BTCL listing to cost govt P20m

The Botswana Privatisation Asset Holdings (BPAH) has requested P14million funding from the government through the ministry of Finance and Development Planning to enable it to act in the capacity of market maker, Botswana Guardian can reveal.

BPAH is a company limited by guarantee, incorporated in terms of the Companies Act No 32, 2004. The sole purpose of the company is to collect, receive, warehouse and hold shares and other assets from privatised entities. Botswana Guardian can reveal that, on December 5th 2015, Sheyan Edirisinghe, Director – PricewaterhouseCoopers (PwC), Managers of BPAH wrote to the Ministry’s Permanent Secretary, Solomon Sekwakwa seeking funding.

“We write to you requesting for funding for BPAH for the purpose of acting as the market maker in respect of the impending initial public offering of Botswana Telecommunications Corporation Limited (“BTCL”) shares,” reads the proposal seen by this publication. 

In order for BPAH to act in the capacity of the market maker, Edirisinghe indicated in the proposal that it requires an operating reserve, adequate to procure and temporary hold shares of BTCL. “The role of the market maker is the first of its nature in Botswana.

Further, the BTCL privatisation is also the first of its nature in Botswana. As such, there is no point of reference to determine the quantum of the operating reserve required by BPAH to effectively discharge its duties as the market maker. Therefore, the best method of determining the amount of the operating reserve is a guestimate,” reads the letter.

In determining the guestimate, he said the following were considered: Discussions BPAH has had with the BTCL initial public offer consortium, consisting of Messrs Collins Newman and Messrs Deloitte & Touche and PEEPA;
Suggested moratorium period before the market maker becomes effective, which is presently under discussion and pending approval by the relevant authorities;

Suggested trading limits between the market maker and would-be buyers / sellers, which is also presently under discussion and pending approval by the relevant authorities. Considering the above, PwC indicated to Sekwakwa that, an operating reserve of between P20 million and P25 million, which represents approximately 5 percent of the value of shares of BTCL, was considered to be a prudent guestimate for BPAH to effectively discharge its duties as market maker.

Botswana Guardian understands that a meeting took place between the management of BPAH and the BTCL consortium on 11 November 2015. “We have been informed that an amount of P6 million has been secured by PEEPA towards the operating reserve on behalf of BPAH for the fiscal year 2015/16. We therefore, request a further P14 million (which has been derived at by using the lower estimate of the total operating reserve of P20 million less the amount already secured by PEEPA) for the fiscal year 2016/17.

We fully appreciate that the funding request for the fiscal year 2016/17 is delayed. However, given the significance of the success of the BTCL initial public offering and the timing of events that have taken place, we request your favourable consideration of our funding request,” writes PwC Director.

The government of Botswana made a decision to privatise the Botswana Telecommunications Corporation. With this in mind, a new entity, Botswana Telecommunications Corporation Limited was incorporated and a portion of its shares are currently on offer to Batswana through an initial public offering and will soon list in the local bourse. 

With this background in mind and with the objective of maintaining liquidity in the stock market with respect of the BTCL shares, the role of a market maker was deemed to be a necessity. Responding to a Botswana Guardian inquiry, on the BPAH’s mandate, Edirisinghe said, “The role of the market maker is to purchase publicly traded shares of BTCL from existing shareholders who wish to sell their shares in the event that there is no alternative purchaser in the market.

The market maker is conversely also required to avail shares of BTCL for sale in the market in the event that there are no available sellers. The Market Maker will in essence act as a buyer and seller of last resort, quoting prices at which it is prepared to buy and sell shares of BTCL.” 

He also indicated that the government of Botswana appointed BPAH as the market maker for the BTCL shares and all entities to be privatised in the future.