Botswana: Country and Foreign Investment
This page was last updated on 25 Apr 2019.
The small but thriving Botswana Stock Exchange is based in the national capital, Gaborone. A market was established in 1989 and this became the Botswana Stock Exchange in 1995, governed by the Botswana Stock Exchange Act. All listings were initially included in the only index, the Botswana Share Market Index, which is weighted according to the volume of shares in issue and the current bid price. However, as the market developed and diversified in terms of domestic companies and dual foreign companies listed, the need for additional markets indicators arose.
Three distinct indices were introduced to reflect the market diversity and these are; domestic company index (DCI), foreign company index (FCI) and the all company index (ACI). As well as equities, BDC bonds and Investec floating rate notes are traded. Private investors are estimated to account for under 10% of the total market capitalisation.
The number of companies listed on the Botswana Stock Exchange increased from 16 in 2001 to 30 in 2010. Market capitalization, including domestic and foreign companies, was just under USD56bn, this was a 16% increase on December 31, 2009. The total number of listed companies stood at 36 in April 2019, consisting of 26 domestic listings and 10 foreign listings.
Some years after the idea had first been mooted, in 2014 the legal process to privatise the BSE got under way. The process was completed on 16 August 2018, with the government owning 81% of the shares.
The licensing authority for brokers in Botswana is the Ministry of Finance. Membership may be corporate or individual. Trading occurs by the open outcry system, and settlement is on a T + 5 basis for both local and overseas clients.
As part of the BSE’s strategy to develop the capital market, the Central Securities Depository (CSD) was inaugurated in 2008. The CSD has brought prompt, efficient clearing and settlement of trades and the reduction of risks inherent in the process.
With the introduction of the CSD, the settlement cycle was tightened and the BSE shortened it to T+3 in conforming to international standards and to reduce settlement risk. The CSD also allows the BSE to record and analyse trading information more efficiently, which improves the deployment of its marketing strategy.
After some delay, the BSE sucessfully introduced an automated trading system (ATS) in September 2012. This development supports the BSE’s marketing initiatives by making it easy for both Botswanan and foreign investors to trade on the BSE.
There is a 15% withholding tax on dividends, reduced by the 2011/2012 budget to 7.5% with effect from the 2012 tax year, although IFSC companies are exempt; Capital gains tax is 15%, but, again, IFSC companies are exempt.