What if you could lend money to a company or government like a bank and still be able to sell that loan later? You’re not buying a business, you’re giving someone money to use and they pay you back with a little something extra. If you need cash before they finish paying, you can sell that deal to someone else. That’s what bonds are. Bond trading in Botswana is like a kraal for big cattle only. But now the BSE wants small farmers like you to be able to step in.
The Cattle Post Gate Is Opening
The Botswana Stock Exchange (BSE) recently said it wants to make it easier for ordinary Batswana to invest in bonds.
Currently, the bond market is like a cattle auction. Only big commercial farmers are allowed in. The BSE wants to throw open the kraal gates so that even a smallholder like you with just a goat or two can take part in buying and selling.
But what are bonds? And how are they different from shares?
Shares: You Own the Tuckshop
When you buy shares, you are buying a piece of a business. It’s like joining hands with your friends to own a tuckshop. If the tuckshop makes a profit, you all get a slice of that money. If it grows, the value of your slice grows too.
People buy and sell shares on a stock exchange, in this case the BSE, which has more than 30 listed companies to own.
The prices go up and down depending on how the business is doing, just like how buyers at the cattle post may offer more for a healthy cow, and less for a skinny one.
But What About Bonds?
But bonds are not ownership; they are loans. Instead of buying a share of a business, you are lending money to someone, like the government or a big company, and earning interest from that. In essence, you are buying debt because you put money on it. You will see how this debt can be sold too (this is done in a primary market or secondary market, take note of this).
Let’s make it real first:
Your cousin wants to start a chicken business. He borrows P1,000 from you and promises to pay you back in one year (12 months). This is called the maturity date.
Family aside, the business of lending out money is to make money. Let’s say your cousin agrees to give you P50 every three months, but you still get your P1000 in full at the end of 12 months, which means the total amount collected back is P1200.
That P200 over the year is your interest and the P1000 is the money you loaned out.
In this case:
- Your cousin is the borrower (just like the government).
- You are the bondholder (the lender).
- The P50, every three months, is your interest.
- The P1,000 you get back at the end is your capital.
That’s a bond. The kind of deal with your cousin is a primary market. You’re dealing directly with the borrower.
Bonds Can Be Resold Too
Fast forward six months. It’s now June and you have already received P50 for the first 3 months of 2025 and another P50 for the next three months ending June (P100 in total has returned to you).
You need cash quickly, but you can’t ask for the money from your cousin because the deal is for 12 months. You go to your neighbour and explain that your cousin still owes you P1,000, and he’ll still pay another P100 in interest before the year ends (P50 end of September and P50 end of December).
You propose to sell the remaining debt owed. Your neighbour agrees to pay you P950 to take over the deal and earn the remaining money from your cousin. Now he will collect that P100 in interest and also get the P1,000 back when your cousin repays.
That’s how bonds can be bought and sold before maturity, just like goats or chickens in the market.
That’s the secondary market.
You’re not lending to your cousin anymore; you’re just selling the agreement to someone else, who takes over the right to earn the interest and get repaid. In total, the neighbor paid P950 but got P1100, profiting P150 as a return.
Yield Up, Price Down: When Things Get Tricky
Now, let’s say rumors spread that your cousin’s chicken project is not going well. There is fear that he might not pay back. Nobody wants that loan anymore.
Your neighbor now tries to sell it for just P800, just to get rid of it. But the interest is still P100 and it doesn’t change because that is what your cousin promised from day one. Now the one who buys the deal earns P100 interest on P800, not P1,000. That’s a better deal for them, right?
That’s what people in finance call a higher yield. It simply means:
How much are you earning compared to what you paid?
So:
- If you paid P1,000 and get P100, that’s a 10% yield.
- If you paid P800 and get P100, that’s a 12.5% yield.
The opposite is also true.
Let’s say your cousin’s chicken business is booming. Everyone wants that loan. Someone offers you P1,100 for it. They’re now earning less than 10%, because they paid more for the same interest.
This is a key rule in bonds:
- When the price goes down, the yield goes up.
- When the price goes up, the yield goes down. And vice versa.
This still happens in the secondary market, and in this case, the BSE. By opening the bond market to retail traders, the BSE will be giving investors like you an opportunity to lend money to the government or companies, earn interest payments, and maybe even trade your bond if you need cash early.
Welcome to the bond kraal.
