Wednesday, May 22, 2024

Masisi statement sends De Beers, industry into a frenzy

President Mokgweetsi Masisi’s comments about the Botswana government’s ongoing negotiations with De Beers has reportedly shaken the diamond mining company and others within the industry.

The President told Botswana Democratic Party (BDP) supporters at a rally in Moshupa last week that his government may consider abandoning their long standing partnership with De Beers should the company refuse to accede to certain demands.

The two parties have been locked in negotiations since the expiry of their previous ten year contract in 2021. The delay in finalising the agreement was initially premised on logistical challenges then brought about by the Covid-19 pandemic.

But President Masisi’s remarks (a year after the lifting of all Covid-19 restrictions) suggest there has been more to the delay than logistics.

Masisi’s remarks have reportedly not gone down well with the De Beers Group, with the company top management reportedly seeking a meeting with the President to address the matter.

Other industry players like government owned Okavango Diamond Company (ODC), and Lucara Botswana are also following the developments closely.

Some within the industry have labelled the President’s remarks as reckless considering the government and De beers are still locked in heated negotiations for a new contract.

Sunday Standard has been reliably informed that this has also put those tasked with negotiating on behalf of Botswana in a difficult position as the President’s statements undermine the ongoing negotiations. “Botswana will now be seen to be negotiating in bad faith,” a senior government official told this publication.  

Masisi told his audience in Moshupa that the 2011 agreement that allowed Botswana to take 10 percent of the diamonds and sell them independently helped the government to discover that the government was not getting a fair share from its own diamonds.

Masisi said he wanted Batswana to know that the country had been getting a raw deal in its partnership with the diamond giant.

 “The relationship or agreement that we have with those that we have partnered with is not achieving a win-win situation for both parties as we were made to believe,” said Masisi.

He said negotiations were ongoing and was convinced that the conclusion of the agreement should be such that it is more beneficial to Botswana than it has been.

The Botswana government has over the past couple of decades felt they are not getting enough benefits from the mining agreement because they believe the agreement favors De Beers at the expense of Botswana. The government has also felt De Beers is not investing enough in the local economy while also shipping jobs.

That is why former president Festus Mogae’s government successfully negotiated for De Beers’ Diamond Trading Company to move to Gaborone around 2008.

“We can and will graduate from a diamond-producing country to a world-class diamond centre,” Mogae was quoted in the media telling delegates from the international industry at a dinner in Antwerp, Belgium. “The cutting and polishing industry in Botswana has been very small, cutting diamonds worth about $30-million per annum. It is our wish the 16 companies now licensed to operate in Botswana should in five years’ time be cutting and polishing at least half-a-billion dollars’ worth of diamonds per annum.”

Botswana has for the past few decades wanted to develop its diamond industry from just polishing and cutting stones, to providing all other financial and technical support services.

The Botswana government also believes De Beers is not transparent enough in its operations and is not providing enough information about its activities.

In 2019 Sunday Standard revealed how De Beers had for years been taking advantage of Botswana government’s naivety to fatten its own bottom line. Sunday Standard investigations revealed how the company buys Debswana rough diamonds from DTCB at bargain basement prices, dips them first in hydrofluoric acid before dipping them in per-chloric acid to release their sparkle and true value.

An analysis of confidential collated data availed to the Sunday Standard indicated how after being bought by De Beers from DTCB, the value of these gemstones shoot up by an average 77 percent once they leave Botswana and arrive in a foreign country before any cutting or polishing takes place.

Negotiations for a new 10 year agreement between the Botswana government and De Beers are currently underway as the parties hope to reach an agreement that is mutually beneficial. Both parties have different interests and goals, and they must come to an agreement that meets the needs of each.

Botswana has been heavily reliant on De Beers for its diamond mining industry, and there remains a fear for the unknown should the two part ways.

De Beers has also been heavily reliant on Botswana will definitely lead to a significant drop in revenue for the company. De Beers has been a dominant player in the diamond industry, and the loss of the contract could lead to a loss of market share.

The company makes approximately 70 percent of its revenue from diamonds mined in Botswana, compared to the 30 percent it makes from its mining activities across the rest of the world.

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