Businesses less optimistic

The third quarter of 2024 has seen businesses growing less optimistic about economic conditions following a slump in diamonds sales that have pushed down economic sentiment. Diamonds are Botswana’s biggest revenue earner. Bank of Botswana’s (BoB) latest Business Expectations Survey (BES) for September 2024 has revealed the decline in optimism. 

BoB said the reduced level of optimism by firms in the current period is reflected in the anticipated deceleration in sales volumes; imports of goods and services; production; profitability; employment; as well as investments mainly due to the weaker global demand and uncertainty

Furthermore, BoB pointed to the slow and muted impact of economic transformation initiatives so far, drought conditions and less-than-optimal performance of the Government Accounting and Budgeting System (GABS), which continues to disrupt business operations, as issues affecting business morale. 

However, there is some level of hope in some quarters. 

“They also anticipate improvement in output of sectors, such as Mining and Quarrying; Finance, Professional and Administrative Activities; and Agriculture sectors, and this could have a positive impact on aggregate domestic economic performance in the third quarter of 2024,” the central bank declared. 

In addition, the BES report indicated that firms anticipate lending interest rates to decrease across all markets, in line with the expected monetary policy easing, globally. Businesses also expect an increase in the volume of borrowing from all markets in the 12-month period to September 2025, as depicted by the positive net balance. 

The anticipated decrease in interest rates and increase in borrowing volume is consistent with the expected monetary policy easing both domestically and globally, the BES report further explained. On the positive end, the BES said the firms expect cost pressures to decrease in the third quarter of 2024. 

Businesses also expect overall output to expand by 2.8 percent in 2024, which is higher than the 1 percent growth forecast by the International Monetary Fund for the same period. In addition, extrapolation from the first two quarters of the year and monthly economic indicators for the third quarter also suggest subdued growth in 2024. 

“Furthermore, firms expect GDP to increase by 2.3 percent and 2.5 percent in the third and fourth quarters of 2024 respectively. Notably, firms in the Mining and Quarrying; Finance, Professional and Administrative Activities; and Agriculture sectors were optimistic in the third quarter of 2024, while those in the Manufacturing; and Retail, Accommodation, Transport and Communications sectors were neutral,” it added. 

However, firms in the Construction and Real Estate sector were pessimistic about growth prospects. The report also said looking ahead, all sectors were optimistic about the fourth quarter of 2024 and the year to September 2025, except the Mining and Quarrying sector. 

Meanwhile, the pessimism in Mining and Quarrying sector may be attributable to a combination of factors, such as the global decrease in demand and economic uncertainty associated with geopolitical conflicts and the growing popularity of synthetic diamonds. 

Meanwhile, optimism in other sectors may be attributed to government interventions aimed at supporting economic activity, including reforms aimed at improving the business environment