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BSE joins the elite league of African stock market

Publishing Date : 14 August, 2018

Author : REARABILWE RAMAPHANE

Botswana Stock Exchange (BSE) has finally demutualised to become a company incorporated under and in terms of the Botswana companies act.  This signals that BSE which now changed its name to Botswana Stock Exchange Limited (BSE Ltd) divorced the statutory entity tag to take in full swing the profit making company status generating return on investment for its shareholders.


 Established in 1989 and started full operation in 1994 as Botswana share market, the BSE has been governed by the Botswana Stock Exchange Act as a statutory parastatal under the Ministry of Finance.  As of 2nd August 2018, the stock market now operates in the ownership setup similar to that of major exchanges such as JSE & Nairobi Stock Exchange. Botswana Stock Exchange is now a registered company under the Companies & Intellectual Property Authority (CIPA) Botswana.


Demutualisation is a process of transforming from a member owned, not-for-profit, entity to a for-profit, investor-owned corporation which involves changing the legal status, structure and governance of an entity. In the case of a stock exchange, it is the separation of the ownership of the exchange from the right to trade on the exchange. In the case of the then BSE, the Proprietary Rights of the members of the then BSE, as well as the cash injection by Government of the Republic Botswana, have been converted to shares in BSE Limited.


The man at the helm of this historic conversion Chief Executive Officer of the now BSE Limited Thapelo Tsheole briefed members of the media on Tuesday, revealing that the demutualisation of the BSE began in December 2015, when the BSE Transition Act, No. 2 of 2015 came into operation. “The Main Committee comprising of broker representatives and Government representatives, as well as the Minister of Finance and Economic Development, played a strategic role in the entire end to end process of demutualisation, along with management,” he said.


Tsheole highlighted that the transformation will significantly energise the capital market in Botswana, and the continent at large.  “Looking at stock exchanges across the world, the pace of stock exchanges’ demutualisation has been rapid in developed markets and slower in emerging markets. This demonstrates the difficulty with which this process is accomplished given the diverse interests of the parties involved,” he said.


 Tsheole however observed that on the part of BSE, the pace of demutualisation was exceptional and without hurdles. Botswana Stock Exchange Limited now joins the elite league of stock exchanges as seventh among twenty-eight stock exchanges in Africa to have undergone demutualisation. Thapelo Tsheole explained that to arrive at the name Botswana Stock Exchange Limited, his organization engaged stakeholders to solicit suggestions on possible names the bourse could adopt, post demutualisation.


“Through an internal process we proposed names such as Botswana Stock Exchange Limited (BSE Ltd), Botswana Securities Exchange (BSX), Botswana Securities Exchange Group (BSE) and Botswana Securities Exchange Holdings (BSE) ,and after thorough engagement with our stakeholders and even the public through several public statements we arrived at BSE Limited,” he said. Stock exchanges all over the world initiate demutualisation hoping to empower the market and to increase revenues and trading volumes.


 However, the trend of stock exchange demutualisation continues to generate debate amongst experts on the impact of such transformation from mutual statutory organization to a shareholder held company.  Observers note that the change in governance structure of an exchange is not important as demutualized exchanges usually still provide the same services and accrue the same benefits as in mutual exchanges.


Experts favour demutualisation on the basis that it opens up various opportunities for exchanges which include merging and consolidation among stock exchanges not only within the area they operate in but also across the borders in order to become more competitive, for example, Paris, Brussels, Amsterdam, Lisbon and LIFFE stock exchanges have combined to form Euronext Group and Euronext merged with the New York Stock Exchange .


The consolidation of stock exchanges enables them to devise new ways and strategies to make them more competitive hence impacting positively on stock exchange performance. The newly transformed bourse now forecasts exciting moves going forward. BSE Limited Executives told members of the media that it is the company’s ambition to self list .


However with the new organization and shareholder structure and form, BSE Boss said consultation with the Shareholders being government & stockbrokers will determine the approach and time for the proposed self listing.  “Self-listing is an accepted practice in a lot of markets and it is a practice that we would like to adopt at the BSE. An opportunity for private investors to own shares in the BSE will become available when the BSE eventually self-lists,” he said.


This would mean shares of the demutualised BSE Limited, would be available for trading on the same stock market. The Nairobi Securities Exchange sold 38% of its shares in a $7.1 million Initial Public Offer in August 2014, and it self-listed soon afterwards. South Africa’s JSE Ltd did the same in 2006. Tsheole underscored that the demutualisation will result in transformation of the structure of the exchange and leads to an improved corporate governance structure to boost investor confidence and maximizes value creation.


‘This demutualisation and immediate corporatization of the Exchange brings forth enormous efficiencies that will enable the bourse to discharge its mandate and drive value for shareholders and stakeholders as we strive to become a world class securities exchange,” he said.
The BSE is currently in the second year of its five year strategy in which it, amongst others, aims to grow the ratio of the BSE’s market capitalization to gross domestic product from 34 percent to 40 percent by 2021 as well as increase the number of domestic companies listed from 24 to 30 by 2021. In the 2016 financial year, the BSE realized revenues of P31.7 million and posted a profit of P8.4 million

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