The Auditor General is unable to audit the mainstay of Botswana’s economy because Debswana diamond mining company is refusing to avail records.
In her latest report, the Auditor General Pulane Letebele echoed concerns raised by the Natural Resources Governance Institute (NRGI) that Debswana does not disclose the transfer of funds to government and details relating to the sale of diamonds adding that such an arrangement puts Botswana’s success story at risk.
Deals between the Botswana government and De Beers are highly secretive. The World Bank has also expressed concern over the secrecy between Botswana government and De Beers.
Letebele expressed concern that “the mining agreement with Debswana was not availed to me as it was considered confidential. This was said to be the case for companies in partnership with the Government of Botswana.”
It turns out the explanation was not true. Letebele revealed that, “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 further stated that “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. 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.”
The Auditor General noted 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, the report says, 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. 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 publicised.
Regarding compliance, Letebele revealed that during the period under review, the amounts collected by the Department of Mines from Debswana ranged between P15.3 billion and P9.04 billion with the highest collected in 2016/2017 and the lowest in 2015/2016.
“Baselines and targets were not set for the collection of dividends over the period under review. This was due to confidentiality of the Debswana sales agreement as well as reliance on the mining companies’ Board of Directors for determination of the sales value of diamonds,” the report says.
In response, the report says, Management stated that they prepared revenue forecasts which informed the budget at national level and that revenue collection was monitored against the budget on a monthly basis. Where resources permitted, they undertook production, sales and revenue audits for reconciliation against royalty payables. They further stated that it was impossible to collect revenue as per plans due to market and production fluctuations.
Regarding Debswana Royaltie, Letebele found that the Department of Mines was inconsistent in their revenue collection drive as they did not set baselines and targets for the revenue collection from Debswana like they did for other mining companies.
The audit covered the period 2014/2015 to 2018/2019 and during this period the highest amount of royalties collected was P44 billion in 2014/2015 while the lowest collected was P3.5 billion in 2018/2019, showing a drastic decrease of P40.5 billion over the 4-year period.
With regard to Debswana Dividends, Letebele’s office found that during the period under review, the amounts collected by the Department ranged between P15.3 billion and P9.04 billion with the highest collected in 2016/2017 and the lowest in 2015/2016. Baselines and targets were not set for the collection of dividends over the period under review. This was due to confidentiality of the Debswana sales agreement as well as reliance on the mining companies’ Board of Directors for determination of the sales value of diamonds.
In response, Debswana Management stated that they prepared revenue forecasts which informed the budget at national level and that revenue collection was monitored against the budget on a monthly basis. Where resources permitted, they undertook production, sales and revenue audits for reconciliation against royalty payables. They further stated that it was impossible to collect revenue as per plans due to market and production fluctuations.
