The pace at which the private sector is growing and its momentum is not up to expectations considering the fact that transformation of the Botswana economy depends very much on the private sector to robustly lead the growth process at a pace that is also sustainable.
This was said by the Research fellow and Macro Economic expert with the Botswana Institute of Development Policy and Analysis (BIDPA), Dr Grace Tabengwa.
“Private sector growth and its momentum still remains below expectation, although some positives are emerging, the concern with private sector or non-mining sector growth is that the performance generally tends to remain well below for example 15% on average for a sector that would have registered significant positive growth rates,” said Tabengwa.
She said that the pace of private sector growth is imperative for unleashing the much needed employment generation capacity, entrepreneurship, competitiveness potential and industrial development which are avenues to address challenges of diversification, inequality, high unemployment and poverty.
“If the private sector gains the requisite momentum for sustainable growth, dealing with the various economic woes would also be much easier to rein in much more smoothly rather than is the current case where government still faces an insurmountable task of dealing with economic huddles as a key actor,” she said.
Tabengwa emphasized that of great importance now is to have more growth in the sectors that have been singled as the alternative possible engines of growth besides the mining sector. Statistics show that most sectors attain less than 10% for most years on average and less than the 3-5% growth range.
“This is an issue that places private sector growth as a priority to attain an overall growth rate of the envisaged 7.5% that is key to the attainment of the Vision 2016 and ultimately delivering the National Development Plan,” she said.
The Macroeconomic expert said although non-mining sector growth has promisingly been positive, concerns remain with addressing national challenges of high unemployment their overall contribution to employment generation which is key for reducing the prevalent unemployment rate especially among the youth, poverty and inequality.
“Performance of the sectors that are crucial for sustainable growth and development notably the manufacturing sector, construction, the agricultural sector which are also key for job creation is not robust,” she highlighted.
Tabengwa said despite the SME support programmes available to provide financing, the rate of job creation expansion and the development of thriving businesses for citizens still remain an area that needs to pick the pace even more to raise overall private sector performance broadly.
She highlighted that though positive steps towards supporting PS growth, Government should play the facilitative role and offer a supportive policy environment to even boost private sector development further and the national growth process.
Tabengwa maintained that a lot still needs to happen to realize the broader private sector impact on the growth of the economy and its implications will translate to diversification, employment generation, strong business development and a broad growth base.
To date Botswana still faces high unemployment with limited private sector role in contributing to generating significant employment opportunities shows that more still needs to be done to grow the private sector.
“The fact that the government sector still remains a major a employer shows that more effort has to be directed to building a thriving private sector to impact broadly on the employment generation,” she said.
According to her, private sector development in Botswana requires that current challenges that hamper its progress be addressed. The issues include enhancing the business environment, accountability to business reforms, conceptualized problematic aspects in business regulation and implementation of policies.
“The greatest challenge currently is turning strategies to intended goals and achieving positive results and turnaround. This is where significant effort should now be directed to,” she said.
Some challenges that have been long identified as hindering PS growth include lack of requisite skills, lack of adequate infrastructure, power and water shortages, identification of export and investment opportunities.
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The recent study on youth entrepreneurship in Botswana has identified difficult access to funding, land, machinery, lack of entrepreneurial mindset and proper training as serious challenges that continue to hamper youth entrepreneurship development in this country.
The study conducted by Alliance for African Partnership (AAP) in collaboration with University of Botswana has confirmed that despite the government and private sector multi-billion pula entrepreneurship development initiatives, many young people in Botswana continue to fail to grow their businesses into sustainable and successful companies that can help reduce unemployment.
University of Botswana researchers Gaofetege Ganamotse and Rudolph Boy who compiled findings in the 2022 study report for Botswana stated that as part of the study interviews were conducted with successful youth entrepreneurs to understand their critical success factors.
According to the researchers other participants were community leaders, business mentors, Ministry of Trade and Industry, Ministry of Youth, Gender, Sport and Culture, financial institutions, higher education institutions, non-governmental institutions, policymakers, private organizations, and support structures such as legal and technical experts and accountants who were interviewed to understand how they facilitate successful youth entrepreneurship.
The researchers said they found that although Botswana government is perceived as the most supportive to businesses when compared to other governments in sub-Saharan Africa, youth entrepreneurs still face challenges when accessing government funding. “Several finance-related challenges were identified by youth entrepreneurs. Some respondents lamented the lack of access to start-up finance, whereas others mentioned lack of access to infrastructure.”
The researchers stated that in Botswana entrepreneurship is not yet perceived as a field or career of choice by many youth “Participants in the study emphasized that the many youth are more of necessity entrepreneurs, seeing business venturing as a “fall back. Other facilitators mentioned that some youth do not display creativity, mind-blowing innovative solutions, and business management skills. Some youth entrepreneurs like to take shortcuts like selling sweets or muffins.”
According to the researchers, some of the youth do not display perseverance when they are faced with adversity in business. “Young people lack of an entrepreneurial mindset is a common challenge among youth in business. Some have a mindset focused on free services, handouts, and rapid gains. They want overnight success. As such, they give up easily when faced with challenges. On the other hand, some participants argue that they may opt for quick wins because they do not have access to any land, machinery, offices, and vehicles.”
The researchers stated that most youth involved in business ventures do not have the necessary training or skills to maintain a business. “Poor financial management has also been cited as one of the challenges for youth entrepreneurs, such as using profit for personal reasons rather than investing in the business. Also some are not being able to separate their livelihood from their businesses.
Lastly, youth entrepreneurs reported a lack of experience as one of the challenges. For example, the experience of running a business with projections, sticking to the projections, having an accounting system, maintaining a clean and clear billing system, and sound administration system.”
According to the researchers, the participants in the study emphasized that there is fragmentation within the entrepreneurial ecosystem, whereby there is replication of business activities without any differentiation. “There is no integration of the ecosystem players. As such, they end up with duplicate programs targeting the same objectives. The financial sector recommended that there is a need for an intermediary body that will bring all the ecosystem actors together and serve as a “one-stop shop” for entrepreneurs and build mentorship programs that accommodate the business lifecycle from inception to growth.”
Botswana Housing Corporation (BHC) is said to have recorded an operating surplus of P61 Million, an improvement compared to the previous year. The housing, office and other building needs giant met with stakeholders recently to share how the business has been.
The P61 million is a significant increase against the P6 million operating loss realized in the prior year. Profit before income tax also increased significantly from P2 million in the prior year to P72 million which resulted in an overall increase in surplus after tax from P1 million prior year to P64 million for the year under review.
Chief of Finance Officer, Diratsagae Kgamanyane disclosed; “This growth in surplus was driven mainly by rental revenue that increased by 15% from P209 million to P240 million and reduction in expenditure from P272 million to P214 million on the back of cost containment.” He further stated that sales of high margin investment properties also contributed significantly to the growth in surplus as well as impairment reversals on receivables amounting to P25 million.
It is said that the Corporation recorded a total revenue of P702 million, an 8% decrease when compared to the P760 million recorded in the prior year. “Sales revenue which is one of the major revenue streams returned impressive margins, contributing to the overall growth in the gross margin,” added Kgamanyane.
He further stated professional fees revenue line declined significantly by 64% to P5 million from P14 million in the prior year which attributed to suspension of planned projects by their clients due to Covid-19 pandemic. “Facilities Management revenue decreased by P 24 million from P69 million recorded in prior year to P45 million due to reduction in projects,” Kgamanyane said.
The Corporation’s strength is on its investment properties portfolio that stood at P1.4 billion at the end of the reporting period. “The Corporation continues its strategy to diversify revenue streams despite both facilities management income and professional fees being challenged by the prevailing economic conditions that have seen its major clients curtailing spending,” added the CEO.
On the one hand, the Corporation’s Strategic Performance which intended to build 12 300 houses by 2023 has so far managed to build 4 830 houses under their SHHA funding scheme, 1 240 houses for commercial or external use which includes use by government and 1 970 houses to rent to individuals.
BHC Acting CEO Pascaline Sefawe noted that; BHC’s planned projects are said to include building 336 flat units in Gaborone Block 7 at approximately P224 million, 100 units in Maun at approximately P78 million, 13 units in Phakalane at approximately P26 million, 212 units in Kazungula at approximately P160 million, 96 units at approximately P42 million in Francistown and 84 units at approximately P61 million in Letlhakane. Emphasing; “People tend to accuse us of only building houses in Gaborone, so here we are, including other areas in our planned projects.”