Botswana Business Sector Buoyant In 2018

…despite the challenging economic environment


A recent Bank of Botswana (BoB) study shows that the country’s business sector is optimistic 2018 could be a better year compared to 2017.
The Business Expectation Survey (BES) which measures optimism of companies in agriculture, mining, manufacturing, water, electricity, construction, trade, transport, as well as financial and business services shows that more firms operating in Botswana expect better business conditions in 2018 with an overall confidence level of 52 percent for the first half of 2018 and 67 percent for the entire year of 2018.
During the second half of 2017- confidence amongst domestic-oriented businesses was lower at 46 percent from 48 percent in the first half of 2017, shows the survey which also reflects lower confidence level in the forecast lower growth of 3.5 percent for the domestic economy by local businesses compared to the 2018/19 Budget Strategy Paper forecast output growth of 4.7 percent. “Confidence among businesses weakened marginally in the second half of 2017 compared to the first half of 2017, but strengthened going forward in to 2018. The improved confidence could be attributable to government’s projection of a pick-up in economic performance during 2018. Looking ahead, the level of optimism for domestic firms improve to 53 percent in the first half of 2018 and 67 percent in the year to December 2018,” state Bank of Botswana researchers.
According to the researchers the mining sector is expected to recover due to improvement in demand for diamonds as a result of favourable global economic prospects while the services sector is expected to benefit from stability in water and electricity supply and the projected expansion in government spending.
The researchers stated that the increase in optimism has been recorded despite the subdued demand in the domestic and regional markets which continue to threaten business confidence. “Despite the perceived challenging business environment, survey respondents are relatively optimistic about the demand for their products in the first half of 2018. As a result, they expect to have smaller levels of inventory during the period and have revised upward their expectations regarding production and profitability.”
The researchers also found that more firms in the country are planning to increase investment in all categories including buildings, plant, machinery, vehicle and equipment. “The generally improving expectations in 2018 with respect to investment are consistent with the optimistic outlook for 2018.”
The Bank of Botswana has indicated that the business environment is still considered to be challenging, but largely stable.
The bank indicated that the weak growth outlook for South Africa, which is likely to have an adverse impact on neighbouring countries, is expected to have a moderate effect in Botswana’s economy. Potential negative spillovers into Botswana include lower exports to South Africa and reduced SACU receipts, according to the bank.
The survey conducted towards the end of last year collected views of the business sector regarding changes in the state of economy during the first half of 2018 and the twelve-month period to December 2018.