Raising capital through listing in the local bourse could become easier for Small and Micro-Medium Enterprises (SMME) as the Botswana Stock Exchange (BSE) introduces a new listing board for companies that cannot meet requirements in both the main and venture capital board.
BSE CEO Thapelo Tsheole told delegates at a BSE Listing and Investment Conference last week that the new board which specifically targets SMME is expected to be launched before the end of this year.
According to Tsheole, listing requirements for the board will be made easier to allow more SMME who would like to raise capital via the stock exchange to list. BSE is expected to lower listing requirements in the new board and come up with corporate governance structures and listing processes which are practical, acceptable and cost effective for SMMEs. It has emerged that majority of SMMEs in Botswana cannot afford to list on the stock exchange, as they find it difficult to meet set listing requirements. According to the requirements, before listing companies are expected to go through a rigorous pre-listing phase which involves restructuring to improve corporate governance, adopting recognizable financial reporting standards and putting together a company prospectus. The second phase, according to the requirements involves due diligence and marketing the company to attract investors. The two phases which need input from lawyers, corporate financiers, company secretaries, marketing experts normally takes 9-12 months to complete.
Tsheole indicated that the processes and services of experts engaged before listing are not affordable to the majority to SMMEs. “We will look at listing rules and see how we can amend them and find out how SMMEs can be structured before listing. After that we will educate SMME companies about listing on the platform and also educate investors so that they have same level of education,” stated the CEO.
He noted that BSE is aware that listing SMMEs is risky but, “ it’s not that there are no investors who can invest in these companies. We have never given SMMEs a platform to list and this is a new initiative in Botswana.”
Executive Director for the US Milken Institute’s Center for Financial Markets, Staci Warden (who was one of the delegates) stated that as companies grow into significant entities, it’s important for their owners to consider the BSE as a gateway to raise capital. Stacy has noted that according to the World Bank 2015 report, global credit growth for SMME’s is over US$1 trillion. “The credit is the most important constraint to economic growth in middle income countries. We need to find other ways of ensuring SMME access to capital,” she said. She added that a large percentage of firms in countries such as South Africa, India and Jamaica increase profitability and financial performance through listing.