Financial markets operate on the principles of integrity and confidence, Botswana Stock Exchange CEO, Thapelo Tsheole, has noted.
“When you take your money to invest, you need to be taking it to a credible institution and an institution in which you are sure your money is safe,” he said on Thursday this week in Gaborone at the Invest in Botswana seminar held at the US–Africa Business Summit.
Tsheole said this is why the local bourse has accredited itself to a number of international institutions where it conforms to international rules, requirements and regulations. “We are a member of the World Federation of Exchanges (WEF) and therefore operate in the same league as the top exchanges in the world,” he disclosed.
In charge of US$1.5 trillion
“We also hold the presidency of all African exchanges for the next two years, based on our growth and credibility, in charge of about US$1.5 trillion markets and 1500 companies.” Most importantly, he added, the BSE subscribes to the sustainability of stock exchanges and therefore issues surrounding ESG and sustainability are at the core of its business.
Further, with Mauritius and Johannesburg stock exchanges, the BSE is one of three exchanges in Africa that have been given accreditation by the UK’s revenue customs in terms of recognition for tax issues by UK investors. “To get through all these memberships, we needed to put in place a lot of effort in terms of the way we do business and the way we regulate our market,” Tsheole asserted. “We are now an international stock exchange.”
First for macroeconomic environment
Tsheole told potential investors at the seminar that Botswana has been rated number one in the whole world in terms of its macroeconomic environment.
“This is very important for financial stability and for financial markets and is therefore a big advantage for us to receive your money as investments or for you to come and do business in Botswana and expand into the rest of the region,” he said. But most importantly, he added, Botswana is one of the countries that do not have exchange controls. “But in practical terms, it might be difficult to happen like in other countries, especially if you don’t have adequate financial resources, like foreign reserves to support your financial currency movement,” Tsheole noted. “The Pula itself is one of the currencies in Africa that is predictable and that can be priced in advance.”
Strength of the Pula
By doing so, he emphasised, investors can move their money at any point in time, which means they can invest and later take their profits out of the country.
“It is very crucial because in other emerging market economies, you can put money in but the money that you make in that country remains until you are given the authority to take it out,” he pointed out. This, he said, makes Botswana one of the most attractive countries for investment in Africa. Given the strength of the Pula, investors are assured of putting their money in a proper and stable currency relative to the US Dollar and are therefore likely to get competitive returns. “That is why we are saying bring your money to Botswana.”
Safe for investors
Tsheole pointed out that over the years, the BSE has been able to attract companies better than its counterparts in other countries. The Botswana bourse has 31 equities made up of foreign and domestic companies, five Exchange Traded Funds, and 46 bonds. But it is participation of foreign investors in the BSE that its CEO is keen for investors to take note of. In 2022, he explained, the BSE had a participation of 34 percent foreign investors.
“This is the lowest we have ever achieved,” Tsheole noted. “In good years when interest rates are not high in developing markets, we normally hover around 55 percent of foreigners coming into our market.” He pointed to this as a good indication that it is safe for investors to bring their money to Botswana. “Therefore, we urge you to bring a lot of money into our economy,” he said, adding that another important factor is that Botswana has a strong pension industry.
Same as Kenya
“In actual fact, we export 70 percent in terms of our savings as a country,” he said. “As such, when you are a company looking to establish in Botswana, you can come and raise capital in Botswana, which will enable you to expand into the rest of the region.
“We offer that advantage as a country, mainly because we have a pension industry of about US$ 12 billion.” To put that into perspective, he explained, Botswana has a population of about 2 million people while Kenya has a population of 54 million people, but the pension fund in Kenya is about US$12 billion, which is the same as that of Botswana.
Springboard to global markets
Yet another factor is that the last few years have witnessed a trend where companies come to establish their headquarters in Botswana. “Companies come here and set up, produce in Botswana and expand to the rest of Africa,” Tsheole said. “The headquarters is in Botswana because it is good to do business here. This is what we are encouraging you to do.”
He disclosed that one of the BSE plans going forward is to unlock the potential in capital markets. “We are going to be allowing a lot of dual listings,” he said. “A lot of ESG and sustainable finance. There is going to be a lot of work based on that in addition to what is happening. “As a stock exchange, we will be taking it a step further in terms of self-listing in order to operate at a much more international level than we are.” The BSE is also buoyed by the commitment from the government in terms of privatising some of the state-owned entities to put more activity in the economy.
P13bn in pension funds
Tsheole said there is a huge opportunity because an estimated P13 billion belonging to pension funds will be coming home in the next few years. “This money will be looking for domestic investments, which includes investors coming here to set up companies to raise capital and expand into the rest of Africa or even doing import substitution,” he said.
More exciting is that Botswana has joined the African Exchanges Linkage Project (AELP), which is a group of nine African stock exchanges where tradability of stock exchanges is going to be made very easy. “We will be able to have investors based in Botswana able to buy shares in Kenya or Nigeria; based in Botswana and using a Botswana broker,” Tsheole said. “Even in Nigeria or Kenya, they will be able to buy shares in BSE-listed equities.”
