Capital Raising during COVID-19: Perspectives and Developments from the Botswana Stock Exchange

On 5 June, 2020, the Botswana Stock Exchange held its inaugural virtual opening bell facilitated, becoming one of the few stock exchanges in Africa to do so during this pandemic. This piece examines the BSE’s COVID-19 response and reactions from market stakeholders.



The ‘opening bell’ is among the oldest and long lasting traditions in stock exchanges worldwide, often signaling the beginning of trading each day with jubilant fanfare. The custom of the opening bell at the Botswana Stock Exchange (BSE) began in June 2018 and has continued on a monthly basis up until the lockdown, which lasted 49 days from 3 April 2020. The BSE uses this initiative to provide updates on market performance and strategic initiatives as well as the exchange’s strategic outlook. Often, the occasion features speakers from the capital markets ecosystem to discuss topical issues pertinent to the domestic capital market and to the BSE’s strategic plan on a progressive basis.

On 5 June, 2020, the BSE held its inaugural virtual opening bell facilitated, through Microsoft Teams and livestreamed the ceremony on Facebook, becoming one of the few stock exchanges in Africa to do so during this pandemic. Themed “Capital raising in the midst of COVID-19,” the ceremony’s agenda, led and moderated by the BSE CEO, Thapelo Tsheole, unpacked the BSE’s COVID-19 response plan and current measures, market performance, and an overview on how companies can utilize the stock exchange post-COVID-19 pandemic.

Tsheole was joined on the chat by Boikanyo Mogami, Managing Partner at Morula Capital Partners; Gregory Matsake, CEO at Imara Capital Securities; and Rizwan Desai, Managing Partner at Desai Law Group, respectively. This piece summarizes their discussion.

Capital raising in the midst of COVID-19: BSE perspective and developments

Opening the discussions, Tsheole provided a perspective on how the BSE has adapted and survived during the pandemic.

“With the advent of total lockdown the BSE was declared an essential service,” he said, “and thus began conducting its trading and settlement operations from home, although with the flexibility to come to the office anytime. The return to office continues to adhere to the set protocols that include mandatory wearing of masks, daily temperature checks, sanitization, general daily health monitoring as well as access to counselling services. Social distancing protocols have also been implemented in the office, and as regards external stakeholders, contact is mainly through telephone, email, and a designated mail delivery box at the premises.”

Tsheole further explained that BSE has requested listed companies to provide certain disclosures especially on the impact of COVID-19 pandemic on their services and operational performance so that investors, when trading in these securities, are well acquainted with the real and likely effects of COVID-19 on listed companies. The majority of the companies have successfully managed to provide and publicize these disclosures. At the same time, as some companies experienced delays in publishing financials, the BSE intervened by granting additional time to enable companies to complete the auditing and publication of their financials.

“In the midst of the lockdown, the BSE strengthened its communication with issuers and prospects, publishing a paper titled, ‘How companies can utilize the stock exchange post-COVID-19 pandemic.'”

“In the midst of the lockdown,” Tsheole explained, “the BSE strengthened its communication with issuers and prospects, publishing a paper titled ‘How companies can utilize the stock exchange post-COVID-19 pandemic.’” The paper, which is available across BSE platforms, addresses various capital raising mechanisms on the exchange ranging from direct equity or debt listings, corporate actions such as rights issues, secondary offerings, scrip dividends, and bonus shares and the relative importance and advantage of being a listed entity.

Reflecting on the year-to-May 2020 market performance, Tsheole said that the BSE’s Domestic Company Index (DCI) has declined by 2.3% in BWP terms and 12.7% in USD terms, with the latter mainly attributable to the BWP’s 11.9% depreciation against the USD.

“The majority of African markets have experienced significant downturns on a year-to-date basis in USD terms,” he said, “generally in line with the emerging markets as indicated by the MSCI’s 16.5% drop over the same period. Similarly, BSE’s trading volumes have declined in comparison to the corresponding 2019 period, but quite pleasantly the bond market traded ahead of equities, at US$29.6 million and US$23.6 million, respectively.”

From a strategic perspective, the CEO expects the new Central Securities Depository (CSD) system, which will among others enable remote and online access of investor accounts, to go live in October 2020 and an upgraded Automated Trading System (ATS) to begin operating in November 2020, subject to the evolution of the pandemic. “Despite the higher bond trading levels thus far in 2020, government bonds which account for majority of trading activity currently trade over-the-counter outside the BSE, and the project to centralize all trading at the BSE is expected to revolutionize the bond market significantly from both an efficiency and liquidity point of view,” he expanded. The BSE is also launching a new website and mobile app with enhanced interaction features and content to increase investor engagement and information access. In addition, the bourse launched a stock market ticker, that shows live market prices, just ahead of lockdown which is installed at its offices and the central business district in the capital city, Gaborone.

Closing his opening presentation, Tsheole added that just ahead of lockdown the BSE was declared a Self-Regulated Organization (SRO) by the Ministry of Finance and Economic Development, a move that will cut red tape in terms of duplication of regulatory functions between the BSE and the capital markets regulator, the Non-Bank Financial Institutions Regulatory Authority (NBFIRA), in addition to being in line with international best practice.

Does COVID-19 affect prospects for attracting investors and capital? – an asset manager’s perspective

According to Boikanyo Mogami, the Botswana’s DCI has outperformed global markets in dollar terms despite this being predominantly a function of liquidity challenges on the local bourse, which culminates in slow reaction of prices to fundamentals unlike in more developed and liquid global markets. He added that with the lockdown and COVID-19 protocols, businesses have been affected to varying degrees, with the majority now facing solvency challenges but these could be best addressed by accessing the deeper pools of liquidity in the domestic public markets.

“COVID-19 has increased risks and has affected return expectations, but with uncertainties around the vaccine and the duration of the ensuing health and economic pandemic, businesses certainly need patient and long-term capital that is flexible and adaptable to survive the pandemic.”

Botswana’s pension funds invest about 40% locally, noted Mogami, despite the abundance of business and investment opportunities locally which, as a result of low pension fund participation, tend to be funded privately by commercial banks and development finance institutions. “At a total of P27Bn (about US$2.5 billion) in respect of private funding versus the BSE domestic equities market cap of P37.0 Bn (about US$3.4 billion), a lot of funding clearly happens outside of the BSE and this represents opportunities that pension funds could be participating in through the stock market.  Interestingly, there has a consistent increase in private equity allocation by pension funds, now at 4% of total pension fund assets of P79 Bn (USD 7.2 Bn)” he highlighted. This is a good development, he said, as private equity tends to use public markets to divest from companies as evidenced with the 2 listings on the BSE promoted by Botswana Development Corporation (BDC), a local development finance institution.

Mogami outlined that the pandemic has affected several countries worldwide, prompting central banks to cut interest rates significantly, with some close to zero while Botswana slashed its bank rate by 50 basis points to 4.25% in April 2020. On the back of the cumulatively accommodative monetary policy, Mogami is of the view that local pension funds are facing global bond yields close to zero in their developed bond markets allocation and the BWP’s 11.7% depreciation against the USD presents an opportunity for fixed income to be invested heavily in Botswana.

Mogami went on to suggest that Botswana’s banks, which are the biggest funders of private businesses, are likely to curtail lending mainly because of high uncertainty regarding cash flows of businesses. “With such reduced appetite for new loans,” he said, “banks would potentially prefer loan amortization which is not appropriate for businesses that are already challenged from a solvency and liquidity standpoint. Thus, going forward this creates funding opportunities for long term investors like pension funds with patient capital to be deployed through public markets and to add to the development of the stock exchange.” In conclusion, Mogami stated that COVID-19 has increased risks and has affected return expectations, but with uncertainties around the vaccine and the duration of the ensuing health and economic pandemic, businesses certainly need patient and long-term capital that is flexible and adaptable to survive the pandemic – and this need can be accessed primarily through the stock exchange.

Capital raising dynamics to consider – a broker’s perspective

In Gregory Matsake’s assessment, whether there is a disaster or no disaster, there are projects that need funding, and so capital raising will presumably persist amid COVID-19. He added that brokers have, indeed, had a few tangible enquiries and attempts at raising capital, but besides the investors not being physically accessible through roadshows due to restrictions around COVID-19, the main challenge is elevated risk aversion where investors consequently water down the fundamentals of the projects as they see these as far riskier than they otherwise would have been in the absence of COVID-19. This, therefore, deeply discounts the valuations, poses significant dilutions, and ultimately demotivates the promoters, creating a mismatch between the expectations of promoters and those of the would-be investors. Matsake indicated that unlisted investments pose a challenge which can, however, be addressed by pension funds having a clearly defined developmental agenda in their investment mandates, to complement the efforts of the BSE in developing the capital market and broadening investment instruments.

He added, “We need a developed market to be able to create better opportunities for pension funds and this cannot be achieved without their participation. Incremental investments in public markets by pension funds contribute to skills development in the industry, more capabilities to assess opportunities, more products, and increased innovation.”

What legal issues are likely to arise amid COVID-19? – a legal adviser’s perspective

Desai outlined the robustness of the BSE’s interventions amid the pandemic, particularly from a regulatory consideration. From his standpoint, the BSE has adopted a productive approach to help clients and customers. They have done so, he said, by promoting engagement and fostering flexible regulatory environment to assist companies to meet their disclosure obligation. He explained that in the UK, and several other markets, a number of companies have fallen on hard times, but some have used this opportunity to raise capital. If companies have the right story and the right governance structures, he suggested, they may still be able to go to the market.

“Companies aspiring to list should use this time to ensure that they have clear documentation to tell their story and to gain a better understanding of listing rules so that they do not start from scratch in terms of the listing process as the economy gradually pulls out of the pandemic.”

From a regulatory standpoint, his opinion is that the BSE rules have not become more onerous and are not likely to. He explained that the ongoing 6-month State of Emergency (SOE) has introduced broad compliance issues for companies. “In fact, the BSE has introduced flexibility in relation to, for example, disclosure obligations in order to facilitate compliance in this challenging environment. However, taking into account that this is a ‘new normal,’ a listed company or one that intends to list will nevertheless have to comply with broad national laws including those of business restructuring and insolvencies as well labor regulations applicable during the SOE.”

He emphasized that companies should not feel that because the practical business environment is difficult, the BSE’s regulatory environment is more difficult all of a sudden, as the two do not go hand in hand. Desai argued that this era could potentially unleash innovative products and regulation that will subsequently benefit even those entities looking to come to market post COVID-19. Therefore, he doesn’t expect there to be complete inactivity in the market due to the pandemic, but thought that listed entities should take advantage of corporate actions during this period and adequately consult with the BSE regarding flexibility and limitations of the regulatory and business environment. Summing up his position, Desai made the case that the companies aspiring to list should use this time to ensure that they have clear documentation to tell their story and to gain a better understanding of listing rules so that they do not start from scratch in terms of the listing process as the economy gradually pulls out of the pandemic.

Final thoughts

Closing the discussions, BSE CEO, Thapelo Tsheole affirmed that the present listings requirements have some form of flexibility for compliance, which is particularly useful in the context of the current crisis. Tsheole explained that the apparent advantage with the COVID-19 pandemic is that there are quicker responses to issues that ordinarily in the past were not as quickly addressed, including the frequent engagement of the exchange with its customers regarding the various mechanisms for raising and preserving capital in this crisis and conducting corporate actions. Tsheole concluded by highlighting that as an affiliate of the World Federation of Exchanges (WFE), the BSE is among the stock exchanges that submitted their COVID-19 response plans and measures for publication to the international community. Within the SADC region, as the Secretariat of the Committee of SADC Stock Exchanges (COSSE), the BSE is monitoring the developments among SADC stock exchanges in terms of responses to the crisis and guidance to customers. “As the pandemic evolves, the BSE will also respond with guidance and assistance for listing firms and for investors,” he concluded.

With those insights the CEO invited the discussants to ring the bell from their end to officially open the market and thanked them for their input, adding, “Their names will go down in history as discussants in the first ever virtual opening bell ceremony in Botswana.”

With that the market was declared officially opened.


About the Author

Kopano Bolokwe is a 2020 alumnus of the IFC-Milken Institute Capital Markets Program. He is Head of Product Development at the Botswana Stock Exchange.


The views and opinions expressed in this publication are solely those of the author and do not purport to reflect the opinions or views of COVID-19 Africa Watch or any affiliated organization.

COVID-19 Africa Watch tracks major developments and policy announcements from across the continent and also offers a curated selection of analysis on how the pandemic will impact African economies and development efforts. The site is a project of the Milken Institute’s Global Market Development Practice.


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