Raging diamond wars!
Brian Benza | Friday February 14, 2014 15:20
Renowned local entrepreneur Anthony Siwawa together with a diamond merchant, Gil Goshen, were last week quizzed by the Botswana Police over criminal accusations laid against them in a case that turned out to be a fragment of a year-long raging business dispute between two Israeli diamantaires with vast international business interests, being fought on Botswana territory.
At the core of the dispute, which resulted in De Beers suspending diamond allocations to Life Diamond Botswana (LDB), a local diamond cutting and polishing plant, last month, are two Israeli diamantaires, Erez Dalyot and Alon Arabov, who are fighting for the majority 80% ownership in LDB with the latter claiming in courts that Dalyot sold his 40% shareholding to him in a February 2013 agreement.
Siwawa is a local partner (20%) in a diamond cutting and polishing plant, Life Diamonds Botswana (LDB), a company that has since February 2013 been the subject of waging “propaganda” wars fought mostly within the confines of De Beers, government offices, and courts of law in Gaborone, Tel Aviv and Paris.
According to Siwawa, last week’s brief stint with the police which saw Arabov’s partner, Goshen being prevented from leaving the country, was at the instigation of Dalyot who has resorted to ‘intimidation and harassment’ notwithstanding the court case currently taking place in Paris and Tel Aviv.
“Dalyot filed false accusation against Goshen and myself, as directors of the company, for having illegally authorised withdrawals of funds from the company account. This was despite clear evidence that the only funds taken from the company account was used to pay workers’ salaries for January,” said Siwawa who further explained that, “Goshen was prevented from leaving the country on Thursday evening.
All parties, that is, Dalyot, Goshen and myself met with the police on Friday to discuss the criminal complaint made by Dalyot in so far as the dispute is concerned. The matter was found to be baseless and of no merit, save that it was done to harass and intimidate. Goshen then left the country for Israel on Friday.
Siwawa is the nominee diamond licence holder through his company, Novawall.
Beneficiation versus ‘quick spin’ trading
As a result of the bigger dispute between Arabov and Dalyot which is already having significant ramifications in the local diamond sector, De Beers last month suspended its US$15 million a year diamond allocations to the company, a development that is threatening the jobs of about 90 workers that have been left with no rough diamonds to cut and polish.
The Arabov group has, however since pledged to pay all workers salaries until the dispute has been resolved.
At the centre of the dispute for ownership of LDB is a matter that drives to the heart of the Botswana’s diamonds beneficiation dream. One party is more interested in the ‘quick spin’ trading of diamonds sourced from De Beers while the other wanted to focus on cutting and polishing of sights.
According to the agreement among the partners, the objective of getting the DTC sight and for the establishment of Life Diamonds Botswana was specifically for “trading and/or processing of rough diamonds sourced from DTC in Botswana and from any other source in Botswana”. According to court papers filed in Tel Aviv, “towards the end of 2012, when the company factory was in advanced stages of construction and operations were expected to commence within a short time span, Erez Dalyot informed the plaintiff (Arabov) that he wished to focus on the trade of diamonds, and not the actual processing thereof - which was supposed to be the main business of the Life Diamonds Botswana - and therefore he was not interested in continuing his operations within the company in Botswana.”
“Despite the surprise of the sudden withdrawal of Dalyot from the agreements between the parties, and in light of the fact that in any event, the contribution of the Defendant and Dalyot up to that time for the construction of the factory was minimal (if at all), and in light of the fact that the defendant did not inject any of the capital that it had undertaken to pay, Arabov Group agreed to respond to the wishes of Dalyot, and the parties conducted long and detailed negotiations in this context - ultimately deciding that the Arabov Group would purchase all of the Erez Dalyot’s D.D. Manufacturing N.V. shares in the Botswana company,” read the court papers filed by the Arabov Group. “Accordingly, on February 18, 2013, Arabov Group and Dalyot’s Company signed and closed an agreement based on which the Dalyot Company would sell all of its holdings in the Company to the Arabov Group; the above was effective as of February 18, 2013,” reads the papers.
This meant, upon the purchase of the holdings, the Arabov Group became, on February 18, 2013, the controlling shareholder of the Company, holding 80% of its share capital while 20% of the share capital remained in the hands of Anthony Siwawa.
However in his defence papers filed in the Tel Aviv court, Dalyot claims the 40% share transfer agreement was signed but that not all the conditions were met and therefore it isn’t a valid agreement. Consequently, he argues that he still holds a 40% ownership in LDB.
Before the current case in Tel Aviv, two judges in Botswana have thrown out the matter twice and each time the court ruled that Erez Dalyot had no rights to sign on behalf of the company nor withdraw money from the corporate accounts.
Siwawa told BusinessWeek that Dalyot’s tactics of trying to lay false criminal charges against the directors of the company would not deter them from ensuring that the diamond polishing licence is used in compliance with the objectives and regulations of the country in so far as the industry is concerned.
The history of Erez Dalyot with Botswana started in 2008, when he became one of the 16 manufacturing sight holders.
Initially De Beers had a list of 12 candidates but at the last moment the Botswana government added four names with Dalyot being one of the latter. Asked about the suspension of the sight allocations, De Beers said they do not comment on specific contractual issues with individual Sight-holders.
“However, as a matter of course, in any situation where there is an issue that could impact the downstream diamond sector in Botswana, we would work on finding the best ways to mitigate against any negative impact and focus on maintaining the success of the domestic industry.
“With regards to the Sight-holder businesses operating factories in Botswana, each of these businesses has been granted a licence by Government and successfully competed for supply by going through the objective selection process that is used for Sight-holder selection,” De Beers midstream communications manager, David Johnson told BusinessWeek.