Bank of Botswana has released the Business Expectation Survey for the last half of the year which shows that there has been an increase in overall business confidence. However businesses still remain wary of the uncertainties surrounding demand for commodities in the global market, which continues to threaten business operations.
The Bank undertakes the Business Expectations Survey (BES) twice a year in order to collect information on perceptions among the local business community about the prevailing state of the economy, as well as future prospects. Businesses are asked to respond to a range of questions relating to, among others, the business climate and prospects for economic growth, inflation and business performance over the survey horizon, which starts from the second half of 2016 until end of 2017.
The survey report shows that overall business confidence in the last half of the year is 43 percent, up by 7 percent from the level that prevailed during the first half of the year reported in the March 2016 survey. The higher confidence level in the second half of 2016 is, however, five percentage points lower than the 48 percent anticipated for the same period at the time of the March 2016 survey. Moreover, there is an improvement in the level of confidence for the rest of the survey period, rising to 51 percent in the first half of 2017 and to 58 percent for the entire 2017.
Domestic oriented businesses were much more optimistic with the level of confidence reaching 43 percent in second half, compared to 31 percent in the first half of the year. Looking ahead, the level of optimism improves to 46 percent in the first half of 2017 and 52% for the whole of 2017.
However, the survey reveals that the confidence level of export-oriented businesses declined significantly, from 71 percent in the first half of the year as reported in the previous survey, to 42 percent in the last half of 2016. Going forward, business confidence recovers markedly to anticipated levels of 75 percent and 92 percent in H1 2017 and the whole of 2017, respectively. Thus, the overall expected upswing in business confidence for 2017 is due to a more positive outlook by both export and domestic oriented businesses.
When it comes to national output growth, businesses are conservative about Gross Domestic Product (GDP) growth. On average, businesses expect real GDP to grow by 2 percent in 2016 and by 2.6 percent in 2017. These are lower than the government forecasts of 3.5 percent for 2016 and 4.1 percent for 2017, indicated in the Budget Strategy Paper for 2017/18. According to the report, the expected economic growth rate for 2016 by the business community, is an improvement over the actual contraction of 0.3 percent realised in 2015, and is consistent with the improving business confidence.
In terms of capacity utilization, investments, input costs and job creation, the majority (85 percent) of businesses expect to utilise at least 50 percent of their productive capacity in the second half of 2016, while at the same time anticipating to raise investment and employment levels in the first half of 2017. This is in spite of strong business sentiments about rising costs of inputs in the period.
The survey indicates that 15 percent of the respondents anticipate operating below 50 percent of their productive capacity in the current period, while 54 percent expect to produce between 50 and 80 percent of their capacity; 31 percent of the businesses expect their productive capacity to exceed 80 percent. Thus, the current levels of capacity utilisation by businesses are broadly comparable with those reported in the March 2016 survey (46 percent anticipated operating between 50 and 80 and 33 percent expected to exceed 80 percent), hence suggesting that the business environment is still challenging, but stable.
Despite the challenging operating environment, the businesses surveyed are optimistic about demand for their products and services, expecting inventory levels to drop as they move more products and services in the first half of 2017.
“In turn, this feeds through to more positive expectations regarding production, employment and profitability in the current period and the remaining period of the survey. Nonetheless, expectations for investment in building, plant and machinery and other items in H2 2016, have been revised downwards in the current survey, compared to expectations for the same period expressed in the March Survey,” the report stated.
Still on that, the report highlighted that there is an improvement in expectations relating to investment in vehicles and equipment between the two surveys. Looking ahead, a majority of businesses anticipate to undertake more investment in the first half of 2017, indicative of the optimistic outlook for 2017.
The Business Expectations Report also reveals that sentiment amongst firms regarding rising cost of inputs is still strong and higher than in the March 2016 Survey. Nonetheless, expectations of higher costs eased for wages and utilities, while remaining broadly strong for materials, rent, and transport and other items in the first half of 2017. The survey from respondents show that expectations of rising costs of inputs decreases in the later period of the survey, consistent with moderating inflation expectations.
The decision by the central bank to slash the bank rate in 2015 and 2016 has struck a chord with the business community as the survey shows that they anticipate an easy access to credit with a bias towards domestic borrowing in the early part of 2017 due to favourable interest rates, before opting to borrow from South Africa later in the year, taking advantage of the currency exchange. The report further reveals that for capital investment, companies would prefer to borrow domestically than abroad (South Africa and international markets) in the first half of 2017, but would opt to borrow from South Africa in the 12-months period to December 2017.
“Regarding borrowing costs, there is some anticipation of lower domestic interest rates in the first half of 2017 before rates start to rise in the later part of the year. Expectations of lower domestic interest rates are aligned to the reduction of the Bank rate from 6 percent to 5.5 percent since August 2016, together with prevailing low inflation, which continues to fluctuate around the lower end of the Bank’s 3 – 6 percent range,” part of the report reads.
While in 2015 there were talks of liquidity crisis, the central bank eased the reserve requirements cap, allowing for more money in the banking sector to enable more lending. The decision appears to have opened doors for businesses. In terms of access to finance, there is a reduction in the proportion of businesses which believe access to credit is tight (44.9 percent compared to 50.8 percent in the previous survey), while the number of those viewing access as easy has fallen from 13.6 percent in the March 2016 Survey to 9 percent. However, there is a significant increase in the proportion of businesses which believe access to credit is normal (46.2 percent from 35.6 percent in the March 2016 Survey). In general, compared to the March 2016 survey, the business sentiment about access to finance has improved.
Despite inflation rate treading below the bank’s medium term range for most part of the year, the respondents projected inflation is above the current inflationary levels but within the Bank’s inflation objective, suggesting confidence in the bank’s monetary policy.
“Businesses have revised their inflation expectations for 2016 slightly downwards to an average of 3.6 percent from 3.7 percent in the March 2016 Survey. Inflation expectations of 3.8 percent for 2017 remained the same as in the March 2016 Survey. Despite the relatively low average inflation expectations, they still remain above actual inflation which averaged 2.8 percent in the 9 months to September 2016,” the report said and also adding that the majority of respondents expect inflation to be within the Bank of Botswana’s medium term inflation objective range of 3-6 percent in 2016 (66 percent) and 2017 (68 percent), possibly reflecting the sustained period during which inflation has been within the objective range, which adds to the Bank’s policy credibility.
In the previous surveys, local based businesses used to cite the water and power crisis as a major challenge to their operations. However in the latest survey respondents now point to weakening domestic demand coupled with reduced government spending as the first and second most significant challenges facing businesses due to perceived slow growth in household disposable income and public expenditure. According to the report, the next ranked impediments to business operations relate to regulatory and supervisory framework and availability of raw materials. Respondents also highlight unavailability of skilled labour and weak international demand among the serious challenges they face.
Prices for cereals or staple foods in Botswana and other Southern African countries continue to rise at a slower pace, following trends in the global markets, according to the latest November 2022 Food Price Monitoring and Analysis by Food Agricultural Organization (FAO) of the United Nations.
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Botswana Institution Of Engineers (BIE), has last week hosted a gala dinner in which they appreciated engineers who worked tirelessly and with dedication for 10 years from 1983 to steer the BIE to its current status.
The event that was held at the Phakalane Golf Estate had brought together young, experienced and veteran engineers and was held under the theme “Vitalize the dignity and eminence of all professional engineers”.
Explaining the theme, the institution’s treasurer, Thanabalasingam Raveendran said that engineers were looked upon reverentially with respect as the educated but with time it seems to have deteriorated. He indicated that there is a need to change the narrative by all means.
“The BIE exists for the welfare and the betterment of us Botswana engineers, we need to recognize specialised units within our Institution. We Engineers strongly believe in Engineers make it happen” Raveendran said.
He indicated that under the theme they appeal to all engineers to energize, to attain quality of being worthy of honour and respect and to achieve recognized superiority amongst the Society.
Raveendran stated that engineers need to ensure their end product is of good quality satisfying the end users expectations and engineers must be honest in their work.
“Approximately 8000 engineers registered with Engineering Regulatory Board (ERB) are not members of the BIE, engineers need to make every effort to recruit them to BIE” he said.
He alluded that BIE being a society, it currently needs to upgrade itself at par with professional institutions elsewhere like the UK and USA.
He further stated that BIE has to have engineering units of specialised disciplines like Civil/Mechanical/electrical etc
“As President Masisi indicated in his inaugural speech, the young people, who make 60 percent of the population of this country, are the future leaders and therefore investing in them is building the bridge to the future” said Raveendran
Kandima indicated that BIE has a memorandum of Understanding with Engineers Registration Board (ERB), where BIE is a recognised provider of CPD training, mentorship programmes and more importantly IPD undertaking to upgrade the skills and know-how of our engineers.
“For us to achieve our mandate and make worthwhile changes to engineering in Botswana, we have to be totally focused and act with intent” said Kandima.
Furthermore, Stephen Williams, past president of the BIE from 1986-1988 told the engineers that the BIE provides a fertile environment where they can meet, share ideas and grow professionally.
“The BIE is also a nesting place for graduate engineers to learn from their peers and seniors, it also cater for engineering technicians and technologists and so nobody in the technology field is left out” he said.
He further indicated that Botswana Government provides a conductive environment for growth of engineering professionals.
“It must be stated that the Botswana Government recognises the existence of BIE and it can further be stated that the government enables ERB to carry out its mandate as a regulator of engineering professionals” said Williams
He plead with engineering companies to recognize and support BIE as it is the only source of engineering personnel’s for various Industries .
Furthermore, when giving his farewell speech, Michael Pinard , a past president of the institution said how they are viewed as engineers by the general public might be due to some lack of appreciation as to exactly what role they play in the development of the country.
“The BIE slogan is aptly coined-Engineers make it happen, in other words, what man dreams engineers create” Said Pinard.