The Impasse Between SMEs and Asset Managers

At the inaugural Botswana Stock Exchange (BSE) Tshipidi Investment Forum in Gaborone this week, Small and Medium Enterprises (SMEs) raised concerns that asset managers often overlook investing in their businesses. However, asset managers responded that they often work under restrictions of asset owners. “We basically execute what the institutional investors and pension funds have requested to assist them with regard to gaining exposure,” said the CEO of Botswana Insurance Fund Management (BIFM), Clair Mathe-Lisenda. [ihc-hide-content ihc_mb_type="show" ihc_mb_who="1,2,3,4" ihc_mb_template="1" ] She was participating in a panel discussion on SME development through the stock market. Because of restrictions pertaining to the mandate, she said, fund managers often do not assist entrepreneurs as they would like to. Mathe-Lisenda added that institutional investors are often conscious of ESG when considering making an investment, particularly the “G” aspect, or Governance. “When we talk about the requirements that you should present, they include at least three years of audited financial statements,” she noted. “This speaks to the ‘G’ that institutional investors request from us as asset managers.” According to Mathe-Lisenda, audited financial statements, though often expensive, are an important requirement to establish if there is an investment case or not. The Managing Director of Kgori Capital, Alphonse Ndzinge, said like other asset managers, they are constrained by the mandate given to them by asset owners. “But in terms of principle, we support SMEs 100 percent,” he asserted, noting that Kgori Capital has assisted SMEs with trade financing in the past, nevertheless. For his part, the Managing Director Ninety-One, Martinus Seboni, proffered the advice that the BSE should consider adopting the practice of the Johannesburg Stock Exchange (JSE) of segregating listed companies according to size but devising its own guidelines because the JSE is much bigger than the BSE. The Minister of Trade and Industry, Mmusi Kgafela, had earlier cited a study undertaken by the Botswana Institute for Development Policy Analysis (BIDPA) in 2002, (SMEs Make the Cornerstone of Botswana’s Economy) according to which SMEs “account for 50 percent private sector employment”. Delivering the keynote speech at the forum, Minister Kgafela said SMEs also play a key role in economies globally, especially in emerging markets. He emphasised that it is essential to create a favourable environment that allows SMEs to realise their potential as engines of growth. “To-date, financial constraints of SMEs have a negative impact on their growth of potential businesses,” Minister Kgafela said, adding this affects employment creation and economic diversification. He underscored access to capital from formal credit markets, saying this is “pivotal to the survival of the SMEs”. The minister acknowledged that financing has been dominated by financial banks traditionally, but noted that there is a growing emphasis on diversifying the range of financing options. The minister pointed out that platforms such as the BSE are considered an opportunity for financing. “In addition to financial constraints, one of the key challenges facing SMEs in Botswana is lack of corporate governance structures,” he asserted, alluding to issues of ESG. [/ihc-hide-content]

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The Impasse Between SMEs and Asset Managers

While SMEs also want to be considered by asset managers for investment, this hardly ever happens because asset managers operate under the restrictions of asset holders who emphasise good governance and other principles

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The Impasse Between SMEs and Asset Managers

While SMEs also want to be considered by asset managers for investment, this hardly ever happens because asset managers operate under the restrictions of asset holders who emphasise good governance and other principles

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