Botswana businesses sampled in the latest Bank of Botswana’s (BoB) survey have revealed that there is no need to borrow money across the borders as interest rates are at the lowest locally. According to BoB’s Business Expectations Survey (BES) for the period ended March to April 2015, domestic enterprises would decline loans from South Africa in preference of local financiers.
“In line with their capital investment plans, businesses would prefer domestic borrowing followed by international borrowing, as opposed to funding from South Africa during the second half of 2015 and the twelve-month period to June 2016,” BES noted. “This is consistent with the anticipated lower interest rates in Botswana during 2015 and the twelve-month period to June 2016.”
According to Bank of Botswana, expectations of lower borrowing costs in the domestic market could be due to the reduction of the Bank Rate from 7.5 percent to 6.5 percent in the months prior to the survey period, together with continued low prevailing rates of inflation. BES suggested that interest rate increases over the outlook period are expected for both South Africa and the international market. Last week, the Bank’s Monetary Policy Committee decided to maintain the Bank Rate at 6.5 percent, arguing that, “The current state of the economy and both the domestic and external economic outlook, including the inflation forecast, suggest that the prevailing monetary policy stance is consistent with maintaining inflation within the Bank’s medium-term objective range of 3 ÔÇô 6 percent”.
In terms of access to finance, 46.3 percent (September 2014:63.8 percent) of the surveyed businesses believe access to credit is normal; 13 percent (September 2014: 12.1 percent) consider access to be easy, while 40.7 percent (September 2014: 24.1 percent) rate access to be tight. “Hence, an increasing number of businesses consider access to credit to be difficult, in line with recent concerns that domestic banks are responding to reduced liquidity by tightening their lending criteria.”