From Gaborone to Wall Street: BSE opens global markets to local investors

The Botswana Stock Exchange has dual-listed three Satrix funds, giving local investors one-click access to the S&P 500, MSCI World and MSCI Emerging Markets with no offshore account required. 

In this interview, Staff Writer KEABETSWE NEWEL speaks to BSE’s Kopano Bolokwe who unpacks what these three products actually are, what they cost, who they suit and what they mean for both individual investors and the exchange’s broader ambitions

Q: Could you explain the mechanical structure of these newly listed ‘feeder’ ETFs, and how they bridge local retail capital in Botswana pula directly into international underlying indices like the S&P 500 or the MSCI World?

A: Structurally, each of these three instruments is a “feeder fund” meaning a fund that does not buy the underlying shares directly, but instead pools investor money and channels the entire pool into one existing offshore fund.

·      For SXB500, that offshore fund is the iShares Core S&P 500 UCITS ETF; 

·      For SXBWDM it is the Amundi Core MSCI World UCITS ETF; 

·      For SXBEMG it is the iShares Core MSCI EM IMI UCITS ETF. 

That underlying fund is the one that actually holds the shares, including Apple, Nvidia, TSMC and so on, in the market and currency in which they trade.

On the BSE side, the mechanics an investor experiences are the same as trading any other locally listed share: 

·      Units trade continuously during market hours in Botswana Pula and 

·      An appointed market maker (Sanlam Private Wealth) together with a local liquidity provider (Motswedi Securities) stand ready to quote buy and sell prices. 

·      The daily unit price, or Net Asset Value, is simply the value of the underlying offshore fund converted into Pula at the prevailing exchange rate so pricing is mechanical and transparent rather than something set independently by the manager. 

·      Standard Chartered Bank acts as trustee, providing an additional layer of custodial oversight over fund assets. 

In practice, an investor instructs their usual BSE member stockbroker, pays in Pula and never has to open an offshore account, apply for exchange control clearance, or convert currency themselves because that complexity is handled inside the fund structure.

One trade in Pula on the BSE gives an investor a slice of the global fund, which owns the real shares abroad.

Q: The three listings cover distinct global territories – Developed Markets, Emerging Markets, and the US large-cap space. What specific asset classes, sectors, and geographic regions are investors buying into with each individual ETF?

A: Satrix S&P 500 Feeder ETF (SXB500): focused exclusively on the United States, this ETF tracks the S&P 500 Index and gives investors exposure to approximately 500 large-cap US companies, representing around 80 percent of the US equity market. Sector exposure is heavily weighted towards Information Technology (38 percent), followed by Financial Services (11 percent), Communication Services (10 percent) and Consumer Discretionary (9 percent). Major holdings include Nvidia, Apple, Microsoft, Amazon, Alphabet, Meta and Tesla.

Satrix MSCI World Feeder ETF (SXBWDM): This ETF provides exposure to developed markets across 23 countries. While the US accounts for roughly 73 percent of the index, investors also gain exposure to Europe, Japan, Canada, Australia and other advanced economies. Sector allocations are led by Information Technology (30 percent), Financial Services (15 percent) and Industrials (11 percent). The fund offers exposure to many of the world’s largest multinational companies, including Apple, Nvidia, Microsoft, Amazon and Meta.

Satrix MSCI Emerging Markets Feeder ETF (SXBEMG): This ETF targets developing economies through exposure to more than 3,000 large-, mid- and small-cap companies across 24 emerging markets. Geographic exposure is concentrated in Taiwan (27 percent) and South Korea (22 percent), with the balance spread across markets such as China, India, Brazil and South Africa. Sector exposure is led by Information Technology (41 percent), Financials (17 percent), Consumer Discretionary (8 percent) and Industrials (8 percent). Key holdings include Taiwan Semiconductor Manufacturing Company (TSMC), Samsung Electronics, Tencent, Alibaba and SK Hynix.

Q: Passive investing is widely celebrated for its cost efficiency. What is the expected cost structure or Total Expense Ratio (TER) for these local listings, and how does it compare to a local investor trying to build an offshore portfolio manually? 

 A: The Total Expense Ratio (TER) is the all-in annual cost of running the fund, i.e. it bundles the underlying management fee together with costs such as audit, custody and other operating expenses into a single percentage of the fund’s assets. 

It is deducted automatically from the fund’s value over the year; investors never receive a separate invoice for it. 

Illustrative Example of manually building one’s own off-shore portfolio:

To put 0.25 percent in perspective: on a P10,000 investment, that is roughly P25 a year. 

It is worth setting that against what “doing it yourself” actually costs. Opening an account with an offshore broker typically involves a currency conversion spread of around 1-2 percent each way, per-trade brokerage of the order of USD 5-15 per US share purchase. 

Ultimately, this adds up quickly if buying 20 or 30 individual shares to approximate an index and an ongoing offshore platform or custody fee that is often in the 0.3 percent-1 percent per year range on top of any underlying fund fees. 

There is also the practical friction of exchange control clearance, offshore tax reporting, and reduced local recourse if something goes wrong with an intermediary outside Botswana’s regulatory perimeter. 

As such, a BSE-listed ETF replaces all of that with a single, locally regulated, Pula-denominated product with one visible fee.

Q: Local investors historically carry a heavy domestic concentration risk. In practical terms, how do these global equity options change the risk-return dynamic for a typical local investment portfolio? 

A: It is worth separating retail and institutional investors here, because the starting point for each is different.

Retail investors in Botswana do typically show strong home bias: personally-directed savings tend to sit in domestic property, local unit trusts and direct local equity holdings. For this investor, adding a global ETF meaningfully changes the risk picture. 

A simple illustration: two investors, both with P100,000.

If the local market has a difficult year, Investor B’s global slice which is spread across dozens of countries and thousands of companies is very unlikely to move for the same reason, so their overall portfolio takes a smaller hit. That is diversification doing its job: not eliminating risk, but ensuring one bad domestic year does not sink the whole portfolio.

Institutional investors are a different story, and it is important to get this right: Botswana’s large institutional pools of capital including pension funds, insurers and asset managers, already lean offshore and have done for years. This is not a gap in their strategy; it reflects the fact that Botswana’s domestic market is comparatively shallow, with a limited number of listed companies and bonds. Local pension and retirement funds have therefore historically had to look beyond Botswana’s borders to find enough scale, depth and diversification to meet their return and liability-matching objectives, operating within the offshore allocation limits set by prudential investment guidelines.

For this audience, what these ETFs change is not so much diversification because institutional investors already have that, but rather efficiency and access.

A BSE-listed feeder ETF lets a pension fund or insurer gain the same S&P 500, MSCI World or MSCI Emerging Markets exposure it might otherwise access through an offshore mandate or foreign asset manager, but through a locally listed, Pula-denominated, transparently priced and BSE-regulated instrument, often with simpler operational and reporting overhead than a bespoke offshore allocation.

In short, retail investors gain a diversification option they largely did not have while institutional investors gain a cheaper, simpler route to diversification they were already pursuing offshore.

Q: Since these ETFs are priced and tracked locally in Botswana Pula but track foreign-denominated assets, how do fluctuations between the Pula and major global currencies (like the US Dollar) impact investors?  

A: Even though the ETF trades on the BSE in Pula, the underlying assets it holds, being S&P 500 companies, MSCI World or MSCI Emerging Markets constituents, are priced in US dollars (or other foreign currencies, depending on the index). The ETF’s Pula price is effectively a translation of that foreign-currency value into Pula at the prevailing exchange rate. So, an investor’s total return has two separate components layered on top of each other: the performance of the underlying index in its home currency (for example, how the S&P 500 does in USD), and the movement of the Pula against that currency over the same period. A local investor’s actual return is therefore approximately index return plus the currency return, with some compounding effect between the two.

This creates currency risk but also potentially currency diversification benefits. For Botswana-based investors whose wealth and income are mainly linked to the local economy and currency, exposure to foreign currencies can provide a hedge against periods when the Pula weakens.

An emerging market index requires a different risk tolerance than a developed market tracker. Below is a profile of the ideal retail and institutional investors investors for each of these three instruments based on time horizon and risk appetite.

Q: The BSE has witnessed robust momentum in ETF turnover recently. How exactly are these new global instruments expected to drive fresh trading liquidity and increase day-to-day engagement from retail day traders.

A: There are three concrete mechanisms at play here, rather than a general assumption that new products automatically mean more activity: 

New trading occasions: Previously, a Motswana investor wanting S&P 500 or global exposure had no BSE-listed way to act on that. Whatever trading did happen, happened through an offshore broker, entirely outside the BSE’s order book. Every unit of these three ETFs bought or sold from here on is incremental turnover the BSE would not otherwise have captured.

Two-sided market making: Each ETF has an appointed market maker (Sanlam Private Wealth) and local liquidity provider (Motswedi Securities) contractually obligated to continuously quote both a buy and a sell price close to Net Asset Value. This differs from an ordinary domestic share, where liquidity depends purely on natural buyers and sellers meeting each other; here, the market maker’s obligation keeps spreads tight and ensures a counterparty is available even when retail demand is thin, which is what allows a retail investor to trade in small size without materially moving the price.

More reasons to check the market: Because these funds track fast-moving global benchmarks including US tech earnings, Federal Reserve rate decisions, Asian manufacturing data, they give existing and new BSE account holders a reason to look at prices, and potentially trade, more frequently than a domestic share that might move mainly around results season or dividend announcements.

Taken together with the growing retail participation already seen on the BSE’s ETF board, this supports the exchange’s broader ambition set out in its 10X strategy, which aims to grow overall market turnover and depth.

Q: Securing secondary listings from established issuers like Satrix is a major achievement. How does this successful issuance improve the BSE’s visibility, and what is the pipeline strategy for attracting more global fund managers to list on the BSE?

A: Landing Satrix matters because of who Satrix is: one of the largest and most established ETF issuers on the continent, with index licensing relationships (S&P, MSCI, iShares, Amundi) and a regulatory track record that reassures both regulators and prospective co-issuers. 

Their willingness to dual-list here functions as a kind of due-diligence pass as it signals that the BSE’s listing requirements, its custodial framework (with Standard Chartered Bank acting as trustee), and its settlement and market-making infrastructure are all fit to support an internationally recognised issuer, not only domestic companies.

That reference point becomes central to the BSE’s conversations with the next prospective issuer. Rather than asking a global fund manager to be the first mover into unfamiliar market infrastructure, the BSE can point to a live, functioning, liquid Satrix listing as proof of concept. 

Each successful listing lowers the operational and reputational risk perceived by the next issuer and this is how a smaller exchange typically builds critical mass: sequentially, proof point by proof point, rather than all at once. 

This listing sits within the BSE’s broader 10X strategy to deepen and diversify the exchange’s product base, and the exchange has indicated its intention to continue engaging additional global asset managers and index providers as part of that pipeline.

Q: A historical challenge for Botswana has been local capital leaving the country in search of global returns. Do these local-access global ETFs help plug that gap by keeping investment capital circulating within the domestic exchange infrastructure?

A: Historically, Botswana investors seeking global equity exposure generally had to invest through offshore brokers, offshore funds, or asset managers’ foreign mandates, meaning much of the trading activity and related revenue took place outside Botswana’s market infrastructure.

The listing of global feeder ETFs on the BSE changes this by allowing investors to access international markets through locally listed instruments. While the underlying exposure remains offshore, trading, settlement and custody occur locally, helping the BSE retain trading activity, liquidity and fee income while keeping local brokers and asset managers involved.

However, these ETFs do not necessarily keep capital invested within Botswana’s economy. The underlying investments still provide exposure to foreign companies and may even make offshore diversification more attractive and accessible. As such, they are better viewed as a “capture the flow” solution, thus keeping the mechanics of investing onshore, rather than keeping the capital itself at home.

Importantly, these products can also serve as a foundation for a broader ETF market. The BSE’s longer-term ambition includes Botswana-focused ETFs linked to sectors such as diamonds, agriculture, tourism, or baskets of domestic companies. Such products could deepen the local capital market and give investors opportunities to gain exposure to Botswana’s own economic strengths through transparent, tradable investment vehicles.

Q: The listings are framed as a step toward positioning the BSE as a world-class securities exchange. Strategically, how do these global listings advance Botswana’s competitive edge against larger regional peers like the JSE?

A: These ETF listings strengthen the BSE’s strategic position in several ways.

1. Broader product offering: the exchange moves beyond a market historically known primarily for domestic equities and bonds, giving investors access to US large-cap equities, developed-market equities, and emerging-market equities through a single local exchange. This represents a meaningful expansion of what Botswana investors can trade without leaving the BSE’s infrastructure and aligns closely with the BSE’s 10X strategy, which seeks to significantly grow the scale, depth, liquidity and relevance of Botswana’s capital markets.

2. Increased investor participation: retail and institutional investors who previously had to look exclusively offshore to meet their international allocation needs can now do so through BSE-listed instruments, which helps deepen local market activity, turnover and broker involvement rather than losing that flow to foreign brokerages or platforms.

3. Growth of the ETF ecosystem: ETFs are among the fastest-growing segments of financial markets globally, and by expanding its ETF board, the BSE aligns itself with the direction leading exchanges have already taken toward low-cost, transparent, diversified investment products, rather than relying solely on bespoke domestic listings.

4. International market integration: the listings also support the BSE’s ambition to position itself as a globally connected African exchange. By offering exposure to internationally recognised benchmarks such as the S&P 500, MSCI World and MSCI Emerging Markets, the BSE strengthens its relevance to both local and international investors and creates a bridge between Botswana’s capital market and global investment opportunities, allowing investors to access international returns through a locally regulated platform. This enhances the exchange’s credibility, visibility and competitiveness while advancing the objectives of its 10X growth strategy.