Business expectations plunge as credit, inflation fears rise
Lewanika Timothy | Monday March 9, 2026 09:24
Business confidence has deteriorated in recent surveys, with enterprises bracing for tougher trading conditions than in 2025. The latest survey points to mounting cost pressures, particularly on materials, utilities, rent and transport at a time when liquidity constraints and slower government spending are already weighing on the private sector.
Firms expressed muted optimism over increasing costs of borrowing across all markets, with expectations of monetary policy tightening expressed in increased interest rates. These concerns are founded on last year’s increases in lending rates by all commercial banks, which increase the costs for new and existing loans for firms.
“Firms expect lending interest rates to increase across all markets in 2026, with the strongest increase anticipated in the domestic market,” the survey reads. “This expectation is most likely informed by higher domestic lending interest rates amid liquidity distribution challenges and weak economic activity.'
Last year, nearly all commercial banks deviated from the central bank's interest rate benchmark, with prime lending rates increasing by 110 basis points due to the prolonged liquidity squeeze in the local capital market.
Businesses have had to bear increased repayments on existing loans, with future loans becoming more expensive, hindering expansion plans for many firms.
The latest survey further showed that firms still expected to continue borrowing despite the high cost of finance; however, the credit is to finance the growing costs of working capital to support operations, as opposed to borrowing for investment.
“Notwithstanding the anticipated rise in lending interest rates, firms also expect borrowing volumes to rise across all markets over the same period, with most firms preferring to borrow domestically and in South Africa. “This increase may reflect rising working-capital requirements and liquidity needs rather than expansionary investment intentions,” the survey revealed.
An expected increase in the cost of inputs or raw materials used in the production of goods and services also dampened the mood of firms in the first quarter of 2026, with higher-than-expected costs coming from payment of utilities.
The Botswana Power Corporation has requested a 46% tariff hike, with the Botswana Energy Regulatory Authority due to decide before April 1. Public transport fares are also expected to increase in the coming months, adding pressure on consumers and reducing disposable incomes.
“Overall, firms expected cost pressures to increase slightly in the fourth quarter of 2025 compared to the third quarter, mainly due to the anticipated increase in input costs, particularly for materials, rent, utilities and transport,” BoB researchers disclosed.
The firms anticipate continued weakness, with business conditions expected to be less supportive of economic activity in the fourth quarter of 2025 and the first quarter of 2026. The cautious outlook is consistent with the weaker fiscal position, with the Finance Ministry expecting a 0.4 percent contraction for 2025.
Final Gross Domestic Product figures are due out on March 31.