Saturday, September 26, 2020

Turning the D-word from shame to pride ÔÇô the De Beers story

Gareth Penny knows how deeply unpopular De Beers is among Batswana.

For a multi-national that has spent a fortune nurturing and cultivating a positive image abroad, it is ironic that so little attention was paid to a country that matters most to the company’s balance sheet; through Debswana, Botswana alone contributes over half of De Beers revenue.
The fault, says Penny, is entirely De Beers’.

Over the years, De Beers chose to tell its success story to the outside world, manifestly leaving Botswana out. It has been a terrible mistake for which, by their admission, De Beers has paid dearly.

“We have been poor at telling our story to Batswana. We focused on the international scene hoping that the facts would speak for themselves here. From now on, we will be telling our story,” the De Beers Managing Director says bluntly as he announces a change of strategy.
De Beers has learnt the hard way.

Although the company has for decades been an integral part of Botswana’s economy, a great majority of Batswana continue to look down at De Beers with a mixture of both contempt and suspicion.
Official statistics indicate that for every 5 Dollars generated from the partnership between De Beers and Botswana Government, 4 Dollars remains in Botswana.

Debswana, which manages the partnership, generates over 70 percent of Botswana’s foreign earnings.
Internationally, the Partnership between De Beers and Botswana is cited as among the most successful Public Private Partnerships in the world. Botswana is now not only a 50% shareholder in Debswana and DTC Botswana, but Botswana government negotiated a 15% shareholding in De Beers s.a. and is represented on the De Beers s.a. Board of Directors.

Between 2000 and 2009, Botswana Government received the equivalent of P137bn or US$18bn (in 2009 terms) from all the partnership activities. 96 percent of these receipts originated at Debswana, which is a 50/50 partnership.

Roughly four of every five dollars of cash generated by Debswana goes into Government coffers. There is universal consensus that it is the income from diamond mining that has enabled Botswana to achieve its unique record of developmental success.

Botswana stands out as the single most successful state in transforming its natural resources base into sustainable development.

Botswana has successfully secured De Beers’ support for in-country beneficiation – to the extent that De Beers invested US$83 million to build DTC Botswana’s state-of-the-art sorting and valuing building in Gaborone.

Thanks to continuous negotiations by the Government, De Beers has recently announced that they are in the process of moving many of the outstanding functions that have historically taken place in London to Botswana.

The total historical direct investment by De Beers in Botswana from 1970 to 2009 is the equivalent to BWP 10bn/US$1.5bn (in 2009 value).

Yet for all the positive outcomes of the partnership, which by every account, is abnormally skewed in favour of Botswana, De Beers finds itself an object of scorn, looked at with derision and near hatred by a majority of citizens to whose livelihood the company has played no small part in improving.

It is this negative perception among Batswana that the De Beers Managing Director says De Beers is worried about and will henceforth work tirelessly at changing.

Giving glimpses of the communication strategy going forward, Penny says De Beers success in Botswana will be the focal point, the battleground of attempts to showcase just what a great success a well managed Public Private Partnership has the potential to become.

While more attention was in the past given to the outside world, Penny is emphatic that going forward De Beers is going to be more specific about its audience in Botswana.

While in the past the story was coined largely for the international audience, this time around it is going to be told to the people who under the circumstances matter most – the citizens of Botswana.

The goal, says Penny, is to make sure that Batswana feel proud of De Beers, not least because it is a world class business in which their government has a direct stake.
“Obviously there are going to be bumps along the way. But in the next 25 years we want your kids to look at De Beers and say ‘this is a company that contributed to the development of our country,’” Penny says, as a matter of fact.

By far the year 2009 was the worst in De Beers history. The Managing Director compares what the company went through last year with what happened 70 years ago during The Great Depression.
As a result of the hardships, Botswana Government found itself obliged to pump in over a billion Pula as part of her equity share injection.

Penny is determinedly upbeat that the executive management team he leads will, in the wellness of time, prove that Botswana government’s injection of its equity share capital has been a good investment.

“We will not disappoint our shareholders,” he says.

He points out that notwithstanding the difficulties the company is emerging from, De Beers is not a sinking ship many have predicted it to be.

“It is a result of support we got from our shareholders that we are back on track. As things are, De Beers is a company with a great future ahead of itself.”

Even as he looks ahead with astounding optimism in the wake of what has been a tumultuous year, Penny’s conversation is unable to steer clear from the task at hand to convince Batswana that their partnership with De Beers has benefited all involved.

He readily concedes that Batswana have a misperception that De Beers has been a senior partner.
This misperception, which is deeply dug in, has a historical dimension to it.
The Botswana/De Beers relationship was spawned at a time when De Beers was totally different from what it is today.

The relationship, once compared by former President Festus Mogae to that of Siamese twins, started at a time when De Beers was at the height of its powers.
The relationship was born at a time when the company controlled as much as about 80 percent of the world’s diamond industry.

That was also a time when the company took astound pride in the secrecy of its operations; a cartel by every definition, controlling both demand and supply as well as literally fixing prices of the world diamond industry.

It was during those years that the company fell foul of the United States antitrust laws ÔÇô resulting in a protracted generations old standoff which was only settled recently by Penny’s crop of executives.

He is adamant that as a result of a concreted drive to tell the De Beers story to Botswana, Batswana will become proud of their long association with a company that has for centuries dominated the world diamond industry.

“We had hoped that the figures would speak for themselves. It turns out that we were wrong,” he says in reference to why De Beers has in the past chosen to overlook Botswana in its communication strategy.

The difference with the strategy that the De Beers top man is tentatively unveiling is that while in the past Botswana was overlooked, this time around it will be the centerpiece.

The charm offensive will be led by a person no less than the Managing Director himself.
“You can rest assured that you are going to see more of us telling this success story here the same way we have in the past told it abroad,” said Penny.

Although the figures tell an amazingly positive and rosy story, citizens’ suspicions are to a large extent fuelled by a reluctance on the part of government to be upfront with them in opening up on key aspects of the agreements that govern the relationship with De Beers.

The real test of De Beers success will be whether Batswana begin to perceive the company’s presence in Botswana as a source of good.

Thankfully, Penny is under no illusion about what it will take before he reaches that point.
Which is why perhaps he neither wants to dwell nor allow himself to be distracted by recent allegations that De Beers has in the past paid out large amounts of money to former President Sir Ketumile Masire under shady circumstances.

“What you are talking about happened so many decades ago. The facts are so back in history that it is very difficult to ascertain what the circumstances were. What is important is that going forward we are going to be focused on governance.”

He says whatever donations De Beers makes it will be done transparently.
“I can’t say we won’t fund a political party. What I can say is that in so doing we will be totally transparent.”

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