Total deposits held by commercial banks increased to P83.9 billion in April, up from P79.9 billion in March. This represents an increase of P4 billion or 5.1 percent.
According to data released by the Bank of Botswana (BoB), deposits held by the central government, local government, resident businesses and non-resident businesses went up by P72 million, P634 million, P1.1 billion and P6 million respectively. Within the resident businesses category, deposits held by private businesses rose by P1.57 billion while those held by parastatals decreased by P403 million.
While businesses accounted for 73.4 percent of total deposits compared to 23.5 percent for households, households deposits have increased the most by value, at P2.2 billion.
Since the outbreak of COVID-19, there has been a high level of uncertainty about future economic prospects, motivating people to save more and spend less. Overall credit extension for banks has been growing slower than deposits. The Bank of Botswana (BoB) shows that in April, credit growth only grew by P564 million. While deposits stood at P83.9 billion in April, banks’ credit was P66.2 billion.
COVID containment measures (lockdowns) have been making it extremely difficult for households to spend their earnings coupled with government partly maintaining the incomes of others. Deposits were concentrated around the time government imposed lockdowns. For example, total deposits held by commercial banks increased by P2.375 billion or 3.1 percent from P77.257 billion in March 2020 to P79.632 billion in April 2020.
The lockdowns imposed by government may have also impacted on luxury services by some of the country’s high income earners, which contributed to deposits rising. High-income earners with discretionary spending often spend their share of income on services that were heavily affected by containment measures. These include travel, restaurants and festivals, all of which were either banned or restricted.
As households appeared to be parking money in banks, market data by the Botswana Stock Exchange (BSE) shows that individual trading on the stock exchange reduced, although marginally. In 2020 alone, local institutional investors combined with local individual investors and accounted for 60.4 percent of trading activity in 2020 compared to 66.6 percent in the previous period.
According to the BSE, this indicates that the share of foreign investors in trading activity increased to 39.4 percent from 33.3 percent in 2020 versus 2019 respectively. Further analysis indicates that this was primarily on account of net sell-offs by foreigners as the risk aversion heightened due to the pandemic, an observation that was consistent across most African markets.
The BSE showed that local individuals’ contribution to turnover reduced in 2020 from 9.9 percent to 9.5 percent. So did the value of their monetary net investments which amounted to P66.2 million compared to P178.5 in 2019. However, these percentages show a great improvement compared to the previous years as the average for the past five years by local individual investors amounts to 6.7 percent, which is lower than the 9.5 percent for 2020.
During the first half of 2021, local companies contributed 62.4 percent to total equity turnover or P182.8 million in monetary terms while local individuals contributed 7.4 percent or P21.7 million in monetary terms during the period under review. Foreign companies contributed 24.1 percent or P70.5 million to total equity turnover while foreign individuals and brokers contributed 5.9 percent (P17.4 million) and 0.1 percent (P0.2 million) to equity turnover respectively.
In 2020, listed companies experienced the challenges brought about by the pandemic, particularly on the back of national lockdowns and restrictions in movement, suppressing stock prices. Four companies (compared to 11 in 2019) registered positive price changes, 18 (compared to 10 in 2019) registered negative price movements and two (compared to three in 2019) closed the year with share prices back to their end of 2019 levels. Experts usually advise investors to buy when prices are low for them to benefit as they appreciate, combined with dividend payouts. There are several companies that experts believe are trading at attractive prices relative to their long prospects and other available local alternatives.
As it appears, most listed companies have factored in the effects of COVID on their operations and are now showing recovery. As with other markets, the Domestic Company Index (DCI) continued with its momentum of gains from April and May, adding 0.5 percent in June to end the second quarter of the year with a depreciation of 3.7 percent, compared to a depreciation of 5.1 percent in the first quarter of the year. Of the 30 companies, 12 depreciated in share price, nine appreciated in share price while nine experienced no share price change.
In America, investors are all in on the stock markets. According to a report by the Wall Street Journal, individual investors are holding more stocks than ever before as major indexes climb to fresh highs. They are also reportedly “upping the ante by borrowing to magnify their bets or increasingly buying on small dips in the market”.
Wall Street reports that stockholdings among US households increased to 41 percent of their total financial assets in April, the highest level on record. “JPMorgan’s Nikolaos Panigirtzoglou, who analysed the data, attributed the elevated allocations to appreciating share prices alongside stock purchases,” the report says. The enthusiasm came after markets edged lower. Investors have become optimistic, influenced by expected rosy earnings and recovery of the economy.
According to the CEO of the BSE, Thapelo Tsheole, only 10 percent of the P1.8 billion traded in 2019 came from local individuals. However, Tsheole believes it is a remarkable P180 million by individual Batswana, the highest amount that they have ever seen in the history of the BSE. “Individual Batswana have historically invested tens of millions of pula in the stock market, and with the increasing number of investors in the market who are now at 94,000, we have also seen an increase in the amount of money being invested in listed companies on the BSE,” he explained. “If you drill further down, junior residents, who are Batswana under the age of 18, invested P1.8 million in 2019.”
Retail investors’ interest in the market has certainly picked since Choppies listed. This was further cemented when BTCL listed as their widespread roadshows sensitised a lot of people regarding the stock market and how it can be used to build wealth. The BSE has also been aggressive in its roadshows of raising awareness of this. But it seems a lot more needs to be done as far as educating the public is concerned.