Stanbic raises P150m through bond placement
Mbongeni Mguni | Monday March 27, 2023 06:00
The latest bond, which carries a 9.15 percent fixed rate and matures in March 2028, was listed on the Botswana Stock Exchange (BSE) last week. With the placement, Stanbic now has nine outstanding bonds issued under its P2 billion programme, which dates back to May 2008.
In a market circular issued by the BSE, Stanbic said the latest bond’s proceeds would be for “general corporate use,” a broad description which analysts said could touch on treasury activities.
Stanbic’s placement comes as activity picks up in the local bond market, where another corporate issuer, the Botswana Savings Bank, raised P192 million through the floating of four notes. The bonds, also a private placement, were part of the BSB’s P1 billion note issuance programme announced last March.
Rates on both Stanbic’s and the BSB’s appeared to be a touch high, a situation analysts said was due to the need for the issuers to beat inflation and the returns being offered by government’s bonds.
Government, through the Bank of Botswana, returns to the market today (Friday), seeking P500 million through the issuance of three bonds. The central bank will offer P100 million of 2043 bonds, the longest maturing on the market, as well as P200 million each in the 2031 and 2027 bonds.
Government doubled its domestic debt ceiling to P30 billion in September 2020 and increased its auctions to monthly from quarterly, as it sought funds to shore up the budget, amidst the pandemic’s impact on public finances. At the time, the Government Investment Account (GIA), which acts as a fiscal buffer in difficult times, had dropped to an all-time low in December 2020 and has been recovering since.
Finance Minister Peggy Serame recently told Parliament that government and the International Monetary Fund were working on strengthening public finance management, in light of high public spending, widening deficits and the drop in the GIA.
“It is anticipated that the outcome of this process will be a fiscal rule that supports a fiscal consolidation path that will underpin a long-term fiscal strategy of re-building financial buffers to cushion the economy against potential exogenous shocks,” she told legislators.
In her budget speech in February, Serame said the Finance ministry was revisiting a fiscal rule under which future recurrent budgets would be solely funded from non-mining revenues, while 60% of the country’s mineral earnings would be reserved for projects and skills development.
Under the rule, 40% of mineral revenues in any particular financial year would be saved for future generations, through investment in the Pula Fund managed by the Bank of Botswana.
The budget has been running deficits since 2017–2018, peaking at P16.4 billion during the pandemic. This has eroded government savings and increased its debt pile while forcing Batswana to pay higher taxes, levies and others.