Botswana Public Officers Pension Fund (BPOPF) CEO, Boitumelo Molefe has emphasised the importance of having vibrant bond markets noting that they have numerous benefits that can help meet a range of development challenges.
Speaking during the bond market conference that was hosted by BSE in collaboration with Botswana Bond Market Association (BBMA) last week, Molefe said that the bond market promotes efficient diversification of available funds in the economy to the most productive uses.
“Bond markets minimise the friction and cost of intermediation between issuers and investors, as well as optimise management of cash flow and currency mismatches between issuers and investors,” she said.
According to Molefe, they also offer additional funding mechanisms for companies, providing additional capacity if they have a significant need and continue financing if the bank financing is not available.
She said that the growth of local institutional investors, particularly pension funds has led to a significant boost in the domestic bond market noting that institutional investors currently hold approximately 75% of the P12 billion of total domestic bonds in issue.
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On his part the Minister of Investment, Trade and Industry, Vincent Seretse said that Botswana’s bond market’s liquidity is still relatively low noting that out of the 39 listed bonds, six are government and that in terms of value, government is still the major player in the bond market accounting for P7.3 billion out of the P11 billion bond market capitalisation.
He said that on the other side of the financial markets, the borrowings or loans and advances from the banking system accounted for a third, which is 33% of the country’s GDP as at the end of 2015.
According to the minister, ideally borrowings from the bond market should be a larger percentage of the GDP relative to borrowings from the commercial banks.