which the economy operates. This economy comprises of different individuals across the districts and major towns and cities of the country.

Every year, the BSE releases an annual report which elucidates the contribution made by retail investors to turnover by districts. According to the BSE 2015 Annual report, 1730 members of the public attended presentations conducted by the local bourse in 2015. The report adds that BSE participated in exhibitions and trade fairs to increase the awareness on investment opportunities. Other initiatives include social media, radio and television investment programmes which the BSE says will continue in 2016. The expectation is that the bourse will realise improvement in retail investor participation. 

The report makes clear that domestic companies currently continue to dominate in terms of the contribution to turnover at the local bourse.  

“Owing to the structure of Botswana’s economy and demographics, much activity has been concentrated in the Southern and Eastern parts of the country. As such, local retail investors’ turnover has largely originated from the South-Eastern part of the country,” cites the annual report. 

Based on a three year trend between 2012 and 2014 obtained from the 2014 annual report, the observation made by BSE remains consistent in the analysis of geographical contribution. Investors in Gaborone have consistently contributed the highest turnover. For example, Gaborone contributed P70 328 000, P168 818 000 and P60 220 000 in 2012, 2013 and 2014 respectively. The second highest contribution registered over the three year across the 13 districts, towns and cities does not exceed P10 million. In fact the highest figure recorded over that period was P7 584 million in 2013 by Kgatleng. Retail investors in Kgatleng and Selibe Phikwe contribute fairly better than the other districts, towns and cities. 

Interestingly the 2015 annual report notes a significant change in the turnover distribution across the country. “Notably, the contribution of retail investors based in Gaborone has declined from 78.5% in 2014 to 70.7% in 2015. On the other hand, contribution of the Ngamiland district based retail investors jumped from 0.8% to 6.9% in 2014 and 2015, respectively. This is encouraging as it illustrates that turnover distribution is somewhat improving,” cites the report. Based on the three period between 2012 and 2014 the highest figure recorded for Ngamiland was P 1 301 million and the lowest at P 0.290 million. 

The 2015 annual report goes further to state that the improvement in turnover distribution is not to suggest that the local bourse should fall to a lax market development exercise. The report further says that more effort is needed to increase the contribution of peripheral districts such as Chobe, North-East and Kgalagadi districts. What was observed between 2012 and 2014 is that none of the peripheral districts registered a figure over a million. 

An annual report released three years later notes that “market development initiatives have been carried out even in areas with relatively less economic activity. The BSE is confident that in the long run, deepening financial awareness will translate into increased retail investor participation in the capital market, and thus justify the investment in both time and resources expended by the BSE to “reach out” to investors.” 

BSE remains committed to improving the distribution of retail turnover across the country. Bringing in the earlier point made by Sikalesele-Vaka, the ultimate achievement by BSE to increase the distribution of retail investors will mean that individuals are as much contributing to the development and growth of the economy just as much as private and public companies. 

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