As the Botswana Stock Exchange (BSE) forges ahead with its demutualisation drive, expectation is that the move will provide more investment options for Batswana and help in improving liquidity on the local stock market.
Demutualisation is described as a process by which a member-owned mutual organisation converts into a company owned by shareholders. Usually, the members exchange their proprietary rights for shares of the demutualised company. Currently, government through the Ministry of Finance and Development Planning controls the BSE.
BSE deputy chief executive officer, Thapelo Tsheole said demutualisation would enhance the BSE’s efficiency by allowing a more flexible governance structure, which will foster decisive action in response to the business environment.
“Consequently, as a company, the BSE will very easily be able to form strategic partnerships, better compete with other stock exchanges and quite possibly list on itself,” he said. He further noted that through the demutualisation, the BSE would become a corporate entity with its own objectives.
Moreover, it will transform from a non-profit organisation to becoming a profit-making company like any other corporate entity. Tsheole noted that currently, the BSE is not a company registered under the Companies Act, but an exchange owned by members, licensed stockbrokers and the government.
A senior researcher at Motswedi Securities, Garry Juma stated that demutualisation has become a global phenomenon and that closer to home, exchanges such as the Johannesburg Stock Exchange (JSE) have already undergone demutualisation.
“Globally exchanges such as the Singapore Stock Exchange, Japan’s Nikkei, New York’s NASDAQ among others, have gone through the same route and have gained global recognition and grown strongly,” he said.
He added that with demutualisation, the BSE would be exposed to good corporate governance, enhanced efficiency and transparency associated with publicly listed firms.
He said it also allows the exchange to be listed on its own floor where Batswana would have the opportunity of investing in the shares. Further, it allows the exchange to be competitive and to take up investments that could enhance returns for shareholders.
In December last year, parliament passed the BSE Transition Bill that allowed for the bourse to be registered as a private company and transformed into a commercial entity.
It is understood that incorporation of the BSE will enable it to operate on a more commercial basis, enter into strategic alliances and exploit opportunities for development of Botswana’s capital markets.