Generally, the importance and presence of individual or retail investors in the stock market is well recognized by stock exchanges. By and large, stock exchanges have developed specific initiatives to attract retail investors, to increase their level of participation, and most importantly to increase the quality of their participation by ensuring that they are “well-informed” or “educated” and have access to the necessary technology that appeals to the retail market segment. The quality of the focus on the youth, considered to be anyone up to the age of 35, has been improving overtime with an increasing number of the educational and technological innovations targeted specifically towards them in order to build generational legacies of young and growing investors, who are a larger percentage of the demographic, in order for them to get access to economically empowering opportunities in the stock market whilst supporting entrepreneurship and economic activity through capital formation and allocation.
“The stock market is for everyone, young and old and just anyone who is interested to participate at varying amounts of monies. This makes the BSE a very crucial institution in democratising finance and in promoting economic empowerment opportunities to the general population. In that sense, we strive to have an investor base that is very diverse and heterogeneous comprising of both institutional and retail investors. Within the retail segment, we want to see a strong participation of young people and I am pleased that they are indeed coming through. If you look at the numbers published by the BSE, 10 percent of the P1.8 billion traded in 2019 came from local individuals. That is a remarkable P180 million by individual Batswana, the highest amount we have ever seen in the history of the Exchange. Individual Batswana have historically invested tens of millions of Pulas 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. If you drill further down, junior residents who are Batswana under the age of 18 invested P1.8 million in 2019. These numbers are a clear testimony of two things; (i) the BSE continues to do an impressive job in terms informing and educating Batswana about investing; and (ii) the BSE has developed initiatives which are tailored for young people and these initiatives are paying off”, explained Tsheole.
In April 2019, the BSE won the Best Education Initiative in Africa award which was awarded by SRP, beating the biggest exchanges in Africa such as the Johannesburg Stock Exchange, Nigeria Stock Exchange, The Egyptian Exchange and the Nairobi Securities Exchange, to mention but a few. Tsheole attributed this to the support of the government in terms of ensuring that the BSE has had enough resources overtime to undertake market development initiatives across the country. He added, ‘’In Botswana, information about the stock market is provided free of charge unlike in many other markets. Actually, some stock exchanges do not even undertake public education initiatives, they leave that to the brokers to undertake. For us, public education and financial literacy is our strategic initiative as it supports a lot of other key strategic initiatives. Therefore, we always want to ensure that we are visible in Botswana, in cities, in towns and in rural villages, that we spread the message on television, radio stations as well as publications”.
Tsheole chairs the Market Development Working Group of the African Securities Exchanges Association (ASEA), which is responsible for promoting investor activity and attracting issuers to African stock exchanges. A study conducted by Tsheole’s Working Group under ASEA in 2018 titled “Comparative study on attracting listings and investors in African exchanges” highlighted that African exchanges are faced with common challenges such as low levels of financial literacy, poor savings, inadequate investment culture and lack of awareness about the importance of the stock market. The study highlighted a number of initiatives being deployed by individual exchanges to address these challenges.
“One of our flagship initiative, which actually played a key role in winning us the Best Education Initiative in Africa award, is the Secondary Schools Finance and Investment Competition. This initiative is the crucial for building Botswana’s well informed and active investor base of the future. As a competition among secondary schools, it is accessible to all secondary schools in Botswana, public and private and we have seen extensive participation by all the schools since we launched the initiative in 2016. On average, in the finals of the competition we have 10 schools, each comprising of 4 students, from which we select the top 3 schools or 12 students who are awarded vouchers to buy shares of their choice on the BSE, through a broker of their choice. This is very powerful in terms of enabling access to investment opportunities for young people and at grassroots level. Going forward we are even pushing for the capital market subject to be included in the school curriculum in order to capture them young”.
According to Tsheole, education of young people and young Batswana plays both an economic role and a social role as it improved awareness about the stock market and general financial literacy levels lead to better savings and investment decisions, ultimately resulting in better livelihoods and the upliftment of the national economy. A research report by the World Federation of Exchanges (WFE) in 2017 titled “Enhancing retail participation in emerging markets” expands on this, arguing that “From a social perspective, having individuals directly invested in the stock market may contribute to a greater democratisation of finance. Well-functioning exchanges contribute positively to broader economic growth and development. They do this by mobilising savings towards productive enterprises. To the extent that individual citizens can participate in this, they tap into the country’s growth story. In addition to the positive economic benefits, this may also provide the exchange with a certain social licence to operate, meaning that the exchange is viewed, not as something remote from ordinary citizens, but rather as contributing positively to individuals’ ability to realise their aspirations. By enabling broad-based wealth creation through financial inclusion, the exchange achieves a potentially higher degree of public legitimacy and relevance”, the report outlines.
What comes out clearly from this WFE report is that stock exchanges have a natural and indigenous role to facilitate citizen economic empowerment. Initial Public Offerings (IPOs) provide immense opportunities for everyone, especially young people given that most of them occur at fairly affordable share prices as the company comes to the market for the first time in its existence to open up to public shareholders. University students are therefore able to invest some of their allowances in these opportunities. Quite evidently, a general decline in stock market performance also provides similar entry opportunities as young people are again able to pick up shares at very affordable prices, on the expectation that such shares will recover over time. “Unlike institutional investors such as pension funds, young people and individuals have the liberty to enter and exit the market willy-nilly as they are not tied to long-term investment mandates. With this they bring vibrancy, liquidity and price discovery to the stock market, impacting price movements from time to time as they trade even with small amounts of money and just a few shares. This is something that fund managers love to see, to an extent that when they decide to invest in IPOs they actually want to see a larger investor spread comprising of individual investors. I think with this in mind, it gives us an idea there is a consistent need to broaden the private sector through privatisation of State Owned Entities (SOE) in order to enable our larger population, which is predominantly young people, to support the capital requirements on our public enterprises and play a role in easing the burden of financing on government”, Tsheole contended.
Globally, the youth have demonstrated immense competency and acumen in developing viable enterprises and listing them on the stock market. In the US, the surge in the technology industry in recent times has been primarily driven by young innovators such as Mark Zuckerberg of Facebook, and cohort. According to Tsheole, this trend is visible elsewhere in the world including in Africa and Botswana. He emphasised, “The potential for young people in Botswana to create and list businesses on the BSE is also huge, which is why we formulated the Tshipidi SME Board to facilitate small businesses to list. We went on to formulate the Tshipidi Mentorship Programme in 2019 to build a pipeline of potential SMEs that can list on the BSE, and these are very credible, resilient, innovative and well-run business by young people that have potential to list in the medium to long term”.
One of the biggest challenges to young entrepreneurs and SMEs worldwide and even locally is access to finance. As SMEs play a crucial role in Botswana’s competitiveness, economic growth, economic diversification and in creating sustainable jobs, the government of Botswana has adopted the “Botswana Business Environment Doing Business Reforms Roadmap” to support SMEs by reforming laws to create an enabling environment for them to access capital. The core of this program is the establishment of the national collateral registry which will facilitate secured transactions. The main impact of the collateral registry is to enable entrepreneurs and SMEs as well as larger business to begin to use movable assets such as cars, furniture, livestock, farm produce, equipment in their factories as collateral against loans unlike in the current environment where only immovable assets such as property are widely accepted as collateral for loans.
Commenting on this notable reform, Tsheole pointed out that the BSE and the CSDB have come forward in positioning themselves as the potential partners or operators of the national collateral registry as they see synergies with the kind of infrastructure they operate, their expertise in securities markets and their mandate in promoting SME access to finance. Quoting anecdotal evidence from a World Bank study, Tsheole mentioned that more than half of the private enterprises in emerging markets have no access to credit, adding that this percentage is even higher and reaches up to 80 percent in the Middle East and Sub-Saharan Africa. However, he said, research has shown that once a national collateral registry is established there is an increase in the level of credit extension, averaging 60 percent as a percentage of gross domestic product compared only 30 to 32 percent for countries without such a framework. In the process the number of firms that can access credit increases and the cost of credit also declines. “This is crucial in strengthening the private sector, fostering a private sector-led economy and enabling companies to scale to an extent that they become attractive candidates to list on the BSE. I therefore expect this project to bring immense benefits to the youth who have demonstrated an inclination towards innovative entrepreneurship. In my view, the future looks bright for potential listings by youth in the future taking into account the potential impacts of this project and the enabling regulatory developments on the BSE with respect to the Tshipidi SME Board”, he added.
The recent developments at the BSE including a new website with modern visuals and data analytics as well as the mobile app are some of the ways the Exchange is gearing itself to appeal, attract and retain youth investors and businesses. “Young people are technologically savvy and they prefer to see information on-the-go, as such these developments are expected to widen the reach of the BSE to a broader audience, particularly to young people, with the benefits not only accruing to them but also to listed companies given the vibrancy that a diverse investor bases creates in a market”, he highlighted.