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SMME’s encouraged to list on BSE to raise capital

Botswana’s SMME’s have been encouraged to list on the Botswana Stock Exchange(BSE), to raise capital to pursue investment opportunities domestically, regionally and internationally thereby contributing to economic growth and employment creation.

“Our SMME’s, should harness the abundant opportunities presented by domestic and global economies. Our private sector, especially the SMMEs, should position themselves by listing on the Botswana Stock Exchange, in order to service the increasingly sophisticated needs of the growing middle-class in Botswana and further afield,” said Vice President, Mokgweetsi Masisi in official opening remarks at the BSE’s 2nd Annual Listing and Investment Conference Thursday.

He said, “The Government of Botswana has demonstrated its commitment to the development of the capital market. This has been achieved by maintaining a stable macroeconomic environment whose main elements include sustainable fiscal balances, low inflation and a competitive exchange rate system.”

Masisi revealed that SMME’s are part of the target sector for the Economic Stimulus Programme (ESP) and over 300 citizen companies have been awarded tenders for ESP projects with a total of 18,789 people directly employed as at the end of January 2017.

“We have witnessed the closure of some mining businesses due to depressed global commodity prices; the most significant being liquidation of BCL and Tati Nickel Mines. This has adversely affected our national economy, communities near those mines and those who are now left without employment,” said Masisi.

He said, “There is however hope as prospective investors have shown keen interest in the BCL Mine. Three mines are scheduled to start operations during 2017 and we have witnessed an upsurge in diamond sales during the last two quarters.”

By increasing the number of listings, the liquidity of local markets will be enhanced, attracting more participants to local capital markets and facilitating efforts to make Botswana Stock Exchange to become a World Class Securities Exchange.

According to officials Africa with an estimated middle class population of around 1.1 billion people by 2060, represents a hug opportunity. African markets are also more accessible due to improving governance, political stability, economic growth and investment in economic infrastructure.

The issuance of the bonds, with their attendant costs, at the time when the country was running budget surpluses, allegedly demonstrated Botswana’s Government’s commitment to the developing capital market as a potential source of capital for serious businesses.

Botswana is now ranked 71st out of 140 countries according to the Global Competitiveness Report of 2015-16, generated by the World Economic Forum with its macroeconomic environment ranked 9th globally which remains one of its competitive strengths.

According to the Organisation for Economic Cooperation and Development (OECD), Small, Medium and Micro Enterprises (SMMEs) make up over 95 percent of enterprises and account for 60 to 70 percent of jobs in most OECD countries. In essence, SMME’s are an important panacea to economies like ours where job creation and economic diversification are a national priority.

Although Botswana ranks better relative to Sub Saharan Africa in the pillar of Financial Market Development, as per the Global Competitiveness Report of 2016/2017, a lot more work is needed to adequately serve the SMME sector. In particular, there is a greater need to position SMME’s for funding at every stage of their development. Traditional lending institutions, being largely conservative, have an inclination to provide financial resources to SMMEs in their later stages of development. As such, other institutions have to step in to fill this gap.

Research has proven that a substantial and disappointingly unacceptable number of SMMEs fail during the first few years of operations with most crippled by lack of access to growth capital as well as cash flow problems.  The stock market is one avenue for promoting access to capital.

The awareness, especially among entrepreneurs, about the prevalence and value of the stock market is another issue. Hence, the BSE has found it fit to develop strategic initiatives aimed at addressing the knowledge gap among businesses about the value of accessing the stock market.

At 34 percent of GDP, the domestic companies listed on the BSE represent some of the biggest enterprises in Botswana and some have expanded beyond borders to further growth and diversify, aided by the ability to access deeper pools of capital through the Stock Exchange.

“As you would be aware, the aim of this listings conference, is to open up the BSE to the business community and bring together the BSE and private companies, listed companies and experts in the capital market to discuss the value added to a private company by - listing on the Stock Exchange and the steps involved in the listing process. It also intends to shed some light on preparatory processes of listings, amongst several other topics of note as detailed in today’s programme,” said Lieutenant General Tebogo Masire, Chairman of the BSE Main Committee.

He said, “We have decided to afford the audience the opportunity to hear from owners of unlisted businesses about their perception of the value of listing on the BSE and also get to hear from institutional investors about how they believe companies should position themselves to be attractive for funding.”

 

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