According to the Bank of Botswana, Botswana’s economy has to grow by 6.7% to escape the middle income trap, achieve a high income status and realise the aspirations of Vision 2036 – Towards Prosperity for All.
However, the current economic projections point to growth of no more than one percent. Amid the prevailing fiscal pressures, thought leaders concede that it is more vital now than ever before to spur private sector growth in order to transform and diversify the economy, and position it for faster growth.
At the just ended 17th National Business Council, held in Francistown from 26 – 28 August, thought leaders gathered to come up with resolutions that could transform Botswana’s economy, under the theme “Invigorating Economic Transformation through Private Sector Growth”.
The Botswana Stock Exchange (BSE)’S acting CEO, Kopano Bolokwe, speaking as a panellist on the topic of “Spurring Private Sector Growth through Privatization”, conceded that one of the ways of transforming the economy and growing the private sector is by listing State Owned Enterprises (SOEs) on the Stock Exchange.
“The kind of SOEs that Botswana has are large enterprises with sizeable assets, such that their listing on the BSE could not only develop the capital market but could also grow the size and the diversity of the private sector,” he said.
He alluded to the listing of Botswana Telecommunications Corporation Limited (BTCL) in April 2016 as having contributed to the growth in the size of the BSE, and to the growth in the number of investors. Bolokwe highlighted that there is a direct correlation between privatising SOEs by way of listing on the stock exchange, the growth of the size of the market and the growth of the private sector.
He pointed to research conducted by the World Bank on the Impact of SOE Listings on Capital Market Development in Emerging Markets, which showed significant increases in the stock exchanges in Egypt, Morocco, Nigeria, Kenya and South Africa as a result of their privatisation programmes.
Bolokwe also expressed that the impact of listing more SOEs on the stock market is that more citizens become financially included and economically empowered and that government tends to experience less pressure in terms of having to provide financial support to SOEs and therefore saves money that is deployed into development projects.
“The dividend paid by a listed company is a way of distributing wealth to nationals and to government in the case of listed SOEs. In addition, a listed SOE provides government the opportunity to raise finance on a continuing basis by selling some stake to the public,” he explained.
Data from the BSE indicates that there are a number of SOEs that are already issuing bonds on the BSE, and therefore are very familiar with the BSE listings requirements and have built relationships with the advisors and intermediaries in the capital market ecosystem. They also have support from government in so far as raising capital on the BSE is concerned, as well as from investors who invest in these bonds. Thus, these SOEs could find it easier to list equity on the BSE if a listing is considered to be an appropriate method of privatising them.
Research from the World Bank on the subject matter indicates SOE listings in African countries tend to be oversubscribed, implying that there is usually more demand for their shares than the supply. This was also the case with BTCL which was oversubscribed by 1.68 times, meaning that the public demanded over 776 million shares compared to the 462 million shares that were available for sale. The BTCL listing has been recognised as one of the largest and most historic initial public offerings (IPOs) in Botswana.
In July 2024, BTCL released an impressive set of financial results for the full year ended 31 March 2024 and announced a total dividend payout of 23 thebe per share, comprising of a special dividend of 15.3 thebe per share and a final dividend of 7.7 thebe per share. The company has paid more than P1 billion in dividends since listing.
Reflecting on this, Bolokwe added that there is an established positive relationship between SOE listings and wealth creation or wealth distribution. Since listing, Batswana have received close to P500 million as income from BTCL, and this is in addition to the returns from price movements as some sold their shares when the share price went above the listing price. In a similar vein, government, which owns 51% of BTCL, has received just over P500 Million in income since listing as well of hundreds of millions of Pula in income taxes paid.
“This shows that if more and more SOEs are listed on the BSE, government could save a lot of money that is ordinarily paid out as subventions, could receive significant income as the point of listing, and could also receive material incremental income from these entities as they seek to grow their revenues and pay taxes, and also grow their profits and the value of their shares and rewards shareholders through dividends.”
Bolokwe pointed that government is providing a conducive environment for invigorating private sector growth and economic transformation, advising that SOEs must take advantage of this disposition to engage more with government and communicate their vision to transform their entities into thriving public-private owned and listed entities.
He commended government for enabling the transformation of the BSE from a parastatal to become a public company limited by shares, and for supporting its aspirations to be a listed company on the BSE.
The acting CEO reassured the participants that is it clear that government understands its role as being a facilitator of economic transformation and of a private sector-led economy by being a strategic investor where SOE listing is concerned.
“Understandably, the majority of these SOEs could be considered strategic assets which would ordinarily be difficult for government to let go of.
“What we appreciate is that government has well organised shareholder rights and compacts that are focused on advancing value creation, accountability and high performance and such a focus is important to facilitate the transformation and evolution of SOEs without undue jeopardy to the SOEs’ role as a public good.
“This is what we are seeing with the BSE, which has since 2018 been able to balance its commercial objective of generating profits for shareholders without unduly undermining its role as a public good by potentially putting its commercial interests first to milk its users and customers”, Bolokwe said.
As one of the resolutions in respect of spurring private sector growth through SOEs listings, Bolokwe advised that shareholders must adopt best practices when taking SOEs public, which include promoting competitive neutrality by not imposing ownership restrictions in order to allow for price discovery, a better valuation and vibrant investor participation. He said this helps to build a track record and gain investor confidence and public support for future SOE privatisations.
He added that any successful SOE listing has a potential to inspire other SOEs, and even unlisted private companies, that it is indeed possible to undertake a listing on the stock exchange and reap the benefits of listing.
“Botswana has a large and sophisticated domestic institutional investor base who devote expertise and resources to analyse these opportunities and invest in them,” he said.
“The country has no capital controls and has an impressive number of foreign investors.
“It has a large SOE pipeline as seen from the Privatization Masterplan, with some already having a presence in the capital market by way of bonds.
“All these factors bode well for successful listing of SOEs and capital raising, and must be fully exploited to invigorate economic transformation through the private sector and to spur private sector growth through privatisation.”
