Tourism Likely to Experience Long Negative Effects of COVID-19


Botswana’s tourism industry is likely to experience the long-lasting negative effects of the COVID-19 pandemic, experts have warned. According to Sethunya Sejoe and Kitso Mokhurutse of Econsult, this is because there is no clear indication of when “business as normal” will return.
Econsult is owned by former Bank of Botswana deputy governor, Dr. Keith Jefferis. “Despite an increase in domestic tourism, recovery in the industry has remained subdued due to limited international travel,” noted Sejoe and Mokhurutse in the fourth quarter (Q4) 2020 Econsult Economic Review released recently. The two warn that casualties are also likely in the tourism industry, with some businesses not surviving the duration of the pandemic.
The experts say there may be a need to extend targeted interventions to support worst-hit sectors like tourism, hospitality and entertainment. The government introduced short-term economic stabilisation measures to combat the effects of COVID-19 last year. Wage subsidies for most firms, a loan guarantee scheme and deferment of certain tax obligations were among them. The two note that the interventions were in line with best practice internationally.
The two experts noted that across other sectors, the negative impact of COVID-19 was widespread throughout Q2 2020 but there have been signs of subsequent recovery. “There will however be a prolonged negative impact on some sectors: transport, due to restrictions on domestic and international travel; catering/restaurants, sports and entertainment due to crowd restrictions and travel restrictions; bars and alcohol related trade due to the prohibition of alcohol sales,” they wrote.
Regarding inflation, Sejo and Mokhurutse noted that a significant drop in international oil prices along with weakened global demand subduing imported inflation were the main drivers behind the decline in the domestic inflation rate which reached historically low levels in mid2020. “The last half of 2020 did see a slight rise in domestic inflation as global demand began to rise as economies began easing lockdown/travel restrictions, international oil prices began to recover, and food prices rose,” they observed.
According to the Econsult experts, the country’s financial sector has proven to be more resilient than was initially predicted. They wrote that the sharp increase in arrears/debt write-offs that were expected have not been realised. According to the two, total bank credit has continued to grow, albeit at a slower pace, as commercial banks began to adopt a more cautious approach to lending.
“Bank credit to firms, which had been contracting since June 2019, registered positive growth in October 2020, indicating a possible resurgence in firm output/activity in the future,” they wrote. “Arrears on bank lending as a proportion of credit have also remained fairly stable, gradually declining from 6.2 percent in Q4 2019 to 5.6 percent in Q3 2020.”