Archive for the 'Botswana' Category

Africa issuers raised $341m in 6 months, down 28%

Enterprises based in Africa raised $341 million through equity issues in the first half of 2019, down 28% on the $472m raised in the first half of 2018. Law firm Baker McKenzie has published its Cross-Border IPO Index for H1 2019, using data sourced from Refinitiv, and says this was mainly because only $85m was raised from 4 initial public offers (IPOs) on African exchanges, down 80% from $419m from 4 IPOs in the first half of 2018.

The numbers exclude mega issues by Africa-focused issuers based outside Africa. These include $750m raised on 28 June by the IPO for UK-headquartered Airtel Africa (read about the slow first day) which operates in 14 countries; and $196m raised by pan-Africa e-commerce Jumia Group (headquartered in Germany) on the New York Stock Exchange in April, see our article about the share price performance since then. Jumia sells in 13 African countries and is top e-commerce website with over 15m monthly visitors in Nigeria.

Wildu du Plessis, Head of Capital Markets at Baker McKenzie in Johannesburg, says in a press release: “The drop in African IPO values in H1 2019 was mostly because of political and economic uncertainty on the continent. Investors wanting to raise capital in Africa are thinking twice and waiting for political and economic stability to return before going ahead. Also eroding investor confidence in Africa are the escalating global trade tensions, which have culminated in, for example, the so-called United States (US) China trade wars and the possibility of a “no deal Brexit” – both have the potential to impact African economies significantly.”

Egypt buzzing

Listing bell and trading floor of the Egyptian Exchange

Baker McKenzie says Egypt is generating buzz around its pipeline of IPOs with some speculating this could be the busiest year for listings in Cairo since the uprising in 2011. Growing confidence in economic policies introduced since the currency float has boosted the Egyptian Exchange (EGX) and is prompting companies to consider share sales.

In April Khalid Abel Rahman, Assistant Minister of Finance for Capital Market Affairs, said the Government was embarking on an IPO programme is to raise EGP100bn ($5.8bn). Mohamed Farid, Chairman of the Egyptian Exchange, said that three private companies expect to launch initial public offerings (IPOs) before the end of 2019,

Baker McKenzie says a large IPO is Carbon Holdings Ltd, expected to raise $250m by selling a 30% stake and listing in London and Egypt. The company has missed the Q2 timetable mentioned by Karim Helal, Managing Director of Corporate Finance and Investor Relations, in this article last September. EFG Hermes is acting as advisor and global coordinator for the IPO, Baker & McKenzie is local legal counsel, and White & Case is international counsel.

Another large IPO is expected from Banque du Caire SAE, owned by Egypt’s second-largest state-owned bank Banque Misr. The bank has announced it will offer a 20%-30% of its shares for sale through private placement and public offering. The offer is expected to raise $300m-$400m and is forecast to happen in Q3 or Q4.

Hard work in South Africa

Du Plessis warns that governance concerns held back capital raising in South Africa: “Capital raising has decreased substantially in recent years, also due to economic and political uncertainty. Political stability will hopefully begin to return now that country’s elections are over, but there is still a lot of work to do to stabilise the economy. The World Bank recently downgraded South Africa’s growth rates and I think there is at least another year of hard work before the economy starts to recuperate and capital markets in South Africa recover,” Du Plessis says.

Life returns in Nigeria

Du Plessis adds: “There are also signs of life returning to Nigeria’s capital markets. Political instability was also to blame for a big collapse in capital raising in Nigeria in recent years, but the country looks to be recovering”. Baker McKenzie’s recent Global Transactions Forecast predicts more IPOs in Nigeria in the next 3 years. “Hopefully this is the start of a long upswing in capital raising activity in the country,” says Du Plessis.

Not specifically mentioned was the $5.1bn listing of MTN Nigeria on the Nigerian Stock Exchange (see article), which is expected to be followed by a public offering of shares soon.

By sector (details from Baker McKenzie, Enko Capital and other sources)

Energy and power: South African company Renergen Ltd, which produces natural gas and helium, in an IPO in Australia offered 12.5m shares at AUD0.80 to raise AUD10m ($7m) for its Virginia Gas Project in South Africa. Financial: Banking group Oragroup listed on the Bourse Régionale des Valeurs Mobilières (BRVM) in April after a successful IPO in Oct-Nov 2018, selling 20% of the shares to raise XOF56.92bn ($101.2m) in the largest share offer on the BRVM.
Technology: It was reported by Enko that telco Mascom could do an IPO in Botswana later this year and Econet’s Strive Masiyiwa says it will be in October and will be the biggest listing on the Botswana Stock Exchange, according to this report. Namibia’s MTC (Mobile Telecommunications Corporation) has announced plans for an IPO in Mar-June 2020.
Real estate: ICON Properties PLC’s IPO last December in Malawi raised $19.3m, and the shares were listed on the Malawi Stock Exchange in January.
Industrial: Skyway Aviation Handling Co (SAHCOL) in Nigeria launched an IPO in November 2018 but only raised NGN1.2bn ($3.4m) compared to a target of NGN1.9bn ($5.2m) despite extending the offer until January. It listed on the Nigerian Stock Exchange on 24 April.
Healthcare: Speed Medical SAE raised EGP21.5m ($1.3m), less than half its target in a domestic IPO before listing on the Egyptian Exchange in April. Consumer: Eastern Tobacco, listed on the EGX, announced in March that it had raised EGP1.7bn ($104m) through offering 4.5% of its shares in public and private offers.

Global Outlook

The Africa picture mirrors a global 37% fall in capital raised through IPOs in global markets, compared to the first 6 months of 2018. According to Baker McKenzie, a total of $69.8bn was raised across 514 IPOs, which is the lowest for value and volume since 2016. The US Federal government shutdown, continuing trade tensions between the US and Beijing, the ongoing Brexit saga and the decline of mega IPOs all contributed to a slower market performance. “With fewer IPOs in the market, competition amongst exchanges is growing, as some listing locations make strategic changes to entice public offerings. The introduction of China’s Science and Technology Innovation Board looks set to shake up the market and challenge New York and Hong Kong for tech listings. “

Koen Vanhaerents, Baker McKenzie’s Head of Global Capital Markets, says: “.. significant political issues stifled activity, along with a change in investor sentiment towards risk – particularly among pre-revenue companies.” The decline “is perhaps skewed slightly when compared to the stellar performance seen in the same period in 2018. With a strong pipeline, H2 2019 looks set to deliver a much more prosperous performance overall.”

EMEA outlook

The EMEA IPO market struggled during the first 6 months of 2019 due to uncertainties surrounding the UK’s exit from the European Union. Overall capital raised fell by 67% compared to the same period in 2018 to $9.2bn while the number of IPOs fell by 61% to 47. Cross-border activity was even more profoundly impacted with only three listings in EMEA and only one of those on the London Stock Exchange. Domestic activity levels helped the London Stock Exchange to retain the top spot for overall capital raising at $2.7bn from 12 listings. Seven of these listings were from the financials sector and raised almost $2bn, the largest of which was Network International’s $1.4bn IPO.

Second to London was Borsa Italiana with $2.3bn from 7 listings, boosted by the $2.2bn Nexi SpA listing. SIX Swiss exchange pulled in $1.9bn from 2 IPOs, with Stadler Rail’s debut accounting for $1.3bn of that.

Despite its sluggish performance, EMEA is proving to be the region of choice for FinTech listings, particularly in the payments field, as the age of digitization and cashless transactions continues to explode, fueling the need for innovation and technological growth. FinTech listings accounted for more than a third of capital raised and the largest listing was Nexi SpA’s IPO.

IPO report 2 – African companies raised $2.2bn in 2018

Africa-focused companies raised $2.17 billion via 18 share offers (IPO) and listings in 2018, but the number is down 25% from $2.89bn raised in 2017 with 26 share offers and listings. According to asset manager Enko Capital, the slowdown was driven by “unfavourable market conditions”.

The Egyptian Exchange had 4 IPOs in 2018, and Ghana, Morocco and South Africa had 2 IPOs each and Botswana and Uganda one each. Six Africa-focused companies also offer shares through IPO on foreign exchanges in London and Australia. The offers included 2 IPOs linked to exits by private equity firms, continuing a trend to develop this as an exit route for private equity growth investors in African enterprises.

Enko Capital adds that the African exchanges enjoyed another 16 new listings in 2018, of which 7 were listing by introduction (down from 8 in 2017), 6 were cross listings (5 in 2017) and 3 were spin-offs as a company separated a part (4 in 2017).

The total number of listings for Africa-focused firms was 34 in 2018 (43 in 2017).

Botswana’s December bank listing

On 13 December 2018, African Banking Corporation of Botswana Limited (BankABC) successfully listed on the Botswana Stock Exchange following an IPO which raised BWP361.05 million ($33.90m). It is Botswana’s fifth largest bank in Botswana by assets and has over 60,000 customers and 330 employees. The IPO featured 180,525,000 shares or 24.9% of its share capital at BWP2.00 each.

Bank ABC is a subsidiary of Atlas Mara through ABC Holdings Limited, also incorporated in Botswana, which is the parent company of a number of sub-Saharan Africa banks operating under the BancABC brand in Botswana, Mozambique, Tanzania, Zambia and Zimbabwe and a group services office in South Africa. The group was formed through mergers and acquisitions and offers personal, business and corporate banking as well as asset management, stockbroking and treasury services.

Egyptian education provider listed Sept

The Egyptian listings included an IPO of some 14.5m shares of Egypt’s Cairo for Investment and Real Estate Development company (CIRA) which was 18.9 times oversubscribed in September 2018. There was also a private offer for 192.5m shares which was 10.6 times oversubscribed, according to this story from African Markets website. The total offer was 207m shares at EGP6.00 each for a total of EGP1.2bn ($70.7m). CIRA is a private education provider in Egypt, targeting both the K-12 and the higher-education segments in six governorates, the main selling shareholder was the Social Impact Capital Ltd, according to Egypt Today.

Africa set for $3.1bn boom in IPOs

Law firm Baker & McKenzie forecasts that African initial public offers (IPOs) of shares will raise over $3.1 billion in 2016 with 15 IPOs in the pipeline. The firm says in a press release that Egypt, Nigeria and South Africa are likely to be the busiest exchanges, despite the commodity price headwinds, and that Africa’s fourth exchange for IPOs is.. London.

The 15 IPOs in the pipeline are set to beat the total raised in 2015 by 21 African IPOs by $1.5bn, nearly doubling the total raised that year and more than raised for the while period 2011 to 2013. The last time initial share offers raised this much capital was 2010, when $4.4bn was raised.

Deals include:
• Tanzania’s Dar es Salaam Stock Exchange plans to self-list this year
• Botswana Telecommunications Corporations Limited is Botswana’s biggest IPO so far and closed on 4 March
• Egypt has been building up a backlog of delayed deals and many could come to market in coming months, including retail, financial services and food sectors. The Government is also rumoured to be preparing the first privatizations of state owned enterprises since the programme was stopped in 2011, after a boom 2004-2006 when privatizations helped annual economic growth of 7%. One example could be state-owned United Bank of Egypt, a lender with assets of $3.6bn.
• Nigeria’s pipeline looks reasonable for later in the year in the tech, telco and transport sectors
• South Africa will see 2 or more deals, after 9 IPOs in 2015
• Mauritius continues to act as Africa’s offshore financial centre, equity offerings include rights issues and private placements as well as IPOs
• Rwanda predicts 3 IPOs this year
• Blueline is a west African train project which aims to list in Paris, promoted by French tycoon Vincent Bolloré
• Markets are watching with keen interest the progress by the East African Securities Exchange Association seeking to fast-track integration of their markets, which may unlock demand among issuers while increasing liquidity.

Most active sectors for last 5 years were power, real estate, financial services and healthcare. As the markets broaden, there is growing interest in consumer staples and technology, as the growing middle class demand more sophisticated services.

Koen Vanhaerents, Baker & McKenzie’s Global Head of Capital Markets, commented: “These are challenging economic times for those of Africa’s economies dependent on commodities for much of their income, while so-called “hot money” flows out of emerging market funds investing in Africa. So it is positive to see steady progress in Africa’s equity capital markets, with a strong pipeline so early in 2016 and potentially larger deals than we’ve seen for some time.”

baker+mackenziegraphics160307_IPOs

London remains the key global financial centre for Africa. Edward Bibko, head of B&M EMEA Capital Markets Practice, said: “There’s enormous pent up demand among issuers to conduct capital raisings, particularly in Egypt, which is showing strong growth and the emergence of a larger middle class. The wider continent still faces challenges and there is little local institutional investment or retail demand other than in the biggest economies. This means larger companies have to dual-list in a global financial centre like London, as well as their home market, to avoid volatility driven by the fact that skittish international investors make up the majority of market activity.” As mentioned earlier, Interswitch plans the first $1bn tech listing, probably a dual listing in London and the Nigerian Stock Exchange, although this may be delayed until early 2017. Mauritius headquarters Essar Energy raised $1.9bn, the largest sum ever by an African company when it listed in London in 2010.

Other equity deals include:
• Real estate fund Tadvest’s dual-listing in Mauritius and Namibia
• Mauritian retailer Compagnie des Magasins Populaires’ recently announced $4 million rights issue
• Atlantic Leaf Properties’ $70m private placement of equity listed on Stock Exchange of Mauritius.

This video broadcast on 7 March on CNBC features Wildu du Plessis, Partner at Baker & McKenzie, with some interesting ideas and very useful regional breakdowns.

Botswana supermarket raising $48m in JSE dual-listing

Botswana supermarket chain Choppies Enterprises Limited has launched a roadshow this week to raise $48 million and dual-list on the main board of the JSE Ltd on 27 May. It is offering to sell 117.4m new shares and 160m shares from existing investors.

Choppies was founded in 1986 and now operates 125 stores in Botswana, South Africa and Zimbabwe and employs over 11,000 people. It hopes to expand in Tanzania and Zambia, while Kenya and Namibia have also come up in reports.

The listing will be a secondary inward listing, so far only a few African companies have taken advantage of this opportunity offered by the JSE. The share price will be finalized after a roadshow which began on 11 May and a book-build run by Rand Merchant Bank. The offer should raise about R574m based on the current share price on the Botswana Stock Exchange.

Choppies store (credit Chronicle, Zimbabwe)

Choppies store (credit Chronicle, Zimbabwe)

Mr. Ramachandran Ottapathu, Group CEO said in a press release: “This is a really exciting moment in the life of the company. The listing on the JSE gives us further impetus for our ambitious growth plans. We are on track to have over 200 stores by the end of next year and we will be opening our first stores in Zambia and Tanzania by mid-2015. Choppies is a strong cash-generating business that has traditionally supported our organic growth of new store openings. The listing will allow us to fast-track the continued roll-out of new stores, unlock opportunities in new markets and fund acquisitions where opportunities arise.” Full details of the offer are available at their investor portal.

Media coverage on Reuters, Bloomberg and Business Day highlights the growth but adds that South African retailers Shoprite and Spar Group are also going after middle-income consumers in African markets. Bloomberg says it trades at 24x estimated earnings, compared to 21.4x for Shoprite and quotes Sasfin senior equity analyst Alec Abraham: “If Choppies can raise money at this price-to-earnings ratio, good for them. But it’s a very competitive space and companies are having to really invest to keep their market share.”

According to the company, Choppies has seen superior growth over recent years with a compound annual growth rate of 27% in total revenues from BWP2.4 billion for the year to 30 June 2011 to BWP5.0bn for the year to June 2014. Earnings before interest, tax, depreciation and amortisation (EBITDA) have grown at a CAGR of 19% to BWP352m in 2014, from BWP207m in 2011.

Mr. Ottapathu said: “We continue to establish ourselves in areas where we see great potential with the transition to branded convenience. We have the benefit of many years of experience identifying the right places to start up new stores for our target market. Our differentiated approach of partnering with local operators and sourcing from local suppliers provides us many advantages as we expand into new markets”.

Choppies locates its stores near taxi ranks and bus routes and is not in large shopping centres, Ottapathu told Bloomberg it has not experienced “significant pressure” on sales in South Africa. “We see growth opportunities in the current markets in which we operate and the retail penetration of the markets we are going into is low,” he said.

JSE launches futures trading for 3 African currencies

South Africa’s Johannesburg Stock Exchange (www.jse.co.za) has launched currency future instruments which will help investors and businesspeople looking to hedge against African currency movements. The 3 new currency futures are the first to track exchange rate between the rand (ZAR) and Nigeria’s Naira (NGN), Kenya Shilling (KES) and Zambia Kwacha (ZMW).
The move will allow investors, importers and exporters to protect themselves against the currency movement in the foreign country. The JSE has partnered with Barclays Africa and specialist brokers, Tradition Futures, to bring this new offering to market.
A press release from the JSE quotes Andrew Gillespie of Tradition Futures: “It is a groundbreaking development to have a transparent, independent, well-regulated platform to mitigate or assume FX (foreign exchange) risk in these African countries, against any other currency of their choice – that does not prejudice anyone, irrespective of size, domicile or nationality.

Representatives of JSE, Reserve Bank, Kenya and Zambia open trading in African currencies (credit: JSE)

Representatives of JSE, Reserve Bank, Kenya and Zambia open trading in African currencies (credit: JSE)


“The ability to transact anonymously, through specialist brokers such as Tradition Futures, and to have access to full and fair, timeous price discovery is an international benchmark requirement for a developed market. This allows for a level and fair playing field, where the best price is available to all, without bias or favour, which is a significant facet and feature of this market in African FX on the JSE.”

Guide to African currencies (see www.charterresource.org/african-currencies)

Guide to African currencies (see www.charterresource.org/african-currencies)


The JSE already offers futures against the ZAR in: USD (contracts of $1,000), Euro, Sterling, Australian dollar, Japan Yen, Canada dollar, New Zealand dollar, Chinese Renminbi, Swiss Franc, Botswana Pula and a couple of custom instruments. See the helpful brochure available here.

How they work
A currency futures contract is an obligation to buy or sell an underlying currency at a fixed exchange rate at a specified date in the future. For example, a futures contract can give an investor the right to buy USD at ZAR10 per USD1 at the end of December. One party to the agreement is obligated to buy (longs) the currency at a specified exchange rate and the other agrees to sell (shorts) it at the expiry date. A futures contract is therefore an agreement between two investors with different views on the way or extent a currency will move.
The underlying instrument of a currency future contract is the rate of exchange between one unit of foreign currency and the South African rand. The value of the futures contract moves up and down with this exchange rate – the level of the exchange rate determines the value of the futures contract. Currency futures contracts therefore allow participants to take a view on the movement of the exchange rate as well as to hedge against currency risk. Currency futures are used as a trading, speculating and hedging tool by all interested participants.
The new JSE futures contracts will provide the market participants with the ability to get exposure on the JSE to the exchange rate between the USD and the Zambian, Kenyan and Nigerian currencies through trading synthetic cross-currencies. For example, investors can get exposure to the exchange rate between the USD and the KES by trading both against the ZAR. To promote cross-currency trading the JSE will charge trading fees on only one of the foreign trade logs and not both.

Boosting African trade
The currency futures were launched on 3 October. The press release quotes Warren Geers, General Manager: Capital Markets at the JSE: “The JSE is very excited about this new groundbreaking initiative as we have been working on this strategy for 2 years. With Africa being a global investment destination it makes sense for the JSE as a major exchange player in Africa to be involved in providing appropriate products to mitigate currency risk and exposure when dealing in Africa.”
Trade statistics from the South African Revenue Service (SARS) show trade between South Africa and Nigeria totalled R34.4 billion, between South Africa and Zambia was nearly R18bn, and between South Africa and Kenya amounted to R4.6bn for for January-July 2014.

For more information, look at the currency futures details on the JSE website.

Top performances for USD investors at Africa’s stock exchanges

Malawi came out as Africa’s top-performing securities exchange for USD-based investors over 2013, with a strong 62.4% return over the year to 31 December. According to data published by the excellent website, www.investinginafrica.net, 8 out of 13 African exchanges surveyed beat the 29.6% return achieved by the key US S&P 500 equity index.
Other top performers for USD investors included West Africa’s regional securities exchange Bourse Régionale des Valeurs Mobilières (BRVM) which covers 8 countries. Ghana Stock Exchange gave 44.8% return, the Nigerian Stock Exchange was close behind with 44.6% and Kenya’s Nairobi Securities Exchange scored 43.7%.
Worst performers were the Namibian Stock Exchange (-2.6%) and the South Africa’s Johannesburg Stock Exchange (JSE) with a return of -9.3%, both strongly affected by the decline in the exchange rate of ZAR currency against USD.
Prospects for African exchanges continue to look good with many African economies expected to continue strong growth in coming years and increasing deal interest. However, changes in quantitative easing in the US could lead to cash withdrawals from emerging and frontier markets including Africa.
Liquidity is a major challenge for many exchanges, according to the data by Ryan Hoover of InvestinginAfrica. Zambia’s Lusaka stock exchange only traded $0.7million of African equities a week, while Malawi and Uganda only achieved $0.8m each and Namibia $1m. Ghana was at $3.5m a week, just behind Abidjan-based BRVM which traded $4.6m, while Mauritius managed $5.7m a week, Botswana $6.2m and the Zimbabwe Stock Exchange $8.5m. Most liquid exchanges in the list (which does not include the Egyptian Exchange) include Nairobi averaging $37.1m a week, Nigeria at $106.8m and the JSE at $3.5 billion of equity trading a week.
Although Hoover lists the Dar es Salaam SE as trading a creditable $10.7m a week, a news report in the Tanzania Daily News say turnover jumped 5 fold to TZS252.3bn ($155.9m) in 2013, up from TZS50.9bn in 2012, which is equivalent to $3m a week. The paper quotes DSE’s CEO Moremi Marwa saying: “The DSE outstanding performance demonstrates the increased activities coupled with education campaigns geared at enhancing awareness that gradually made the market more vibrant”. However, the article notes there was a single transaction for TZS78.5bn ($48.5m) in Tanzania Breweries (TBL) in the third week of December 2013 as 48 deals between the International Finance Corporation and local investors which boosted local ownership and may have influenced the figures.

For the full table, check www.investinginafrica.net here:

Rise of pension giants set to transform investment in Africa

New giants are arising in African investments – the domestic pension funds. In Nigeria the National Pensions Commission (PenCom) estimated registered pensions to be worth US$14bn in June 2011, with asset values up by 8% in three months; Namibia’s Government Institutions Pension Fund alone is worth some $6bn; South Africa’s pension funds grew at a compound annual growth rate of 14.3% in US dollar terms over 10 years to December 2010, including over 28% in 2010 and Tanzania’s pension industry was audited at $2.1bn for 2010, and growing by 25% a year.

The number of pensioners is set to soar, according to United Nations figures, as the number of people over 60 years in Africa will rise from 55m in 2010 to 213m by 2050, compared to 236m Europeans over 60 years old by 2050. Current pension funds cover only 5%-10% of Africans ranging from 3% in Niger but it used to be 80% in North African countries such as Egypt, Libya and Tunisia. Pensions are not available at all in some countries.

Regulatory reforms are driving the growth of African pensions. Recent reformers include Cote d’Ivoire, Gabon, Kenya, Nigeria, Senegal and Uganda. Ghana created a National Pensions Authority with a 2010 act. Reform in Kenya, including investment guidelines and a new regulator, resulted in strong growth and good investment returns. Tanzania passed the Social Security Regulatory Act in 2008. The rising pension industry is likely to boost fund management and equity industries, exits for private equity and even to fill some of the $45bn annual funding gap for infrastructure. For instance, In January 2012, Tanzania’s National Social Security Fund signed an agreement to finance 60% of the $137m cost of building Kigamboni Bridge. South Africa’s $130bn Government Employees Pension Fund is a major investor in the Pan-African Infrastructure Development Fund which raised $625m in 2007 and is targeting $1bn on its second offering.

For more details on Africa’s pension industry, please check my article published in The Africa Report magazine and website, here is the link www.theafricareport.com and for brief profiles of 6 giant African funds, check here.

Botswana’s rise as world diamond centre – Stanchart “money laundering” woes slow P1.8bn OPIC financing

A large centre of the world’s diamond trade is moving to Botswana, the world’s top diamond producer. De Beers’ Diamond Trading Corporation (DTC) has successfully moved from London to Gaborone in August and De Beers estimates that some 32 million carats of diamonds worth US$6 billion – about 40% of world diamond sales – will be aggregated in Botswana each year. The “sights” by which De Beers sells packets of diamonds to selected buyers ten times a year, will also move to Gaborone from London.
The US Overseas Private Investment Corporation (www.opic.gov) has been trying to join the action, with a BWP1.8bn ($234m) deal to finance the 21 diamond manufacturing companies operating in Botswana, according to this report on Mmegi Online. OPIC is aiming to work with US diamond and jewellery company Lazare Kaplan Botswana. Finalization has slowed since relations between Standard Chartered bank and the US after allegations of money-laundering schemes worth $250m of Iranian funds. The deal was initially set up with ABN Amro bank, which established a Gaborone office as part of the first deal, but the stakeholders reportedly fell out.
The diamond trade switch will have a huge effect on the fast-growing Botswana economy and comes after tough negotiations between De Beers and the Botswana Government. Production from all of De Beers mines across Namibia, Botswana, Canada ‎and South Africa will be sent to Gaborone and mixed and sorted into various ‎categories before the “sightboxes” are sent to London for distribution to 66 London and two Canadian sightholders. Boxes will go to Johannesburg for 10 South African sightholders and to Windhoek for 13 DTC Namibia sightholders.
The first of 85 diamond sorters, who mix the sightboxes, have already gone to Gaborone. De Beers said the move of the aggregation operation, after nearly 80 years in London, was two months ahead of schedule, although three years since the initial deadline passed after tough and prolonged negotiations with ‎the Government of Botswana before a 10-year supply agreement was agreed in 2011.
By the ‎end of 2013, the 10 “London sights” a year will move to Gaborone and sightholders will travel. De Beers says US$22m will be invested to get DTCB Building ready for the first sight. Banks which lend to sightholders, such as ABN Amro, Bank of India and another Indian bank, are setting up and Stanchart is expanding its diamond financing division. A division of jeweller Tiffany & Co. already has cutting and polishing operations in Gaborone.

Diamond trading shift to make Botswana economy sparkle
© Sergydv | Stock Free Images & Dreamstime Stock Photos

The Botswana Government has set up Okavango Diamond Company (ODC) and this will also start selling diamonds in 2013, with the right to buy 12% allocated supply from Debswana in 2013, rising to 15% by 2016. Debswana produced 22.9m carats in 2011, so ODC would get 2.7m – 3.4m carats (US$300m – US$583m a year) to sell, rising as Debswana production climbs. It is be first time full revenue on some Debswana production will be channelled entirely to the Botswana Government and not shared with De Beers. Industry expert Martin Rapaport says ODC will be among the world’s top 6 or 7 diamond suppliers and will be able to brand “Botswana diamonds”, attracting a stream of tourists and buyers. It recently appointed diamond veteran Tony Frears as Managing Director. The sales will also provide the Government with market intelligence. ODC may eventually start trading polished diamonds. Firestone Diamonds and Lucara Diamonds have also sold rough diamonds.
OPIC’s financing is to help diamond-manufacturing companies in Botswana to finance purchase of rough for processing and help a financial sector support development of the cutting and polishing sector. According to Mmegi, there are 21 Botswana sightholders and the amount allocated will rise from the current $550m to $800m.
Philippe Mellier, De Beers chief executive, said: ‎‎“As De Beers shifts more and more of its sales operations to Botswana over the next ‎year, we will solidify the long-term future of the partnership and work to transform ‎Botswana into one of the world’s leading diamond trading and manufacturing hubs.” He added that it should not affect South Africa and Namibia’s activities “There is no risk. In fact, we believe there will be an overflow effect on South Africa’s industry and in Namibia as well.”

Botswana Stock Exchange launches automated trading

Months of hard work came to a climax when the Botswana Stock Exchange successfully launched its automated trading system (ATS) and now has live trading. This replaces the open outcry trading system and the aim is to make the BSE more visible and trading more efficient. The exchange has been using a central securities depository (CSD) since 2008 and this was upgraded alongside the implementation of the ATS.
The ATS was installed by MillenniumIT, part of the London Stock Exchange Group, after a BWP8.8 million ($1.1m) contract. MillenniumIT also installed the CSD.
The new system was implemented on Friday 24 August. The day before, Thursday 23 August, was a trading holiday, while Friday was a settlement holiday with trades settling instead on 27 August. These holidays were meant to enable the BSE to transition from the old CSD system to the upgraded version.
There is still a key target to encourage more shareholders to dematerialize their paper certificates and register them in the CSD for ease of trading. According to the BSE Annual Report, 46% of all domestic company shares and 91% of foreign company shares were dematerialized by December 2011, and so was the first corporate bond. In the annual report Chairman Patrick O’Flaherty notes “Along with the implementation of the ATS, our CSD (Central Securities Depositories) system is also being upgraded. This will ensure that the trading, clearing and settlement infrastructure of the BSE remains state of the art”.
In 2011 the BSE recorded average daily turnover of BWP4.1m. The volume of shares traded in 2011 was 458.7m, up from 308.7m in 2010. Letshego Holdings did a ten-for-one share split in 2010 and Furnmart and G4s followed suit in 2011.

INTERVIEW WITH HIRAN MENDIS, CEO OF BOTSWANA STOCK EXCHANGE
ACMN: What has the market participants’ reactions to the ATS?
HM: The response has been very positive. Automated trading is a completely new development in our market, but all market participants, particularly the brokers, have embraced the development and have basically hit the ground running. The amount of enthusiasm in the market is very humbling for the BSE.

ACMN: Were there any problems in the implementation?
HM: Apart from the normal day-to-day challenges that form part of any project, there were no major challenges. As the BSE, we had to work extra hard throughout the lifetime of the project to bring all stakeholders together and make sure that everyone is on the same page; that everyone understands and embraces the primary objective of bringing our market to par with other regional and international giants. Overall, it has been an extremely demanding but very rewarding experience for all stakeholders.

ACMN: Have you seen an increase in trading volumes?
HM: It’s still too early to say. In the first 2 days, it was quiet; probably because the traders were being cautious with the new trading platform. But turnover has since jumped back to previous levels.

ACMN: Are brokers now connecting from their offices (wide area network)?
HM: The brokers have been connecting from their offices since 2008 and this setup is still being used, even with the ATS. The networks have so far been very cooperative as we have not had any outages. The links that we have been using for WAN connectivity since 2008 have been very stable. On average, we have experienced less than 10 hours of downtime per year since 2008. About half of this downtime happened outside of trading hours.

ACMN: Can you give some technical details about the ATS and the CSD and their integration?
HM: The ATS is a trading platform, primarily responsible for accepting client orders, as input by brokers, and matching those orders on set criteria to produce trades. CSD system acts as a back-end for the ATS, handling the registry function for the ATS, together with clearing and settlement of all trades that happen at the ATS. For a client to be able to trade through the ATS, then they need to open a CSD account first. Communication between the systems is on a real-time basis and as clients buy/sell shares, their CSD account balances are updated in real time. The ATS is able to trade equity, debt, ETFs (exchange-traded funds), and GDRs (global depository receipts). Instruments that are currently actively trading through the ATS/CSD are equities and ETFs. Plans to include bonds are underway and CFDs will follow in due course. Trading currently happens from 10:30 to 13:30. The first trading session is an opening auction, followed by regular trading, then an interim auction session, then another regular trading session, which is followed by a closing auction session, and finally a closing price cross session.

ACMN: What future steps are planned – such as increased data flows, remote membership of BSE and direct market access?
HM: At this point we are more concerned with ensuring that that system continues to function according to expectations. Once the dust has settled and all stakeholders are comfortable with the system then the BSE will begin exploring availing market data in real-time to data vendors etc. After that, as a second phase of the automation drive, we will explore the possibility of Internet trading. As the BSE, we understand and appreciate that a wide spectrum of developments are now possible with an automated market. Funds and time permitting, we will build services around the CSD/ATS systems in order to turn our market into a true global player.

SADC stock exchanges work together towards links, shared skills and better visibility

The 10 stock exchanges of the Southern African Development Community (SADC) are working together to increase the effectiveness of their markets. The Committee of SADC Stock Exchanges (CoSSE) has agreed to concentrate on 6 priority areas in support of regional moves to more efficient capital markets.
The stock exchanges will explore ways to use technology to link their trading and order systems and work together to ensure clearing and settlement systems align with global standards adopted in April. They are working closely with SADC institutions to support development of regional systems, including payment and will boost visibility of trading data and enhance their joint website (www.cossesadc.org), launched in April by the JSE and I-Net Bridge. The bourses will also pool resources to accelerate training and skills development for capital markets staff.
CoSSE members are Botswana Stock Exchange, Malawi Stock Exchange, Stock Exchange of Mauritius, Bolsa de Valores de Moçambique, Namibian Stock Exchange, South Africa’s JSE Ltd, Swaziland Stock Exchange, Dar es Salaam Stock Exchange of Tanzania, Zambia’s Lusaka Stock Exchange, and the Zimbabwe Stock Exchange. They met on 25 June in Gaborone, Botswana in a meeting convened by CoSSE with support from SADC Secretariat.
“Stock exchanges have their roles cut out in each of our economies to augment our governments’ efforts to grow national economies for the greater good and as part of the SADC region’s struggle for growth to escape poverty,” says Mrs Beatrice Nkanza, Chairperson of CoSSE and CEO of the Lusaka Stock Exchange. “They are the channel for long-term risk capital, which is urgently needed for the region’s businesses, infrastructure providers and even governments. They also encourage saving and investment. CoSSE members are working closely together to support SADC initiatives and to make individual markets even more effective”.
CoSSE was set up in 1997 as a collective body of the stock exchanges in the Southern African Development Community (SADC). It promotes co-operation and collaboration between member stock exchanges and is resourced by a Secretariat, supported by the JSE. SADC defines CoSSE’s role in the Finance and Investment Protocol and other policy documents and CoSSE has links to ministerial and senior treasury bodies and also works closely with the Committee of Insurance, Securities and Non-Banking Financial Authorities (CISNA) and the Committee of Central Bank Governors (CCBG).
CoSSE had set up three working committees to implement six business plans, prioritized from the initiatives identified in its Strategic Plan 2011-2016. These are:
1. Legal and Secretariat working committee – chaired by Geoff Rothschild of the JSE. This is responsible for formalizing and resourcing the Secretariat, and for continuing and improving liaison with CISNA and other SADC organs.
2. Market Development working committee – chaired by Vipin Mahabirsingh of the Stock Exchange of Mauritius. CoSSE has been developing models for inter-connectivity between automated trading systems at some or all member exchanges. The working committee will help member exchanges ensure their clearing and settlement systems comply with new global standards and support regional initiatives.
3. Capacity-Building and Visibility working committee – chaired by Anabela Chambuca Pinho of the Bolsa de Valores de Moçambique. This will liaise with member exchanges, regulators, stockbrokers, investors and others to develop and coordinate training courses. It will also enhance the new CoSSE website, help members to upgrade their own websites and to ensure their trading data and company news are disseminated internationally.
Progress will be guided by an Executive Committee, consisting of CoSSE Chairperson Mrs Nkanza, CoSSE Vice-Chairperson Gabriel Kitua (CEO of the Dar es Salaam Stock Exchange in Tanzania) and the three working committee chairpersons. The strategic plan was developed with assistance from FinMark Trust.

For more information contact
Beatrice Nkanza, CEO Lusaka Stock Exchange, tel +260 (1) 228391 or email nkanzab [at] luse.co.zm
Gabriel Kitua, CEO Dar es Salaam Stock Exchange, tel +255 22 2135779 or email gabriel.kitua [at] dse.co.tz.
Pearl Moatshe of CoSSE Secretariat, tel +27 11 5207118 or email pearlm [at] jse.co.za