Sometime in 2004, Nicky Oppenheimer tried to join Botswana in the trenches against Survival International. An exasperated former President Festus Mogae told him to butt off.
To switched-on officials privy to the goings on between Botswana and De Beers, this was a sign of the times. Oppenheimer, the De Beers Executive Chairman was suffering the whole gamut of Mogae’s vile temper. Sometimes, it was a hostile snub or a snide remark; more often it was the cold shoulder.
The relationship between De Beers and Debswana was in a state of tectonic rift following the commissioning of Slaughter & May to investigate corporate governance at Debswana.
Oppenheimer was under no illusions that things would blow over in time for the renewal of the Jwaneng mining lease later in the year. Botswana was stalling in renewing the lease agreement. Internal correspondence reveals that that De Beers’ officials were jittery that the frayed relationship with Botswana government had moved beyond crisis that eventually passes. De Beers, who had been closed out of the Slaughter & May investigations information loop, wrote in one of the secret internal reports: This “suggests that the government of Botswana does not trust De Beers, and has positioned De Beers as the potential partner to Nchindo’s alleged misconduct and the government of Botswana as a victim”.
Preliminary findings by Slaughter & May revealed that during the delisting of De Beers four years earlier, the mining giant used Mogae’s name to pull off a monumental swindle against Botswana.
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.
The Slaughter & May audit findings implicated Nicky Oppenheimer in former Debswana Managing Director Louis Nchindo’s plan to use Mogae’s name to hoodwink the Debswana board into signing authorization for the de-listing of De Beers. The late Debswana chief said Mogae had given him authority to negotiate on behalf of the Botswana government, at a secret meeting the two held with Oppenheimer.
The Slaughter & May report stated that, “it has been suggested to us that the Botswana Government 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 Resources were present at the meeting no notes were made.”
Oppenheimer was quoted in the Slaughter & May report saying “he was very clear that Mr Nchindo represented the government of Botswana”. This contradicted a De Beers confidential internal document which was passed to the Sunday Standard revealing that it was “incorrect” that Mogae gave Nchindo the powers of attorney. “The former MD may have alleged this but HE could not because his powers pertain to national executive matters and not Debswana corporate affairs.”
Four years later, in 2004, while Botswana was balking at renewing the De Beers mining lease, Mogae convened a meeting (at which Oppenheimer and other Debswana board members were present) to set the record straight. He told the meeting that he holds the board fully accountable for the decision to endorse the de-listing of De Beers”.
This was the turning point in the relationship between Botswana and De Beers. It did not look like the beginning of a revolution. There were no crowds massed outside the parliament building with angry placards, no soldiers and anti-riot police deployed on the streets of Gaborone. And yet in its own bloodless way that shook Botswana, quietly and without violence, a revolution slipped through while most people were looking the other way. The Botswana government lost its fear of De Beers – the hitherto better half in the Debswana marriage. As information began to emerge on how De Beers had swindled Botswana, the government enclave’s fear of De Beers, accumulated over three decades began to dissipate and give way to anger. Overnight, the country’s leadership that had cowered before the Oppenheimer family empire felt free to rage at it. Even civil servants who days earlier had felt obliged to keep quiet about the De Beers dealing in Debswana were queuing up to hurl stones at the once mighty titan.
Insiders say Mogae who once compared Botswana and De Beers to Siamese twins felt betrayed and saw the lease renewal negotiations as an opportunity to get back at Oppenheimer and De beers.
The situation was not helped by Slaughter & May’s suggestion that if there had been more transparency Botswana would have obtained a better deal. Before the De Beers delisting, Debswana had a 5% interest in a listed De Beers and it 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.”
Relevant government officials were kept in the dark. As a result, the government of Botswana did not have independent legal and financial advice on the deal, and depended on De Beers who had different objectives. Both independent legal advisors and financial advisors were appointed in November 2000 and were proposed to Nchindo (a De Beers representative in Debswana) by De Beers’ financial advisors.
This was before other board members outside Oppenheimer knew of the transaction, and the appointment was not formally approved by the board.
The Slaughter & May report expressed concern that Debswana Board Chairman, Nicky Oppenheimer, never raised the De Beers privatisation transaction at Debswana board meetings, although he has extensive board experience. “In fact, it appears from the board minutes that this very complex and important transaction was not discussed in detail at any board meeting.”
Although Oppenheimer must have been aware of the potential for conflict there was never any disclosure to the Debswana board about the De Beers share options held by Nchindo. The options, valued at US$ 6 million were to be paid out as part of the transaction. This meant the more favorable the transaction was to De Beers, the more Nchindo stood to benefit, although he claimed to be representing the Botswana government.
The Slaughter & May report also highlights the potentially conflicting interest of Oppenheimer, a shareholder in De Beers, Executive Chairman of De Beers and Chairman of Debswana.
Botswana government’s resolve to play hard ball was not lost on De Beers’ officials. If De Beers had any illusions about things blowing over, they were dispelled when Mogae appointed Dr Akolang Tombale to lead the Botswana negotiating team for the Jwaneng and Orapa mines lease agreements.
Tombale who was in the Debswana board had little respect for De Beers, and like Mogae probably felt betrayed by the Oppenheimer dynasty. Tombale, then Permanent Secretary in the Ministry of Mineral Resources had earlier told Slaughter & May 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”, explained 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. Tombale was unhappy because “he believed this meant Oppenheimer and his charges were not acting in the interest of both shareholders”, stated the Slaughter & May report.
When the two parties finally sat down to negotiate the lease agreement after a lot of stalling, the fragile, odd-couple relationship between Botswana and De Beers, forever locked together by economics, has reached the lowest historic dip. And so began the most difficult negotiations between the two parties ever.
By the time the negotiating teams signed on the dotted line in July 2006, Botswana had managed to force through a beneficiation agreement. What seemed impossible, even unthinkable, had occurred: Mogae who over the years had supported De Beers against beneficiation had made an about turn and managed to twist the mining giant’s hand into signing a beneficiation agreement.
Dr Tombale recalled how on a number of occasions, members of the De Beers negotiating team had to rush from the negotiating room to the Sir Seretse Khama airport to catch the last plane home. In fact, when the De Beers secretariat staff members started posting invitation letters for the signing ceremony, the negotiating teams were still locked in a meeting somewhere in Lichtenberg, South Africa haggling over the final details of the agreement.
Addressing journalist during the signing ceremony, Dr Tombale lifted his eyes to gaze at the ceiling and let slip a chuckle as he recalled the times they had to call in Mogae’s spine whenever negotiations got mired in a deadlock. And such incidents were many. Of all the tough moments, Tombale remembers most vividly how the negotiations ground to a halt because De Beers would not sit around the table with consultants commissioned by the Botswana team to help them with the negotiations. For sometime both teams were stuck in their positions and the whole process was fast losing altitude, until President Mogae stepped in. “He handled it quite well. In fact he handled it so well that they eventually came around to seeing our point”, recalls Tombale. With a point on the Botswana score card, everyone returned to the negotiation room and took up their seats around the table. The Botswana team would later make numerous trips to the Office of the President for pep talks whenever they seemed to be losing steam.
Mogae was so determined to use Botswana’s dominant position in the rough supply chain to leverage stealthy takeover of bits and pieces of the De Beers operation that while his lieutenants were hunched around the table haggling with De Beers, he went around the world drumming up support for his ambitious beneficiation plan. At the time the undertaking seemed so vast that most were convinced it would see him out. During a visit to India in 2005, he did not pass up an opportunity to lobby international diamantaires to his cause. A few months later he was in Namibia campaigning that more cutting and polishing should be done in southern Africa where the bulk of gem-quality diamonds are being mined. “We are not doing this in a hostile manner. We think since we are a source of this, it would be funny that we do little in diamonds and cutting,” he said. Speaking at a joint press briefing in Windhoek with his Namibian counterpart Hifikepunye Pohamba, Mogae stated, “Over time, we, the diamond-producing countries in Southern Africa want more value addition done.” His next stop was South Africa where he lobbied parliamentarians to back him push De Beers to bring diamonds from around the world to be “aggregated” in Botswana, an activity that then carried out in London. Addressing the South African Parliament, Mogae asked South Africa for its backing in his attempt to pressure De Beers into moving the Diamond Trading Company’s “aggregating” (sorting) facilities to Gaborone from London.
“The most important thing was that we were certain of the president’s support and what we eventually got from the negotiation far surpassed what we had expected”, Tombale told the Sunday Standard after the signing ceremony.
