KHAMA FORCES SUDDEN RE-NEGOTIATION OF DE BEERS –BOTSWANA DEAL

KHAMA FORCES SUDDEN RE-NEGOTIATION OF DE BEERS –BOTSWANA DEAL

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Seretse Khama Ian Khama. AFP PHOTO/MONIRUL BHUIYAN

• Khama and De Beers seek deal before new leadership
• Mining licences more than 10 years from expiration
• The Khama’s interests in diamonds questioned
• Move seen to secure De Beers interests before April 2017

 

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President Ian Khama has re-opened negotiations with De Beers on the company’s mining licenses and sales agreement with Botswana, which end in 2029 and 2020 respectively, Investigations by The Business Weekly & Review revealed.
He seems hell-bent to leave in place new contracts before his presidency expires next year April. Close sources say the president wants to get pen to paper and get it done before leaving office in April 2018.

Permanent Secretary to the Ministry of Ministry of Finance and Economic Development Solomon Sekwakwa has admitted, although grudgingly, that negotiations are in progress. “Agreements have time. That time elapses and we should renegotiate before then,” he said.

De Deers ten year sales agreement with Botswana expires in 2020, but the mining licenses for Jwaneng Mine, Orapa, Letlhakane and Damtshaa mines all expire in 2029, 12 years after Khama leaves office. Critics wonder why Khama finds it important to pull back a contract more than a decade away from elapsing and renegotiate it.

Critics argue that the president has an option of passing responsibility to the next answerable sitting president. If Khama’s plan goes according to his wishes, it is another commitment he will leave for the next government especially the UDC, that is if the Botswana Democratic Party loses grip on power.

Khama’s family has interests in the diamond industry, which he may want to secure before he loses power. After the relocation of the Diamond Trading Company (DTC) to Gaborone, government established Okavango Diamond Company (ODC) which receives 15 percent of Debswana’s rough diamond production to sell independently on behalf of government. Khama appointed his nephew, Marcus Khama Ter Haar to the position of Deputy CEO. Ter Haar worked at De Beers as Finance Executive from 2006 to 2007. He then became Group Manager Business Development for three years before jumping to DTC Botswana as Head of Sales. His next position was Deputy CEO at ODC, where he is also more powerful than the CEO.

President Khama’s younger brother, Tshekedi Khama also has massive interest in the diamond sector. Through a company called Monak Ventures (pty) ltd, the younger Khama together with some partners have a 10 percent stake in BK11 Diamond Mine situated in Boteti. Firestone Diamonds owns the remaining 90 percent.

Government has been engaged with De Beers in a 50/50 percent partnership which bore Debswana, after the diamond explorer discovered a second largest kimberlite in the world, at Orapa pipeline in 1969. Since then the partnership has been flawless, with government enjoying royalties, dividends as well as tax money from the De Beers group, save for too much ‘secrecy’ emphasized by World Bank.

Sekwakwa agreed to the secrecy. He said it is their trade secret and they will keep it that way for competition purposes.
It is still unclear what prompted the sudden interest to renegotiate this deal as early as now. The Business Weekly and Review asked Sekwakwa if the government was not happy with any terms of the agreement. He responded: “In a deal you win some you lose some. But the last deal we signed was very good.”
Those in the know however argue that De Beers might have also been tempted by the remarks of the leader of opposing Umbrella for Democratic Change (UDC) Duma Boko who stressed any new government would consider adding other players into the diamond mining partnership which so far has been the exclusive preserve of De Beers. Sources say this might have prompted De Beers to go to the tables with Khama to strike a much favorable deal.

The Business Weekly & Review sent a set for 9 questions to the group of companies to establish if they are aware of the developments by government, which terms will be altered, when and why. Midstream Communications Manager, David Johnson attempted to neither but said in a statement. “While we can’t comment on what may or may not form part of any future agreement with Government, we remain fully focused on continuing to be a dedicated partner to the people of Botswana and to delivering on our commitments in the current sales agreement. We are driven to provide Botswana’s diamonds with a world-leading route to market and to support Government in achieving its economic objectives, thereby playing our part in helping to deliver sustainable benefit for all of Botswana’s citizens.”

The World Bank has raised concerns over this deal recently, pointing to the lack of disclosure on mining contracts. The multilateral lender says disclosure of such information will improve transparency in Botswana business dealings. Botswana’s diamond terms are not published even in the Auditor General.

“The lack of disclosure of diamond and integrated project contracts has affected the scoring of transparency and accountability in license allocation,” recommending they should consider publishing mining contracts and subject them to audit by the Auditor General.

Sekwakwa acknowledged but argues that there can never be that transparency given in the interest of preserving one’s competitive urge.

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