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Restrictions may hamper FDI growth ľ Jefferis

ISAAC PINIELO
Jefferis
The recent restriction of foreign participation in the Botswana Telecommunications Corporation Limited (BTCL) initial public offering (IPO) is likely to hamper the growth of foreign direct investment (FDI) in the country, a prominent economist has said.

Managing Director of Econsult Botswana, Keith Jefferis noted in an economic review for the first quarter of 2016 that the way in which the privatisation of BTCL was conducted was in conflict with the official privatisation policy.

“We note that the partial privatisation restricted participation to citizens, citizen-owned companies and local asset managers,” he said.

Citing a clause from the privatisation policy paper, Jefferis, who is the former deputy governor of Bank of Botswana (BoB), said outright exclusion of foreign investors or across-the-board fixed restrictions on foreign participation in privatised enterprises will be avoided and that any restrictions will be considered on a case by-case basis.

“Allowing foreign participation in privatisation activities is in line with government’s policy of promoting Botswana as an investor friendly location for international companies,” he stated.

According to the central bank, FDI in Botswana increased by P996 million in the third quarter of 2015, averaging P817.7 million from 2004 until 2015 and reaching an all-time high of P3.37 billion in the second quarter of 2011 and a record low of -P23.3 million in the first quarter of 2012.

However, the chief executive officer of the Public Enterprises Evaluation and Privatisation Agency (PEEPA), Kgotla Ramaphane had earlier on indicated that his organisation will ensure that BTCL transactions only benefit ordinary Batswana, noting that they will not entertain people who will front for big organisations or foreign interests since BTCL shares are strictly geared for the benefit of Batswana.

But the government’s privatisation policy that was adopted in 2000, sought to raise the country’s growth potential by securing stronger flows of foreign direct investment.

The government’s impetus was further buttressed by Keshav Sharma of the department of political and administrative studies at the University of Botswana (UB) in his research paper titled, “Privatisation and Public Private Partnership in Africa: The Case of Botswana.”

He stated that limiting foreign participation to

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very low levels could deter foreign investors.

“The government realises that there may not be enough local corporate investors with the financial resources and management expertise to acquire large state-owned enterprises. In such cases, foreign participation will be necessary,” he said.

He further reiterated that the government’s policy is not to exclude foreign investors outright and not to impose across-the-board fixed restriction on foreign participation but to consider these on case-by-case basis.

“This is in keeping with government’s policy to project Botswana as an investor-friendly country,” he added.

Sharma said where practicable, government will encourage and enable Botswana investors to acquire majority control. He said if citizen investors do not come forward to own majority of shares, concessions such as build-operate-transfer (BOT) or build-own-operate-transfer (BOOT) will also be considered in cases where international expertise and technology are needed.

Meanwhile, according to Jefferis, the successful flotation of a minority stake in BTCL which marked the first IPO of a state-owned enterprise, was one positive development during the early part of the year, adding that the IPO was oversubscribed by 68 percent.

Applications for 900,000 shares or less were allocated in full, while others received the first 900,000 plus 11.45 percent of the balance. On listing, the share rose in value from the IPO price of P1.00 to P1.30, although it has since fallen back to P1.12.

“The IPO received an enthusiastic response, and as a result the main achievement has been a dramatic expansion in the number of shareholders,” he noted.

Prior to the BTCL IPO, Jefferis added that the number of individual accounts in the Central Securities Depository (CSD) was around 28,000.

With 50,301 shareholders, excluding government and employees, BTCL now has by far the most widely dispersed shareholding of any company listed on the BSE, and has significantly extended share ownership by adding around 47,000 new shareholders, according to the economist.



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