The dual role played by De Beers Global Sight Holder Sales (DBGSS) has played a major role in the exploitation of Botswana by the global diamantaire, a Botswana Unified Revenue Services (BURS) internal audit report implies.
The report says the directors, who also held positions in other De Beers Group subsidiary companies cannot be expected to act against the interests of those companies. The report lists Bernard Olivier (Forevermark Ltd), Varda Shine (DTCB), Neo Moroka (DTCB), Christopher Mokgware (helped set up Diamond Trading Company Botswana and DBGSS), and Eric Caverhill as DBGSS directors who would be expected to act in favour of De Beers Group.
The report says nearly all directors of DBGSS had dual interest primarily as directors of other companies that would benefit from the license and marketing agreements.
“Unless there is compelling factual evidence to the contrary it is always reasonable to make the assumption that directors of a company are focused solely on their own company interests, in compliance with their fiduciary duties to that company.In the case of DBGSS, most of the directors were directors of other companies within the De Beers Group, and decisions regarding entering into license and marketing activities were made by these directors prior to the constitution of DBGSS board. Hence it is reasonable to assume that they acted in the interest of the companies for which they were directors at the time. Clearly there is duality of purpose and interests there.” The auditors say they conclude that the directors acted in the dual interest of DBGSS and the other companies of the Group for which they were directors.
“A man does not change his mind when he changes his hat”, the report says, quoting Judge Nicholas Aja in the case for Commissioner for Inland Revenue v Pick’n Pay Wholesalers.
The report goes on to make reference to the directors’ reports for Forevermark UK Limited (FMUK) and De Beers UK (DBUK), together with the transfer pricing documentation submitted to BURS emphasize that the marketing function of DBUK which is subcontracted to FMUK is for the entire group. This means that it is not exclusively for DBGSS.
“The trade of these entities, according to our analysis of Anglo American Annual Reports (2014-2020), constitutes 31, 7% of De Beers Group’s diamond sales to third parties while DBGSS’ trade constitutes about 68, 3% of the group’s diamond sales on the international market,” the report says.
“Additionally, payments for the marketing fees would simultaneously market and promote trademarks, tradenames and brands such as Forevermark brand, which do not belong to DBGSS but belong to other entities within De Beers’ group. Here again there is duality of purpose. Hence the expenses are not incurred wholly and exclusively for the purpose of the trade of DBGSS.”
The report argues that the marketing and intellectual property fees charged to DBGSS and paid to DBUK are exploitive and meant to maintain DBUK’s trade continuity and enable the company to make profit off DBGSS’s rough diamond sales.
“The royalty payments received by DBUK come only from the group company –DBGSS. These payments would develop and maintain intellectual property that belongs to DBUK implying that a portion of the royalty fees would be for the purpose of the trade of DBUK without which DBUK would not be able to carry out its trade. The quantum of the royalty payments is to enable DBGSS to maintain and develop intellectual property belonging to DBUK.”