De Beers, government in shareholders’ squabble

Relations between partners in Debswana ÔÇô De Beers and the Botswana government – are on the skids following deep-seated differences on the way to manage diamond mines in Jwaneng, Orapa and Letlakane.
Permanent Secretary in the Ministry of Minerals Energy & Water Resources, Dr Akolang Tombale, confirmed this week that government had foiled an attempt by De Beers to get a management contract of Debswana mines through the backdoor.
As Debswana faces a major cash crunch with the anticipated expenditure on the rehabilitation of its mines and the planned expensive underground mining, there is an irreconcilable clash in business interests represented by De Beers and political interests represented by government in Debswana.
De Beers, who are preoccupied with the Debswana bottom line, are unhappy that the mines are not being run efficiently, while government, which sees Debswana as a vote catching vehicle, will not accede to scaling back some of the social responsibility commitments which are pushing up the Debswana operational costs.
Dr Tombale confirmed that although his office should have been the first port of call, De Beers sidestepped him and approached Vice President Ian Khama with their request that they be given the contract to run Debswana mines.
Although De Beers was apparently hoping to leverage their “blood” relationship with the Vice President, he turned down their request.
Debswana insiders say De Beers’ accusations are baseless given that, unlike in South Africa, Debswana mines are obliged to provide social services to the communities in the vicinity of the mines. This arrangement pushes operation costs higher.
They say it is, therefore, unfair to compare the South African situation with Botswana’s.
Debswana accounts for close to 70 percent of De Beers revenue stream.
According to Tombale, De Beers argued that, with their background, they are better trained to take the Debswana Mines to another level, especially in the face of anticipated ground mining in the coming years.
“De Beers felt they could do better. With the mines going underground and becoming more capital intensive, they think they have the right people,” he said.
He, however, said the suggestion was not made to his ministry.
“The important thing is that their suggestion was never officially deliberated upon,” said Tombale.
He said over and above getting money from diamonds through Debswana, government is more interested in using the company to grow skills among citizens hence they would not want to give a management contract to another company.
“The feeling in government is that Debswana should not only be producing diamonds, the company should also produce and export skills,” he said.
He said government analysis is that, given its strategic importance, Debswana is the best vehicle to use to develop sill base among citizens.
“In any case, a decision has been made to leave Debswana as an independent company,” implying that giving the Management contract to De Beers, who are a shareholder, might undermine such a position.
On whether the reopening of a De Beers office in Botswana would not increase friction between the shareholders, Dr Tombale said it remains a possibility “if not well managed by those in charge.”
“De Beers feel they have a reputation that they want to protect. But we in government also feel there is a certain way that things have to be done. It will depend on how those responsible manage the relationship,” he said.
The latest misunderstanding is not helped by the tension between the two shareholders which have been simmering for sometime.
Government and De Beers have been at loggerheads on a number of issues, including on the handling of the relocation of Basarwa from the Central Kalahari Game Reserve.
De Beers has been calling for a compromise, but powerful voices from within government have spurned such efforts.