Tuesday, January 19, 2021

Exposed – De Beers, Masire secret files

De Beers “confidential” records reveal how the mining company paid lots of money to keep former President Ketumile Masire in power, and paid even more money to get him out of power, partly because he had become a liability because of his financial troubles.

A “confidential letter” written by Philip Leyden, one of De Beers directors, to a colleague reveals how De Beers threw money at Masire’s problems to help the new president through his first general election in 1984.

De Beers records suggest that on the eve of the election, four years after Masire took over the country’s presidency, he was no longer credit worthy. The mining company had been advised that there was “no prospect of any further direct assistance from the banks” to Masire’s company, GM Five.

In the letter, Leyden is motivating a bailout for Masire and points out that, “apparently local creditors, other than the banks, are mainly Indians one of whom has been pressing more strongly as the elections approached”.

The letter was based mostly on information that had been presented to De Beers by Len Fisher and one Lynott on the state of Masire’s finances.

Indications are that the bail out plan was a confidential operation and Leyden wanted to be sure that he could trust the duo. “I found Lynott engaging, but further background would be useful. Len Fisher is, of course, an old friend, and indeed handled our patent dispute with GE many years ago.”

Masire gets a free ride?
Lynott had told De Beers that he would be happy to provide a competent manager for five of Masire’s farms, plus two leased and calculated the monthly costs at about P 20 000 if control was improved.

From Leyden’s letter, it emerged that they had “attempted unsuccessfully to arrange a long term loan of plus, minus US $ 2, 5 million which would be used to pay off the banks, redeem the bonds, and provide time to service a new commitment.”

At the time, Lynott had told De Beers that there was “no prospect of any further direct assistance from the banks, and Agrifin’s role would stop with the provision of better management, with an expatriate”.

Although Barclays felt that GM Five could not be rescued, Lynott was optimistic because at the time, Masire had “been offered a 5% beneficial interest in the proposed oil seed plant to be established at Lobatse at a capital cost of US $ 15million, of which $ 6 million was in place plus some export credits which seemed likely to come through”.

In his letter, Leyden states that Lynott “was not specific about this, and my impression is that they are still looking for US $9 million. Of the total, $5 million will be for an initial consignment of sunflower seed from the US plus $9 million for the kit and limited infrastructure, mainly a six track railway siding adjacent to the Jwaneng one. About $ 1 million spent. Project payback is calculated at P19 million so the 5% would be worth plus, minus P 1 million per annum. They hope to commission in June 1985. Unsaid but implied was that our friend [Masire] had a free ride.”

De Beers bail out?
According to a briefing that Lynott made to De Beers on behalf of GM Five, there were “two strings to the bow, a tightly run farm which could sustain itself, and service the loans, and the cash flow from the 5% in the edible oil project”.

Leyden, then a De Beers executive director, took the feasibility study from Lynott and passed it to “the right part” of the De Beers Group.

Leyden stated that they had “a temporary arrangement through Barclays” and that the bail out money would be handled trough Coopers and Lybrand, GM Five accountants and company secretaries who later joined with Price Waterhouse to form PricewaterhouseCoopers.

On the basis of the feasibility study by Lynott and the motivation by Leyden, De Beers employed one Wilcott as GM Five farm manager. In addition, De Beers raised a loan of P 186 228 from Barclays Bank on behalf of Masire’s company. This, however, did not help Masire’s company, and instead the situation seemed to have worsened.
By November 1987, one year and a few months before the 1989 General Elections, GM Five’s situation was critical. Masire, through his company, owed De Beers P805 910. He also owed Standard Chartered Bank P860 000.

Another bail out?
GM Five then negotiated another bail out plan with De Beers.
According to De Beers internal correspondence, copies of which have been passed to the Sunday Standard, GM Five requested that De Beers should reduce the total amount owing of P805 910 by the costs associated with the farm manager of P164 466 and the amount paid directly to Barclays of P 186 228. The Barclays loan of P186 228 to G.M Five was granted at the request of De Beers, and it was subsequently agreed that De Beers would repay the loan to Barclays and debit their loan to G.M Five.

After De Beers had forgiven GM Five of the debts associated with the farm manager and the money De Beers had paid to Barclays on behalf of GM five, this left the net amount owed to De Beers at P455 216.

GM Five proposed rounding the amount up to a round P500 000. GM Five further asked De Beers for a moratorium of the loan (P500 000) for a period of 5 years. Thereafter the loan would be repaid over a period of five years in equal annual instalments.

At this point, De Beers appears to have been losing patience with Masire and proposed that he should be seen to be doing something about his debts. Masire sold part of his livestock to Hurwitz Group and the proceeds were used to pay part of the Standard Chartered Bank loan and other creditors. According to the De Beers internal correspondence, the GM Five “farm rental payments (P100 000 p.a) by Hurwitz would be applied to the remainder of the loan. The lease is for a period of five years, with an option to renew at the end of the lease period (end 1990). Other financial arrangements would have to be made between G.M Five and Standard Chartered Bank to repay the balance of the loan,” – estimated to be P300 000 at that point in time.

GM Five in the red
De Beers held discussions with Masire’s accountants Coopers and Lybrand. According to a De Beers internal memo, “in discussions with Prem Shah of Coopers and Lybrand it became apparent that G.M Five does not have assets which could produce significant cash flows that could be applied to repay any of our loans (thus the request for a five year moratorium)”.

Four years later, in 1994 on a polling day marked by a low turnout, the left-wing BNF made significant gains in the best opposition showing ever; it captured all four seats in the capital, Gaborone. De Beers was worried that the opposition may win the 1999 elections. Debswana Managing Director, Louis Nchindo, made a proposal to President Masire that the BDP should commission a consultancy to help the party chances in the 1999 elections. De Beers and Anglo American then engaged the services of Dr Lawrence Schlemmer, vice president of the think-tank South African Institute of Race Relations, and director of the research organization, MarkData. He also does consultancy work and impact assessment for a host of other organizations. Asked how he came to do work in Botswana during an interview with Sunday Standard three years ago, Dr Schlemmer stated: “It was probably from the interaction that government has with fairly large capitalist enterprises such as De Beers, Anglo-American and the businessman ÔÇô what’s his name?”

From the description, Sunday Standard correspondent, Mesh Moeti, mentioned the usual suspect ÔÇô to which Dr Schlemmer snapped his fingers, exclaiming simultaneously, “Yes, that’s him. These guys operate across different countries. The interaction between industrialists and politicians caused the politicians to realize that they needed to relook themselves again. The interaction…gave (the politicians) the sense that ‘you needed to be on top of the game.”

De Beers buys Masire out?
At the time, Masire’s financial situation had worsened and De Beers was worried that it was a “bomb that could explode anytime.”

Fortunately, Dr Schlemmer recommended a change of leadership. Masire’s debts to Standard Chartered Bank, National Development Bank, BAMB and other sundry liabilities had ballooned to millions. It is understood that he would not leave the State House knowing that his creditors would be waiting for him.
De Beers then put together another bail out plan that would ensure that the president retires in peace. By July 1998, four months after he had retired in office, De Beers and Masire were putting finishing touches to the paper work that would have close to P 4 million transferred from a De Beers company in Panama to GM Five.
By 31 July 1998 at a GM Five meeting attended by Sir Ketumile and his wife Gladys Masire, it was resolved that the De Beers off shore company, Clairemont Corporation, would acquire 3 700 000, 7,5 redeemable cumulative preference shares of P1.00.

According to the minutes of the meeting, “It was resolved that the proceeds from this issue would be used to discharge the company’s indebtedness to Standard Chartered Bank, National Development Bank, BAMB and other sundry liabilities and may not be used for any other purpose except as provided above.”

Money Laundering
By August 12, 1998, GM Five company secretaries, Price Waterhouse Coopers notified Bank of Botswana of the P 3, 7 million which would accrue to GM Five as a result of sale of its shares to Clairemont Corporation of P.O Box 272, 9490 Vaduz, Liechtenstein.
By August 24, the Bank of Botswana Principal Bank Examiner, H. L Gibbs, wrote to Price Waterhouse Coopers granting permission for the allotment of GM Five 3 700 000 redeemable cumulative preference shares to the De Beers offshore company.

In a deal that smacks of money laundering, all legal requirements for the sale of shares between GM Five and Clairemont Corporation were met, the underlying transaction, however, was not a sale of shares but a transfer of bail out money from De Beers to GM Five.

Responding to a Sunday Standard questionnaire three weeks ago, De Beers stated that “it is true that De Beers was once again approached by Louis Nchindo to grant financial assistance to the former Head of State shortly after his retirement. Not only did this specific transaction take place after Sir Ketumile left office it was not at all linked to any negotiations between the company and the Government of Botswana for current or past commercial arrangements.”

Read In-depth and Sir Ketumile’s response in the opinion pages


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