The Botswana Stock Exchange (BSE) interim Chief Executive Officer, Kopano Bolokwe has said the local bourse could be viewed as mining exchange because it offers a platform to invest in the sector.
Bolokwe was presenting at a panel discussion on Wednesday at a two-day Future of Mining Summit, held in Gaborone.
He said, with a market capitalisation of P740 billion on the local bourse, around P705 billion is listed as equity or stock.
“Then we have bonds and Exchange Traded Funds (ETFs) some of which are commodity-backed, like NewGold ETF, NewPlat ETF and New Palladium ETF,” he said.
Of that P705 billion, Bolokwe said close to 90 percent is in the hands of the mining sector, predominantly the foreign flagships such as Anglo American, Lucara, Botswana Diamonds, Shumba Coal, Tlou Energy and Botala Energy who are listed in other international Stock Exchanges as well as Minergy which is a domestic mining company.
Excitingly, the mining sector on the BSE is currently the best performing sector according to Bolokwe.
“Over the past 18 months, this sector has grown by close to 90 percent, and has contributed just over 75 percent to the total growth of the BSE’s equity capitalisation,” he said.
Further, he said as a foreign companies sector, its overall performance has outclassed that of local companies.
The index tracking this sector, which is largely the Foreign Company Index, grew by close to 60 percent last year, with Anglo shares rising 92 percent, Lucara 45 percent and Botswana Diamonds 14 percent, according to Bolokwe.
ROLE OF CAPITAL MARKETS IN FACILITATING THE FUNDING FOR LARGE-SCALE MINING PROJECTS
According to Bolokwe, capital markets provide various mechanisms to facilitate the flow of capital from investors to companies that need funding.
He added that capital markets can support large-scale mining projects.
Through Equity Financing, Bolokwe said the BSE helps mining companies raise capital through the issuance of equity or shares. This can be done through Initial Public Offerings (IPOs) where mining companies can go public, offering shares to investors for the first time.
Further, Bolokwe mentioned secondary offerings, where companies that are already listed on the BSE can issue additional shares to raise more funds for new projects or business expansion.
The new BSE boss also mentioned Private Placement where companies can raise funding through selling shares directly to institutional investors or private equity firms whIch can provide substantial capital quickly.
Another form of financing according to him is Debt Financing, which is essentially raising capital through the issuance of debt securities.
Bolokwe also mentioned Corporate bonds which allow mining companies to raise large amounts of capital without diluting ownership, as well as Convertible bonds which can be converted into shares, providing flexibility to investors and potentially lowering interest costs for the company.
Mining companies on the BSE currently use equity financing. There are seven (7) companies listed on the BSE under the mining sector with a collective market capitalisation of P631 Billion, according to Bolokwe. He said, over the years, this number has consistently trailed above 10 pre COVID-19.
Over the past 6 years, he said mining companies listed on the BSE successfully raised the following amounts of capital on the primary market through additional issuances of equity:
| Year | Amount Raised (P Million) |
| 2023 | 294 |
| 2022 | 97 |
| 2021 | 459 |
| 2020 | 118 |
| 2019 | 547 |
| 2018 | 365 |
| TOTAL | P1.9Bn |
In furtherance, Bolokwe revealed that debt is a severely underutilised instrument that allows mining companies to raise large amounts of capital in stages. To raise capital through debt, he said a mining company does not need to have listed equity, they are required to submit a listing application to issue a bond. This includes a Programme Memorandum which could amount to P500 million or P1 billion or any amount a company needs to raise over a period. Under this Programme Memorandum the company can issue several bonds of different amounts as and when they need.
In addition, he said mining companies may also issue Sustainable Debt especially during this time as the world transitions to a greener future. Through the SADC Green Bond Programme facilitated by a partnership between the Committee of SADC Stock Exchanges (CoSSE) and FSD Africa, companies can, according to Bolokwe get technical and financial assistance from FSD Africa to issue green bonds.
BENEFITS AND CHALLENGES OF LISTING MINING COMPANIES ON THE STOCK EXCHANGE
Bolokwe explained that mining companies can experience various challenges and benefits of listing on a Stock Exchange.
He said mining companies are often affected by fluctuations in commodity prices, which can lead to volatility in their stock prices.
Further, he added that there are cost implications associated with listing and ensuring compliance to regulations. These often add to costs associated with mining projects.
“However, a listing and compliance in general should not been as a cost- it’s a risk mitigation strategy to de-risk the business and it’s a long term value creation strategy for all stakeholders. It’s the single most important mechanisms of promoting empowerment, beneficiation and inclusion – the key priorities of our Government across the economy,” he said, adding that mining is a capital-intensive industry with long lead times across the mining value chain – the time between exploration, development, and production.
“Companies that successfully list on stock exchanges often demonstrate strong leadership, sound governance practices, and a clear strategy for addressing industry-specific risks.”
BENEFITS
Bolokwe said listing on the BSE offers a platform to raise capital as and when necessary and quite quickly whether its equity or debt.
“This can be channelled towards new and existing projects. It takes around 13 working days to receive approval from the BSE to list equity or debt instruments. It is important to note that the time required to receive approval is highly dependent on the quality of submission,” he explains, adding that Botswana has no exchange rate controls making the local landscape favourable for capital raising.
Further, he said there is abundant capital from Botswana pension funds that seek instruments to invest in.
“Total fund assets are over P130 billion. Recently there have been regulatory changes to the Pension Fund Investment Rules (PFR II) investment allocation limits seeing a shift from 70/30 split between offshore and onshore investments to 50/50. Currently funds are being repatriated back to Botswana and need assets and investment opportunities. The repatriation is subjected to completion by 2027,” he noted.
He also mentioned Botswana’ stable political environment and strong macroeconomic fundamentals. He added also that listing allows trading of company’s shares which provides an exit route for shareholders who would like to disinvest .
