BCP wants more out of gov't-De Beers deal
Innocent Selatlhwa | Tuesday June 13, 2023 06:00
The BCP has produced a position paper on the ongoing contract negotiations between De Beers and Botswana. The current contract expires end of this month.
"The BCP has, from inception, been consistent in advocating for Botswana to retain more of the benefits (investment, knowledge, technology, industrialisation, skills, and jobs) from its mineral resources and raw materials in general through extensive beneficiation," reads the position paper.
The party says this is particularly true for diamonds, which have historically offered exceptional opportunities for industrialisation, but also applies to coal, copper, nickel, soda ash, gold, and meat and meat products.
"The new diamond marketing contract must promote this objective. That way, our diamonds will help promote, attract, and retain investment, domesticate high-end knowledge, technology, and skills, build industries around diamonds and create quality employment opportunities and wealth for our youths and the nation." It says the negotiations must be conducted judiciously, in good faith, and with the utmost respect for the process and each other.
The BCP is concerned by what it sees as performative, unseemly, and injudicious public statements from President Mokgweetsi Masisi delegitimising De Beers whilst negotiations are ongoing. "The statements," it says, "insinuate that De Beers has cheated Botswana out of billions of revenue and is unwilling to accommodate Botswana on a fairer deal."
The BCP highlights that Masisi's statements appear calculated to whip up public sentiment against De Beers. The opposition party finds this approach to commercial diplomacy objectionable and potentially destructive.
First, it is not good for the decades-long mutually beneficial relationship between Botswana and De Beers, from which both parties have benefited handsomely. De Beers is the single most important business and development partner Botswana has had to date, it explains. The partnership has produced results given that the contribution of diamonds to government revenue exceeds Botswana’s entire development budget. Second, the disparaging posture degrades the investment climate and undermines the country’s own investments in De Beers.
"The investor community is paying attention to Botswana’s conduct during these negotiations. Further, De Beers and Anglo-American executives and shareholders are no doubt talking to their peers around the world." It says the message Masisi is sending, perhaps inadvertently, is that Botswana does not value investors. This will make promoting, attracting, and retaining investment that much more difficult. Third, it disregards the attendant risks to the economy, the fiscus and our collective wellbeing. Mining GDP, 95% of which is diamonds, accounts for 33% of total GDP, 79% of exports, and 35–40% of government revenue. These figures suggest a high degree of vulnerability to our economy.
Furthermore, Botswana’s trade in third-party diamonds (imports and re-exports) rests solely on third parties’ confidence in De Beers as a technical partner. Botswana also holds a 15% stake in De Beers, which in 2022 had a turnover of P89.2 billion ($6.6 billion). "For these reasons, Botswana cannot afford to be casual about its relationship with De Beers." The BCP also does not approve of the secrecy around the Botswana–De Beers contracts. Whilst it accepts that negotiations themselves should not be conducted in public, the eventual contractual agreements should not, as a matter of public interest, be secret. It supports the Extractive Industries Transparency Initiative’s call for better governance of the extractives and in particular transparency around agreements, revenues, and revenue sharing.
The government should take full responsibility for our agreements and the state of development of the diamond value chain. As a matter of accountability, the government should take responsibility for the agreements Botswana enters into, the policies, strategies, and incentives we develop or fail to develop and the consequences thereto.
"The lack of a strategy to build industries around diamonds is the government’s fault, not De Beers’s. That said, it is beyond doubt that given the amount of wealth, it has made out of Botswana’s diamonds, De Beers could have done more to build a considerably more positive legacy than it has hitherto done, one of profound transformation of the economy and lives.
In the 1980s, when De Beers was a virtual global monopoly, it had the knowledge and leverage to get players higher up in the diamond value chain to invest in the development of diamond-based industries and help transform what was then a dirt poor Botswana." The BCP also has serious governance concerns about the HB Antwerp deal.
The BCP appreciates some of the government’s ostensible intents behind the HB Antwerp deal. However, the BCP has serious governance concerns about it. "First, the agreement is shrouded in secrecy, which is an anomaly where public funds are invested. Second, and as a consequence of this secrecy, the public has no idea how much the government spent to acquire 24% of HB Antwerp, how much HB Antwerp was worth at the time and most importantly, whether any credible due diligence preceded the deal." These are material considerations because they speak to the distribution of risk between the parties, the potential to disrupt the De Beers deal, and the fiduciary responsibilities of the leadership, it argues. The BCP calls for transparency around the HB Antwerp deal. More than an improved diamond marketing contract, the Dumelang Saleshando-led party says Botswana needs to develop and execute solid strategies for building value-adding industries around its raw materials.
Further, Botswana needs to commit to building a truly competitive investment climate to position the country to promote, attract, and retain investment at the levels required to significantly reduce unemployment and poverty. This may even entail investing in synthetic diamonds, an area where De Beers is currently a global leader. "Message discipline and policy consistency are two of the fundamentals the ongoing negotiations on a new diamond marketing deal suggest we are getting wrong.
The message, at all levels of government, the presidency in particular, should unambiguously be 'Botswana is open for business'. And we should get the best deals for Botswana."