From a listing’s perspective, the Botswana Stock Exchange (BSE) says it is working hard to boost liquidity as it anticipates a “strong pipeline” of new domestic equity listings, including multinationals.
According to the Chief Executive Officer (CEO) Thapelo Tsheole, these listings are expected before the end of 2021 and will serve to increase turnover and volume levels and ultimately increase the number of listed companies on the bourse. Tsheole was giving opening remarks in a webinar discussion this week.
Doing business in the midst of the COVID-19 pandemic has undoubtedly not been normal for many organisations. Despite the operational resilience of the BSE, the immediate impact has been felt and witnessed in the decline of secondary market activity and reduced primary market activity in terms of new equity listings.
A total turnover of P3.6 billion was recorded in 2020 compared to P4.2 billion in 2019, a decline of 14.1 percent. This was mainly on account of a 61.4 percent reduction in equity turnover relative to 2019, reflecting the challenges of implementing investment decisions due to various events such as the subdued domestic economy and the COVID-19 pandemic.
The performance of local equities reflects, to a larger extent, the trajectory of the local economy. The operational performances of listed companies have been adversely affected by the restrictions imposed to contain the virus, among others, and this translated into lower trading activity as investors preferred to trade cautiously.
From a return perspective, the DCI registered a decline of 8.2 percent in comparison to a decline of 4.6 percent in 2019. This notwithstanding, the majority of the companies have sustained dividend pay-outs even amid declining profitability, and this has cushioned the adverse performance of share prices, meaning that the DCI total return index (DCTRI) declined by a lower amount of 3.6 percent. Thus, while prices were declining on aggregate, Tsheole says investors were still able to benefit from the dividend pay-outs and this helped to reduce the overall decline in price returns.
Despite this difficult period, the BSE has witnessed renewed appetite through corporate actions, new debt instruments and tap issuances. These have significantly lifted the profile of the exchange as a viable platform for capital raising during a pandemic. “With the rollout of our listings framework, the BSE has been able to stimulate interest among various prospective issuers which we hope can be converted into actual listings in the short to medium term,” Tsheole said.
The BSE is also working on introducing Global Depository Receipts (GDRs). “Consultations on GDR Rules were conducted by the BSE and the industry,” the CEO disclosed. “Subsequent to that, the rules were presented to the BSE Board for approval on 25th March, 2021. The rules currently sit with NBFIRA for approval.”
The BSE has embarked on projects that will pave the way for improvement of its current technological infrastructures to streamline its processes. These projects include implementation of a new clearing and settlement (CSD) system that comes with new functionalities such as Securities Borrowing and Lending (SBL), management of the Settlement Guarantee Fund, IPO processing, E-Voting for listed entities, repo management and online investor access, among others.
To complement this new CSD system, Tsheole said the BSE will also be upgrading the current Automated Traded System (ATS) to increase capacity that will ensure that the trading system is able to handle larger trades. “The upgrading of this system supports our strategy to grow the market and increase the average daily turnover levels to P18.0 million per day,” he explained, noting that both of these projects are expected to be concluded before the end of the year. “The power of technology and digital platforms cannot be overemphasised and it is inevitable that digital platforms need to be harnessed to complement the way we work and to improve connectivity and productivity.”
During the past 12 months, the BSE engaged in a rigorous stakeholder engagement exercise with listed entities to ascertain the impact of the COVID-19 pandemic on their respective sectors and individual business activity. Furthermore, the BSE used this opportune moment to solicit feedback from listed entities on critical issues that affect the market, such as regulation, market development, communication and overall experience as a listed entity.
From these engagements, Tsheole noted, most listed entities were able to raise some common concerns. “These included additional capital requirements, initiatives geared towards enhancing liquidity, cost of compliance, the need for the BSE to lobby on their behalf, dematerialisation of shares, SME development and listing of green products, amongst a few,” he said.