A tough start to business in 2015
Staff Writer | Thursday April 30, 2015 16:20
This is what the data
had to say in part:
“In the international economic arena, the growth slowdown – particularly in China – has continued to have a negative impact on commodities markets.
“This has led to further declines in the prices of key primary commodities and weaker demand for luxury products including diamonds.
“Given that mining remains central to the Botswana economy – and of overwhelming importance to exports – the impact has been extensive,” says the report.
It goes on to say that declining prices for copper and nickel have created a difficult environment for existing and emerging base metals miners. Weak demand for diamonds has led to squeezed margins for polishers and ultimately, reduced exports.
“Exports of Botswana rough diamonds in January and February 2015 were 29% down in US dollar terms compared to the same period in 2014, indicating potential balance of payments pressures if the trend continues.
“Low demand and weak prices for bulk commodities such as coal and iron ore means that hopes of developing new, large-scale export operations, along with associated infrastructure such as the Trans-Kalahari Railway, are very much on the back burner, especially as prices are expected to remain low into the medium term.
“The positive aspect of weak commodities prices is of course the low price of oil, which has helped to bring inflation down to historic lows in Botswana and elsewhere.
“While global oil prices rose somewhat in the first quarter, the expectation is that inflation in Botswana will remain very low for the rest of 2015,” states the report.
Another positive development in the first quarter was the 2015 budget, which showed that government finances are reasonably healthy.
Says the report: “A budget surplus of P7.2 billion (5.5% of GDP) was recorded in the 2013/14 financial year – the most recent for which actual revenue and spending data are available –and approximately balanced budgets are projected for the current and forthcoming financial years.
“Government financial savings – an essential cushion against future shocks – are gradually being rebuilt, although public sector pay increases may slow this down.”
The report adds that a range of other factors have contributed negatively to the economic environment, particularly for the private sector.
“The tightening of requirements for the issuance and renewal of work permits for expatriate employees and foreign investors has led to the closure of several businesses and the shelving of expansion plans by others.
“It is one of the reasons for poor performance with regard to job creation.
“It has also undermined economic confidence and Botswana’s reputation for openness and “fair dealing” more generally.
“The failure of key public services, including water and electricity supplies has not helped either. Nor has the tightening of liquidity conditions in the financial sector, which led to reduced availability of credit and higher interest rates on borrowing, despite lower policy rates.
“Compounding all of these developments, the regional drought has negatively affected farming, and is in due course likely to lead to higher regional food prices as well as increased government spending on social welfare programmes.
Econsult Botswana says various initiatives have been undertaken or proposed to address some of these problems.
It says towards the end of the quarter, the Bank of Botswana reduced the liquidity requirements imposed on the banks.
“This has eased some of the constraints on bank credit and profitability. A wide range of business environment reforms has been agreed upon, in principle, by Cabinet.
“Several of them are quite far-reaching and could have a dramatic and positive impact on business conditions, assuming that they are followed through to the implementation stage in a reasonable time frame, without the underlying intent being compromised.
“Finally, an extensive consultation process is taking place with regard to the formulation of a new national Vision, to take effect for the 25-year period after the end of the current Vision 2016.
“This will be a prerequisite for the finalisation of National Development Plan 11, which has now been postponed for a year (to 2017) so that it can be made consistent with the new Vision.
“Besides objectives related to economic growth and poverty reduction, the Vision will also include a range of objectives related to the quality of life and citizen well-being, as well as environmental and economic sustainability.
“The Vision objectives will also complement the new Sustainable Development Goals (SDGs) being developed under the auspices of the United Nations as a successor framework to the Millennium Development Goals,” the reports reveals in conclusion.