Brian Benza
14 March 2008
Gaborone — Today, two new Republic of Botswana government bonds worth P500 million each are to be listed on the Botswana Stock Exchange (BSE).
The two bonds, which were auctioned by the Bank of Botswana (BoB) last Friday, were highly oversubscribed, showing investors' strong thirst for investment instruments in the country's capital markets.
On the day, the central bank also issued a six-month P300 million Treasury Bill with a stop out yield of 11.41 percent. BOB Public Relations Officer Chepete Chepete confirmed to Business Week that the bonds will be listed on the bourse today.
"The two bonds are scheduled to be listed on BSE on March 14. The treasury bill will not be listed," he said, adding that the bank had not yet set any date for further issuance of the bonds, although the treasury bills will be issued on a semi-annual basis.
The latest development is part of a rollout of a bond issuance programme of up to P5 billion proposed in the 2008/09 national budget and approved by Parliament last week.
The first bond, BW 004, which matures on March 12, 2011, was subscribed to the tune of P2.23 billion at a coupon rate of 10.5 percent. Its highest bidder offered 11.9 percent, while the lowest offered 10 percent. The second bond, BW005, which has a 10.5-year lifespan maturing on September 12, 2018, attracted an equally high interest from investors with received bids amounting to as much as P2.58 billion at a coupon rate of 10 percent. It attracted the highest bid of 15 percent while its lowest bid was 9.7 percent.
The bonds, which were mostly snapped up by institutional investors, will be listed through a private placement.
The issuance of the bonds, which began this month, were a direct response to calls from the market about the lack of a proper paper, which was not working in favour of the development of the capital market. Investors and fund managers have long mourned the lack of mature investment vehicles on the market, leading to the market becoming highly liquid.
Asked to comment on whether the new bonds would satisfy market demands, Chepete said the bonds alone would not meet the demand, given the significant demand for pula-denominated assets on the market.
"However, the continued buildup of outstanding bonds will, to some extent, meet this demand", he said. "Buy tapping the market regularly, a reference point for other potential issuers will be created, encouraging other issuers to issue pula-denominated debt, thereby assisting in the objective of providing a range of pula-denominated assets to investors." he said.
In his 2008 budget speech, the Minister of Finance, Baledzi Gaolathe, said Government would continue to support the development of the capital market with a regular bond issuance programme.
"Government has put in place a regular programme of issue of and re-issue of bonds to build up and maintain a presence across the yield curve from six months to twelve years", the minister said.
"By generating a benchmark maturity and yield profile, the government bond issuance programme will guide borrowers who need to access the market for long-term finance."
The minister added that the new bonds would also seek to reduce the cost of Bank of Botswana Certificates (BoBCs), and facilitate planning for Government's investment in large-scale development projects during NDP10.
Speaking in Parliament last week, Gaolathe said the bond issuance programme would also facilitate planning for investments by Government, parastatals and the private sector in large scale development projects like the expansion of Morupule Power Station, the Mmamabula Power Project, the new university and major dams.
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