Tuesday, January 25, 2022

Debswana rebuffs Auditor General’s report

Debswana Diamond Company has responding sharply to suggestions by the Auditor General that it withheld information.

  
The Auditor General Pulane Letebele stated in her 2020/2021 report that she faced some difficulties in accessing mining agreements between the government of Botswana and Debswana.

When an article quoting the Auditor General’s suggestion that the secrecy made it difficult to appreciate obligations and responsibilities of  Botswana Government and Debswana, it got the diamond mining company’s attention and in its response decided to call the Auditor General’s bluff.

Asked by Sunday Standard to clarify its contention as far as the article and the report by the Auditor General is concerned, Debswana said it is a private limited company and therefore does not fall within the mandate of the Auditor General.

While the other party to the agreement, De Beers and private auditors have unfettered access to Debswana operations the government’s own auditor is closed out.

In their repose Debswana stated: “However, the Company does acknowledge that its affairs may fall within the remit of the Auditor General in the hands of one of the shareholders, Government of the Republic of Botswana, but the Company is not involved in those processes,” the company said.

Debswana said contrary to suggestions made, there has been no direct engagement between Debswana and the Auditor General (AG) with regard to the audit in question.

“The Auditor General’s mandate, as espoused under section 124 of the Constitution of Botswana, includes the ‘public accounts of Botswana and of all officers, courts and authorities of the Government of Botswana, and for that purpose the Auditor-General or any person authorized by him or her in that behalf shall have access to all books, records, reports and other documents relating to those accounts,” Debswana said.
 
It also added that “Further note that Debswana is audited annually by third party Independent Auditors appointed by the Board of Directors. We therefore advise that you refer all other questions pertaining to the aforesaid audit report to MMGE (Ministry of Minerals Green Technology Energy Security), who are the primary client of the Auditor General in this matter.”


Immediate comment from the Auditor General and the Ministry was not available.

In her report, Letebele had expressed concern that the mining agreement with Debswana was not availed to her by the department of mining as it was considered confidential.
“This was said to be the case for companies in partnership with the Government of Botswana. However, the agreement for Botash mining company was availed together with its terms and conditions of operations even though it is also in partnership with the Government,” she said.
In addition, she said Debswana mining licences were availed “to me without terms and conditions of operation, whereas other diamond mining companies’ mining licences together with their terms and conditions of operation were availed” adding that “ The failure to avail the Debswana mining company’s terms of operation made it difficult to understand the responsibilities and obligations of the contracting parties.”
In her detailed report, Letebele, observed that the Extractive Industry Transparency Initiative (EITI) principles encourage countries to publicly disclose their extractive (mining) sector contracts agreements and licences. Botswana is however not a member of the EITI.

“In response, Management stated that mining contracts were not availed because they were commercial contracts, which if made public would potentially compromise the contracting parties especially if competitors got hold of the agreements,” she said.
 
She added that “They further indicated that it was common practice for such agreements to be confidential and it should be noted that although the agreements were confidential, key terms of the agreements were publicized.”
Letebele’s concerns are not unfounded. In one of its recent report, the Natural Resource Governance Institute (NRGI) raised a red flag over Debswana’s secretive financials relating to the sale of diamonds.

The report stated that while Debswana appears to have good corporate governance structures in general, the rules describing how the company operates are less clear than those of most other State Owned Enterprises (OEs) evaluated in the RGI.

Describing Debswana as Botswana’s most significant diamond mining enterprise and a 50/50 joint venture between the government and De Beers, the report explained the company had been evaluated as the state-owned enterprise for the purposes of the RGI.

In particularly, the report noted that Debswana does not disclose the transfers of funds to the government and details relating to the sale of diamonds.

“Furthermore, while the company provides much information in its annual reports, our researchers could not find the core financial details that analysts require to provide effective independent oversight of the company,” says the report.

The report stated that Debswana has a failing score, but could improve its performance by improving annual reports.
The company scored 29 of 100 points. It ranked 61 of 74 SOEs in the index and lands on the border between the poor and failing performance bands.

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