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Local companies anticipate rise in cost pressures

Local companies anticipate rise in cost pressures
SURVEY CONDUCTED: Bank of Botswana expects cost pressures to rise

A survey by the Bank of Botswana (BoB) has indicated that companies expect cost pressures to rise incredibly during the first quarter of 2021.

The quarterly survey called the Business Expectation Survey (BES) suggests that firms expect cost pressures to rise due to the anticipated increase in some input costs, including materials, rent, wages, and transport costs.

This is believed to be in line with the recent increase in inflation, following the upward adjustment in fuel prices and postal services tariffs affected in October last year.

Local firms’ expectation of inflation is said to have been generally on a downward trend since 2013 and within BoB’s objective range of 3 -6 percent since 2014.

Regarding factors affecting business conditions, generally firms, predominately those in trade, hotels, restaurants, transport, and communications sector, specified Covid-19 restrictions as the greatest challenge to their business operations in the fourth quarter of 2020.

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Weak international demand was the second most cited challenge of doing business, especially companies in the mining and quarrying, and trade, restaurants, hotels, transport, and communications.

The decline in international demand is partly attributed to international travel restrictions, which have since been eased towards the end of 2020.

Shortage of raw materials has also been identified as an impediment to doing business in the country, a challenge which affects the manufacturing sector mostly.

The other challenge that firms that took in the survey pointed out as a challenge of doing business in the country is the unavailability of skilled labor, a problem faced mostly by companies in the construction sector.

On a positive note, the local political climate, water, and electricity supply were viewed as the most supportive factors of doing business in the country during the fourth quarter of 2020.

Companies have also indicated that access to credit has become tight in the fourth quarter of the past year even though export market-oriented firms expected the interest rates to be lower than in the previous quarter.

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It has been observed that companies that mainly target the domestic market prefer to borrow from all markets with more preference given to the domestic market, while export-oriented firms prefer to borrow mostly from the domestic market, and to a much lower degree from elsewhere.

About 45 percent of the surveyed companies indicated that their decision on which market to borrow from was informed by accessibility, whereas 29 percent cited the availability of required loan products.

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