'Sweet nothings' as De Beers again woos Botswana
Mbongeni Mguni | Friday November 16, 2018 13:15
An unofficial decision has been made by both teams to use the metaphor of romance to describe the process of negotiating and securing a new diamond sales agreement.
In May, President Mokgweetsi Masisi spoke of a “marriage” between De Beers and Botswana. On Tuesday, he spoke of the process as a “renewal of vows”. De Beers group CEO, Bruce Cleaver said the diamond giant “couldn’t wish for a better partner” and said the relationship would be “around for another 50 years”.
Outside of that, however, precious little has been shared as to exactly what the two teams will be pushing for in the latest deal. Continuing the romance metaphor, observers say the rhetoric around the talks, for now, amounts to the “sweet nothings” of courtship, with little substance provided, before the grim reality of marriage sinks in.
At its heart, the sales agreement between De Beers and the Government of Botswana governs the conditions around the sale of diamonds from Debswana through the De Beers process.
The last such talks, concluded in September 2011, delivered by far the best deal for Botswana, with the migration of multibillion US dollar diamond activities from London to Gaborone. The deal also secured an independent pricing avenue for Botswana, via the establishment of the state-owned Okavango Diamond Company, which last year posted record sales of US$567 million.
The agreement before that, in 2006, saw Gaborone secure the establishment of the 45-million carat per annum Diamond Trading Company Botswana (DTCB).
The Government of Botswana and De Beers have to conclude their talks before the current deal expires in September 2020, meaning the two teams will spend most of next year shuffling between Gaborone and London to finalise their meetings.
Behind the honeyed words, some cold hard facts have come to light. Where previously government leveraged Debswana to secure concessions from De Beers, the declining resources at the various mines mean the current agreement could be the last where the Debswana hand is played to its fullest extent. Jwaneng, the world’s richest mine, will have to spend billions more on Cut 9, which will extend its life to 2034, while more expenditure is required at Orapa’s Cut 3 to push its life beyond 2030.
President Mokgweetsi Masisi has already expressed his eagerness to push for a greater share of global diamond activities in Botswana, in order to boost economic diversification efforts and support sustainable development beyond the lifespan of the mines themselves.
At the Diamond Conference on Tuesday, he said this would involve Botswana securing more access to global diamond jewellery and retail activities.
“We need to move further up the pipeline to jewellery manufacturing and retail. Participation at these upmarket levels of the pipeline, however small, will go a long way in promoting the development of Gaborone as a diamond city and Botswana as the number one diamond destination.”
It is also known that Botswana will push for the opening up of the sources, which supply the DTCB in order to fully utilise its capacity. Gaborone’s negotiators, according to several sources, will also want more access to De Beers’ most prized trade secret, the DTC price book used to set the value of Debswana’s mines.
Government also wants greater citizen participation in diamond activities beyond direct and indirect jobs, with Batswana fully participating in the value chain around the mining of diamonds.
The negotiating teams have been set up with the local team, officially called the Minerals Policy Committee, comprising the Bank of Botswana governor, Permanent Secretary to the President, Attorney General and Finance Ministry permanent secretary.
Minerals minister, Eric Molale, who is reprising his role having steered the 2011 agreement as the then PSP, leads the Committee.
The first point is for both sides to draft and agree on heads of agreement, which essentially are what the issues the negotiations will focus on or simply the agenda for the talks.
The process involves extensive consultation with shareholders on both sides, drafting and re-drafting before the actual horse-trading begins.
For now the niceties continue with Masisi saying whatever the case, the partnership would endure.
“I would rather view these negotiations as a renewal of vows and what will be renegotiated are the details of the ceremony and the invitation list.
“I can assure you that the agreement will be realised.”
For Molale, the negotiations are kicking off on solid ground. According to the Minister, the current agreement has run through the years without either party ever needing to invoke a dispute clause in the deal.
“As partners in this industry, it would shock the world if we were to part; the diamond industry would never be the same again,” he said in response to Mmegi questions on Tuesday, at a media briefing in which he sat side by side with Cleaver.
“We need each other in this journey and we shall remain steadfast as the two parties for a win-win situation.”
Molale and Cleaver sat on opposites sides of the negotiating table for the 2011 deal, when the latter was De Beers’ executive director for strategy and commercial relationships. In fact, the new negotiating teams feature several veterans from the 2011 deal, including Finance PS, Solomon Sekwakwa and De Beers Botswana resident director, Neo Moroka.
The two teams have reportedly engaged already and with familiar faces around the table as well as the evidently easy camaraderie between Molale and Cleaver, many would be forgiven for expecting smooth sailing next year.
However, as Molale and Cleaver hint, the talks are never easy. The Minister said starting talks early allows for “breathing space to resolve for any differences,” while Cleaver said the teams would not be “rushed into an agreement”.
From precedent, the period between the finalisation of the heads of agreement can drag on. The 2006 deal was preceded by heads of agreement being finalised in 2004, while the 2011 deal had a similar lag.
Molale told Mmegi that Batswana should put their trust in the negotiators.
“Just be patient and we will give you the best deal you have ever seen.”