Businesses remain upbeat despite diamond slump

Deloitte-Chief Economist of Deloitte UK Ian Stewart and Barclays Botswana Economist Katso Tshipinare at Deloitte Survey for Botswana. PIC: KAGISO ONKATSWITSE
Deloitte-Chief Economist of Deloitte UK Ian Stewart and Barclays Botswana Economist Katso Tshipinare at Deloitte Survey for Botswana. PIC: KAGISO ONKATSWITSE

A Deloitte survey covering chief financial officers of large Botswana firms, says businesses are more upbeat about economic growth prospects next year and beyond, than their Southern African peers.

The survey, conducted in June, comes as the local private sector braces for a P4.03 billion deficit in the 2015/16 financial year and significantly lower growth, due to a slump in diamond and base metal prices. While the Economic Stimulus Package announced last weekend is expected to positively impact these forecasts, few details on its timing and size have thus far been availed.

Released to the media at a briefing held in Gaborone this week, Deloitte’s CFO survey covers 45 Botswana CFOs who manage a collective annual turnover of US$250 million. The survey was also carried out in other parts of the world, including several African states.

According to the survey, on average local businesses expect economic growth at 4.9 percent for 2015, 4.7 percent for 2016 and 5.1 percent for 2017. The 2015 projection is an improvement on the 2014 survey where CFO’s forecast 4.5 percent growth, while the 2016 projection is marginally lower than the 4.7 percent forecast in the 2014 survey.


By comparison, surveyed financial chiefs in Southern Africa expect growth of 3.9 percent for 2015, 4.1 percent for 2016 and five percent for 2017. The 250 CFOs who took part in the survey in South Africa, do not expect growth over the same period to exceed 3.3 percent.

Local financial chiefs also expect the Botswana Pula to decline by 4.1 percent against the US dollar in 2015, by 4.7 percent in 2016 and by 3.2 percent in 2017, while their Southern Africa peers expect depreciation of up to eight percent in 2015.

Botswana CFOs are also among the few in Southern Africa thinking of investing in new businesses, as the top priority for the majority of surveyed businesses across the continent is to retain cash for liquidity. Deloitte UK chief economist and partner, Ian Stewart told BusinessWeek in an interview that the survey had revealed robust levels of confidence among local businesses.

“They are less defensive about the way they will run their businesses,” he said.

“While they are talking about cost control and greater efficiencies, it is less so than the rest of Southern Africa and Botswana CFOs are also looking at capital expenditure.

“This shows a very smart response because while they understand the risks they are also looking at the long term.” Stewart, who devised the CFO Survey in 2007 and has seen it spread to more than 40 countries, said the survey results indicated local firms’ comparative resilience in the face of the economic slowdown.

“This is an economy that already is witnessing a very marked slowdown and the corporate sector is showing resilience,” he said.

“Unlike South Africa, Botswana’s trend growth has been higher. In the long term, Botswana is outperforming SA. Botswana’s economy could possibly grow by between four and five percent in the long term, while South Africa is looking at between two and 2.5 percent.”

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