Bond market has potential to diversify economy

Minster of Investment, Trade and Industry Vincent Seretse says there is a need to grow the domestic bond market as this will go a long way in diversifying the economy.

Speaking during a Botswana Stock Exchange (BSE) Bond Market Conference in Gaborone, the minister said the local bond market is still in its early stages of development hence there is need to take it to another better level.“As we endeavour to diversify the economy from the dependence on diamonds, our pillar of strength that needs to be nurtured and grown further is that of financial market development,” said Seretse. 

As a percentage of the Gross Domestic Product (GDP), the bond market constitutes only 7.5 percent compared to close to 40 percent constituted by the domestic companies in the BSE.

Botswana bond market’s liquidity is still relatively low. “Out of the 39 listed bonds, six are government bonds, in terms of value, government is the major player in the bond market accounting for P7.3 billion out of the P11.0 billion bond market capitalisation,” pointed out Seretse.  He said on the other side of the financial markets, the borrowings or loans and advances from the banking system accounted for a third (33%) of the country’s GDP as at the end of 2015.

Minister Seretse said Botswana has worked her way over the years to gain international recognition from all corners of the globe. “In the process, we have made strides in improving our economic relations and our economic competitiveness, allowing ourselves an opportunity to learn from our counterparts and they benchmark from us,” said Seretse at the conference attended by delegates from South Africa, Swaziland, Kenya among others.

He added that the prudent macroeconomic management of Botswana financial resources can be attributed to the overall impressive scores in the global competitiveness index report which ranked Botswana number 64 out of 140 countries for the year 2015/16.Seretse said despite the upset caused by the global 2008 recession to 2010, Botswana was amongst a few developing economies that recovered relatively faster than other economies from the global economic scourge.

He stated that the government has made significant infrastructure investment in the capital market. Seretse said systems such the Central Securities Depository and the Automated Trading Systems should be optimised by all stakeholders to promote efficiency in the capital market.“I encourage the spirit of collective effort to be sustained and hope it to bear fruits for the interest of the country,” he said at the conference held under the theme, ‘The bond market - a pillar of the economy.’

For his part, BSE Chief Executive, Thapelo Tsheole said worldwide, bond markets are bigger than the equity markets and the cornerstone of every economy.“Whilst the domestic bond market has played a very crucial role of supporting domestic economic growth in various ways, it hasn’t developed at a rate that we have seen in the domestic equity market,” said Tsheole.He said it is this background that continues to compel BSE to develop strategies to unlock the potential and value within the bond market.

The BSE organised the conference in conjunction with the Botswana Bond Market Association, African Development Bank, Stanbic Bank, Bifm, Afena Capital, Investec Asset Management, Allan Gray and Basis Points Capital (BPS).
The Botswana Guardian was the media partner at the business event.