As a Quantitative Analyst at First National Bank Botswana (FNBB), the country’s largest commercial bank by value, Basele is not just a financial market analyst. His approach is backed by complex mathematical and statistical modelling.
But Botswana has been preaching the diversification sermon for a very long time. Of recent, the nation learnt a lesson when government revenue took a dip as a result of non-performance in the mining sector (specifically diamonds) after COVID-19 struck. To appreciate the urgency with which diversification needs to be approached, The Business Weekly & Review asked Basele what he thinks needs to be done to diversify and industrialise Botswana, especially in low output sectors such as manufacturing.
At FNBB, Basele is tasked with conducting and presenting in-depth economic research relevant to the bank’s corporate, institutional and individual client base. The scope of his role includes retrieving and manipulating quantitative data into an understandable format. It is carried out through extensive data mining and analysis with a view to influencing creative business solutions. However, Basele also has the capability of analysing national economic trends using the data he mines at the bank, more so that national economic trends are intertwined with corporate sector performance. In a response to this publication, Basele says a sense of urgency is required to diversify Botswana.
“As mentioned, diversification has remained a key priority for the country over the years. Various policies and structures have been crafted with the view of realising a broader-based growth profile for the country. Despite some efforts being realised in the tertiary sector, other key sectors such as agriculture and manufacturing still reflected limited contributions to the country’s GDP,” he says. Basele adds that it is hoped that the Economic Recovery and Transformation Plan (ERTP), with these sectors being highlighted for development and given funding being secured to provide key infrastructure and promote programmes aimed at their development, will materialise in a more sustainable growth profile for the country.
He observes further that the successful implementation of the country’s transformation agenda, with growth being distributed across more sectors of the economy, coupled with increased participation from the private sector, will also help address Botswana’s unemployment challenges. Unemployment is currently at 26 percent, which is more than a quarter of the population.
To a question regarding what should be done to accelerate citizen economic empowerment, Basele responds that some measures are already in place to promote citizen economic empowerment. A key legislative measure, he says, is the Economic Inclusion Act which seeks to enforce instruments such as the Citizen Economic Empowerment Policy to ensure that Batswana participate in economic activities reserved for them. In his view, increased citizen participation would not only lead to inclusive growth but would also ensure results in increased household incomes as well as cash circulation which will in turn boost economic activity.
Basele speaks highly of programmes like the Debswana Citizen Economic Empowerment Programme (CEEP)that have been set up to ensure increased beneficiation with the procurement of certain services reserved for local businesses. “These measures ensure that local businesses build up their capacity not only to meet local requirements but to improve their competitiveness internationally. In short, increased willingness to support building local capacity across the board will accelerate citizen economic empowerment,” Basele asserts.
The world’s leading diamond producer by value, Debswana Diamond Company, has allocated a staggering P20 billion to help advance government’s efforts in achieving a diversified economy, inclusive economic growth and import substitution. Debswana is doing this through its Citizen Economic Empowerment Programme (CEEP), which is a practical tool of inclusive economic growth where citizen owned companies take the lead in the economic activity. It is a vision that no other private sector player has devised and a vision that will advance Botswana’s efforts towards economic participation by Batswana and ensure a meaningful stake in the economy by citizens.
That vision carries an ambitious initiative that is expected to create a remarkable 20 000 jobs by 2024. Under this ambitious undertaking, Debswana will localise manufacturing of its production inputs and grow Botswana’s manufacturing base, a commitment that no other company has ever made.
In the previous financial period, the nation witnessed a contraction in terms of the overall budget as a result of weak performance by leading economic sectors like the minerals sector. Finance Minister Peggy Serame delivered her maiden budget to Parliament on 7 February 2022. According to revised estimates, revenue is anticipated to have increased to P63.4billion in 2021/22 (from P49.4billion in 2020/21) against expenditure of P73.6billion (compared to P65.8billion in 2020/21) – resulting in a much narrower budget deficit of approximately 5.1 percent of GDP. The improvement in revenue, according to Basele, stems from a surge in diamond sales over the course of 2021, resulting in elevated levels of mineral revenue. “Expenditure, on the other hand, was pushed up by COVID-19 related costs which included procuring various equipment, including vaccines, he notes, giving a contrast.
Over the medium term, Basele says preliminary budget figures indicate a more positive outlook for Botswana’s fiscal position as a result of a substantial rebound in mineral revenues coupled with a recovery in the level of Southern African Customs Union (SACU) receipts. He notes that current estimates point to the deficit narrowing to -3.2 percent of GDP in 2022/23, adding that the budget deficit is expected to be financed through a combination of domestic and external borrowing over the medium term. However, he takes comfort in the fact that Botswana’s debt-to-GDP ratio still favours increased borrowing.
The country’s current public debt level is estimated at 26 percent of GDP against a prescribed limit of 40 percent – indicating less fiscal risk premium. Nevertheless, as Botswana approaches the start of National Development Plan 12 (NDP 12) in 2023/24, the FNBB Quantitative Analyst cautions that it will have to contend with key issues as part of its efforts to promote fiscal sustainability. “These include the country’s reliance on diamond mining activities for both growth and fiscal revenue, and the resulting vulnerability to external factors affecting diamond demand,” Basele says.
To improve the current revenue mix, he advises that Botswana will have to improve its tax collection efforts in order to create a buffer against any volatility in mineral and SACU revenues. Diversification efforts will also need to be ramped up to broaden the local tax base. Efforts to contain COVID-19 should also be prioritised if Botswana is to achieve sustainable growth according to Basele. The Ministry of Health will receive the largest allocation, owing to the continued need to procure various health equipment, vaccines and booster shots for the population. “This highlights the government’s intention to bolster Botswana’s health system, saving the population from the COVID-19 pandemic and creating an environment that will allow a return to ‘normality’. Although the order, in terms of allocation, has shifted given the pandemic, the ministries still listed comprise the top 5 allocations.
The development budget contracted over the course of 2020 and 2021 as a result of the pandemic. Due to its severe impact, funds were diverted to procuring various types of health equipment and securing vaccines for the population. Additionally, says Basele, due to restrictions imposed on the number of workers permitted on key construction projects, the level of development experienced over the period was limited, coupled with delays in the procurement of machinery and equipment, along with other materials, as a result of supply-chain disruptions.
Prior to joining FNBB in 2018, Basele was a research and teaching assistant at the Botswana International University of Science and Technology (BIUST) under the department of mathematics and statistical science. As a researcher, he collaborated with colleagues to conduct new study in the field of distribution theory. This led to development and subsequent publication of a model used for survival analysis. Basele holds an MSc in Statistics (BIUST) and a BA in Economics & Statistics (University of Botswana).