Sparkle: Botswana supplies at least 70% of De Beers’ rough diamonds. Debswana, an equal partnership between the government and the De Beers group, has four mines. Photo: Monirul Bhuiyan/AFP
As Botswana draws closer to its general elections next year, President Mokgweetsi Masisi appears to be playing a political game with a push for a bigger stake for the state in the diamond partnership it has with De Beers.
Debswana is an equal partnership between the government of Botswana and the De Beers group of companies, which includes De Beers and Anglo American. The partnership was established in 1968 and is one of the world’s foremost diamond producers by value and volume.
Next year, the country will go to the polls to elect a new national assembly as well as local councils.
Masisi is legally able to run for another term because he has not exceeded the constitutional limit of two five-year terms.
A month ago, Masisi said he would raise the stakes in talks with De Beers to renew a sales deal which expires in June.
According to veteran mining analyst Peter Major, the president is trying to garner votes by signalling that he is not a puppet of corporates but rather a strong leader keen to get Botswana a great better deal.
“This is purely political on Botswana’s side. He is showing how tough he is,” Major said.
“Masisi is worried that he might lose out, he’s worried that his party might lose a few votes. So, this is how he’s showing everybody to elect him, because he is tough and negotiates. He’s a bit of a loose cannon. He’s doing it to show his opposition.”
Masisi has threatened to walk away from talks to renew the deal unless Botswana gets a larger share of output from the joint venture. He did not specify the size of the share it sought, Reuters reported.
As it stands, three-quarters of Debswana’s production, which was 24 million carats last year, was sold to De Beers. The balance was sold to the state-owned Okavango Diamond Company, which was set up under the current 2011 sales deal as Botswana sought to market gems outside the De Beers system.
Debswana operates four diamond mines whose stones are sold to De Beers and the Okavango Diamond Company.
Debswana is the biggest contributor to the De Beers Group rough diamond production. Globally, Botswana accounts for 70% of De Beers’ rough diamonds.
“I think they [the government] are shooting themselves in the foot. We’re not talking about being greedy now. We’re just talking about the possible impact this may have on a good working relationship,” Major said, calling Masisi’s stance a resource nationalism drive ahead of the elections.
Resource nationalism describes moves by a host government to toughen tax and other rules governing foreign-owned resource projects. Economists often decry its effect, but it remains a common feature of both democratic and authoritarian regimes.
For example, Chile and Peru have elected leftist presidents seeking to raise taxes on the mining industry and block environmentally controversial projects.
Masisi’s actions also reflect the threat he feels from his predecessor Ian Khama ahead of next year’s vote, said Isaac Matshego, an economist at Nedbank.
“I think the backdrop of the pressure that has been put on the current president by the former president, Khama, has led to such decisions,” Matshego said, referring to Khama’s vow to vigorously campaign to dethrone Masisi.
Khama says Masisi is an authoritarian and that he regrets appointing him as his successor. Khama was president for a decade until 2018 when Masisi, then his deputy, became president.
Khama, who lives in South Africa, has said he wants to return home and mobilise a coalition to remove Masisi through the vote.
In public, De Beers appears unfazed by the government’s move, but in private the company is worried, Major said.
“They are nervous about it. And they’re playing it down. They are scared because they invested a lot into Botswana,” he said. “They have to have this mine and they can’t afford to lose it. It is the richest diamond mine in the world. They put billions of bucks into it and they don’t want to write that money off. They have to come to a deal.”
In Botswana, the company’s production increased by 8% to 24.1 million carats, according to De Beers’ financial results for last year. In South Africa, production increased by 4% to 5.5 million carats.
“De Beers are worried but they’re giving it their best shot. I’m pretty sure they’ll work something out at the last minute.
“When you put big money into mine, you’re really committed. This isn’t Microsoft or Google or Nike … that can just pack up one day and go. With a mine, they have so much money in the ground. They can’t pack up and walk away,” Major added.
In response to questions from the Mail & Guardian, the De Beers Group said the heart of its negotiations with the government of Botswana was a discussion on how best to broaden and deepen the unparalleled socioeconomic growth the 54-year partnership has delivered with and for the country.
“By the end of 2022, De Beers supplied more than $1 billion in rough diamonds into 31 local diamond cutting and polishing facilities employing nearly 4 000 Botswana citizens,” the group said in an emailed response.
“We are proud of what we have delivered collectively with the government and excited by the potential to build on this foundation to expand citizen opportunity in the years ahead for Batswana.”
Matshego said it was unlikely that the two parties would not reach a deal that was satisfactory to the Botswana government.
“They will try to not break up the long-standing arrangement with De Beers because, in reality, there is no other company that could replace De Beers because the De Beers arrangement is quite important to Botswana.
“Basically, De Beers has run Botswana’s mine since inception, in the late 1960s,” Matshego said.
De Beers would go as far as it had to to keep the Botswana government as its partner because the arrangement is lucrative for the company, Matshego added.