Business confidence remains subdued

Shortages of water have contributed to lower economic activity
Shortages of water have contributed to lower economic activity

The level of optimism among businesses remains subdued on the back of power and water shortages, constrained government spending as well as weak domestic demand, a survey carried out by the Bank of Botswana (BoB) shows.

According to the Business Expectation Survey (BES) released by the BoB this week, the level of optimism as measured by the Business Confidence Index (BCI) was stagnant at 44 percent between March and September this year.

The BES, which sampled 100 businesses across various economic sectors, presents results of the survey carried out for three distinct periods, including the second half of 2015, the first half of 2016 and the 12 month period to December 2016.

“Overall confidence in the second half of 2015 is 44 percent, the same as for March 2015 survey. This was significantly lower than the 51 percent projected for this period in the earlier survey, a clear indication that expectations have been revised downwards. The continued subdued level of confidence reflects recurring water shortages in the Greater Gaborone area as well as power outages,” said the Central Bank.

Government has traditionally been the biggest actor in the local economy employing the highest amount of formal sector jobs while the private sector has always relied heavily on state projects for survival. However, revenues have plateaued in recent years compelling government, which employs 38 percent of the 340,000 formal jobs, to restrict its level of spending much to the detriment of both businesses and households.

The 44 percent BCI indicates that less than half of the respondents view the operating conditions as satisfactory. The BES also found that domestic businesses are more pessimistic than the export-oriented counterparts over the next six months, but that confidence seems to take a big knock in the full year to December 2016.

“Confidence among domestic-oriented businesses is 44 percent, slightly lower than 45 percent in the previous survey, but rising to 57 percent by the end of the survey period.

“Furthermore, there has been a significant decline in the confidence levels of export-oriented businesses from 43 percent in the previous survey to 33 percent in the current period. The business confidence for export-oriented firms improves to 50 percent over the next six months and later falls to 25 percent for the whole of 2016,” says the BES.

Despite the subdued levels of business confidence, the survey respondents said they are relatively optimistic, compared to the previous survey, about the demand for their products in the current period and the first half of 2016. In turn, this fed through to more positive expectations regarding production, employment and profitability, especially later in the year 2016.

“This is consistent with the greater optimism among local businesses regarding growth prospects for 2016.

“The survey indicates that most respondents anticipate operating at above 50 percent of their productive capacity in the current period. Thus, the current levels of capacity utilisation by businesses are broadly comparable with those in the previous survey,” reads the BES.

The Bank undertakes the BES twice a year in order to collect information on perceptions among the local business community about the prevailing state of the economy as well as future prospects.

For this survey, 51 percent of surveyed businesses responded, compared to 55 percent in the March 2015 survey.

Editor's Comment
What about employees in private sector?

How can this be achieved when there already is little care about the working conditions of those within the private sector employ?For a long time, private sector employees have been neglected by their employers, not because they cannot do better to care for them, but because they take advantage of government's laxity when it comes to protecting and advocating for public sector employees, giving the cue to employers within the private sector...

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