Botswana government representatives who appended their signatures to give the de-listing of De Beers the go ahead committed Botswana to a deal they do not understand ÔÇô it has been revealed.
Consultants who were engaged by government to investigate corporate governance at De Beers stated that they are concerned that no senior executive at Debswana is “sufficiently familiar with the very complex structures through which its investment in De Beers is now held… The only person at Debswana Diamond Company (DDC) who is aware of having an understanding of these matters has recently resigned.”
The consultants recommended that Botswana government, their advisors and Debswana should review the structure of its investment in De Beers “as a matter of priority and care be taken to ensure that various key documents, agreements and contracts are safeguarded and that there is sufficient knowledge transfer.”
It also emerged that Botswana is getting a raw deal in its partnership with De Beers because government representatives who negotiated the deal were outwitted into surrendering control of Debswana.
The consultants revealed that, “despite the government of Botswana having a significantly larger economic interest in Debswana Diamond Company than De Beers, both have an equal representation on the board. This is in contrast to the position at (DBI) De Beers where the number of directors is proportional to the economic interest and minority joint venture partners’ interests are protected as certain decisions require consent of all shareholders.”
The consultants have recommended that shareholders should “reconsider the composition of the board to more accurately reflect the actual economic interest. If the current structure is to be retained, the directors representing the government of Botswana could be categorised as “A” directors and those representing De Beers as “B” directors. We recommend that any resolution required to be approved by the Board should be passed by way of a majority vote of both the “A” directors (representing the government vote) and the “B” directors (representing the De Beers vote.) This should help to ensure that each of the directors is properly empowered to exercise their personal authority. If a revised structure is adopted, we shall be pleased to advice accordingly.”
The Botswana situation is not helped by the fact that government representatives on the Debswana board are allegedly disadvantaged because unlike their De Beers counterparts, they do not work in the industry full time.