A vintage philosophy from ancient British economist, John Myanard Keynes who pioneered the use of ‘animal spirits,’ or originally spiritus animalis in Latin, metaphor into the business literature 84 years ago by looking at human behavior in connection with economics, gets a bright reincarnation today.
Bank of Botswana on a quarterly basis offers Business Expectations Survey (BES) – a research which collects information on the domestic business community’s perceptions about the prevailing state of the economy and prospects, hence resembling the Keynes school of thought.
The current economic status involving Botswana and the globe moves governments to borrow a leaf from the father of macroeconomics, Keynes. COVID-19 forces governments into emphasizing the Keynesian economics as demand and supply is now determined by a pandemic which has affected business and consumer confidence across the globe.
According to the March BES, which is the latest offering by the central bank, the dwindling business confidence which was recorded in the last quarter of 2019 was carried onto the first months of 2020 as firms approaches the current COVID-19 economic with less optimism.
March BES which was done for the first quarter of 2020, the time when COVID-19 was declared a pandemic by WHO, paints a gloomy picture on the business confidence in this country. March is the same period when Botswana registered its first corona virus cases, forcing a declaration of a 28 lockdown which put most part of the economic activity on chains.
According to BES report of March, the results suggest that firms were less optimistic about economic activity in the first quarter of 2020 compared to the fourth quarter of 2019. Businesses which were surveyed expected a decrease in exports and imports of goods and services; production; sales; stocks; profitability; and investment in buildings, vehicles and equipment in the first quarter of 2020.
“Overall, businesses expected a decrease in exports and imports of goods and services; production; sales; stocks; profitability; and investment in buildings, vehicles and equipment in the first quarter of 2020,” said the recent BES report.
The recent BES is a product of the survey carried out in the first quarter of 2020, covering the first quarter of 2020 (Q1:2020 – the current period); the second quarter of 2020 (Q2:2020); and the twelve-month period (M12) from April 2020 – March 2021 (Q2:2020- Q1:2021). The central bank reminded that the survey was conducted at the time when the coronavirus (Covid-19) that was first reported in Wuhan (China) began to spread rapidly across the globe and was later declared a pandemic by the World Health Organization (WHO).
The current survey whose response rate is 77 percent down from 82 percent recorded in the December 2019 survey looked at 100 businesses from eight economic sectors, namely: agriculture; mining; manufacturing; water and electricity; construction; trade, hotels and restaurants; transport and communications; and finance and business services.
The response rate reduced because firms who were surveyed either took time to respond or did not respond because they were on March lockdown. According BES the mining and quarrying sector will be hard hit because its business predominantly targets the export market which makes firms in the sector less optimistic about economic growth prospects over the survey horizon.
“This is consistent with the unfavourable market conditions, especially with respect to the diamond industry, occasioned by, among others, weaker global demand for rough diamonds associated with the US-China trade war and the interruption of trading due to the outbreak of the Coronavirus pandemic,” said the Bank of Botswana survey on domestic business confidence.
According to BES, there will be stagnation which will go towards the next 12-month period. Debswana has scaled production and De Beers is no longer doing sales until further notice. Botswana economy depends mostly on diamonds as they are also a mainstay of this country’s exports. Employment is expected to Firms also do not see the economy to improve this year or on the last three remaining quarters of 2020.
Currently most businesses are on lockdown, save for retail businesses which are categorized as essential services. Consumers at large are on lockdown while business operating hours are shrunk to go with the 8pm daily national curfew.
According to the March BES, employment, which is only recorded for the second quarter, is expected to decline in the current survey. The mind of business’s dwindling spirits when looking at business confidence in the first half of 2020 is coincides with perceptions of weaker overall economic growth in the first quarter of 2020, and the overall contraction expected in the second quarter.
“The perceived generally weaker economic performance in the current survey compared to the previous one could be associated with the disruption of business operations following the outbreak of the Covid-19 pandemic,” says the BES.
Sleeping animalistic spirit to wake next year
Keynesian metaphorically compares a business mind to a never say die instinct of an animal. Seeming to have adopted the Keynesian school of thought, the BES focus mainly on anticipated direction of change in selected indicators: that is; whether conditions will improve, worsen or remain unchanged. According to the central bank, the results are then consolidated into an overall measure called ‘net balance’. This measure is obtained by summing the positive and negative responses to each question/element by firms belonging to the same sector, which are then weighted by the sector’s contribution to nominal gross domestic product (GDP), according to Bank of Botswana.
That is why the firms’ negative projection of the economy which is dampened by low business confidence comes with a bit of optimism comes with a positive offset. For example, according to the March BES, there will be signs of increase by firms in investment in plant and machinery in the second quarter of 2020, but will be taken down by general anticipated tight access to credit in the domestic market.
While firms that were met by the BES expect the domestic economy to contract in the second quarter of 2020, there is a hope that things will improve as the year goes. Majority of firms looked at by the March BES expect business conditions to deteriorate in the first two quarters of 2020 some of the hope was deferred to improve in the twelve-month period to March 2021. The improvement which is expected to be carried towards March next year is expected to remain below the level recorded in March 2020.
“The perceived improvement in optimism is in line with the anticipated universal economic recovery in 2021 by the International Monetary Fund. Confidence in the domestic market-oriented firms is mainly driven by the trade, hotels and restaurants, transport and communications sectors,” says the recent BES. Access to credit
The central bank last week cut the Bank rate by 50 basis points for economic stimulation and improve access to credit. Businesses wish to increase investment in plant and machinery in the second quarter of 2020, but are anticipating tight access to credit in the domestic market.
Firms in the domestic market perceived access to credit to be tight in the first quarter of 2020, mainly because they consider the domestic interest rates to be high, according to a survey on businesses. The business survey further said export-oriented market firms perceived access to credit to be normal, and the interest rates to have remained unchanged in the review period.
Some firms, especially those targeting the domestic market, prefer to borrow from both the domestic market and elsewhere (other than South Africa market) in 2020, according to BES. Most of the export-oriented firms prefer to borrow from both the domestic and South African markets, while they have no plans to borrow from elsewhere.
Firms expect the lending rates and the volume of borrowing from the domestic market to increase in the twelve-month period to March 2021 according to BES. Lending rates in the rest of the markets are expected to decline, while borrowing from elsewhere is expected to rise considerably and marginally in South Africa. BES says firms also expected inflation to remain stable and within the Bank’s medium-term objective range of 3 – 6 percent, for both 2020 and 2021.
The Directorate of Public Prosecutions (DPP)’s decision to reject and appeal the High Court’s verdict on a case involving High Court Judge, Dr Zein Kebonang has frustrated the Judicial Service Commission (JSC) and Judge Kebonang’s back to work discussions.
JSC and Kebonang have been in constant discussions over the latter’s return to work following a ruling by a High Court panel of judges clearing him of any wrong doing in the National Petroleum Fund criminal case filed by the DPP. However the finalization of the matter has been hanged on whether the DPP will appeal the matter or not – the prosecution body has since appealed.
Botswana Democratic Party (BDP) top brass has declined a request by Umbrella for Democratic Change (UDC) to negotiate the legal fees occasioned by 2019 general elections petition in which the latter disputed in court the outcome of the elections.
This publication is made aware that UDC Vice President Dumelang Saleshando was left with an egg on his face after the BDP big wigs, comprising of party Chairman Slumber Tsogwane and Secretary General Mpho Balopi rejected his plea.
“He was told that this is a legal matter and therefore their (UDC) lawyer should engage ours (BDP) for negotiations because it is way far from our jurisdiction,” BDP Head of Communications, Kagelelo Kentse, told this publication.
This spelt doom for the main opposition party and Saleshando who seems not to have confidence and that the UDC lawyers have the dexterity to negotiate these kind of matters. It is not clear whether Saleshando requested UDC lawyer Boingotlo Toteng to sit at the table with Bogopa Manewe, Tobedza and Co, who are representing the BDP to strike a deal as per the BDP top echelons suggested.
“From my understanding, the matter is dealt with politically as the two parties are negotiating how to resolve it, but by far nothing has come to me on the matter. So I believe they are still substantively engaging each other,” Toteng said briefly in an interview on Thursday.
UDC petitioners saddled with costs after mounting an unprecedented legal suit before the court to try and overturn BDP’s October 2019 victory. The participants in the legal matter involves 15 parliamentary candidates’ and nine councillors. The UDC petitioned the court and contested the outcome of the elections citing “irregularities in some of the constituencies”.
In a brief ruling in January 2020, Judge President Ian Kirby on behalf of a five-member panel said: “We have no jurisdiction to entertain these appeals. These appeals must be struck out each with costs including costs of counsel”. This was a second blow to the UDC in about a month after their 2019 appeals were dismissed by the High Court a day before Christmas Day.
This week BDP attorneys decided to attach UDC petitioners’ property in a bid to settle the debts. UDC President Duma Boko is among those that will see their property being attached with 14 of his party members. “We have attached some and we are on course. So far, Dr. Mpho Pheko (who contested Gaborone Central) and that of Dr, Micus Chimbombi (who contested Kgalagadi South) will have their assets being sold on the 5th of February 2021,” BDP attorney Basimane Bogopa said.
Asked whether they met with UDC lawyers to try solve the matter, Bogopa said no and added. “Remember we are trying to raise the client’s funds, so after these two others will follow. Right now we are just prioritising those from Court of Appeal, as soon as the high court is done with taxation we will attach.”
Saleshando, when contacted about the outcomes of the meeting with the BDP, told WeekendPost that: “It would not be proper and procedural for me to tell you about the meeting outcomes before I share with UDC National Executive Committee (NEC), so I will have to brief them first.”
UDC NEC will meet on the 20th of next month to deal with a number of thorny issues including settling the legal fees. Negotiations with other opposition parties- Alliance for Progressives and Botswana Patriotic Front (BPF) are also on the agenda.
Currently, UDC has raised P44 238 of the P565 000 needed to cover bills from the Court of Appeal (CoA). This is the amount in a UDC trust account which is paltry funds equating 7.8 per cent of the overall required money. In the past despite the petitioners maintaining that there was promise to assist them to settle legal fees, UDC Spokesperson, Moeti Mohwasa then said the party has never agreed in no way to help them.
“We have just been put in debt by someone,” one of the petitioners told this publication in the past. “President’s (Duma Boko) message was clear at the beginning that money has been sourced somewhere to help with the whole process but now we are here there is nothing and we are just running around trying to make ends meet and pay,” added the petitioner in an interview UDC NEC has in December last year directed all the 57 constituencies to each raise a minimum of P10, 000. The funds will be used to settle debts that are currently engulfing the petitioners with Sheriffs, who are already hovering around ready to attach their assets.
The petitioners, despite the party intervention, have every right to worry. “This is so because ‘the deadline for this initiative (P10, 000 per constituency) is the end of the first quarter of this year (2021),” a period in which the sheriffs would have long auctioned the properties.
President of the Umbrella for Democratic Change (UDC) Duma Boko’s alliance with former President Lt Gen Ian Khama continues to unsettle some quarters within the opposition collective, who believe the duo, if not managed, will once again result in an unsuccessful bid for government in 2024.
While Khama has denied that he has undeclared preference to have Boko remaining as leader of UDC, many believe that the two have a common programme, while other opposition leaders remain on the side-lines.