As African nations ratchet up the war against illicit financial flows (IFF) and indigenous scholar-activists lend intellectual support to the cause, mining companies have been identified as the major culprits in the haemorrhaging of the continent’s financial wealth. This revelation should be of great concern to Botswana whose national economy is largely dependent on diamond mining.
Speaking at a regional IFF seminar held at Oasis Motel last Tuesday, Luckystar Miyandazi from Action Aid International said that while in the East African Community nations lose money through the telecommunications industry, in the Southern African Development Community such loss occurs through the extractive industries.
She didn’t get into precise details about how that happens but what was said in Botswana’s own parliament by the Gaborone Bonnington South MP, Ndaba Gaolathe, during the budget-speech session is helpful. Weeks after Discovery Metals Boseto Copper Mine in Toteng closed down, in the process laying off some 400 workers, parliament debated this issue.
Taking the floor, Gaolathe told the house that he happened to have had the privilege to go through the financial accounts of Boseto “and I can assure you I am not all that bad when it comes to studying very analytically the financials of any company.” A former CEO at Bifm Private Equity Managers, Gaolathe holds an MBA in Finance from the Wharton School of the University of Pennsylvania and well as a BA in Economics and BS in Mathematics from the George Washington University, both in the United States. What he made of Boseto’s financials was that while they gave the impression that the mine was doing poorly, the opposite was actually the case. He attributed this to “creative accounting” which masked the fact that Boseto has a lot of potential.
“It is a type of mine that I would buy if I was a businessman. I would buy and I would do well. What I am trying to suggest to you Honourable Minister is that you are going to be facing over the next few years an influx of people coming into this country not so much to mine for the long term, but an influx of people coming into this country to do what is called mining arbitrage,” said the MP, directly addressing the Minister of Minerals, Energy and Water Resources, Kitso Mokaila.
Gaolathe defined mining arbitrage as when business people come into a country with no intention to develop mines but to make a quick, once-off profit by establishing a mining business and selling it when conditions are favourable.
In echoing what the MP said about a seemingly profitable company being made to look bankrupt through arbitrage, Miyandazi said that in East Africa where she is from (she is Kenyan), some companies evade tax by continually declaring losses while continuing to do business.