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Political uncertainty in Botswana frights foreign investors

Publishing Date : 21 October, 2019

Author : TSAONE SEGAETSHO

Think tanks and pundits alike have predicted that Botswana’s next week Wednesday polls will not be easy or free flowing. This wave of uncertainty has not only descended on politicians, foreign investors are also showing less confidence in Botswana markets.


Beginning of this year, rating agency Moodys said it expects limited election-related policy uncertainty in Botswana, Namibia, Senegal and Ghana, “given their track records of political stability.” But the political climate of Botswana has become more divisive and has sprung out before the eyes of international media, much to the evident fear of foreign investors. In his presentation, when making an analysis of African capital markets titled ‘Driving liquidity in African capital markets’, the Botswana Stock Exchange (BSE) Chief Executive Officer Thapelo Tsheole, highlighted limited foreign investor participation as one of the factors contributing to the continent’ s susceptibility to illiquidity. Tsheole also said African markets also suffer from; lack of financial literacy, high transaction costs, buy-and-hold strategies and small retail investor.


Market experts also told this publication that there was a lot of uncertainty during the beginning of this year going on towards this month’s polls. The main worry, according to experts, is the issue of the former president joining opposition, as that can mean instability in the Botswana political ground. No one was confident that the ruling BDP will win but now there is little hope hence foreign investors will remain reluctant in putting their money in a political uncertain country. Surveys and researches predicts that the 2014 elections BDP 46 percent vote will shrink even further. BDP got a popular vote of 53.3 percent in 2009. According to Afrobarometer survey conducted in July/August, BDP would enjoy a 2-to-1 lead over the opposition UDC 44 percent to 22 percent.


Beginning of this year, Africa’s leading bank by assets said BDP will win, but without an outright majority. The bank said an ongoing feud between the current president and his predecessor has wrought political unrest in the country. However the bank was still hopeful of Botswana even before this month polls saying: “We view the current political turmoil as temporary; we expect no significant deviation from the current economic policy, even if the BDP lost the election.”


A lot of action has not been seen in the local bourse this year and many believe it is because foreign investors are scared to invest in Botswana, especially before this month’s highly contested elections. This year there has been a trend of narrow decrease in Domestic Company Index. Even if the Domestic Company Index increases, it was with a very small significance.


Where the markets stands before the next Wednesday polls

According to Motswedi Securities’ recent Daily Financial Market Highlights released this week, while foreign investment on local markets has been low, activity improved more than tenfold on Thursday on the local bourse as compared to the previous trading session, with 244,000 shares moving through the market, worth a little under P529, 000. According to Motswedi’s Equity Market Summary, the highest performer was FNBB, which for the second consecutive day led the trades, only this time crossing 121,000 shares valued at P344, 000. From the previous day's 4 thebe climb, FNBB gained a further 5 thebe in the day's session the stock climbed to a year high of P2.85/share.


“It seems that demand for the bank's stock is strong, as can be reflected by the strides the share price is taking to extend its year to date – of which currently stands at 16.3%. On the losers end, Sechaba lost the one thebe it gained earlier on in the week. The stock moved back to its week-opening price of P20.56/share - courtesy of a small 100 shares changing ownership,” said Motswedi Securities.


According to Stockbrokers Botswana’s recent market commentary, the DCI ticked up by 0.16 percent to close the week at 7472.45. The FCI was flat, closing at 1564.54 points. BTCL was the biggest gainer this week, up 4 thebe to close at 105 thebe. Total turnover for the week amounted to BWP14, 961,093 as 1,846,272 securities exchanged hands. ETF NewGold held the lion’s share of turnover with 82 percent. BTCL’s share was 4 percent while Letshego’s was 3 percent.

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