Country’s financial market envy of Africa, bettered only by SA
Botswana’s financial market is reportedly one of the best in the continent, although experts have labelled the overall African financial market small.
The Absa Africa Financial Markets Index launched recently puts Botswana second to South Africa (SA) among the 20 countries included.
The Index recognises Botswana as having a stable performance across all pillars examined, with the country also working hard to improve its local investor base.
Analysed pillars included market depth, in which size, liquidity, and depth of markets and diversity of products were determined; access to foreign exchange; market transparency, tax, and regulatory environment.
Other aspects focused on the capacity of local investors; macroeconomic opportunity and legality and enforceability of standard financial markets master agreements.
Overall, Botswana scored 65 percent, beaten only by SA’s 93, and ahead of countries such as Nigeria and Mauritius.
Taking part in a panel discussion following the launch of the Index, Botswana Stock Exchange Limited (BSEL) CEO, Thapelo Tsheole said the African financial market is small but developing rapidly.
“In terms of the status of the African market, I think there is a huge development happening across the continent, especially in the financial markets,” noted Tsheole, citing the example of the South African Development Community (SADC) Stock Exchange, of which he is the chairman, which has successfully convinced the region’s governors and finance ministers to improve the eco-system of the bond market in the sub-continent.
“So, of the 14 countries, we are going to see some level of improvement in the bond markets in terms of the way bonds are growing,” he explained during a panel discussion, where he described African markets as varying between ‘relatively’ and ‘extremely’ small.
“We use the same trading system in Botswana that is used by the Johannesburg Stock Exchange, and that is used by London Stock Exchange. Just imagine on the cost side how much money we use on this system!”
Tsheole believes most African stock markets are illiquid (have few participants and a low volume of activity) because they cannot afford this type of expensive infrastructure.
For his part, Dr. Keith Jefferis, Managing Director at Econsult said with such small market, integration provides means of benefiting from the gains of larger markets.
“But I think generally there is resistance to regional integration. I think the biggest issue in this part of the world with regional integration is the fear of being dominated by South Africa,” surmised the former Bank of Botswana Deputy Governor, who stated this resistance is evident in financial markets as well as cross-border trades.
“We need to appreciate the benefits, and obviously many of the benefits can occur in the future. In the short term, they may be costs, and I think many people tend to see the short costs rather than the long-term benefits,” declared Dr. Jefferis.