Businesses to prefer international borrowing

Businesses will over the next 12 months prefer international borrowing to finance their investment or operating activities as opposed to funding from Botswana, the Bank of Botswana (BoB) Business Expectations Survey (BES) March 2014 indicates.

The BES, which reports on current confidence levels among local businesses as well as their expectations of movements in key economic indicators, says there is however, some anticipation of lower interest rates in Botswana in the second half and twelve-months period to June 2015. “Expectations of lower borrowing costs in the domestic market could be due to the reduction of the Bank rate from 8 per cent to 7.5 per cent in the months prior to the survey period together with continued low prevailing rates of inflation,” the survey says.

It indicates that firms anticipate that lending rates will increase in South Africa, while in the international market there is much weaker expectation that rates will increase over the outlook period. “In terms of access to finance, an overwhelming percent of the surveyed businesses (67.9 per cent) consider access to credit as normal, while 7.5 per cent consider it as easy and 24.5 per cent think that it is tight. In comparison with the September 2013 BES, perceptions of access to finance have improved slightly,” it states further.

There are however, challenges faced by businesses; the major ones being the weak domestic demand and restrictive regulatory environment. “As has been the case in past surveys, concerns over limited domestic demand were the most commonly-cited challenges by businesses. This is consistent with fiscal consolidation measures put in place by the Government, including restrained growth in salaries,” the survey indicates.

It says the second concern is to do with the regulatory framework for business and the third one is availability of skilled labour. “The last two challenges are closely related and are normally associated with the difficulty in acquisition of work and residence permits for expatriate skilled manpower, where it appears that the new criteria under the Points Based System introduced in 2012 have not yet resolved the concerns of local businesses. It is hoped that the recently enacted Immigration Amendment Act of 2014 will now help resolve this issue,” it says.

Power outages that occurred earlier this year were also a cause for concern but the businesses were hopeful that it was just a temporary problem, hence they do not intend to either retrench workers or reduce operating hours.