Sunday, June 23, 2024

Botswana CFOs wary of expansion beyond borders

Botswana Chief Financial Officers (CFOs) are reluctant to expand their businesses to other parts of the African continent with researchers advising that because of Botswana’s small economy, local firms should increasingly look beyond their borders.


The 3rd Deloitte CFO Survey for Botswana stated that those looking to expand into new markets in Southern Africa over the next three years amount to 18 percent, down from 29 percent in 2014.


The report showed that only 9 percent are considering expansion into West Africa and 4 percent into East Africa. “This is surprising, given that the slowing GDP growth in South Africa has compelled many leading South African firms to consider international expansion,” observed Deloitte.


“For Botswana, the opposite appears to be the case as a reduced number of CFOs report that their firms seek to internationalise,” it added. Deloitte added that the natural market for Botswana’s new intra-regional multinationals is South Africa.


They cited the regional expansion in Southern Africa and recent listing of leading retailer, Choppies, on the JSE as indicative of this.


“Botswana has a relatively small economy. In their search for growth, Botswana firms will increasingly have to look beyond their borders, first to Southern Africa and thereafter further north into other African regions,” noted Deloitte.


On risk factors, the fragile state of the global economic recovery is considered the greatest business risk for CFOs in Botswana.


This is understandable given the uncertainty surrounding economies in the US, Europe and China, which have a direct impact on commodities-based economies such as Botswana. Global unrest and the impact of continuing electricity price increases are also regarded as significant risk factors, the survey noted.


“The Botswana government is undertaking various measures to address electricity constraints in the country and a sizeable development budget has been allocated for this in the 2015/16 financial year.” Deloitte also said improving investor confidence is the top strategic priority for companies in Botswana. This aligns strongly with South Africa and other countries in Southern Africa, who have also pegged it as their leading priority.


“A reduction in investor confidence may relate to political concerns highlighted by Botswana CFOs in the report, which include the need to effectively prioritise government spending on the provision of social services, job creation and service delivery, as well as reduce corruption and deliver more effectively on infrastructure projects. Companies in Botswana are also directing their strategic energy on growing their customer base, channels and products; increasing revenue from developed markets; and promoting brand equity,” it said.


The Global Competitiveness Report (GCR) 2015-2016 revealed that although Botswana may have made gains in global competitiveness rankings, the country still struggles in key pillars because it is in transition stage of development.


“Notwithstanding these accomplishments, the country still struggles on other pillars such as business sophistication (111th), market size (105th), innovation (102nd) higher education and training (100th) and goods market efficiency (95th),” it has been observed.


“This is mainly triggered by the fact that Botswana is in transition stage of development from being a factor driven economy to an efficiency driven one. As a result, Botswana performs better on the factor driven pillars relative to efficiency and innovation driven pillars of competitiveness.” 


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