Thursday, December 3, 2020

De Beers, Botswana secrecy steals Botswana’s shine

A decision by the Botswana Government and De Beers to continue keeping their sales agreement secretive is making the country lose its position as a continental success story.

This has emerged from a new report by the Natural Resources Governance Institute.

In its latest report, the Natural Resources Governance Institute (NRGI) warned that another decision by Debswana not to disclose how much revenue it contributes to the government and its failure to publish financial results puts Botswana’s success story at risk.

The report discusses good practices and challenges in resource governance that arise from the findings from the index’s three components namely, value realization, revenue managementand enabling environment.

They highlight high-scoring good practices as lessons and examples to share across countries, sectors and over time. The overall picture remains that the more dependent a country is on natural resources, the less transparent and accountable the management of the extractive sector.

On value realisation, Botswana scored 40 out of 100, on revenue management, 62 out 100, on enabling environment 81 out of 100 and with regard to revenue as percentage of government, the country scored 30.6 percent out of 100.

The report states that there is need to strengthen Botswana’s resource governance success with licensing and (state-owned enterprise) SOE management.

“Botswana managed to comply with its fiscal rule during the global commodity price crash, but overall, compliance levels are low,” the report says.

Acknowledging that Botswana is a continental success story of development based on resource revenues the reports says that Botswana consistently implements its legal framework and has the strongest enabling environment in sub-Saharan Africa.

The report reveals that Botswana’s fiscal rule and its sovereign wealth fund, the Pula fund, have helped the country to invest diamond revenues in health and education.

“However, two areasÔÇölicensing and state-owned enterprise (SOE) governanceÔÇöweigh down Botswana’s score,” the report says.

It states that” When licensing for diamonds, the government does not disclose negotiable terms, the resulting contracts, ultimate owners of or public officials’ interests in extractive projects.”

The reports show that “Debswana, the state’s joint venture controlling most diamond production, has adopted some but not all desired corporate reporting practices. Specifically, it does not disclose how much revenue it contributes to the government and annual reports do not include financial results needed for independent oversight.”

Botswana’s institutions have facilitated a continental success story, which could be further strengthened by transparent licensing and SOE management, the report says.

The report says as the first step in developing mineral resources, the award of exploration and production licenses presents a critical opportunity to set the course of governance for the entire lifecycle of a project. Botswana is among 10 countries in the Sub Saharan region with failing scores in this area. They include other include among others significant resource economies South Africa, Nigeria, Sudan and Madagascar.

Botswana is also among countries that have not published resource contracts.

Worryingly, the report says, these countries do not disclose all fiscal terms in laws or model contracts, meaning that stakeholders are unable to compare actual revenues to fiscal terms and make a meaningful assessment about whether the county has secured a good deal.

“In contrast, when contracts are available, comparing them across countries strengthens the government’s position in negotiations, reduces risk of renegotiation and supports oversight,” the report says.

“Beneficial ownership, or information about who owns interests in extractive companies, is becoming a critical component of the fight against corruption, illicit financial flows and tax evasion in resource rich countries,” the report states further.

 It recommended that Governments and companies should disclose full text contracts online and in a timely manner to facilitate transparency of terms and conditions of extraction to strengthen the government’s contract negotiation position.

 It also recommended that Government should establish rules and systems for disclosing beneficial owners and public officials’ financial interests to the public to enable oversight and reduce risk of conflict of interest in the sector.

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The Telegraph December 2

Digital edition of The Telegraph, December 2, 2020.