Whilst the last Initial Public Offer (IPO) on the BSE was at least seven years ago, the local bourse’s dry spell has been helped by secondary equity listings, various types of debt listings and the introduction of innovative products such as Exchange Traded Funds.
Turnover, which is the value of shares traded, as well as liquidity, has also been rising on the BSE.
The exchange’s head of Market Development, Thapelo Moribame, told BusinessWeek that the local bourse was working on the equity listing, which is due in the fourth quarter. She declined to give details on the company or sector it belongs to.
“While I cannot share the name of the company due to privacy restrictions, we are expecting an equity listing around November this year and another one next year from the local market. “We have been working hard as the exchange to attract companies to list, especially the family-owned enterprises who have had many years of operations,” she said in an interview on Tuesday.
Equity listings, particularly via IPOs, are important for the bourse as they provide investors with an opportunity to channel capital into diverse assets, mainly for long-term gains. They also boost the financial sophistication of the local market.
However, primary equity listings have been an uphill task for the BSE mainly because of the cost associated with making a company public. A report published by the BSE on the cost of listing revealed that professional fees which include legal fees, accounting fees and others, were the greatest cost contributors that impeded listings on the exchange.
Changes to the Retirement Fund Act have made it essential for the local capital market, especially the BSE, to develop more products and attract new listings. The amended Act includes provisions for the repatriation of part of the billions of pula in pension funds currently invested offshore.
Speaking during the Botswana Insurance Fund Management (Bifm) annual market update on Wednesday, Imara Capital CEO, Gregory Matsake, said that the market desperately needs more equity listings to ease pressure on the money market that cannot absorb all the returning funds.
According to Matsake as it stands, returns in the local money market have been slashed from an average of seven to nine percent to 4.5 percent on average because of high capital injections into the market. Matsake further said that demand for viable asset classes to channel the funds into has been pushing the prices of stocks up in the bourse causing the need for more and increased listings.
“When you look at the price of blue chips, prices have been going up due to money supply outstripping the availability of equities available to absorb capital. Local pension funds already own the majority of listed equities and there is much more capital being pumped in,” he said.
