Tuesday, September 22, 2020

Magang comes in from the cold

For years, David Magang, Botswana’s pioneering champion of diamond beneficiation has known the torment of being associated with a campaign lampooned as ridiculous. The former Minister of Minerals speaks to Outsa Mokone and Spencer Mogapi about De Beers’ behind the scene intrigues.

David Magang was a young lawyer going about his work when he had his first run in with De Beers.

“It was an eye opener,” the bespectacled businessman daintily turned out in a pin striped suite and a fawn cuff linked shirt reflected from the safe distance of 28 years.

“In 1978 I was approached by a client, Hernie Smuts, who had two diamond beneficiation plants in Johannesburg. One factory was for big diamonds cut by whites and the other was for small stones cut by coloureds. He asked me to apply for a diamond polishing licence in Botswana on his behalf.”

The young lawyer did not know where to start. Nothing like that had ever been done in Botswana before. He spent the next few days preparing a presentation about how the project would create jobs and down stream industries for Botswana. He attached the presentation to the application letter and made an appointment to see the then minister of Mineral Resources and Water Affairs, Dr Gaositwe Chiepe.

Magang chuckles in between sips of steaming Five Roses tea as he recalls the minister’s reaction when he introduced Smuts and explained the purpose of their visit. A goggle eyed Dr Chiepe asked: “Does this man come from De Beers?”

A few days later, Magang was talking to a frantic voice on the other end of the phone. It was Smuts, pleading with his lawyer to drop the application. Smuts had received a phone call from the South African minister of mines saying De Beers had complained to him that Smuts was stepping on their toes in Botswana by applying for a diamond cutting license. “If you go ahead with the application De Beers may stop selling to me and ruin my business,” Smuts explained to Magang.

The application failed. The incident, however, was to shape Magang’s politics and give him an idea of the animal he was dealing with. Today, if you looked up Magang’s contribution on the pages of the National Assembly archived Hansard you would constantly come across excerpts from the paper he prepared 28 years ago together with the license application on behalf of Smuts.

He recalls that it has been a one man and “terribly lonely” fight on behalf of Batswana, with no support from government, not from former president Sir Ketumile Masire, not from Festus Mogae who Magang counts as one of his friends and not even from the opposition benches.

From 1979 when he was elected Member of Parliament for Lentswe-le-Tau until he quit active politics, Magang became the lone voice of beneficiation and De Beers’ biggest adversary in both parliament and government.

The balding sexagenarian enjoying his morning cup of tea is almost transformed into a twenty-something bookworm as he recalls how he stayed up two nights at university, reading a thick volume of Fidel Castro’s speech.

The bearded Cuban firebrand was condemning the first world’s exploitation of developing countries. Castro argued that as a young peasant boy, his family had to raise one hundred bushels of wheat to buy a tractor. “Twenty five years later not even a thousand bushels can buy a tractor yet we still till the same plot of land.”

Magang felt that Castro’s illustration was instructive. He squirmed as he watched Botswana going down the route of Cuban peasants. “Of course, we are Africans. Africans are loath to process their own products. We prefer to export cheap and import expensively,” Magang says as a matter of fact. He, however, was not about to stand aside and watch as Botswana was being parceled out to foreigners.

Besides gangs of diamond smugglers, very few Batswana could claim to have their hands on the pulse of the diamond industry.

Not surprising, Magang had his first lesson of diamonds from criminals. He was preparing a defence for his clients who were facing charges of diamond smuggling when he asked them how they were able to tell diamonds from broken pieces of glasses: “Just pop it in your mouth, run it against your tongue and it feels different from glass,” one responded.

Most Batswana saw their future in cattle. Come Friday, senior civil servants and big businessmen loaded their 4×4 trucks and headed for the cattle post. Almost everyone who had money invested it in cattle.

Magang and his colleague, Patrick Balopi, then Member of Parliament for Francistown, saw a huge business opportunity in leather beneficiation. The result was Pilane Tannery in Pilane and an associate shoe manufacturing company in Gaborone which employed hundreds of Batswana.

One morning, he received a brown envelope with a letter ordering closure of the tannery. Authorities complained of the pungent smell coming from the hides which where being tanned. Hundreds of his employees were thrown onto the streets and their jobs were exported with the hides to other countries.

Still smarting from the incident, in 1982, Magang penned his first pamphlet on beneficiation, which still enjoys the pride of place on his bookshelf. “I did not write about diamonds because they were taboo”. Instead, he wrote about leather industry beneficiation.

More than ten years later, government is finally coming around to Magang’s leather beneficiation campaign. The Botswana Export Development Investment Agency (BEDIA) is currently trolling for investors who can set up tanneries in the country. He laughs at the idea.

With his tannery and shoe factory now under lock and key, Magang did not let up on championing beneficiation. His focus was on diamonds. Magang had his second clash with De Beers.

The South African mining giant argued that Botswana’s high labour costs priced the country out of profitable beneficiation in the diamond industry.

About the same time, a Belgian diamond beneficiation company, Mabrodium, set up a cutting factory in Gaborone, employing between 60 and 70 Batswana. They had to buy their stock from London, which was mostly coated diamonds from the Democratic Republic of Congo then Zaire. The company never made any profit. As it turned out, Mabrodium was only a broker for another De Beers sight holder in Belgium which was the one making profit. Magang saw his campaign losing altitude.

When he was finally appointed Minister of Mineral Resources and Water Affairs in 1994, he thought, “Right! Now I am finally going to prove everyone wrong. I had deluded myself into thinking that as a minister I should be able to impress upon government to establish a cutting industry.”

Although Botswana was grappling with growing unemployment figures, the country thought nothing of exporting thousands of jobs with the diamond exports. Figures show that in India the diamond cutting industry was employing 800 000 cutters at the time.
“Of course De Beers would argue that Indians are specialists in cutting small diamonds, and that is not true,” he says.

At the time the Israeli cutting industry had employed 8000.
Thailand employed between 10 000 and 15 000 and none of them had a single diamond mine.

Russia, which had diamond mines, had employed 50 000 cutters and Botswana which was the largest diamond producer in the world by value had next to nothing to show for it.

De Beers then grudgingly agreed that the Teemane plant be set up in Serowe. They convinced government that Debswana should run the cutting factory.

This gave De Beers a free reign over Teemane and, like Mabrodium, it turned losses. Then there was Lazare Kaplan which complained that it was making losses because the diamonds mix it bought from De Beers did not make for a viable enterprise.

Lazare Kaplan tried to lobby government to buy directly from the mines in Orapa, Letlhakane and Jwaneng. Botswana, however, had entered into an agreement with De Beers to sell all its produce. Lazare Kaplan continued buying from London until it collapsed under its accumulated losses. Their factory in Molepolole was then taken over by another De Beers sight holder.

With all local cutting plants turning in losses, Magang’s lone voice was drowned by the “cutting is not viable in Botswana” chorus. De Beers were vindicated and Magang was caricatured as a mad minister who was arguing above his head.

Magang, however, simply joined the dots, and a sinister pattern emerged: De Beers, which had a hand in all the cutting plants, was cooking the numbers to back its claim that cutting was not viable in Botswana.

“De Beers had obviously convinced our political leadership that producing countries ought not to be processing at the same time. My counter to that was that how it is that Russia is doing it profitably, ultimately Angola and Namibia?”

South Africa on the other hand had a law that no diamond mined from the country could be exported until the local market had been satisfied. An extra export tax was levied if diamonds were exported from South Africa.

As a minister, Magang tried to sell beneficiation to Cabinet, but there were no buyers. The then President Sir Ketumile Masire and his deputy Festus Mogae had been sold onto the De Beers propaganda machine and “ were in no mood to establish a cutting industry in Botswana. I had no support from top to bottom, however much I tried. My President and Vice President thought I was mad.”

Even local newspaper headline writers who attended regular briefings from the then Debswana Managing Director, Louis Nchindo, who rubbished the beneficiation lobby as madness were convinced that Magang was mad.

“At the time, I felt terribly lonely. Very few Batswana knew about diamonds. It was me, the President, the Vice President, the Attorney General, Minster of Finance and their officials. These were key ministers involved in negotiations with De Beers. We were supposed to be the leading diamond producer in the world. It made sense that we should understand diamonds just as we understand cattle. But De Beers had deliberately kept Batswana in the dark.”

Magang became the Cabinet laughing stock. “I became the butt of Cabinet jokes when discussions turned to diamonds. Mogae used to laugh saying that at least I had been consistent for years in my beneficiation campaign.”

Magang was almost broken. One day, in a fit of frustration he walked into De Beers offices in Johannesburg and started railing about how De Beers had deliberately designed to keep Batswana ignorant about the diamond industry. He pointed out that in the 25 years that De Beers had been operating in Botswana; it had not trained a single citizen on the workings of the diamond industry.

The first Motswana who was ever exposed to the goings on in the industry was Blackie Marole who was recruited as Permanent Secretary in the Ministry of Mineral Resources to join De Beers, raising a lot of eye brows among De Beers’ critics. Marole later became Debswana Managing Director.

Magang then decided to grow his support base by exposing as many Batswana parliamentarians as possible to the workings of the diamond industry. First he proposed to send a team of MPs to diamond cutting factories in India at government’s expense. By his account, De Beers would not let him.

Instead De Beers insisted on paying for the MPs India visit. The MPs were taken on a tour of India’s diamond cutting sweat shops where they saw cutters tied to stakes and exposed to deplorable working conditions. When they came back, they jumped onto the De Beers band wagon that cutting was not viable in Botswana.

Magang then decided to send another group including his then Permanent Secretary Blackie Marole, government sorter Todd Majaye and Deputy Attorney General Ian Kirby. “Again De Beers took them over and Nchindo insisted on accompanying Marole.”
When he is on song, Majaye likes to talk about how they were plied with strong alcohol, kept up until late at night and chaperoned by De Beers guides. When the second group came back they penned a joint report with De Beers also arguing that cutting was not viable in Botswana.

Magang saw through it all. He insisted that each of the delegates should write own individual report. All the three came up with reports that beneficiation could be made viable in Botswana.

Majaye later fell out with Debswana and was fired under questionable circumstances.
He became a leading Magang supporter.

After sometime, Magang decided to send Daniel Kwelagobe, an outspoken cabinet minister who at times was given to supporting the beneficiation campaign. “When Kwelagobe came back, he was buddy buddy with Nchindo and cut adrift of the campaign, and I thought, that’s it! He is lost to the campaign.”

Magang then decided to send Botswana National Front MPs, hopeful that they would support his campaign seeing that the BNF was also making all the right noise about beneficiation. This time De Beers, again, took over Michael Dingake and Otlaadisa Koosaletse.

About the same time, De Beers was jittery that Botswana’s political sands were shifting. The BNF had returned 14 MPs in the last election and its star was rising.

De Beers decided to run with the hares and hunt with the hounds. While they were trying to open negotiations with BNF, they also secretly sponsored a consultant from the University of Natal, Lawrence Schlemmer to help the ruling Botswana Democratic Party’s chances of winning the elections.

Their cover was ultimately broken when one of Schemers aides tried to rob the project’s research assistants out of their money. The pay dispute ended at the Central Police Station in Gaborone where the De Beers’ name kept coming up.

A few days after De Beers’ first and only meeting with BNF President Dr Kenneth Koma and his confidante Michael Mothobi, the mining company went behind the duo’s back and sponsored the trip by BNF Vice President Michael Dingake and MP Otlaadisa Koosaletse.

This came at a time when relations between Koma and his supporters on the one hand and Dingake and his followers on the other were strained.

When Dingake and Koosaletse came back their relations with Koma and his followers had broken down irreparably.

A few months later Dingake, Koosaletse and most BNF parliamentarians broke away to form the Botswana Congress Party, and the De Beers’ name was again bandied about.

As it turned out, Koosaletse and Dingake never joined the beneficiation campaign. “Instead I heard that one of them got a De Beers scholarship for his child,” recalls Magang.

Magang would later step down from politics frustrated and wagging his finger at De Beers. With time, however South Africa, Namibia and Angola embraced beneficiation and the De Beers campaign that beneficiation is not viable in diamond producing countries ran out of road.

Unbeknown to Magang, an Israeli tycoon by the name of Lev Leviev was also fighting the same battle against De Beers.

Unlike Magang, Leviev had won a few battles against De Beers and forced them on a number of occasions to eat dust.

A former employee of De Beers Leviev has been courting Botswana to open up domestic cutting factories on condition that he buys directly from Debswana and not from De Beers.

This does not sit well with De Beers which has only grudgingly and reluctantly agreed to setting up its marketing arm, the Diamond Trading Company after government threatened not to renew the lease.

Magang believes that even after signing an agreement with government to set up their marketing hose in Botswana, government should never forget that De Beers agreed halfheartedly, reluctantly and hesitantly.

He says if government is not careful De Beers could still renege or find some such excuse.

Already there are fears the relocation of DTC will not meet the deadline as De Beers says there are some outstanding logistics and security issues that have to be sorted out.

“We must not forget that De Beers agreed to relocate here only because they did not want to lose their turf to Leviev. If this new transaction is not managed properly De Beers could very easily renege,” says Magang.


Read this week's paper

The Telegraph September 23

Digital edition of The Telegraph, September 23, 2020.