Wednesday, April 24, 2024

Debswana’s 40 anniversaries in a flagged fanfare

When it re-branded a few years ago, the Debswana Diamond Company could afford to take out full-page adverts and fill only less than one percent of the space with text and images. The equivalent would be one rich person chartering a Boeing 747 and flying without cabin company for a long-distance flight.

On Tuesday when Debswana turns 40 years, there won’t be the grand spectacle one would expect of a company that owns the richest diamond mine in the world and is the nation’s largest forex earner. The company is not broke and has run an ad in newspapers to rebut a front-page story that suggested it was.

However, showing opulence in tough times would be unseemly and the Tuesday anniversary will be marked in a low key manner.

Debswana came into being in June 23 1969 when the government of Botswana (represented by President Seretse Khama, vice president Ketumile Masire and cabinet minister Jimmy Haskins) signed an agreement with De Beers, a South African mining company.

Of the three men on the Botswana side, Masire is the only surviving signatory of an agreement that transformed one of the poorest countries in the world to the economic miracle it would become.
The search for diamonds began in 1955 in the Tuli Block area and in April 1967 a pipe was found in Orapa.

“This was to be the largest (117 hectares) of all the kimberlite pipes which were eventually located in this area. Because of the size of the pipe and the variable grade, sampling and evaluation took two years. But the results were exciting. The Orapa pipe showed considerable potential and the development of the mine was affirmed by the shareholders. Meanwhile, in 1968, two smaller pipes were discovered some 40 kilometers south-east of Orapa, near Letlhakane village. On June 23rd 1968, the De Beers Botswana Mining Company was formed,” Debswana says on its website.

The Orapa mine, which now ranks as the biggest open cast mine in the world, was commissioned in 1971.
A year later, De Beers geologists found diamond deposits 40 meters beneath layers of sand in Jwaneng. A speaker at an event in Phakalane four years ago described Jwaneng mine as “the most precious real estate in the world.” Officiating at its opening in 1982, Masire characterised Jwaneng as “a true prince of mines ÔÇô a gem in the world of gems.”

Some 27 years after coming into full production, Jwaneng is still the most valuable diamond mine in the world. Diamond quality is assessed according to what are called the 4Cs: cut, carat, colour and clarity.

A year after Jwaneng opened, Debswana founded Morupule Colliery in Palapye to supply coal to what was then called the Bamangwato Concession Limited copper and nickel mine in Selebi Phikwe. (‘BCL’ has lost its original acronymic meaning and the name is now a meaningless combination of letters).

Debswana operates two other mines at Letlhakane and Damtshaa. Diamonds from these mines contribute in excess of 70 percent of Botswana’s export earnings. The company is the largest non-government employer in the country.
In 2006, Botswana and De Beers signed an agreement to renew the mining licence for the Jwaneng mine. Extension of mining licences for the Orapa and Damtshaa mines will run concurrently.
The end of 2008 brought bad news to Debswana as diamond sales plummeted on account of primary markets experiencing a downturn in the economy. Analysts suggest that recovery will take some time.

The government and De Beers are supposed to have clashed over appropriate response to this crisis.
While the South African company reportedly favoured retrenchment, the government suggested recapitalization in which its shareholding would have gone up by 30 percent. Thousands of the company’s employees were placed on compulsory leave.

Debswana has invested a huge amount of money to train its personnel and to safeguard this investment; it became the first company in the world to provide free anti-retroviral treatment to its employees.

This programme was subsequently adopted by the government of Botswana.
The relationship between Botswana and De Beers has always excited metaphorical description. Mogae has described it as akin to that of Siamese twins and others have invoked marital analogies.

If this is a marriage, it has not been bliss every step of the way as there have been reports of spousal abuse, with Botswana being the long-suffering victim, periodically concealing a black eye behind gold-rimmed designer shades bought by the abuser.

That notwithstanding, a divorce would be very painful and costly to either party because however imperfect the union, both parties have to make good on the vow of staying together through thick and thin.

There is a view that Botswana is not getting as much as it should from its diamonds. In December 2004, Gaborone Central MP, Dumelang Saleshando, pointed out the absurdity of the country getting less than one percent of the polished gem industry’s wealth. In its agitation for more, Botswana has introduced into popular lexicon a word that does not exist even in the latest edition of Oxford dictionary ÔÇô beneficiation.

In his memoirs, ‘Magic of Perseverance’, former cabinet minister, David Magang, says that he fought tooth and nail to secure Botswana a bigger slice of the pie but met with fierce resistance from De Beers. Magang mooted the idea of beneficiation at a London conference using quite assertive language. At the time he was Minister of Minerals, Energy and Water Affairs.
A year later, when Mogae became president, Magang was deployed (some say demoted) to the Ministry of Works, Transport and Communications.

He writes in his book: “To be honest, my redeployment was not exactly a bolt out of the blue; I had intercepted a fair amount of talk regarding it. To some well-placed people, in fact, it was not a matter of why or when; it was a matter of whether I would live to be redeployed. For instance, Chaim Even-Zohar, editor of a diamond magazine, told me that he knew as early as February that I would be shunted to another ministry when Mogae took the helm. To most of my well-wishers, my transfer, when it indeed occurred, was secondary; it was the fact that I was still in one piece, given my forthrightly candid views over De Beers vis-├á-vis Botswana diamonds, that gladden them.”

Magang states that the governance structure set up by De Beers in managing the diamond wealth removed Botswana officials from real decision-making or from finding out what was really going on.

“In an arrangement where half of the Debswana Board consists of its representatives, the Botswana Government can say that it has reasonable safeguards against unfair play on the part of its partner. That again is illusory. The indigenous people on the board are just too far removed from De Beers Centenary in Switzerland, let alone De Beers Consolidated Mines in South Africa, where strategies to profiteer at the expense of you-know-who are mapped out and kept under lock and key,” he writes.

Magang further alleges that some Batswana colluded with De Beers to work against the interests of the nation at large.

“For instance, it is alleged that a Debswana MD, himself a member of the board, once circulated a memo in which he asked his compatriots to indicate whether they were interested in buying Debswana-owned houses at very relaxed rates. Who in his right mind would bother to probe an entity that gave such an advantage?”

By the former minister’s account, Debswana also sponsored children of highly-placed officials to study abroad.

He had no ally in cabinet, he claims, and Masire for one “said to me during one of our discussions in his office in 1996/97 that Botswana, once a poor country, was now what it was because of De Beers’ discovery of diamonds, in effect saying local beneficiation would be a slap in the face to De Beers. In correcting the president, I said it was not De Beers who had lifted us economically; it was our own, God-given resources.”

As minerals minister, Magang says that he refrained from recommending Louis Nchindo for the position of Debswana managing director because “I did not think Nchindo would best serve the interests of the country as MD of Debswana as to me he was liable to further the interests of De Beers more than those of our government.”

Nchindo ultimately got the job and Magang says that, as Debswana MD, “Nchindo was pro-De Beers; there was scarcely a single issue, I venture to say, regarding which the two took contrary positions. On the issue of beneficiation, for instance, I was … a strong advocate of its application in Botswana whereas Nchindo was dead set against the idea which was precisely the De Beers position.”

Magang says that on one or two occasions when he sent a fact-finding team to witness the viability of beneficiation overseas, “Nchindo and other De Beers’ officials wedged themselves in the delegations and basically hijacked the mission: on one such trip to India, he took charge and saw to it that the team was steered away from those cutting and polishing firms that were the industry model and shepherded through those that were on the fringes, its ragtag and bobtail.”
What is most ironic about what Magang says in his book is that at about the same time that this behind-the-scenes battle was going on, Nchindo minted a new term: ‘citizen economic empowerment.’

However, some beneficiation is beginning to happen, mainly because under Mogae’s administration, the government pursued this programme more aggressively. The jewel in the beneficiation crown has to be the US$83 million Diamond Trading Centre Botswana complex in Gaborone . The complex is the world’s largest and most advanced sorting centre and has drawn sight holders from traditional cutting centers to Gaborone.

DTC Botswana is a 50/50 joint venture between De Beers and Botswana.
Diamonds maybe forever but their money is not.

Forecasts by the Ministry of Finance and Development indicate that in the future, Botswana’s economy will depend less and less on diamond revenue. Current forecast is that income for distribution to the government from diamond mining will fall away by about 65 percent by the end of National Development Plan 11 in 2022, with a decline to near zero by the end of NDP 12 in 2028.

As part of its effort to help in the diversification of the nation’s economy, Debswana supports small, citizen-owned business through Peo Holdings, a venture capital company established in 1997.


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