Firms more upbeat as economy warms up

Buzzing again: The economy’s reopening is helping drive demand and support for businesses PIC: MORERI SEJAKGOMO
Buzzing again: The economy’s reopening is helping drive demand and support for businesses PIC: MORERI SEJAKGOMO

Local firms are feeling significantly more optimistic about the trading environment in the third quarter of the year and into the next 12 months, backed by the lifting of the State of Emergency (SOE) and its associated restrictions, BusinessWeek has learnt.

The latest edition of the Bank of Botswana (BoB) biannual Business Expectations Survey released this week, indicates that local firms are more upbeat about economic activity in the third quarter of the year, compared to the second quarter when they were pessimistic. The survey samples businesses across 13 different sectors and gauges their perceptions about the prevailing state of the economy as well as expectations going forward.

The State of Emergency ended on September 30 and the survey, therefore, covers views from when the restrictions were in place to the period after they were lifted.

“The optimism is evident in the anticipated improvement in profitability, sales volume, imports of goods and services and investment in plant and machinery, in the current survey compared to the previous one,” the BoB’s survey reads. “Notably, firms in manufacturing and, mining and quarrying were optimistic about economic growth prospects in the third quarter of 2021 compared to the prior quarter. “This aligns with the less stringent COVID-19 movement restrictions.”

The BoB’s researchers added: “Firms in all sectors are optimistic about economic recovery in the year to September 2022, led by the retail and accommodation and trade, hotels, transport and communications, mining and quarrying and finance and professional and administrative activities sectors. “The perceived improvement in economic performance in the current survey compared to the previous one, likely reflects the expected resumption of economic activity following the end of the State of Emergency.”

In a report released on Wednesday, Econsult Botswana analysts, Sethunya Kegakgametse and Kitso Mokhurutshe said fears that the end of the SOE would lead to companies collapsing and shedding jobs had been 'overdone'. Under the SOE regulations, companies could not retrench workers, forcing many to adopt measures such as shift work and cutting of salaries, to cope with the pandemic’s impact. Others simply collapsed.

“Businesses that have survived so far are likely to experience stronger demand as the economy recovers, and hence are more likely to hire (or retain) than fire,” the Econsult analysts wrote in a commentary on the third quarter.

The Econsult analysts also noted an increase in the uptake of credit by local firms.

“The increased appetite for credit by businesses is a positive sign of economic recovery, as it reflects that output is increasing,” they stated.

Local firms, however, are far from being in the clear as the BoB’s survey indicates that many expect cost pressures to rise in the fourth quarter of the year, while access to credit is expected to be tighter in the 12 months to September 2022.

Econsult analysts, meanwhile, said household incomes are likely depressed and inequality worse, as a result of COVID-19, even though reliable data has not been made available.

“There are fears that household budgets are under increasing stress due to reduced incomes, job losses and healthcare expenses, which will only mount over time, with no clear end in sight. “The pandemic is likely to have worsened inequality, given that it impacted more on the informal sector than on the formal sector; the informal sector is a key source of income for lower-income households. “This emphasises the need to revisit social protection, as the impact of the pandemic could be detrimental to low-income households, which may struggle to meet basic necessities.”

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