I write this article with trepidation. My trepidation comes not from the fact that this essay is an insight into the relationship between politics and economics, nor that I am commenting on a subject regarding which the system is generally not “transparent”, in the sense of making information available to the public. What is making me really nervous is that to walk in the footsteps of such a thoroughbred politician as Mr. David Magang, is a daunting task. I refer particularly to his comments in The Sunday Standard of 5-11 Nov 2006 captioned, “Magang comes in from the cold”. Nevertheless, I think it important to contribute to the debate on diamonds and their impact on our society.
Any discussion on diamonds requires us to pitch the argument at a slightly higher level than might have been expected of one writing in a newspaper. This may disappoint some but I think my commentary will go a long way in compensating for the lack of available first-hand information in this field. Strange though it may seem, my analysis borrows a little from Marxist philosophy. Of course, in Botswana the ideas of Marxism are ignored or worse, ignorantly identified with the political ideology of the BNF or leftist academics, no matter how forcefully I try to argue that there is a poverty of philosophy today in this country or that the incumbent leadership of the BNF generally lacks the intellectual capacity necessary to grasp Marxist ideology. The BNF leaders, it seems to me, are preoccupied with power judging by recent history.
Unfortunately, the issue of beneficiation (in The Sunday Standard two weeks ago) was dealt with rather myopically, thanks largely to Magang. His account was reminiscent of an ageing Don Quixote who becomes entranced by reading chivalric tales that lead him and his squire wildly astray. Magang was at pains to inform the world about his pioneering efforts to champion beneficiation, with little or no support from other Batswana for whom he apparently valiantly waged battle. Truth be told, the outcome of this obsession with the self is that we are left none the wiser about what really happened, for instance, the relationship between the ruling party or its leaders and certain mining companies, let alone an explanation as to why he excluded the incumbent Leader of the Opposition and BNF president, then Dr Kenneth Koma. I have no quarrel with Magang’s personal contribution to beneficiation as such and cannot question the detail he has given. However, his narrative smacks of the “village-hero” syndrome for, were the case otherwise, our hero would have realized that other patriots were also busy at work beyond the horizon of his little village. Therefore, his story cuts little ice. And here is why.
If we are to fully appreciate the dramatic impact that diamonds have had in our country and the international diamond industry, it is necessary to approach things critically.
To do so, we must not merely limit ourselves to diamonds but closely examine our mineral policy and the mining industry in general. We must also have regard to the external dimension (by which I mean the play and influence of outside forces). The picture that emerges is worthwhile and one that shows our government has done relatively well from a policy perspective. But we must accept that there are arguments for and against our mining policy, a policy devised prior to 1966. In other words, nothing is really new. The basic pattern of relationships today between the government and mining companies was determined during the colonial period, as Pickard (1987) and Colclough & McCarthy (1980) have argued, and the interests of our people were pioneered and championed by Tshekedi Khama, who acted as Batswana’s principal spokesman in the negotiations with RST.
As to beneficiation, the idea itself may not have been fully understood or examined so far, nor does Magang attempt to do this in The Sunday Standard story.
At the end of it all, we are left with the inescapable impression that the interests of ordinary Batswana did not feature in Magang’s plans. For, I ask, why were you not also privy to his struggles on behalf of the masses?
In the BNF, attention was always focused on the establishment of a local cutting and polishing industry when we spoke about diamonds.
I had (and still have) serious concerns about this narrow perspective, although I could see its advantages for us, e.g. political mileage. Also, there were important advantages for the economic welfare of our society. Dr Koma and others (e.g. Todd Majaye) accepted beneficiation as an assurance that the benefits to the population would be delivered. I dare say this perspective prevails even in government circles. This has advantages, as I said above. But it also has its disadvantages. One of the disadvantages is that the anticipated benefits tend to push policymakers towards sacrificing longer-term economic strengths (primarily at the international level) for short-term socio- economic (and political) advantages as the benefits are delivered early (mainly to particular individuals and groups at home). Nevertheless, beneficiation has some policy merit.
Most important, the policy aspect involves a decision about how to allocate power: What decisions does Botswana, as an independent sovereign State, want made in this country as opposed to in Johannesburg, London or Antwerp? In other words, once we disaggregate the concept of beneficiation we are really making our people think about the reasons for choosing a particular level of decision making. There may be a parallel here in the so-called Kimberley Process, where Botswana plays a leading role as a founding member and past Chair. What this demonstrates is that we are a dominant world player (just like De Beers) and not just a major producer of diamonds. Please let us all think about this. I think the emphasis we place on beneficiation should be less about the short-term economic benefits and more about how our country allocates power, and its role, in the international diamond industry. There are historical precedents. A study of the policy and legislation of other producers as Canada, Russia, South Africa and Namibia is rewarding. Do we really want, e.g. De Beers (a family dynasty) to retain its stranglehold over our economic lifeblood?
Please let us give serious thought to the following: “Essentially, world prices for rough diamonds are maintained at high levels by a monopoly controlled by De Beers. The size and quality of Botswana’s diamond production and reserves are such that De Beers could not afford to take the risk of losing control of the marketing of Botswana’s output, for in doing so it would risk a collapse of world diamond prices.” (K Jefferis, 1998). What is the way forward? Let us look briefly at “options”.
One of the problems with major investment agreements originally concluded by colonial regimes is the inviolability of contracts in international law. The anti-colonial struggle sought to secure not only national sovereignty but also national and permanent sovereignty over natural resources. One outcome was that the concept of national sovereignty over natural resources evolved into a thing inherent in the colonized peoples. The right to nationalize foreign interests (subject to appropriate compensation) gained universal recognition as a result of various resolutions of the United Nations during the 1950s and 1960s, thus becoming a part of public international law. Consequently, post-independence governments took advantage of this but also took a rigid position when reviewing or re-negotiating investment or mining agreements. This had a negative effect on the flow of foreign private capital and, thanks largely to the attitude of western powers, delayed much-needed economic development. Today, the number of African countries with the financial and technical capacity to carry out major exploitation of natural resources is severely limited. One observer has noted that the transformation of this attitude took place 30 to 40 years after de-colonization.
A notable exception has been Botswana. Its accomplishments have been attributed to the country’s importance as a diamond producer, flexible mining laws and negotiating capacity. But one should also look at our dismal policy failures. One prime example is the Tati area (evident from past motions on land reform by the late Nkhwa and Butale, and Molefhabangwe). In 1911, the colonial government made a special law expropriating the Tati and then donating it to the Tati Concessions Ltd. Importantly, the British reserved to themselves the power to expropriate. Batswana were forcefully removed from this area to parcels of land set aside as “native reserves”, with the colonial government paying an annual rent to the company for their settlement. The Tati Concessions was also given full ownership of minerals. After independence, our Parliament, in an ill-advised move by the Cabinet, removed the State’s power to expropriate land (and minerals) in the Tati area that the colonial government had decided to retain in exchange with the Tati Concessions Ltd for a piece of land that was later found not to belong to the company.
Since then, there has been a lack of political will (see the Mineral Rights Tax law) to expropriate the company’s minerals although this is possible under the Constitution. In other words, Tati Concessions remains a state within a state to this day.
Another example of a dismal policy failure brings me to Dr Koma. In the past decade he canvassed for a local diamond industry to be set up but certain BNF parliamentarians vigorously (but privately) opposed this. Publicly, Dr Koma was vilified as a dinosaur or ideologue whose “communist” ideas were anachronistic. The BNF dissidents failed to grasp that under our legislation all minerals are the property of the State, with the exception of the Tati area, and that this is the starting point in any policy formulation. Within the BNF, this issue proved to be an irreconcilable contradiction that would later split the party into two. Initially, the contradiction manifested itself as a legitimate tug-of-war between the party line and those who sat in Parliament. It has since been disclosed how the BNF dissidents acted in cahoots with a certain mining conglomerate (see The Sunday Standard 5-11 Nov 2006). Of two things, it is certain: first, without the intervention of the mining company into BNF’s internal affairs (on the eve of important elections), the BCP would never have seen the light of day; second, a strategy had been devised to frustrate the BNF’s electoral prospects, and this is because Dr Koma was adamant that there would be a seismic shift of mining policy by future governments, particularly a government led by himself, even if it meant colliding with vested mining interests. The rest, as they say, is history.
These experiences impel us to search for alternative ways of reviewing mining agreements without violating international norms, or antagonising mining conglomerates. Jefferis has commended the government’s piecemeal approach toward renegotiating mining terms that entails invoking the so-called “abnormal circumstances” clause. That is one approach but I fear this has the potential to produce quite a few legal problems, some of which could be (and have proven to be) difficult when applied in practice. For example, views could differ as to how to define “abnormal circumstances”. This causes legal uncertainty and leads to conflict of negotiating positions.
Importantly, it highlights the fact that even under beneficiation as currently defined, we are going to see a change of strategy, not of policy.
Another approach that I think may be worthwhile is the “critical mass” concept. The idea is to develop a practice where mining companies refrain from opposing agreement when a critical mass of the population desire change. Often, a political party or other lobby group (e.g. BOCCIM) has its finger on the pulse of the nation and both the government of the day and the mining company will do well to be responsive. This approach avoids political risk or intervention when applied in a timely fashion. Of course, any proposed change would need to be consistent with both domestic law and international legal norms. I do not doubt our negotiating strategy but I think we must jettison this paradigm that we have locked ourselves in. Rather, we must strive to be a participant in the monopoly of marketing, pricing and information that the De Beers group enjoys.
In addition, I do not doubt our negotiating competence. But I suggest the idea of forming a small independent group that has expertise in the relevant professional and technical aspects, e.g. diplomats, lawyers, economists, etc, or some kind of “steering committee” that would meet to draft a proposal for the necessary policy or legislative change and that would be put forward to the final decision makers. Such a group could meet on a regular basis to exchange ideas, information, documentation, and perspectives (critical mass). In this way, the government and mining companies are able to reopen negotiations and reach agreement that is transparent. The greater the transparency in the system, the less likely that in future there will be interference in the internal politics of our country by outsiders.
*Michael O. Motlhobi is Law Lecturer at the University of Botswana
