Companies have approached the Botswana Stock Exchange (BSE) to raise P4 billion via debt, as the coronavirus (COVID-19) tightens the business environment and dries up operating cash, BusinessWeek has learnt.
The BSE’s bond market has grown by P3.3 billion this year, from P16.1 billion at the end of 2019, spurred by new and additional listings of bonds by local corporates and government. Bonds are instruments of indebtedness issued by corporates, parastatals and government to raise funds from investors.
BSE Limited CEO, Thapelo Tsheole said the bourse had noted high momentum in the bond market as companies sought to bulk up their books against the impact of COVID-19. He said the pending applications worth P4 billion “Companies are using this market to come and protect themselves from the difficulties caused by COVID-19,” he said in a televised media briefing last Thursday. “If you are a listed company and have problems with funding, you can approach investors for debt and offer them interest.
“This shows that we offer a market that can help companies protect themselves in these conditions.”
Thus far this year, companies on the BSE have issued shares worth P108 million, additional bonds worth P62 million and rights offers to shareholders worth P35 million, Tsheole said.
“Much of the activity we are seeing now is companies coming to market to raise capital because when they are not doing well in business, they want to protect their cash,” the CEO said.
BSE statistics show that while the bond market has risen during COVID-19, the equity market has taken a hit, with total turnover dropping to P483.3 million in the year to date, compared to P1.2 billion over the same period last year. The value of shares traded per day has fallen to an
The CEO said it was common that the bond market would rise and become more active during difficult times, compared to the equity market. Tsheole told BusinessWeek that the increased bond market activity was “a step in the right direction” noting that the existing fee structure for listings was encouraging for those firms that wished to raise debt. “In terms of the money that they raise, to raise P1bn the stock exchange will charge a maximum of P150,000, which is nothing compared to the access to P1bn of funding,” he said.
Commenting on government’s recently increased domestic bond issuance programme, Tsheole said an agreement had been secured to ensure trading of government notes on the BSE, which would open access for ordinary Batswana.
“From 2016 to date, we have increased the number of ordinary Batswana participating in the BSE from 23,000 to 94,000, but they do not have access to government bonds because these are not traded on the BSE, even though they are listed on the BSE,” he told BusinessWeek.
“We are working on a solution with government and the Bank of Botswana (BoB) to bring the trading of government bonds to the BSE because that’s the only platform that can avail these instruments to Batswana.
“Government has agreed and with the BoB, we are working on the modalities.
“We have already procured a system that is going to go live in November or even earlier.
“Batswana need to trade in government bonds and they need such a system.”