Monday, October 26, 2020

Businesses anticipate recovery in 2021 – Survey

It will take more than a year for local businesses to recover from the slowdown caused by the containment measures put in place to curb the spread of coronavirus, suggests fresh information from the business expectations survey (BES) undertaken by Bank of Botswana. 

The BES collects quarterly information on the domestic business community’s perceptions about the prevailing state of the economy and prospects. In the survey, businesses respond to a range of questions relating to, among others: the business climate,  outlook for economic growth, inflation and business performance over the survey horizon. The survey samples 100 businesses from eight economic sectors: agriculture, mining, manufacturing, water and electricity, construction, trade, hotels and restaurants,  transport and communications, and business services. 

The BES for this year’s second quarter (Q2 2020) happened amid a global pandemic that has sickened nearly 17 million and killed over 700,000 people. While Botswana has recorded less than 1,000 cases, the country has enforced strict measures which have included lockdowns, curtailing movements and causing uncertainties. According to the survey results, firms were less optimistic about economic activity during the quarter compared, with businesses expecting deterioration across industries. 

“In general, firms, particularly those in the manufacturing, mining and quarrying, trade, hotels, restaurants, transport and communications sectors, cited weak international demand as the greatest challenge to their business operations in the second quarter of 2020,” researchers from the central bank said. “Shortage of raw materials was the second most commonly cited impediment to doing business, especially in the manufacturing and construction sectors. Furthermore, a number of firms, predominantly in finance and business services, mentioned difficulty in accessing financing from abroad as the greatest challenge to their business operations.”

The mining and quarrying sector, which predominantly targets the export market, was significantly pessimistic about economic growth prospects due to the unfavourable market conditions. The country’s main economic stay, diamond exports, have been pummelled by the Covid-19 outbreak, which has had a major impact on the diamond market, affecting all stages of the diamond supply chain and resulting in decrease in rough diamond sales volumes. Local diamond production was 36 percent lower at 7.5 million carats, below the 11.7 million carats in the same period last year. The reduction in production was attributed to lengthy nationwide lockdown from 2 April to 18 May.

The trade, hotels and restaurants, which is the main contributor to the economy, and the transport and communications sector have also been hampered by the travel restrictions and social distancing requirements, making the sectors’ players highly pessimistic. Another key contributor to the economy, the finance and business services sector, expects poor economic performance consistent with firms’ predicted decline in production and investment during the second quarter of 2020.

“Domestic demand was also cited as a challenge and that can be attributed to zonal movement restrictions and long queues at points of service resulting from COVID-19 containment measures such as social distancing and customer registration requirements. Further, loss of revenue generating activities by some sectors of the economy such as creative arts, entertainment and tourism, coupled with apprehension to spend amid the uncertainty related to COVID-19 impact, also contributed to subdued domestic demand,” the report says. 

Despite the gloomy outlook, local businesses were a little optimistic that business activity will pick up in the third quarter. However, a strong recovery is only expected from next year.

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