Saturday, October 24, 2020

Inside how Nchindo and De Beers ripped Botswana off

Former Debswana Managing Director, Louis Nchindo, and seven other De Beers executives, among them Gary Ralfe and Nicky Oppenheimer, pocketed millions of Pulas in bonus schemes that ripped the government of Botswana off ÔÇô a confidential report has revealed.

Nicky Oppenheimer is De Beers Chairman while Gary Ralfe has retired as De Beers Managing Director.

The Slaughter & May report ÔÇô a copy of which has been passed to The Sunday Standard – details how De Beers nominees in Debswana board lined their pockets at the expense of the Botswana government by pushing up production at Debswana mines even when the price of diamonds was going down.

The report quotes former Permanent Secretary in the Ministry of Minerals, Dr Akolang Tombale, explaining that the “De Beers bonus scheme (share options) was a major concern because it was based on production levels.” The De Beers nominees in Debswana were pushing Debswana to drive up production while the carat/dollar ratio was falling, “a move against the interest of the government of Botswana”, stated Dr Tombale.

At the time of compiling the report, “a sum of US $ 72 million was due to be split between the eight De Beers executives, including Nchindo. Dr Tombale was extremely concerned because he believed this meant they were not acting in the interest of both shareholders.”

The De Beers executives share options scheme is also believed to have disadvantaged the government of Botswana during the transaction to de-list De Beers. This was when the Oppenheimer family withdrew its vast De Beers diamond empire from public gaze in a move designed to grow its fortune on an even greater scale.

In a complex transaction, conducted from both sides of the equator, De Beers was taken private and then absorbed into its sister organization, London-listed mining giant Anglo American.

It emerged in the report that Nchindo, Oppenheimer and other De Beers representatives in the Debswana board had conflicts of interest because they had a personal financial interest in the deal. Under the terms of the share offer, Nchindo could exercise his share options in De Beers. “Hence the more attractive the deal was for De Beers, the more he would gain,” states the report.

The Slaughter & May report further states that, “it has been suggested to us that the Botswana Government’s authority for this transaction was given at a meeting between former president Festus Mogae, Louis Nchindo and Nicky Oppenheimer in late 2000. We understand that as neither HE’s permanent Secretary nor representatives from the Ministry of Minerals Energy and Water Affairs were present at the meeting that no notes were made.”

Oppenheimer is quoted in the report saying “he was very clear that Mr Nchindo represented the government of Botswana”.

Asked if that was the view of President Mogae, he replied: “You must ask the president.”

The report states that although the board must have been aware of the potential for conflict of interest “we note that no disclosure was made to the board in respect of the De Beers share options held by Debswana Managing Director (Louis Nchindo). These options (valued at circa US $ 6 million) were to be paid out as part of the transaction.

The report states: “We are aware of some concerns that if there had been more transparency and consideration of the proposal that Debswana may have obtained a better deal.”

Initially, Debswana had a 5% interest in a listed De Beers and ended up with a 15% stake in a delisted De Beers which, according to the report, is “a minority interest in a much smaller private company, with two dominant shareholders (the Oppenheimer family interest and Anglo American plc) and which had very significant borrowings.

The report further noted that Botswana government nominees in the Debswana board “tend to be at a disadvantage as nearly all are professionals from differing disciplines outside the diamond industry. The De Beers Group nominees are by definition from within the industry. The imbalance has been the cause of considerable friction at Debswana, to the extent that government appointed non executive directors have been excluded from major decision making processes. Matters that should have been the preserve of the Board were usurped by the Managing Director, Mr Nchindo, in some cases, with the tacit approval of the De Beers Group appointed nominees.”

Oppenheimer was quoted saying the structure of Debswana and the way it was operated created a vacuum and that Nchindo moved in to fill the vacuum.


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