The secrecy surrounding the pricing of diamonds by De Beers has again come under the spotlight thanks to a newly released joint report by Botswana Labour Migrants Association (BoLAMA), Center for Economic and Social Rights (CES), and Northwestern Pritzker School of Law Center for International Human Rights (NPSLCIHR). The report (on How the Government and Mine Companies Fail to Protect the Right to Health of Miners and Ex-Miners in Botswana) makes a glaring observation into how this veil of secrecy has the potential to cost the government millions in lost tax revenue.
“The pricing of diamonds is of particular concern,” the report says. “Unlike other minerals which are priced based on independent benchmarks, De Beers prices its diamonds for sale without regulation or oversight.”
The ‘All Risk and No Reward’ miners and ex-miners’ report also pointed to the current practice whereby diamond mining is taxed in accordance with private agreements between mine companies and the Government, the terms of which are not public.
It says while the Government provides information on its total mineral revenues, it does not provide disaggregated data for the revenue it receives from specific mine companies or for each different mineral.
The Botswana government’s failure to be party to the Extractive Industries Transparency Initiative (EITI) which has been the hallmark of international resource governance efforts and a global standard for transparency in mineral sectors, has also raised eyebrows.
Based on the belief that a country’s natural resources belong to its citizens, the EITI has established a global standard to promote the open and accountable management of mineral resources among others. The EITI Standard requires the disclosure of information along the minerals industry value chain from the point of extraction, to how revenues make their way through the government, and how they benefit the public.
It seeks to strengthen public and corporate governance, promote understanding of natural resource management, and provide the data to inform reforms for greater transparency and accountability in the minerals sector.
In 2019 Sunday Standard exposed De Beers’ shady dealings and how the company had for years been taking advantage of Botswana government’s naivety to fatten its own bottom line.
The story detailed how the company bought Debswana rough diamonds from DTCB at bargain basement prices before dipping them in hydrofluoric acid and per chloric acid to release their sparkle and true value.
“An analysis of confidential collated data availed to the Sunday Standard shows that after being bought by De Beers from DTCB, the value of these gemstones shoot up and arrive in a foreign country before any cutting or polishing takes place.”
The secret cleaning operation, the article said, offered the best explanation as to why Botswana diamonds’ value miraculously increases when they are traded between different countries after escaping Botswana’s national borders and tax brackets.
The BoLAMA, CESR and NPSLCIHR miners’ report says the Botswana government must ensure strong enforcement of existing corporate tax laws and advised that mine companies should abstain from engaging in tax evasion activities. “The Organization for Economic Cooperation and Development (OECD) and the European Union have called on Botswana to improve its corporate tax practices particularly as relates to corporate tax evasion and abuse.”
The report also recognized there were some progress in Botswana’s efforts to address some of their concerns, citing the government’s decision to join the OECD Multilateral Convention on Mutual Administrative Assistance.
“In 2019, Botswana enacted the Income Tax (Transfer Pricing) Regulations Act. And the Sunday Standard reports that the Botswana Unified Revenue Service conducted an audit of De Beers. These steps are critical to ensuring that the Government of Botswana is able to raise sufficient resources to finance the right to health, but more must be done,” the report reads.