Economy of Botswana - Financial Sector

Financial Sector

Botswana has a growing financial sector, and the country's national stock market, the Botswana Stock Exchange (BSE), based in Gaborone, is given the responsibility to operate and regulate the equities and fixed interest securities market. Formally established in 1989, the BSE continues to be pivotal to Botswana’s financial system, and in particular the capital market, as an avenue on which government, quasi-government and the private sector can raise debt and equity capital. Although the BSE has just under 40 companies listed, it plays host to the most pre-eminent companies doing business in Botswana. These companies represent a spectrum of industries and commerce, from Banking and financial services to Wholesaling and Retailing, Tourism and Information Technology.

To date, the BSE is one of Africa’s best performing stock exchanges, averaging 24% aggregate return in the past decade. This has allowed the BSE to be the third largest stock exchange, in terms of market capitalization, in Southern Africa.

Given Botswana's lack of exchange controls, stable currency and exceptionally performing stock market, the financial sector has attracted a host of global investors seeking better returns.

Botswana's currency, the pula, is fully convertible and is valued against a basket of currencies heavily weighted toward the South African Rand. Profits and direct investment can be repatriated without restriction from Botswana. The Botswana Government eliminated all exchange controls in 1999. The Central Bank devalued the Pula by 7.5% in February 2004 in a bid to maintain export competitiveness against the real appreciation of the Pula. There was a further 12% devaluation in May 2005 and the policy of a "Crawling peg" was adopted.

The recently established Non-Bank Financial Institutions Regulatory Authority (NBFIRA) is responsible for the oversight of all non-banking financial services entities in the country. As of 2005, about 54 percent of Botswana’s population had access to formal or informal financial services, and 43 percent is banked (with access to at least one formal banking product). The overall access ratio is still low, especially in rural areas, where there are 3.8 branches and 73 ATMs per 100,000 people. Mobile banking services have just started to be offered. In recent years the government and Central Bank have undertaken serious steps to modernize the country’s payment system infrastructure. These efforts included the establishment of a code-line clearing system for the exchange of cheques and electronic funds as well as a Real Time Gross Settlement (RTGS) system, including SWIFT connection. The stock exchange implemented a Central Securities Depository in 2007. Remittance Flows for Botswana amounted to USD 117 million in 2007, a figure that is higher than the total net value of official development assistance.

Gaborone is host to the headquarters of the 14-nation Southern African Development Community (SADC). A successor to the Southern African Development Coordination Conference (SADCC), which focused its efforts on freeing regional economic development from dependence on apartheid in South Africa, SADC embraced the newly democratic South Africa as a member in 1994 and has a broad mandate to encourage growth, development, and economic integration in Southern Africa. SADC's Trade Protocol, which was launched on 1 September 2000, calls for the elimination of all tariff and non-tariff barriers to trade by 2012 among the 11 signatory countries. If successful, it will give Botswana companies free access to the far larger regional market. The Regional Center for Southern Africa (RCSA), which implements the U.S. Agency for International Development's (USAID) Initiative for Southern Africa (ISA), is headquartered in Gaborone as well.