When President Mokgweetsi Masisi swore the oath of office on two occasions, he assumed immense
responsibility to be at the helm of the levers of government, and critically to safeguard Botswana’s
assets, its most enduring being credibility. Botswana is respected for its sentimental reverence of tenets of democracy and truth, all cemented by integrity and strength of a fiscal policy.
Traditionally, disinformation, banana republics and failed states were the purview of dictators. On
Sunday and at Peggy Serame’s launch we witnessed yet a continuation of debunked statements with
Eric Molale reduced to an errant schoolboy giving legitimacy to false statements
The 2011 negotiations between De Beers and the government were the toughest in the history of
negotiations, delivering three notable successes .First was the longest sales agreement of 10 years. The milestone deliverable was the transfer of London based rough diamond international global sightholder sales to Gaborone. Lastly the agreement provided an independent sales outlet for Botswana, giving birth to ODC. From 2011, ODC was to receive 10% of Debswana’s production, rising to 15% over a five year period.
Society needs to appreciate two things – the ownership structure of Debswana and what when totalled
is the flow of revenue. Perhaps a third element could be the partial ownership of De Beers by the
government of Botswana. What is now Debswana used to be called De Beers Botswana Mining Company. At inception in 1970, the government of Botswana held 15% equity in De Beers Botswana Mining Company.
Botswana Diamond Valuing Company was formed in 1971. This was a 50-50 partnership between
Botswana and De Beers, the parent company.
The flow of revenue accruing to Botswana as early as 1970 was 50% of total diamond revenue, derived
from corporate royalty and corporate tax and dividends. After deduction of costs, dividends are paid of
which the government through double taxation pocketed from the De Beers dividend. It is this
combination of royalties, taxes and dividends that I will refer to as the flow of revenue.
The negotiations of 1974 increased Botswana’s equity im De Beers Botswana Mining Company to 50%,
with the flow of revenue increasing to 75%. In the subsequent years and negotiations of 1978, 1986,
1996 and 2006, the flow of revenue increased until plateauing at a staggering 81% to benefit Botswana.
The 1987 acquisition of a 5% stake in De Beers, which increased gradually to 15% by 2001 extended
Botswana’s gains to proceeds from South Africa, Namibia and Canada. The opening of DTC-B in 2008, resulting from a decision of 2006 created about 3000 of jobs. Translocating the De Beers Global
Sightholders Sales to Gaborone localised skills previously domiciled in London.
Successive negotiations have delivered two things – employment and an upturn in the economic
fortunes of Botswana. The opening of Orapa mine came with jobs, and so did Letlhakane and Damtshaa;
and Jwaneng as well as the additions of the DTC-B, ODC and DBGSS. From around 2001, there was an
upward spike in nett returns accruing the Botswana in monetary terms.
Previous negotiations had immediate tangible deliverables whose benefits trickled to the average
Motswana just as the ink settled.
Masisi’s problems start here!
There is little to extract in terms of jobs insofar as the current negotiations are concerned. Equally, the
expected economic benefit is pie in the sky. In view of these two ardent outcomes, a theatrical
performance of unfairly and dishonestly imputing criminality in the part of De Beers became Masisi’s
feasible option to derive relevance.No president has engrossed himself so much into negotiations the way President Masisi has.
The protracted 2021 negotiations are yet to be signed. At present only the heads of terms have been
signed and either party could renege on finality. De Beers’ major principal Anglo America is
emboldened, with four key decisions the major source of discontent. Out of respect to both parties it is
not necessary to delve into these at present – in due course I will.
President Masisi excels with distinction in masterful deception. There he has no match. Needing
campaign content, Masisi set out to hoodwink an unsuspecting nation, positing De Beers as a criminal
entity that has robbed Batswana, and he the saviour who took on a giant. Even RB1 and some
opposition candidates believe Botswana has been getting the raw end of the deal, something very far
from the truth.
The yet to be finalised deal does not come with real jobs and does not influence an upturn in economic
fortunes. Instead, it risks Botswana’s position in its entirety as a republic, and as a long term partner in
the success that is De Beers.
On average since 2010 Botswana produced and sold about 21.5 million carats annually. In 2022, the
largest volume produced and sold generated about $4bn, exchanging to roughly P50bn annually.
Diamond prices have either remained the same or are in decline, meaning whatever sales outlet is there
will make less money compared to the glory years.
With prices, volume of carats and revenue from rough diamond all effectively on the decline,
somewhere in there Masisi’s “negotiations” want to claim success in arm twisting De Beers of P10bn
fund. Against P50bn what would the value of a P1bn fund every year for 10 years be, assuming all else
remained equal?
Masisi’s only proposition in the negotiating – moving ODC quota from 25% to 50% – presents the first
shortfall in what was steady and assured revenue for Botswana. Should the agreement be signed, De
Beers generated revenue and by extension royalties, taxes and dividends coming from same will be
halved in ten years should everything including pricing remain the same. ODC will also have to perform
at par with DBGSS to return the similar revenue.Constell Group, resident in Botswana since 2015, and as a consequence of the 2011 agreement, is one such company committed to expanding the downstream polishing and cutting within our borders.
Whether diamonds are sourced from ODC or DGBSS, it will matter little for Constell. It will be a
Botswana diamond, from either portion of the 21.5 million carats. As a side bar, from an ease of doing business, matching India’s cost of production will be an attractive incentive for most companies forced to be in Botswana. This is a topic for another day.
As mines deepen, annual production of carats reduces, costs shoot upwards, forcing the inevitability of
automation. Introducing a start up like ODC is a saturated market maybe self-injurious.
Without bursting anyone’s bubble, the P10bn fund for development will be an exchange for royalties
and or taxes, or a combination of both coming from Debswana, DTC-B and DBGSS for this purported
fund. In effect, it will be monies moving from the left hand to the right, with no net increase in the flow
of revenue to Botswana other than already accruing to government coffers anyway.
In closing, Masisi does not seem to be a person capable of reconciling his actions with potential
consequences. If he was, he would have toned down on the misplaced rhetoric against De Beers.
When the 2011 negotiations began in 2010, Masisi was Assistant Minister of Presidential Affairs,
deputizing Lesego Motsumi, the lady he must refer to in video. Rre Ponatshego Kedikilwe was Minister
of Minerals Energy & Water Resources and is ultimate signatory on behalf of the government. If indeed
former President Khama “hated” him then, what resulted in him being appointed as Vice President in
November 2014. This, however, is neither here nor there, except to highlight the idleness of pedestrian
thinking that overcomes Masisi.
We have bigger problems.
On the African continent, a precedence of indigenisation has been set, something that must exist as a
threat to the psyche of long-term partners De Beers.
Unlike in previous years, our position as a partner is not as strong as we purport ourselves to be. Copper
is Anglo America’s most valuable commodity contributing well over 25% of earnings. De Beers, with a
troublesome Masisi led government contributes 4%. Analysts both in London and New York support the
idea of Anglo removing Anglo Plats and De Beers from its portfolio.
The two assets, De Beers and Anglo Plats, besides being little contributors are seen as complex and
unreliable contributors because of complex deals involving governments and in De Beers’ part,
unpredictable demand cycles.
Just last week Anglo America’s CEO Duncan Wanblad’s reiteration that Anglo was definitely divesting De
Beers saw the share price increase by up to 5%, buttressing the notion that shareholders and analysts
really support for Anglo to dump De Beers.
In 1981, then Zaire decided to withdraw its diamonds from the Central Selling Organisation (CSO) in
London. In response, De Beers flooded the market with similar products to those from Zaire, lowering
the price from $3/carat to half. Zaire backtracked quickly. Even Australia’s Argyle mine was put in line
quickly when they tried to be funny.
At present, President Masisi and his erratic conduct towards partners De Beers is holding Botswana at
ransom. Should the country be thrown into an economic crisis, Batswana should take responsibility for
allowing themselves to be sold a lie, believing it and failing at the least, to ask the President for once to
be serious, and lead in the truth.
Partial blame and culpability of the diamond disinformation must extend to the media. It appears our
journalists are unable for the sake of the country to debunk Masisi’s animating alternative facts in a way
that even Masisi-loving supporters would at the least get a version of the truth. Assessed objectively,
with exception of extension of duration of contracts and the allocation of 50% of the Debswana
production to ODC, the ongoing negotiations judged against historical achievements, will be seen to
have had minimal impact on jobs and the economy.And there is nothing wrong with it. By the flick of his arm, Moses split the Red Sea for the Israelites to gain passage away from Egypt.
The administration led by Sir Seretse Khama made two critical policy decisions. Firstly, vesting mineral
rights to the republic and secondly granting the Botswana government the sole authority to decide how
these resources would be explored and exploited.Sir Ketumile Masire invested directly in De Beers and Festus Mogae increased that stake. Both Masire and Mogae can be credited with lifting the flow of revenue to an acceptable ratio for both partners, one that doesn’t break backs. SKI Khama delivered ODC and DBGSS, sustaining a partnership of 40 years at the time.
The diamond world knows that at present, no deal exists between Botswana and De Beers, save for
some temporary extension. The same world is also on a decline. Unprovoked and uninvited, Masisi
proverbially threw himself into the “buffalo’s horns”, intertwining himself with a false narrative which
when the time comes for it to unravel, he will be the scapegoat.
History will judge Mokgweetsi Masisi harshly, when then it becomes clear in abdicating the oath he took, he allowed greed, flirting with market upstarts like HB Antwerp and sheer ignorance deal a five-decade relationship a fatal blow.