Power shortages weigh on business confidence
Brian Benza | Wednesday June 17, 2015 18:04
A survey conducted by the Bank of Botswana (BoB) reflects an increasingly challenging operating environment, with more than half of business owners more pessimistic about their prospects on the back of weak domestic demand, shortages of skilled manpower, and water and power shortages.
According to the Business Expectation Survey (BES) released by the BoB this week, the level of optimism as measured by the Business Confidence Index (BCI) deteriorated from 52 percent in September 2014 to 44 percent in March 2015.
The BES, which sampled 100 businesses across various economic sectors, presents results of the survey carried out between March and April 2015 for three distinct periods, including the first half of 2015, the second half of 2015 and the 12 month period to June 2016.
“Domestic demand was the most cited challenge by businesses due to perceived slow growth in government spending and household disposable income. Respondents have now ranked electricity shortages as the third most significant challenge facing businesses, an indication of the recent deterioration in the provision of reliable and adequate power supply,” states the report.
Government has traditionally been the biggest actor in the local economy employing the highest amount of formal sector jobs while the private sector has always heavily relied on state projects for their survival.
However, revenues have plateaued in recent years compelling government, which employs 38 percent of the 340,000 formal jobs, to restrict its level of spending much to the detriment of both businesses and households.
The 44 percent BCI indicates that less than half of the respondents view the operating conditions as satisfactory.
According to the BES, the level of confidence among export-oriented businesses took the hardest knock, falling by 50 percent, in the survey period, as prospects of a global economic recovery remain fragile.
“Confidence among domestic-oriented businesses is 45 percent, almost unchanged from 46 percent in the previous survey. “However, there has been a substantial decline in the current confidence levels of export-oriented businesses from 88 percent to 43 percent, and this falls further to only 29 percent over the rest of the year,” reads the BES.
Estimates of Gross Domestic Product (GDP) released during the survey period indicate that the economy grew by 4.4 percent in 2014, down from 9.3 percent in the previous year.
This slowdown mainly reflects the weakening of the mining sector, which expanded by 4.5 percent, compared to growth of 23.9 percent in the previous year. Non-mining GDP slowed down from 6.8 percent in 2013 to 4.4 percent in 2014. In line with the declining levels of optimism, most businesses relative to the September 2014 survey, are less positive about the demand for their products and services in the current period and the second half of 2015, with most respondents generally expecting only marginal increases in sales volumes and the volume of goods imported during 2015.
For this survey, 55 percent of surveyed businesses responded, compared to 63 percent in the September 2014 survey.
The BoB conducts the survey twice a year to gauge local perceptions about current economic conditions and future expectations.