Local commercial banks that participate in the Botswana Stock Exchange’s (BSE) Central Securities Depository (CSD) system will soon endure more costs as fees for the service have been increased twofold.
Since the launch of the CSD in May 2008, the participant fees from custodian banks have remained at P12,000 per annum and with the recent increase, the fees will be P24,000 per annum with effect from April 1, 2016, revealed the Central Securities Depository Company of Botswana (CSDB).
CSDB is a company that was formed by the BSE with the objective of operating a central securities depository in which shareholders and their shareholding of companies listed on the local bourse will be recorded.
Responding to Mmegi Business inquiries, CSD Manager at the BSE, Masego Pheto said the CSDB arrived at a fee of P24,000 per annum following a benchmarking exercise which was conducted with other markets in the region, such as Mauritius and others, with regards to fees charged by their CSDs.
“At inception of CSDB in 2008, a deliberate decision was taken to charge lower fees and these have been kept constant until the current revision. CSDB is currently charging low fees as compared to other countries in the region where custodian fees are in excess of P120,000,” she said.
She added that the proposal to increase fees has been approved by the Non-Bank Financial Institutions Regulatory Authority (NBFIRA).
The development will only affect three local banks, which are the only participating banks also known as custodian banks. They are; First National Bank Botswana (FNBB), Stanbic Bank Botswana and Standard Chartered Botswana.
Asked whether the custodian banks were consulted on the fee increase, Pheto said the CSDB recommended for change in fees to its board of directors, and if approved, they are sent to the NBFIRA for further approval and then the participants are notified of the change in fees.
“Participants shall pay fees, charges and expenses in respect of the services and facilities offered by CSDB as may be specified from time to time by CSDB in the manner specified by CSDB,” she stated.
According to Pheto, the fees charged are used mainly to support the facilities and services offered by the CSD. These, she added, include infrastructure and software services to brokers.
She cited as examples information and communication technology (ICT) services as well as assisting participants to set up systems to enable direct access to the CSD. Other services include software and systems maintenance for participants including help desk services.
The manager further said the fees are also meant for the CSD services and back office operations such as liquidity and exposure management, administration of clients, and risk management to ensure compliance with the rules and regulations governing participants’ operations.
“This includes professional audits, provision of stationary such as account opening forms, account statements and so on,” said Pheto.
In addition, the CSD Manager pointed out that the current fee structure is not commensurate with the cost of services and that facilities offered to participants and the services offered are far advanced, better and modern.
“The maintenance of the system as well as other operational costs are currently funded through government subvention and this cannot be sustained going forward given the current economic situation as well as the upcoming demutualisation of BSE/CSDB where we now have to stand on our feet and support ourselves.”
The CSDB has also announced that it increased the minimum levy on listed companies from the current P5, 000 per annum to P10,000 per annum whilst maintaining the current cap of P15,000 per annum. It added that the transaction fee levy remains unchanged at P5.