Local firms wary of rising costs

Cautiously optimistic: Local firms expect geopolitical tensions in Eastern Europe to increase their costs PIC: PHATSIMO KAPENG
Cautiously optimistic: Local firms expect geopolitical tensions in Eastern Europe to increase their costs PIC: PHATSIMO KAPENG

Local firms surveyed by the Bank of Botswana are less optimistic about business operating conditions and expect the war in Eastern Europe to drive costs higher, particularly oil prices, BusinessWeek has learnt.

The latest edition of the Bank of Botswana's (BoB) quarterly Business Expectations Survey indicates a drop in overall optimism among businesses between the fourth quarter of 2021 and the first quarter of this year. The survey was carried out across 100 businesses from thirteen economic sectors, with a 55% response rate.

“The results suggest that firms are less optimistic about business conditions than they were in the previous survey,” the BoB said in an update recently. “Overall, businesses expect lower sales, inventories and profit, as well as reduced capacity utilisation, compared to the December 2021 survey. “Furthermore, firms anticipate tight access to credit across all markets. “Firms expect cost pressures to be higher in the second quarter of 2022 than in the first quarter of 2022, mainly reflecting the anticipated upward adjustment in fuel prices due to challenges arising from the Ukraine/Russia war.”

Russia’s invasion of Ukraine entered its third-month last week and has disrupted global markets, particularly the prices of crude oil. The Botswana Energy Regulatory Authority cited the conflict in a recent revision of petrol and diesel pump prices by an average of P1.33.

“The decline in business confidence among both domestic market-oriented and export-oriented firms is expected to have a negative impact on the domestic economic performance,” the central bank said. “Firms expect inflation to remain above the upper bound of the bank’s three to six percent objective range in 2022.”

The BoB’s data shows that while general business optimism prevailed across the various survey questions in the first quarter of the year, firms were less confident about indicators such as employment, production/service capacity, sales volume and overall business confidence.

While firms had an overall negative outlook on their profitability in the first quarter, they were marginally more positive in the second quarter, the data indicates.

Generally, the surveyed firms expect to continue investments in vehicles and equipment in the second quarter of the year, with most expecting to use their retained earnings, followed by loans and equity as funding options.

“Retained earnings as a source of financing was prevalent among the manufacturing, retail and accommodation, transport and communications as well as mining and quarrying sectors. “Meanwhile, most of the firms in the finance and professional and administrative sector preferred loans as a funding source,” the BoB reported.

Firms expect the economy to expand by 4.3 percent in 2022, a figure that tallies with government’s projections as well as the recent revisions by the International Monetary Fund.

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...

Have a Story? Send Us a tip
arrow up