Wene Owino
7 July 2009
Gaborone — Business confidence and profitability in Botswana has fallen from 82 percent to 40 percent because of global economic recession, the Bank of Botswana has revealed it is latest survey.
In its Business Expectations Survey for 2009 to February 2010, the central bank says that in the last three years, business confidence in Botswana has averaged 67 percent and the sharp fall has been caused by the pessimism expressed by both domestic and export-oriented firms.
"This represents a major loss of confidence that can be readily associated with the impact of (the global) recession," the bank says.
However, it adds that the fall to 40 percent in business confidence and profitability in Botswana is still better than the all time low of 28 percent recorded in 2005 when the currency - the Pula - was devalued. "This may reflect the extent to which government spending has continued to support domestic demand," the bank explains.
The bank found that business confidence and profitability among producers for the domestic market is set to fall further but there may be some improvement in sentiment in 2010. "This is in line with increasing expectations that the global recovery may have commenced, although until this is clearly manifested, confidence across business is likely to remain at low levels," the central bank says.
It explains that the finalisation of government's revised plans for public spending over the 10th National Development Plan (NDP 10) planning period is important in reducing business uncertainty.
"Expectations regarding inflation have fallen, but only gradually. However, expectations of increases in business costs, including raw materials and wages, are much reduced, underlining the extent to which there is scope for easing monetary policy," the bank says.
In the survey, the bank sampled 100 businesses in agriculture, mining, manufacturing, water and electricity, construction, trade, transport, financial and business services. The survey was carried out at a time when the effects of the global economic ad financial crises had started hitting diamond-rich Botswana.
"While the immediate impact was concentrated in the mining sector (and diamond mining in particular), other sectors have been affected to varying degrees and it might be anticipated that in the context of pervasive uncertainty as to the duration of the slowdown, this will have a broader, negative impact on business sentiment," the bank says.
It explains that the sharp contraction in mining has serious implications for the government budget. It states that although existing spending programmes were largely maintained in the 2009-2010 financial year, current projections indicate a period of extensive budget deficits.
Despite the sharp reduction in business confidence and profitability in Botswana, the central bank expects GDP growth to be positive though modest. "There is an expectation that GDP growth will be positive, albeit only modestly at 2.8 percent in 2008-2009 and 2.6 percent in 20089-2010. While this is substantially lower than the previous survey when growth of six percent was expected for 2008-2009, it remains optimistic, given that the suspension of diamond production for four months will have a substantial negative impact on overall GDP, particularly in 2008-2009," the bank says.
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