Saturday, September 26, 2020

Business braces itself for a difficult year

The ongoing international financial crisis is expected to pose a number of threats and critical challenges to Botswana’s business ventures, big or small, during the course of this year.

This is made worse by the lack of progress on issues of diversification. So far, most of the big companies in the country deal with mining companies while some place the bulk of their business on overseas dealings.

The international credit crisis that started in 2007 has since spread across the world and has hit the mineral dependent southern African country where it hurts most.

Local companies hardest hit by the global economic recession are the mining houses, notably BCL, Tati Nickel Mine and Debswana Diamond Company, resulting in the loss of more than 1000 jobs.
Late last year, BCL indicated that it would slash its workforce by 388 and Tati has followed suit while Debswana has put the bulk of its employees on unpaid leave.

Fearing a possible backlash, the big traditional banks, such as Standard Chartered and Barclays, are alleged to have stopped handing out household loans to mine employees on grounds that they would not be able to re-pay the loans.
The slow demise of the diamond industry has seen the mineral dependant Botswana’s revenues declining.

It is now apparent that local businesses of different natures, whether big or small, shall be affected by the international madness.

Investec Asset Management Botswana’s Fund Manager, Bakang Seretse, is of the view that the general business environment will most definitely be tougher this year compared to other years.
Seretse is of the view that even though Botswana faces its own challenges as a country, the recession would be the cause of suffering for all local based companies and it is incumbent on the government to intervene to avoid the country being dragged down.

Seretse, however, stated: “The good news is that interest rates are mostly likely to fall, the pula is likely to continue doing well compared to the South African rand but things do not look so good for the countries which depend on mineral sales as we expect the prices of key minerals to deteriorate.”
However, on a light note, the prices of crude oil continue to gradually fall much to the excitement of the business community and motorists who last year endured the worst when there was a spike in petrol prices.

Other experts concurred that 2009 will bring difficulties compared to the past year.
University of Botswana Economics lecturer, Dr Oupa Tsheko, shares the same pessimistic sentiments concerning the outlook of local business in 2009.
According to Tsheko, the year ahead is one prevailing with difficulties for the stability of ‘our not so diversified’ economy.

“Expectations are that we are likely to see a lot of companies folding up as government takes initiatives, such as cutting down on certain major projects, to curb spending,” he observed.

“We are also likely to see quite a number of people laid off as companies bite the dust,” he added.
Tsheko’s prediction comes at a time when the downstream cutting and polishing diamond are embroiled in a massive downsizing of its workforce because of sluggish diamond jewellery market. The diamond jewellery market is heavily supported by the United States, which consumes up to 50 percent of the world’s production but the country has been hit by sub-prime lending and the international financial crisis.

The move has forced the world’s leading diamond producer by value , Debswana, to resort to shutting down some of its operations indefinitely and giving its employees a twelve month unpaid leave.
There are reports that some government departments could not hire new workers in anticipation of budget deficit.

The Botswana Police Service (BPS) was expected to hire another batch of 170 civilians but had their plans halted as a measure of saving the little money that was left, when it became apparent that Botswana would not escape the wrath of the financial crisis.

Meanwhile, some small successful companies, such as Sancopit in the building and construction sector, have not yet been affected by the global crisis. However, a number of local small businesses said there were uncertain on what to expect in the New Year.

Sancopit management said they were putting their hopes on the Finance Minister Baledzi Gaolathe’s budget speech for 2009/2010, which is due early next month, to determine what to expect as the year progresses.

However, Tsheko has warned that government is likely to scale-down on major projects to curb costs, but added that rather than focusing on cost cutting government should be looking on burning a lot of cash in a bid to reinvigorate the economy.
“At the state the private sector is in….. only government could intervene and rescue the largest contributor to this economy from faltering altogether,” Tsheko said.

As it turns out, the crisis shall leave no stone unturned, as even the media fraternity is skeptical as to what the future might hold for them if the demise of businesses continues.
Outsa Mokone, editor of the Sunday Standard, says the media business should be prepared for the worst.

“Most of these big companies, including different governmental departments, are constant advertisers in our papers; advertising brings a memorable sum of income to any newspaper’s stability. When our clients come up with cost-cutting schemes, the first thing they usually go for is advertising,” Mokone said.
Mokone said that we are most likely to see local newspapers suffering while trying to make ends meet.

In order to survive the hit, the spaces that were used for adverts would now have to be filled with more news stories that may not even be of substance just so the paper could go to print.
The Managing Director of Caratex, Craig Chow, wasn’t hesitant to admit that the company was deeply affected by the financial meltdown; he revealed that at the moment, they are busy brainstorming to come up with viable solutions to keep themselves afloat.

“At this stage I cannot rule out a possibility of job losses during the course of the year,” said Chow.

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