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Firms expects credit to be less accessible in 2020

About 100 firms have revealed their shyness to take credit facilities from lenders mainly because they consider the domestic interest rates to be high and loans to be less accessible.

This is according to Bank of Botswana’s recent Business Expectations Survey (BES) for this period. This survey looked at a businesses  This report presents results of the survey carried out in the fourth quarter of 2019, covering the fourth quarter of 2019 (Q4:2019 – the current period); the first quarter of 2020 (Q1:2020); and the twelve-month period (M12) from January 2020 – December 2020 (Q1:2020-Q4:2020).

“Firms in the domestic and export-oriented markets perceived access to credit to be tight in the fourth quarter of 2019, mainly because they consider the domestic interest rates to be high,” says the survey. The survey further states that  despite anticipating tight access to credit in the domestic market the anticipated increase in borrowing volumes is consistent with the expected rise in investment, especially in plant and machinery covering.

Firms expect to focus on increasing investment in buildings, plant and machinery, vehicles and equipment in the first quarter of 2020 but are anticipating tight access to credit in the domestic market, hindrance to their performance. According to the business expectations report, the increase in lending rates goes with anticipation of increase in borrowing volumes and this spike rise in investment, especially in plant and machinery.

As revealed in the current businesses survey, firms targeting the domestic market prefer to borrow money from the domestic market in the first quarter of 2020. However export-oriented firms prefer to borrow from the international markets other than South Africa also intending to reduce their borrowing from the domestic market.

Sixty-eight percent of firms that contribute to the domestic economy have complained that there is less availability and accessibility of the required loan products as the basis for their borrowing decisions. But 32 percent of businesses irrespective of whether funds would be sourced from Botswana or elsewhere would borrow if the credit facility is affordable, overlooking at the fact whether the loan is available or accessible.

With difficulty in accessing credit and finance, especially from abroad, businesses also decried unavailability of skilled labour which was cited as the greatest challenge facing businesses in the fourth quarter of 2019. This was also put together with difficulties in recruiting foreign skilled labour by most of the local businesses. The lack of skills is prevalent in manufacturing, trade, hotels, restaurants, transport and communications sectors. Firms in the manufacturing sector cited shortage of raw materials as the greatest challenge to their business operations.

Matsheka takes on the suitcase for the first time amid business community high expectations

When finance minister Thapelo Matsheka takes on the red carpet of Parliament buildings in a suit seemingly almost specifically accustomed for the much publicized national event while clenched to the symbolic black suitcase, the business community is expected to the most attentive of the audience.

In the recent businesses survey results firms show less optimistic about economic activity in the fourth quarter of 2019 compared to the third quarter of 2019. As the third quarter of 2019 shows Botswana to be on trade deficit, businesses also expected a decrease in exports of goods and services; sales; and investment in buildings, vehicles and equipment in the fourth quarter of 2019. Firms expect cost pressures to be subdued in the first quarter of 2020, the time of the launch of the 2020/21 financial year which will be kick-started by Matsheka who will be making a debut as a minister in the finance ministry.

Inflation

The firms expect cost pressures to be subdued in the first quarter of 2020 and this is attributable to the expected downward pressure on rentals, wages and transport costs. There is also expected rise in public wages (last year salary hike was for two years) and this will come with the burden of upward pressure on private sector wages. But Firms expect inflation not to escape the 3-6 percent objective range.

According to a survey on businesses, firms expect cost pressure to fall slightly in the first quarter of 2020, reflecting the anticipated downward pressure on rentals, wages and transport costs. Despite this, firms do not expect any inflationary effect but believe inflation will remain stable, within medium-term objective range of 3 – 6 percent.

Hope in 2020

The survey was not without a gleam of hope as business conditions are perceived to improve in the first quarter of 2020, which is now. “Firms anticipate improvements in capacity/resource utilization; production/service capacity; stocks/inventories; exports of goods and services; profitability; employment; and investment in plant and machinery, buildings, vehicles and equipment in the first quarter of 2020.

These, in combination with expectations of increased growth in the trade, hotels and restaurant and mining sectors contribute to the improved expectations relating to the overall business conditions,” said a survey on firms. The domestic market-oriented firms’ optimism improves in both the first quarter of 2020 and the twelve-month period to December 2020 (M12) compared to the fourth quarter of 2019, according to the recent survey.

According to BES, confidence in the domestic market-oriented firms is mainly driven by the trade, hotels and restaurants, transport and communications and the finance and business services sectors. Export market-oriented firms’ optimism decreases in the first quarter of 2020 compared to the fourth quarter of 2019, but improves for the twelve-month period to December 2020 (M12), according to the survey.

“Firms expected the economy to have grown by 3.3 percent in the fourth quarter of 2019, lower than 3.5 percent growth projected for the third quarter of 2019. These developments were reflected in responses by firms in the trade, hotels and restaurants and transport and communications, the construction as well as the manufacturing sectors the finance and business services and mining and quarrying sectors were optimistic about economic activity in the fourth quarter of 2019. Meanwhile, the GDP estimates indicate that the economy grew by 3.1 percent in the third quarter of 2019,” said the survey on firms.

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Business

Jewellery manufacturing plant to create over 100 jobs

30th January 2023

The state of the art jewellery manufacturing plant that has been set up by international diamond and cutting company, KGK Diamonds Botswana will create over 100 jobs, of which 89 percent will be localized.

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Business

Investors inject capital into Tsodilo Resources Company

25th January 2023

Local diamond and metal exploration company Tsodilo Resources Limited has negotiated a non-brokered private placement of 2,200, 914 units of the company at a price per unit of 0.20 US Dollars, which will provide gross proceeds to the company in the amount of C$440, 188. 20.

According to a statement from the group, proceeds from the private placement will be used for the betterment of the Xaudum iron formation project in Botswana and general corporate purposes.

The statement says every unit of the company will consist of a common share in the capital of the company and one Common Share purchase warrant of the company.

Each warrant will enable a holder to make a single purchase for the period of 24 months at an amount of $0.20. As per regularity requirements, the group indicates that the common shares and warrants will be subject to a four month plus a day hold period from date of closure.

Tsodilo is exempt from the formal valuation and minority shareholder approval requirements. This is for the reason that the fair market value of the private placement, insofar as it involves the director, is not more than 25% of the company’s market capitalization.

Tsodilo Resources Limited is an international diamond and metals exploration company engaged in the search for economic diamond and metal deposits at its Bosoto Limited and Gcwihaba Resources projects in Botswana.  The company has a 100% stake in Bosoto which holds the BK16 kimberlite project in the Orapa Kimberlite Field (OKF) in Botswana.

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Business

Global CEOs Back Plan to Unlock $3.4 Trillion Potential of Africa Free Trade Area

23rd January 2023

African heads of state and global CEOs at the World Economic Forum Annual Meeting backed the launch of the first of its kind report on how public-private partnerships can support the implementation of the African Continental Free Trade Area (AfCFTA).

AfCFTA: A New Era for Global Business and Investment in Africa outlines high-potential sectors, initiatives to support business and investment, operational tools to facilitate the AfCFTA, and illustrative examples from successful businesses in Africa to guide businesses in entering and expanding in this area.

The report aims to provide a pathway for global businesses and investors to understand the biggest trends, opportunities and strategies to successfully invest and achieve high returns in Africa, developing local, sub-regional and continental value chains and accelerating industrialization, all of which go hand in hand with the success of the AfCFTA.

The AfCFTA is the largest free trade area in the world, by area and number of participating countries. Once fully implemented, it will be the fifth-largest economy in the world, with the potential to have a combined GDP of more than $3.4 trillion. Conceived in 2018, it now has 54 national economies in Africa, could attract billions in foreign investment, and boost overseas exports by a third, double intra-continental trade, raise incomes by 8% and lift 50 million people out of poverty.

To ease the pain of transition to its new single market, Africa has learned from trade liberalization in North America and Europe. “Our wide range of partners and experience can help anticipate and mitigate potential disruptions in business and production dynamics,” said Børge Brende, President, and World Economic Forum. “The Forum’s initiatives will help to ease physical, capital and digital flows in Africa through stakeholder collaboration, private-public collaboration and information-sharing.”

Given the continent’s historically low foreign direct investment relative to other regions, the report highlights the sense of excitement as the AfCFTA lowers or removes barriers to trade and competitiveness. “The promising gains from an integrated African market should be a signal to investors around the world that the continent is ripe for business creation, integration and expansion,” said Chido Munyati, Head of Regional Agenda, Africa, World Economic Forum.

The report focuses on four key sectors that have a combined worth of $130 billion and represent high-potential opportunities for companies looking to invest in Africa: automotive; agriculture and agroprocessing; pharmaceuticals; and transport and logistics.

“Macro trends in the four key sectors and across Africa’s growth potential reveal tremendous opportunities for business expansion as population, income and connectivity are on the rise,” said Wamkele Mene, Secretary-General, AfCFTA Secretariat.

“These projections reveal an unprecedented opportunity for local and global businesses to invest in African countries and play a vital role in the development of crucial local and regional value chains on the continent,” said Landry Signé, Executive Director and Professor, Thunderbird School of Global Management and Co-Chair, World Economic Forum Regional Action Group for Africa.

The Forum is actively working towards implementing trade and investment tools through initiatives, such as Friends of the Africa Continental Free Trade Area, to align with the negotiation process of the AfCFTA. It identifies areas where public-private collaboration can help reduce barriers and facilitate investment from international firms.

About the World Economic Forum Annual Meeting 2023

The World Economic Forum Annual Meeting 2023 convenes the world’s foremost leaders under the theme, Cooperation in a Fragmented World. It calls on world leaders to address immediate economic, energy and food crises while laying the groundwork for a more sustainable, resilient world. For further information,

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