Plans by Absa Capital of South Africa to add a new investment product known as NewGold Gold Bullion Debentures to the already existing index of investment portfolios at the Botswana Stock Exchange (BSE), have reached an advanced stage following lengthy and extensive high level consultations between ABSA Capital and BSE spanning from 2008.
And it is expected that local investors could, before end of the year, be exposed to the rare opportunity of investing in gold from South Africa, by purchasing gold backed security shares through a local associate or partner company listed with BSE and henceforth able to partake in the global financial market.
To this end, officials from Absa have been holding a series of meetings with local Fund Managers, Pension Funds and Stock Brokers as well as High Network investors this week to hear what they have to say about the proposed new product.
Batsile Ngomane, ABSA Capital Manager, explained the purpose of their meetings thus, “It should be noted that like we have already indicated earlier on, these weren’t high level meetings as the question of whether the idea is tenable in the country, was no longer at issue.”
“Instead, while in part we delved on specifics such as the mechanics like issues of how Settlements and market making will be done, these interactions also helped us a great deal in determining what the thinking of the investor is about our product,” intimated Ngomane, adding that the feedback was amazingly good.
To explain what she meant by the Settlements mechanics, Ngomane stated that since Absa is listed in the Johannesburg Stock Exchange (JSE) anyone including Botswana citizens interested in investing in Gold backed security shares can do that directly by going to South Africa.
But then as is typical of life, especially in business one needs to establish the necessary trust in terms of who to consult for expert advice and processing of their investment proposals.
This is more likely to be problematic for someone investing in a foreign land, in particular South Africa, which has rigorous financial regulatory laws and processes, as well as specific requirements by the JSE intended to protect investors and the economy.
Added to this, there is the issue of many authorities or companies usually being involved.
“So, against this background part of the discussions entailed how the systems of the two countries (Botswana and South Africa) could be merged and harmoniously aligned to ensure seamless transactions,” posited Ngomane.
Ngomane expressed optimism that it was only a matter of time, and a few things to tackle before the gold backed security shares will be available.
According to Dr Vladimir Nedeljkovic, Associate Principal at Absa Capital, the issues presently outstanding include the need to devise a way of classifying or turning the proposed investment product into a local asset, so that there will reason for a Botswana investor to prefer investing locally than go directly to the JSE.
“The other factor relates to identifying a Domestic partner,” said Nedeljkovic, adding that so far all indications are that the challenges are not insurmountable.
Thapelo Tsheole, Product Development Manager at BSE could not conceal his excitement at the advent of the impending launch of the NewGold Gold Bullion Debentures.
“We are happy that on account of the fact that Botswana has the comparative advantage of not having financial exchange controls, this could be an impetus for the introduction of more attractive products given the confidence investors derive from taking in and out their money with ease,” said Tsheole.
In addition, he explained that the proposed product, like the word Gold-backed, actually means investors would purchase papers with specific serial numbers referencing real traceable physical assets in the form of Gold, stored somewhere in South Africa.