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Business confidence declines

Botswana Firms are less optimistic about economic performance in 2019 than projections made in the 2019 Budget Speech. According to a Bank of Botswana Business Expectations Survey released this week, businesses expect the economy to grow by 3.8 percent in 2019, compared to the estimate of 4.2 percent in the 2019 Budget Speech and the 4.5 percent recorded in 2018.

It is expected that economic activity in the first half of 2019 will be mainly driven by mining and quarrying, trade, hotels, restaurants and transport, finance and real estate and manufacturing – the report says. The results of the Survey suggest that the level of optimism by firms regarding economic activity has declined, compared to the previous survey. Overall, businesses expect lower sales, reduced capacity utilisation and lower profits, compared to the September 2018 survey.

Investment in buildings also declined in the current survey, in line with the dampening effect of the tight access to credit in the domestic market, as perceived by the respondents. The anticipated deterioration in business confidence among both domestic-oriented and export-oriented firms with respect to future prospects is expected to affect economic activity.

The optimism in mining and quarrying, and the trade, hotels, restaurants and transport sectors could be attributable to the positive prospects for global demand for diamonds, which are likely to lead to a rise in sales and prices of diamonds as well as prospects for tourism.  Meanwhile, the BoB Survey notes that Construction is the only sector anticipated to produce less output in the first half of 2019, compared to the second half of 2018, possibly due to the completion of some of the construction projects under the Economic Stimulus Programme and some private construction projects, particularly in the Gaborone Central Business District (CBD) and Palapye, and he lower rate of increase in funds allocated for the development budget in the current financial year.

“Overall, business conditions are expected to remain positive during the first half of 2019, yet slightly weaker than in the final half of 2018. Optimism among businesses declined marginally from a confidence level of 28 percent in the second half of 2018 to 25 percent in the current survey period, and it is expected to fall to 21 percent in the second half of 2019.”

Furthermore, firms anticipate reduced levels of: capacity/resource utilisation; production/service capacity; sales; stocks/inventories; profitability; and investment on buildings and ‘other investment’ during the first half of 2019, compared to the second half of 2018. The BoB Business Expectations Survey reports that the decline in investment on buildings and ‘other’ is in line with the dampening effect arising from the tight access to credit, as perceived by the business community. On the other hand, intentions to invest in vehicles and equipment, and plant and machinery have strengthened, mainly among firms in consumer-related services, such as retail trade, hotels and restaurants.

But there is a reason as to why the decline – The Survey acknowledges that the slippage in perceptions about the overall business conditions in the first half of 2019 arises from the declining optimism among domestic-oriented firms, which comprise about 91 percent of the current survey respondents, compared to the second half of 2018. It states that this group of firms is also less optimistic about business conditions in the second half of 2019 and in the 12-month period to June 2020 (M12).

Meanwhile, export oriented firms are more optimistic about the first half of 2019 compared to the second half of 2018. However, their outlook on business conditions becomes negative in the second half of 2019 and in the 12-month period to June 2020, states the BoB report. “In general, the declining business confidence among both domestic-oriented and export-oriented firms is expected to negatively affect economic activity, as reflected in, among others, the anticipated decline in sales, capacity utilisation and investment in plant and machinery.”

Domestic lending rates expected to rise in both 2019, 2020

According to the BoB Business Expectations Survey, firms expect both lending rates and the volume of borrowing from the domestic market to increase in the second half of 2019 and first half of 2020. However, more firms expect both lending and borrowing rates to be higher in the first half of 2020 than in the second half of 2019.

“Similarly, in South Africa, lending rates are expected to rise in both the second half of 2019 and first half of 2020. The expected rise in lending rates in South Africa is consistent with the consensus forecast for market rates, obtained from Bloomberg3, for the same period. In line with this, borrowing volumes from South Africa are expected to decline in the second half of 2019, before rising in the first half of 2020”, reads the report.

The upward pressure on lending rates elsewhere (any market other than Botswana or South Africa) is expected to drop significantly in the first half of 2020, compared to the second half of 2019, while the expected increase in borrowing volumes over the period is marginal.

Inflation expected to remain within 3-6 percent objective range

The Bank of Botswana Survey further shares that although slightly higher in the current survey, firms’ expectations about the domestic inflation have generally been on a downward trend since 2013, and within the Bank’s inflation objective range of 3-6 percent since 2014.  Furthermore, uncertainty about future inflation has, on the whole, declined as shown by the smaller standard deviation from the average expectations despite the noticeable divergence in the current survey. “Firms’ inflation expectations have averaged 4 percent since 2016, suggesting that inflation expectations are well anchored within the Bank’s objective range.”

Factors Affecting Business Conditions

Unavailability of skilled labour is perceived to be a major challenge to doing business in Botswana, the BoB Business Confidence Survey has noted.  It says the unavailability of skilled labour was cited as the greatest challenge facing businesses in the first half of 2019, arising from the reported difficulties experienced in recruiting foreign skilled labour. The new administration of President Dr Mokgweetsi Masisi has pledged to ease business in this area.

According to this report, difficulties in sourcing skilled labour is more pronounced in the construction sector, followed by trade, hotels, restaurants and transport. Meanwhile the 2018 Global Competitiveness report has also highlighted lack of skilled labour among the main challenges of doing business in Botswana. Meanwhile, the political climate, domestic demand and regulatory framework are viewed as being supportive to doing business in Botswana during this half year.

However, the BoB Survey says the number of firms viewing lack of skilled labour as a challenge has fallen notably compared to the previous survey. An interesting observation from the survey is that, ‘other’, which from the previous survey was viewed as a major challenge to doing business due to the dominance of government spending, is no longer considered a major impediment as government spending is now viewed to be neutral.

The BoB Survey says his may be partly attributable to a reduction in responses from sectors, such as manufacturing and construction, which rely mostly on government as a major client. “Another observation is that water and electricity continue to be viewed as contributing positively to the business climate, reflecting ongoing efforts to improve the supply of these utilities through measures such as the implementation of the North-South Carrier 2 water project and the North-West Transmission Grid electricity connection,” reads the report.

Overall, the Business Confidence Survey notes that business conditions are perceived to have marginally weakened compared to the last survey, and are expected to decline further in the second half of 2019.  “The cost pressures are expected to decline in the second half of 2019, compared to the first half of the year. As firms’ inflation expectations seem to be anchored at rates of just below 4 percent, the survey responses are consistent with the official projection that inflation will remain within the Bank’s objective range of 3 – 6 percent going forward.”

The Business Expectations Survey (BES) was conducted by the Bank of Botswana in March 2019.  It covers local business community’s perceptions about the prevailing state of the economy and economic prospects up to June 2020.

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Payless to partake in BSE’s Flagship Tshipidi program

28th June 2022

Newly established wholly indigenous citizen owned retail chain Payless Retail (PTY) Ltd is set to partake in the first session of Botswana Stock Exchange (BSE)’s Tshipidi Mentorship Program (TMP) on Monday June 29th.

The TMP aims to train and capacitate SMEs so they can operate as corporates and eventually list on the local bourse. According to local bourse, BSE, the program aims to provide practical training to potential issuers through a comprehensive and interactive program that covers the key themes necessary to position a company to list on the BSE.

Payless Retail is a newly established supermarket chain whose mission is to become a convenient one-stop shopping destination as it is one of the Botswana oldest retailing brands.  It started off as Corner Supermarket in January 1976, and to date boasts of nine stores in, among others, Gaborone, Mochudi, Molepolole and Tlokweng. Payless was recently acquired by Ellis Retail Group, which is led by businessman Elliot Moshoke.

The takeover catapulted Ellis Retail to the envious position of being the first wholly indigenous owned major retail chain. “We jumped at this opportunity because it gave us a chance to prove to Batswana that the retail business is open and lucrative.”

The objective is to create a proudly Botswana retail chain that fully supports our national Vision, economic development and citizen economic empowerment ambitions,” Moshoke told BusinessPost.

He further emphasized that Batswana are capable and able to run large scale businesses hence they need to accept invite foreign investors who will come in to support us not take the business.
“Our win as Payless in the Fast Moving Consumer goods (FMCG) industry is a win for Batswana. We need their support in this difficult and challenging journey.

As you are aware, Payless is the only retail chain in the hands of Batswana ba Sekei. We need to take advantage of this to generate employment and create small businesses in retail and Agri businesses,” he explained.

The retailer has also partnered with Botswana Investment & Trade Center (BITC) on their #PushaBW campaign with a view to initiating earnest engagement with local producers to iron out bottlenecks and ensure seamless trading.

“Local producers have to be part of the phenomenal growth of the Payless brand. This will in turn facilitate employment creation and economic growth. We did this because we have the utmost respect for local manufacturers and producers,” he mentioned.

Payless is currently restocking all of its stores; a development that Moshoke says is testament to the retailer’s commitment to growing the brand and ensuring continuity of business. He further revealed that renowned retail suppliers like PST and CA Sales have reignited their trust in Payless, opening their doors for Payless as they have faith in the retailer’s new owners.

The takeover has reportedly saved more than 200 jobs and gave a new lease of life to the previously fledging Payless brand. According to a press release from the management team, the Payless work forces are also extremely excited about what the future holds. The TMP is a comprehensive and interactive program that covers the key themes necessary to position a company to list on the BSE.

The program is administered by experts within the listing ecosystem and seeks to bring the potential issuers closer to the listings advisers, investors and leaders of already listed companies.  “As a strategic initiative, the BSE decided to set up this mentorship program in a bid to assist SMEs to strategize, corporatize and acclimatize in order to list to access equity finance and expand operations,” said the BSE.

The TMP will avail to SMEs practical insights, knowledge and feedback from institutional investors, increased awareness of the BSE listing requirements as well as an intimate network of advisors and CEOs of listed companies. After training, Payless will graduate with improve governance structures and better knowledge of articulating its business strategy. The retailer will also gain increased visibility through BSE marketing platforms.

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BITC assisted companies rake in P2.96 billion in export earnings

21st June 2022

Despite Covid-19 interrupting trade worldwide, exporting companies in Botswana which benefited from the Botswana Investment and Trade Centre (BITC) services realised P2.96 billion in export earnings during the period from April 2020 to March 2021.

In the preceding financial year, the sale of locally manufactured products in foreign markets had registered export revenue of P2, 427 billion against a target of P3, 211 billion BITC, which celebrates 10 years since establishment, continues to carry out several initiatives targeted towards expanding the Botswana export base in line with Botswana’s desire to be an export led economy, underpinned by a robust export promotion programme in line with the National Export Strategy.

The main products exported were swamp cruiser boats, pvc tanks and pvc pipes, ignition wiring sets, semi-precious stones, veterinary medicines, hair braids, coal, textiles (towels and t-shirts) and automobile batteries. These goods were destined mainly for South Africa, Zimbabwe, Austria, Germany, and Namibia.

With Covid-19 still a problem, BITC continues to roll out targeted virtual trade promotion missions across the SADC region with a view to seeking long-lasting market opportunities for locally manufactured products.

Recently, the Centre facilitated participation for Botswana companies at the Eastern Cape Development Council (ECDC) Virtual Export Symposium, the Botswana-Zimbabwe Virtual Trade Mission, the Botswana-Zambia Virtual Trade Mission, Botswana-South Africa Virtual Buyer/Seller Mission as well as the Botswana-Namibia Virtual Trade Mission.

BITC has introduced an e-Exporting programme aimed at assisting Botswana exporters to conduct business on several recommended e-commerce platforms. Due to the advent of COVID-19, BITC is currently promoting e-trade among companies through the establishment of e-commerce platforms and is assisting local companies to embrace digitisation by adopting e-commerce platforms to reach export markets as well as assisting local e-commerce platform developers to scale up their online marketplaces.

During the 2019/2020 financial year, BITC embarked on several initiatives targeted at growing exports in the country; facilitation of participation of local companies in international trade platforms in order to enhance export sales of local products and services into external markets.

BITC also helped in capacity development of local companies to compete in global markets and the nurturing of export awareness and culture among local manufacturers in order to enhance their skills and knowledge of export processes; and in development and implementation of trade facilitation tools that look to improve the overall ease of doing business in Botswana.

As part of building export capacity in 2019/20, six (6) companies were selected to initiate a process to be Organic and Fair Trade Certified. These companies are; Blue Pride (Pty) Ltd, Motlopi Beverages, Moringa Technology Industries (Pty) Ltd, Sleek Foods, Maungo Craft and Divine Morula.

In 2019 seven companies which were enrolled in the Botswana Exporter Development Programme were capacitated with attaining BOBS ISO 9001: 2015 certification. Three (3) companies successfully attained BOBS ISO 9001:2015 certification. These were Lithoflex (Pty) Ltd, General Packaging Industries and Power Engineering.

BITC’s annual flagship exhibition, Global Expo Botswana (GEB) to create opportunities for trade and strategic synergies between local and international companies. The Global Expo Botswana) is a premier business to business exposition that attracts FDI, expansion of domestic investment, promotion of exports of locally produced goods and services and promotion of trade between Botswana and other countries.

Another tool used for export development by BITC is the Botswana Trade Portal, which has experienced some growth in terms of user acceptance and utilisation globally. The portal provides among others a catalogue of information on international, regional and bilateral trade agreements to which Botswana is a party, including the applicable Rules, Regulations and Requirements and the Opportunities for Botswana Businesses on a product by product basis.

The portal also provides information on; measures, legal documents, and forms and procedures needed by Botswana companies that intend on doing business abroad. BITC continues to assist both potential and existing local manufacturing and service entities to realise their export ambitions. This assistance is pursued through the ambit of the Botswana Exporter Development Programme (BEDP) and the Trade Promotion Programme.

BEDP was revised in 2020 in partnership with the United Nations Development Programme (UNDP) with a vision to developing a diversified export-based economy. The programme focuses mostly on capacitating companies to reach export readiness status.

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Inflation up 2.3 percent in May

21st June 2022

Prices for goods and services in this country continue to increase, with the latest figures from Statistics Botswana showing that in May 2022, inflation rate rose to 11.9 percent from 9.6 percent recorded in April 2022.

According to Statistics Botswana update released this week, the largest upward contributions to the annual inflation rate in May 2022 came from increase in the cost of transport (7.2 percent), housing, water, electricity, gas & other Fuels (1.4 percent), food & non-alcoholic beverages (1.1 percent) and miscellaneous goods & services (0.8 percent).

With regard to regional inflation rates between April and May 2022, the Rural Villages inflation rate went up by 2.5 percentage points, from 9.6 percent in April to 12.1 percent in May 2022, according to the government owned statistics entity.

In the monthly update the entity stated that the Urban Villages inflation rate stood at 11.8 percent in May 2022, a rise of 2.4 percentage points from the April rate of 9.4 percent, whereas the Cities & Towns inflation rate recorded an increase of 1.9 percentage points, from 9.9 percent in April to 11.8 percent in May.

Commenting on the national Consumer Price Index, the entity stated that it went up by 2.6 percent, from 120.1 in April to 123.2 in May 2022. Statisticians from the entity noted that the transport group index registered an increase of 7.3 percent, from 134.5 in April to 144.2 in May, mainly due to the rise in retail pump prices for petrol and diesel by P1.54 and P2.74 per litre respectively, which effected on the 13th of May 2022.

The food & non-alcoholic beverages group index rose by 2.6 percent, from 118.6 in April 2022 to 121.6 in May 2022 and this came as a result of increase in prices of oils & fats, vegetables, bread & cereal, mineral waters, soft drinks, fruits & vegetables juices, fish (Fresh, Chilled & Frozen) and meat (Fresh, Chilled & Frozen), according to the Statisticians.

The Statisticians said the furnishing, household equipment & routine maintenance group index rose by 1.0 percent, from 111.6 in April 2022 to 112.7 in May 2022 and this was attributed to a general increase in prices of household appliances, glassware, tableware & household utensils and goods & services for household maintenance.

The prices for clothing & footwear group index moved from 109.4 to 110.4, registering a rise of 0.9 percent during the period under review. Bank of Botswana has projected higher inflation in the short term, associated with the likelihood of further increases in domestic fuel prices in response to persistent high international oil prices and added that the possible increase in public service salaries could add also upward pressure to inflation in this country.

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