More costs pressure expected on firms-survey

Domestic firms expect cost pressures to rise substantially in the second quarter of 2021, mainly attributable to the expected increase in all input costs, Bank of Botswana’s latest business expectation survey has disclosed.

The latest survey by the central bank said firms base their arguments on the fact that there has been a rise on inflation, following the recent upward adjustment in some tax rates such as Value Added Tax, increase on withholding tax on dividends to residents, increase in fuel levy, as well as introduction of levy on sugar sweetened beverages effected in April 2021.

“Firms expectations about domestic inflation have generally been on a downward trend since 2013, and within the Bank’s inflation objective range of 3-6 percent effective 2014,” said the report.

According to the domestic firms’, inflation expectations for 2020 and 2021 averaged 3.7 percent and 3.8 percent respectively, suggesting that inflation expectations are well anchored within the Bank’s objective range. Companies also talked about business impediments that are affecting their sustainability and profit margins. “Difficulty in accessing financing was the second most commonly cited impediment to doing business, especially by firms in the Financing and Business Services sector. Furthermore, unavailability of skilled labour was also considered a challenge to doing business in Botswana, particularly by firms in the construction and mining sectors, reflecting reported difficulties experienced in recruiting foreign skilled labour.

Lastly, weak domestic demand was cited as a challenge to doing business in Botswana, due to perceived slow growth in household disposable incomes following COVID-19 containment measures,” said the report.