PROPUESTAS PARA EL MEJORAMIENTO DEL CONTRATO.

Certain factors are likely to influence a firm’s decision to expand, and these are related to the main problems that a firm faces. Information on how firms rank different factors that could influence their decision to expand was therefore sought. Table 7.11 shows the levels of importance of different factors that the firms would consider as obstacles to their expansion. Competition from imports stands out as an important factor. Sixty per cent of the firms would view competition from imports as a possible obstacle if they were to make a decision to expand their business operations, if we consider the cumulative responses from ‘slight obstacle’ to ‘very severe obstacle’. If we consider only the cumulative responses ‘obstacle’ to ‘very severe obstacle’, at least 53% of the firms would take into account competition from imports as a possible limiting factor to their decision to expand production. Perhaps, related to this obstacle is lack of demand for the products, which the firms fear as an obstacle to their decision to expand. Fifty-eight percent of the firms would consider lack of demand for their products as a deciding factor on their decision to expand. This factor is related to the fear of competition from imports in that the firms are probably considering that the market is already saturated because of the imports of substitutes of the products that they are currently producing.

A lack of business support services (BSS) is the second most important factor that the firms considered an obstacle to expanding production. This scenario may be explained by uncertainty regarding the ability to find markets for the bigger quantities they will produce, or of being exposed to other obligations commensurate with their size, such as paying taxes, for which they may require professional support services.

During the administration of the questionnaire, there was a sizeable proportion of firms that relied on consultants to fill the questionnaires. It took a lot of persuasion to convince such firm owners that an interview with them would be more accurate and time-saving. This in itself shows a need for business support services for some of these firms, and it became obvious that the absence of such a service plays a role in firms’ decisions regarding expansion. Perhaps firms would rather remain small than grow bigger and face bigger challenges without business support services. Other factors that are considered to be an obstacle and would influence firms’ decision to expand include a lack of credit (56% of the firms), lack of infrastructure (55% of the firms), and high utility costs (53% of the firms). It is interesting that while a lack of credit is among the most likely obstacles that firms would face if they were to decide to expand, it is surpassed by other factors such as lack of business support services, lack of demand and competition from imports.

Cost of Utilities

Utilities - that is electricity, water and telecommunications - play an essential role in the production processes of a firm. The level of importance and cost of the different utilities may differ from one firm to another depending on what a specific firm produces. The high cost of utilities has been cited as one of the constraints that firms face in Botswana, as well as one of the reasons for Botswana failing to attract more foreign direct investment.

PERFORMANCE ANDCOMPETITIVENESS OFSMES INBOTSWANA

Lack % Lack % Lack % Lack % Competition % High %

of of Infra- of of from Utility

BSS* structure Credit Demand imports Price

No obstacle 59 42 64 45 62 44 59 42 56 40 66 47 Slight obstacle 17 12 14 10 19 13 20 14 11 8 20 14 Obstacle 21 15 23 16 24 17 14 10 16 11 22 16 Severe obstacle 23 16 18 13 13 9 14 10 5 4 11 8 Very severe obstacle 21 15 22 16 23 16 34 24 53 38 22 16 Total 141 100 141 100 141 100 141 100 141 100 141 100

Table 7.11. Factors that would influence the firm not to expand production.

A fairly small proportion of firms report that electricity, water and telephones do give them some problems that impact on their operations (see Figure 7.2). However, it is worth looking at the nature of the problems raised concerning these utilities. Out of the 50 firms that say electricity is a problem to them, 25 complain about instability of supply emanating from power outages, while only 6 complain about non-supply. Out of the 25 complaining about instability of supply, only 9 firms are Gaborone-based, which suggests that the electricity supply is more reliable in the capital city than elsewhere. Eighteen of the firms complain that electricity is expensive, with only 7 of these 18 firms being Gaborone-based. It should be noted that most of the firms located outside the capital city that complain about electricity costs are referring in most cases to the connection fees. Thus, complaints about costs relate more to the initial fees than to the consumption charges. The more im- portant problem with electricity supply is therefore its reliability rather than its cost.

In case of water, however, reliability and cost seem to be equally important to firms. More or less the same number of firms report that they experience unstable water supplies and that water is expensive for their firms. A similar pattern in the differences between Gaborone-based firms and firms based elsewhere is displayed; about a third of the firms in Gaborone complain about both unreliable supply and high cost.

A somewhat different pattern is depicted regarding telephones in terms of differ- ences between Gaborone-based firms and those based elsewhere. More of the 7. FIRM-LEVELSURVEYRESULTS

complaints about the high cost of telephones are associated with Gaborone-based firms, whereas a higher proportion of firms based elsewhere complain about non- availability and a lack of reliability of telephones.

Security also appears to be a serious problem for some firms. Fifty-seven of the firms say that security is a problem, with 44 (or 77%) of them citing theft as an issue and 7 (12%) complaining about armed robberies. This development should be taken seriously in that inadequate security can have a negative impact on existing businesses and contribute greatly in frightening off potential investors. Surprisingly, higher proportions of firms based elsewhere than Gaborone complain about theft in their firms, suggesting that Gaborone is more secure for businesses than other places in the country. However, a higher proportion of firms in Gaborone complain of armed robbery.

Other problems cited by the firms relate to roads. Altogether 37 firms say that roads have an impact on their operations. Ninteen of these firms complain that the roads are not in good condition while 11 say that they are congested. As would be expec- ted, a higher proportion of firms based elsewhere than Gaborone complain about the bad condition of roads, while a substantially higher proportion of Gaborone-based PERFORMANCE ANDCOMPETITIVENESS OFSMES INBOTSWANA

Figure 7.3. Security problems faced by firms. Other 7% Kidnapping of

executives 4%

Armed robbery 12%

problem, with 22 of these firms citing the non-availability of these services. More complaints about waste disposal are from Gaborone-based firms.