Confidence among local businesses has improved during the first half of 2016 compared with the same period last year. This is according to a survey Bank of Botswana (BoB) known as Business Expectation Survey (BES), the results of which were published this week. The survey, which is carried twice a year by the central bank, indicates that optimism among businesses strengthened in the first half of the year and is expected to rise further in the survey horizon for both domestic market-oriented firms and exporters. It is indicated that optimism among businesses improved from a confidence level of 43 percent in the second half of 2016, to 48 percent for the current survey period, which is the first half of 2017. While growth in optimism might be encouraging, it however emerged that firms seem to have developed some uneasiness with the business conditions in the first half of the year, as their confidence level for the period is said to have declined by three percent compared to their perceptions about the same period in the previous survey. But firms are said to have not lost hope and expect a better future as far as business is concerned with business confidence level of 55 percent for the second half of the year and 67 percent for the 12-month period to June 2018. Domestic-oriented businesses confidence stood at 48 percent during the first half of the year, an increase from 43 percent registered in the last part of last year. Looking ahead, the level of optimism improves to 56 percent in H2:2017 and 65 percent in the year to June 2018, the survey indicates.
Similarly, it says the confidence level of export-oriented businesses increased from 42 percent in the second half of 2016 to 50 percent in the second first half of this year and the figures are expected to remain the same during the second half of the year before recovering remarkably to 75 percent in the second half of the year going well into the first half of 2018. The expected upswing in business confidence for 2017 and the first half of 2018, the report says is due to a more positive outlook by both export and domestic-oriented businesses. In another interesting development, local businesses are said to have indicated preference to borrow from South Africa to finance their planned capital investments for the second half of 2017 and the 12-month period to June next year, with net balances of 8.7 percent to 7.3 percent respectively while remaining almost neutral about borrowing from elsewhere in both periods. Reacting to this when addressing the media this week, BoB Governor Moses Pelaelo said this might be due to the fact that most companies operating here are most cases subsidiaries or associates or South Africa- based businesses.
Firms are reportedly skeptical about borrowing from the domestic market as reflected in a net balance of -4.9 percent in the first half of 2017, which worsens to -12.8 percent in the longer horizon, from the second half of the year into the first half of 2018. The above, the survey says, partly explains the decline in growth of business credit by domestic commercial banks during the first quarter of 2017. The central bank says this is contrary to the anticipated reduction in domestic interests’ rates by the business community, which is consistent with the reduction in the Bank Rate from 6 percent to 5.5 percent since August 2016. The survey further says sentiment about easy access to domestic credit remains weak, worsening from a net balance of 9 percent in the second half of 2016 to 6 percent in the first half of 2017 and says this could explain weaker expectations about domestic borrowing.