Anglo American’s likely departure from the Botswana Stock Exchange could expose the true scale of the domestic market while intensifying pressure on pension funds required to invest more of their assets locally.
DR DOUGLAS RASBASH
The proposed sale of Anglo American’s controlling stake in De Beers is widely regarded as one of the most significant developments in Botswana’s diamond industry for a generation. Public attention has understandably focused on who will ultimately own De Beers and what that may mean for Botswana’s long-standing partnership in one of the world’s most successful diamond businesses.
Yet another consequence has received remarkably little attention.
Once Anglo American divests its interest in De Beers, there will be little strategic rationale for maintaining its secondary listing on the Botswana Stock Exchange (BSE). Although no formal announcement has been made, a subsequent delisting appears a logical and highly probable consequence of the restructuring.
If that happens, the implications will extend far beyond the mining sector.
DEFINING MOMENT
The likely departure of Anglo American could become one of the most significant structural events in Botswana’s financial system since the Botswana Stock Exchange was established. It will not reduce Botswana’s mineral wealth, nor will it alter Debswana’s day-to-day operations.
Instead, it is likely to expose structural weaknesses that have existed within Botswana’s capital market for many years while simultaneously presenting Government with a rare opportunity to reshape the country’s financial future.
For more than a decade, the BSE has proudly reported a market capitalisation exceeding P1 trillion. On paper, Botswana appears to possess one of Africa’s largest stock exchanges, with a market value exceeding three times the country’s Gross Domestic Product.
Such figures naturally project an image of depth, liquidity and financial maturity.
However, headline statistics can sometimes conceal as much as they reveal.
A significant proportion of the BSE’s reported market capitalisation reflects the global value of Anglo American rather than the underlying strength of Botswana’s domestic corporate sector. Once Anglo’s secondary listing disappears, that valuation will disappear with it.
Current estimates suggest the exchange’s market capitalisation could contract from more than P1 trillion to below P200 billion, reducing its apparent size by more than 80 percent.
Botswana itself will not become poorer because of this statistical adjustment. Diamonds will continue to be mined, businesses will continue to operate and the wider economy will continue to function.
What changes is the picture presented by Botswana’s capital market.
The likely delisting will reveal a domestic exchange that is considerably smaller, more concentrated and less diversified than headline figures have long implied.
Ordinarily, this would be an important story in its own right. However, another major policy change is unfolding simultaneously, and together the two developments have the potential to reshape Botswana’s investment landscape.
PENSION PRESSURE
Over recent years, Government, through revised Pension Fund Rules administered by the Non-Bank Financial Institutions Regulatory Authority (NBFIRA), has progressively increased the proportion of retirement savings that must be invested within Botswana.
The policy objective is both understandable and commendable.
Botswana’s own savings should play a greater role in financing domestic investment, infrastructure and economic development rather than flowing predominantly into overseas markets.
The difficulty lies in the timing.
At precisely the moment pension funds are being required to increase domestic investment, Botswana’s single largest listed investment is likely to move offshore.
Botswana’s pension industry now manages assets approaching P170 billion. By the end of 2027, around half of those assets will be required to remain invested domestically.
Finding investments of sufficient scale, liquidity and quality has always been challenging. The likely departure of Anglo American removes one of the few assets capable of absorbing substantial institutional investment while simultaneously providing international diversification.
The implications become even more significant when one follows the shares themselves.
OFFSHORE SHIFT
Anglo American is not disappearing. It is simply changing markets.
Today, its Botswana-listed shares are traded and settled in Botswana pula. Following any delisting, those same shares would continue trading in London, denominated in British pounds.
For individual investors, this may simply represent a change of marketplace and currency. Indeed, continued ownership of a hard-currency asset may provide useful protection against movements in the pula while maintaining exposure to one of the world’s largest diversified mining companies.
Institutional investors face a very different reality.
Once Anglo American ceases to be listed on the Botswana Stock Exchange, those holdings become offshore assets for regulatory purposes. Pension fund managers may therefore find themselves under increasing pressure to reduce positions, not because the investment has become less attractive, but because the regulatory framework requires a growing proportion of retirement savings to remain within Botswana.
This creates a remarkable paradox.
Pension funds may be forced to exchange a globally diversified investment denominated in British pounds for a much smaller pool of domestic investments denominated in Botswana pula.
Billions of pula that once had access to one of the world’s largest listed companies could instead be channelled into a relatively small number of domestic shares.
The consequences are predictable. Competition for quality domestic assets intensifies, share prices become increasingly detached from underlying earnings, dividend yields compress and institutional portfolios become progressively more concentrated.
Ultimately, the issue is not whether the Botswana Stock Exchange rises or falls, but whether the country’s pension system continues to generate the long-term returns needed to support future generations of retirees.
CONCENTRATION RISK
A smaller investment universe also increases the risk that pension funds become overly exposed to the same companies, sectors and economic conditions.
This is particularly important in a country whose economic performance remains closely linked to diamonds, Government expenditure and a relatively limited number of large domestic businesses.
Diversification is not simply a technical preference exercised by fund managers. It is one of the principal ways in which long-term savings are protected against economic shocks, currency movements and the decline of individual companies or industries.
By reducing access to a large, internationally diversified company while increasing domestic investment requirements, the regulatory framework could unintentionally weaken the diversification available to pension funds.
The danger is not necessarily immediate. Domestic share prices may initially benefit from additional demand. Companies may find it easier to raise capital, and local investors may enjoy higher valuations.
However, if too much capital is directed towards too few assets, rising prices may reflect regulatory demand rather than improvements in the productive capacity or profitability of the underlying businesses.
That would create the appearance of capital market growth without necessarily creating corresponding economic value.
DIAMOND EXPOSURE
At the same time, Government has indicated its desire to secure a larger ownership position in De Beers once Anglo American exits.
Such a strategy may strengthen Botswana’s influence within the global diamond industry, but it also changes the distribution of commercial risk.
Historically, much of the volatility associated with the international diamond market has been absorbed by Anglo American’s global balance sheet. As ownership shifts, a greater share of that commercial risk could increasingly reside with Botswana itself.
This matters at a time when the diamond industry is facing changing consumer preferences, growing competition from laboratory-grown diamonds and uncertainty within major international markets.
Greater national ownership may provide Botswana with greater influence and a larger share of future returns, but it may also increase the country’s exposure during periods of weak demand and declining profitability.
None of this should be interpreted as an argument against greater national ownership or against encouraging more domestic investment.
Rather, it demonstrates that these policies cannot be considered in isolation.
Capital market regulation, pension policy and national investment strategy are becoming increasingly interconnected. The challenge for policymakers is therefore not simply to manage Anglo American’s likely departure, but to use it as a catalyst for strengthening Botswana’s capital market.
POLICY RESPONSE
Several policy responses deserve serious consideration.
First, Government and NBFIRA should review the implementation timetable for domestic pension investment requirements to ensure that regulatory objectives remain aligned with the availability of suitable domestic investment opportunities.
The objective of increasing domestic investment should remain, but the pace of implementation should reflect the capacity of the market to absorb additional capital without compromising returns or creating excessive concentration.
Secondly, the supply of investable domestic assets should be expanded through the accelerated listing of commercially viable state-owned enterprises and other strategic public assets.
A broader market is the most sustainable response to the loss of a major listed company. It would provide pension funds with greater choice while improving transparency, corporate governance and public participation in nationally significant enterprises.
Thirdly, Botswana should accelerate the development of alternative domestic investment instruments, including infrastructure bonds, green bonds, Real Estate Investment Trusts, private equity and other long-term investment vehicles.
These instruments could finance productive economic development while providing institutional investors with greater portfolio choice.
Fourthly, regulators should consider transitional arrangements for existing Anglo American holdings so that pension funds are not forced into unnecessary and potentially value-destructive sales simply because the shares migrate to London.
Finally, the time has come to develop a comprehensive National Capital Market Strategy involving Government, the Botswana Stock Exchange, the Bank of Botswana, NBFIRA, institutional investors and the private sector.
Botswana has accumulated substantial domestic savings over many decades. The next challenge is ensuring that those savings are matched by an equally strong pipeline of productive investment opportunities.
REFORM OPPORTUNITY
In many respects, this story is not really about Anglo American.
It is about what Anglo American’s likely departure may reveal about Botswana’s financial system.
The potential delisting should therefore be seen not simply as the loss of one listed company, but as a defining moment in the evolution of Botswana’s capital market.
If policymakers respond with vision and determination, Anglo American’s departure may ultimately be remembered less for the company that left than for the reforms it inspired.
Botswana now has an opportunity to build a deeper, broader and more resilient capital market capable of supporting economic transformation long after the diamond era has passed.