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Firms more upbeat about prospects

MBONGENI MGUNI
Businesses in the country are ‘less pessimistic’ about the economy and their own profitability, despite concerns about rising costs and tight credit in the short term, the latest Bank of Botswana Business Expectations Survey (BES) shows.

The survey, conducted quarterly, sampled 100 businesses across eight economic sectors including agriculture, mining, manufacturing, trade, hotels and restaurants as well as finance and business services. According to the survey, businesses now expect the economy to record zero growth this year, an improvement from their expectation of a 0.2% contraction in the June edition of the BES. By comparison, the Finance and Economic Development ministry expects 8.9 percent contraction of the economy this year, while the International Monetary Fund has projected a 9.6 percent fall.

With the easing of local and international COVID-19 restrictions and recovery of demand, more firms even in hard hit sectors such as hotels, were more optimistic about their short term prospects, the BES showed.

“The expected relative improvement in business conditions is in line with the anticipated recovery in global economic activity associated with the gradual easing of COVID-19 pandemic containment measures,” Bank of Botswana researchers said. “Overall, firms were less pessimistic about business conditions in the third quarter of 2020 compared to the previous quarter.

“The reduced level

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of pessimism reflects the anticipated lower contraction in production, sales, profitability, exports and imports of goods and services as well as investment in buildings, vehicles and equipment, plant and machinery.”

However, firms also reported that while the cost of credit was expected to be cheaper in the short term, access would be tight and many preferred to finance their needs from retained earnings and savings. In addition, businesses also expect cost pressures to rise marginally in the fourth quarter of 2020, mainly due to the expected increase in the cost of transport, “possibly due to the recent hike in fuel prices and the anticipated rise in international oil prices”.

In terms of factors affecting their businesses, firms reported that difficulty in accessing international finance was the major hindrance in the third quarter, followed by difficulty in recruiting skilled foreign labour.

“Furthermore, weak international demand was also seen as a challenge to doing business in Botswana, particularly by those in mining and quarrying, trade, hotels, restaurants, transport and communications sectors,” the survey found.



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