The Botswana Stock Exchange Ltd (BSEL), Africa’s third largest bourse by capitalisation, has unveiled an ambitious plan to ramp up its equity and bond listings, while spreading its product offerings into novel vehicles such as global depository receipts.

The 20-year-old exchange has 34 listed companies and 49 bonds, the former listed across various platforms including venture capital and a small and medium enterprises offering.

Documents made available to the press show that the BSEL plans to grow its listed entities to 45 and its bonds to at least 50, by 2021.

A major part of the growth strategy includes a publicity and financial literacy campaign aimed at potential listees, pension funds and private entities holding capital as well as ordinary members of the public, who have traditionally shied away from participating in the local market.

The exchange is holding bi-annual listings conferences that are already well attended by the private sector and individual investors, while an affiliate body, the Botswana Bond Market Association, has equally ramped up its activities in order to attract more listings particularly from the government and the private sector. The awareness campaign is supported by world-leading infrastructure to support the programmes offered, which include a London Stock Exchange-installed automated trading system and a state of the art Central Securities Depository.

“However, the biggest challenge that we fear should our market continue to remain shallow is the under-utilisation of this capacity as a result of poor uptake of instruments and services by the investing community,” said BSEL chief executive, Thapelo Tsheole, writing in the bourse’s annual report for 2018 released last month. “My plea is that we all pull our weight from our various points towards the evolution and sufficient development of this market.”

FALLING YIELDS

The ambitious plans, however, are facing a stiff challenge from the prolonged trend of falling yields on the BSEL, particularly its flagship Domestic Companies Index, which hosts 24 companies representing the cream of local sectors such as finance, retail, tourism and property.

According to data, the DCI’s total capitalisation in the past five years peaked in 2015 at P50.2 billion ($4.7 billion) but by 2018 had fallen to P42.4 billion (3.9 billion), with analysts pointing to difficult trading conditions for listed entities. Last year, the DCI shed 11.4 per cent in value, compared with a 5.8 per cent loss in 2017 due to reduced earnings by most listed entities.

Most of the loss in 2018 was on the back of a 76 per cent drop in the Choppies’ share price on September 28, after the regional grocer failed to submit its annual financials.

Any hopes that the five year downward trend on the DCI would be broken this year, evaporated after the recent release of statistics showing that for the half year to June 30, the DCI lost 3.34 per cent.

“Most stocks lost ground between April and June 2019, with the biggest losers shedding almost half of their value,” analysts from Stockbrokers Botswana wrote in a research update released on Tuesday. “Liquidity remains tight. The lifeline of trading volumes and turnover has been bulky transactions occurring every so often such as delistings.

They added: “Market capitalisation came down to P40.8 billion ($3.8 billion), versus P42.4 billion in December 2018, largely attributable to the share price decline of 19 companies. At the end of the second quarter, valuations gave a weighted price earnings ratio of 11.3 xs and a dividend yield of 5.3 per cent higher than the first quarter’s five per cent as a result of lower share prices.”

The BSEL is taking comfort from data showing that dividend pay-outs have remained attractive despite the share price drop.

“To the delight of the investors, companies maintained attractive dividend payouts with a dividend yield of 5.5 percent in 2018 versus 5.1 per cent in 2017,” Mr Tsheole noted.