Businesses not out of the woods yet

Curfew and the remaining Covid- 19 induced trade restrictions implemented by authorities on the local economy will continue to affect businesses, Kgori Capital has announced.

The asset management company said although the current restrictions are less constricting, compared to the lockdowns imposed in 2020, constrain on business activity in 2021 is expected to continue. “Forecasts will remain fluid as we get more information on the status of the local and global vaccine rollout as well as the implementation of government’s Economic Recovery and Transformation Plan ( ERTP),” said Portfolio Manager at Kgori Capital, Kwabena Antwi.

There have been no hard lockdowns yet in 2021, despite curfews being implemented since January 2021 and alcohol sales banned between January 2021 and February 2021.

However, newly registered Botswana Beverage Association ( BoBA) has put out a plea for government to revise trading conditions for alcohol under the ongoing COVID- 19 pandemic. Speaking to media recently, the Association representing bars, night clubs, pubs, lounges and bottle stores bemoaned how the industry is crumbling faced with stringent trading conditions now propping up ‘ black market’ trade of alcohol.

BoBA says a lot of illegal alcohol traders are mushrooming across the country, inflating prices while not contributing to taxes.

With over 200 confirmed members, the Association has a barrel of suggestions to put before government and the COVID- 19 Task Force team, as part of efforts to save jobs and entrepreneurs sinking in debts. “We are deeply concerned, we have employees, rented premises and selling alcohol is a source of income for our families,” said BBA Vice Chairperson, Kealeboga Bogatsu, citing that the industry is heavily burdened by headwinds. “Apart from being evicted, we have employees that we have been barred to dismiss from work,” said Bogatsu, citing the State of Emergency ( SoE) regulations which protects employees from termination. Though uncertainties are expected to punctuate the economy, Kgori Capital expects the reserve bank to maintain interest rates at current levels in the medium term in order to support economic growth. Last week, the Bank of Botswana’s ( BoB) Monetary Policy Committee ( MPC) maintained bank rate at 3.75 percent. The MPC said the economy is projected to operate below full capacity in both the short and medium term, not creating any inflationary pressures, going forward, hence the continued accommodative monetary policy stance.

However, Kgori Capital expects inflation to accelerate in the next few months. “This will be driven by transport inflation where we expect further pump price increments as global oil prices continue to rebound on the back of optimism regarding the global economic recovery from the pandemic,” said Antwi. “We expect inflation to accelerate further and briefly touch the six percent upper bound of the BoB’s objective range in late Q2 2021/ Q3 2021, before decelerating.

Our expectation is premised on continued supply push inflation and base effects arising from the transport basket,” he added. Meanwhile, Kgori Capital has adjusted the GDP estimate for 2021 following the release of betterthan- expected quarter four 2020 economic data which indicated that the economy contracted 7.9 percent versus our expectation of an 8.5 percent contraction. “We have revised our 2021 growth expectation upwards to 7.2 percent from 6.3 percent previously with risks balanced,” said Antwi.