BSE shinesAny review of 2022 cannot be complete without mentioning the performance of the Botswana Stock Exchange (BSE), specifically its flagship platform, the Domestic Companies Index (DCI).
As at December 21, the DCI had gained 9.99 percent in the year since January, one of its strongest performances in recent years. In fact, over the corresponding period in 2021, the DCI was up 1.8 percent and in 2020 it was actually down 8.1 percent.
Even discounting the fact that 2020 was affected by the pandemic, the DCI was still down 4.5 percent over the corresponding period in 2019, and down a whopping 11.3% over the same period in 2018. In fact, the last time the DCI performed better than it did this year was in 2015, when it ended the year 11.6% higher.
The DCI’s performance this year, combined with turbulence in offshore markets and resultant declines in asset values for local pension funds, has given a boost to the BSE’s campaign for greater domestic listings. The performance also comes at a time when changes in the pension prudential rules will increase the minimum that can be invested locally to 50% from 30%.
Key Stat: 7247.8, the cumulative percent growth of the DCI since the BSE’s establishment in 1989
Banks powerThe DCI’s growth this year was led by the financial services sector, with several counters heading the list of gainers for the year. Standard Chartered Bank Botswana, First National Bank Botswana, Absa Botswana, Access Bank, and BIHL [Botswana Insurance Holdings Limited] are all on the list of gainers for the year, helping the DCI’s strong performance. By Wednesday, Standard Chartered, was up 46.4% for the year since January, one of the strongest performances by a domestic counter in recent years.
FNBB, meanwhile, was up 40%, while Absa Botswana had added 11% to the value of its shares. Access Bank and BIHL were up two percent and 1.2 percent respectively in the year to date.
The financial sector’s performance is noted by the Financial Stability Council whose recent assessment found that banks were well-capitalised, profitable and performing their intermediary roles in the economy. On the other end of the scale, pan-African microlender, Letshego Holdings gave up a strong start to the year, to drop by nearly 11% in the year to date.
Shareholder discord has resurfaced at the microlender, with a highly publicised board fallout and the axing of the CEO earlier in the year. BBS Ltd has also struggled this year, being counted amongst the worst performers on the DCI, despite recently becoming the country’s first indigenous commercial bank. Part of the bank’s troubles stem from a December 2021 decision by the International Finance Corporation to call in its P260 million funding of the BBS, reportedly due to delays in converting to a commercial bank. The BBS this week said operationalising its banking licence strategy would require significant capital and operational spending, a statement likely to add to investors’ concerns.
Key Stat: P271.3 million, the market value gained by Standard Chartered Bank Botswana on the DCI this year
Budget balanceThe country’s path back to fiscal stability received a boost earlier in the year with the final figures of the 2021–22 budget indicating a small surplus of P104 million, the first positive performance in the fiscus since the 2016–17 financial year. Figures shared by the Finance ministry indicated that the rebound in mining activity, particularly around diamonds, helped the budget recover to a surplus from a steep P16.4 billion deficit in the pandemic-hit 2020–21 financial year.
The surplus for the 2021–22 budget came against a forecast P10.2 billion deficit which would have represented 5.09 percent of Gross Domestic Product (GDP), once again breaking government’s own fiscal rule of limiting deficits to four percent of GDP. The latest figures from the Bank of Botswana are also positive for fiscal stability, as the first five months of the 2022–23 budget have produced a P3.45 billion surplus, again helped by the strong performance of diamonds. Finance Ministry technocrats still expect a P7.7 billion deficit in the current financial year, much of it stemming from the inflation relief measures effected in August, which are due to reduce tax revenues flowing to government.
Key Stat: P3.2 billion, the fourth quarter 2021–22 budget surplus, which is the highest quarterly performance since at least 2016–17
Coal smouldersJindal Africa, the operator of the Mmamabula Energy Complex, was named the preferred bidder to build a 300-megawatt coal-fired project which is expected to be the last fossil-fuel-powered electricity government will ever purchase.
The Minerals and Energy ministry confirmed that Jindal had beaten other shortlisted firms, who included Minergy Limited and Sese Power, to a contract which is conservatively estimated at more than $1 billion (P12.9 billion). Maatla Resources, which was also on the shortlist, pulled out of the tender earlier this year due to challenges in accessing funding. Of the four shortlisted firms, Minergy was expected to be a nose ahead of the field as it already has a demonstrated coal mine in operation, while the other bidders had to prove both coal mining capacity and power station readiness.
The year was seminal for coal producers and developers, as Russia’s invasion of Ukraine set off a global energy crisis, which reignited interest in the ‘dirty’ mineral. Producers such as Minergy and Morupule Coal all reported significantly higher sales, as they were able to pioneer previously untested export routes to offshore markets. Shumba Energy, which previously announced that it was prioritising its renewable projects such as solar, also reported interest in its coal assets from around the globe.
Key Stat: 30 years, the length of the Power Purchase Agreement government and Jindal Africa are set to negotiate
Crypto codifiedThe Non-Bank Financial Institutions Regulatory Authority (NBFIRA) licensed its first cryptocurrency operator, Yellow Card Botswana, in October, after Parliament fast-tracked the approval of the Virtual Assets Act in February. Yellow Card officials said they planned to use their position as the country and continent’s first licensed operator to squeeze out scammers and set industry standards. NBFIRA is also keenly watching Yellow Card’s operations to iron out any challenges or gaps in the law and regulations for other potential crypto licensees.
Meanwhile, the global crypto industry endured a trying year, with several established players going into insolvency, amidst allegations of fraud and financial trickery, dealing a body blow to the industry’s reputation. Values of crypto also took a beating during the year, further worsening prospects for the industry. Bitcoin, the world’s most popular cryptocurrency, has shed about 64% in value this year and with more regulators around the world tightening their screws on the industry, more tough times are on the horizon in the new year.
Key Stat: $16,868.54, the price of Bitcoin as at Wednesday, down from more than $50,000 at the beginning of the year
