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Did De Beers cheat Botswana? – The Masire Factor February 9, 2010

Filed under: Economy/Economie — kikenileda @ 10:43 AM

Debeers_yellow-diamond
 When David Magang sat down to write his memoirs, he certainly could not complain that his career had left him short of material.

The former Minister of Mineral Resources and Water Affairs, who has waged a protracted battle for diamond beneficiation against De Beers, had a front row seat at some of the most questionable goings on between the diamond mining giant and the Botswana government.

“I racked my brains to understand why government was so submissive in its dealings with De Beers. Was this the result of our being in awe of them?


simply because they were DE Beers? If so then we were the only ones of our kind who were so subservient. Namibians for instance, after independence immediately began to bend De Beers to their will,” says Magang in his autobiography “The Magic of Perseverance.”

Magang feels strongly that Botswana diamonds were not harnessed to full effect so that Batswana could derive maximum benefit. 

“All in all, De Beers were doing very little by way of ploughing back the colossal benefits
they were reaping from our diamonds,” he says.

As a Bachelor of Laws graduate who cut his teeth defending diamond smugglers, Magang was a new breed of cabinet minister who was not awed by the workings of the diamond industry. 
He however could not find his feet as the minister responsible for diamond mining. 

“Botswana diamonds were a cloak-and-dagger affair, couched in a form of confidentiality usually associated with sting operations by secret service operatives,” he says.

The fact that he did not have the support of the then President Sir Ketumile Masire did not help his predicament. 

“I became the laughing stock of cabinet, being derided as “the only man in all of Botswana who dare advocate beneficiation. President Quett Masire for one said to me during one of our discussions in his office in 1996/97 that Botswana, once a poor country, was now what it was because of De Beers discovery of diamonds, in effect local beneficiation would be a slap in the face to De Beers. In correcting the president, I said it was not De Beers who had lifted us economically; it was our own God-given resources.

The De Beers top brass knew that although I was the Minister of Mineral Resources, I had no clout; my own colleagues had isolated me and so De Beers directors bypassed me at will and went straight to my superiors. So,every time I held meetings with them, they would already have seen the president and the Minister of Finance, and when I took a stance that countered theirs, they would simply say, “But the president is already in accord with our viewpoint, and so is the Vice President. If they had had the cheek, they might as well have denounced me as a nonentity.”

Curiously, about that time, President Masire’s company, GM Five, was highly indebted and was being helped out by De Beers to stay afloat. Sunday Standard can reveal that De Beers provided financial aid to Masire from as early as his first term in office right up to his last term. 

De Beers through one of its directors Peter Layden, former Debswana Managing Director, Louis Nchindo, and a South African lawyer, Len Fisher, who had handled the De Beers patent dispute with GE years before, helped put together a financial bailout plan for Masire, who was facing financial difficulties on the eve of the 1984 elections.

As part of the rescue plan, De Beers procured an expatriate farm manager for GM Five (a company in which former president is both owner and chairman). De Beers also helped secure a P 186 228 bank loan for GM Five from Barclays Bank. In his second term in office, GM Five owed De Beers close to P 1 million.

Sometime around September 1987, GM Five asked De Beers to reduce the total amount owing of P805 910 by the costs associated with the farm manager of P164 466 and the amount paid directly to Barclays of P186 228 leaving a net amount owing of P455 216. GM Five proposed to round the figure up to a round P500 000.

As part of the deal, De Beers placed a moratorium on the repayment of the loan (P500 000) for a period of five years. There after the loan would be repaid over five years in equal annual installments. At the time, the loan was to be paid; De Beers funded a consultancy by University of Natal and Markdata director, Professor Lawrence Schlemmer to help the Botswana Democratic Party (BDP) win the 1999 elections.

The consultancy recommended that Masire should step down to pave way for new blood (Festus Mogae).

Masire, however, could not step down allegedly because GM Five was heavily in debt. De Beers stepped in and put in more money into GM Five. 

The Sunday Standard can reveal that De Beers helped set up a ghost company called Clairemont Corporation in Panama which they used to transfer close to P 4 000 000 to former president Ketumile Masire’s company, GM Five, under the pretext that they were buying into the company. 

A fictitious sale of shares between GM Five and Clairemont Corporation was staged to help transfer P 3 700 000, which would be used to settle GM Five debts.

Proceeds from the fictitious sale were used to settle GM Five’s loans with Standard Chartered Bank, National Development Bank, Botswana Agricultural Marketing Board and other sundry liabilities. De Beers maintain that the whole scheme was put together by former Debswana Managing Director Louis Nchindo and they did not benefit anything out of it.

The diamond mining giant this week confirmed bailing out Sir Ketumile. In a written response, De Beers spokesperson, Chipo Morapedi, stated that “while it is difficult to comment on the specific sequence of events that occurred more than 25 years ago, it is true that, given the company’s investments and experience in managing farms at the time, we were able to provide management assistance and a loan facility to former President Sir Ketumile Masire.”

The statement from De Beers further said, “The purpose of the loan was to help the then head of state by relieving him of the burden of debt and providing him with resources for the farm to be independently managed and so enabled him to attend to the duties of his office and matters of national interest. Louis Nchindo put the idea to Sir Ketumile and also recommended the assistance to the company. This was done in his capacity as an employee of the company at the time. In the present day and age, the De Beers family of company’s operates in a completely different environment with clear policy guidelines governing donations and for disclosure.”

Masire, however, maintains that Botswana fared very well in its dealings with De Beers through the Minerals Policy Committee (MPC) which comprised four negotiators. They were three Permanent Secretaries and the Attorney General.

In his book, “Very brave or very foolish”, Masire maintains that our negotiating approach – the MPC as the negotiators working under a mandate from Cabinet – served us well. De Beers tried to take advantage of us in various ways such as selectively giving information to politicians who were not part of the negotiating team. However, we retained a disciplined approach and were, I think, quite successful,” he says.

Magang, however, holds a different view. 

“One would have expected them to take a tenaciously hard-line stance against De Beers, to interrogate them vigorously as to why our diamonds were not being harnessed to full effect so that we could derive maximum benefit from our highly prized resources. In my view it was short–sighted to content ourselves with mining only.”

Magang was also pushing for the parallel sale of Botswana diamonds outside the De Beers Central Selling Organization. He championed a window of at least five or 10 percent of our diamonds to be sold in the open market, so as to test and gauge the true market prices. This was rejected by De Beers “principally because government and I were not on of one accord.

Independent advice from other diamond industry leaders like Jack Lunzer was ignored. “I explained my “five percent window for marketing” presentation to HE (Ketumile Masire), who was quite receptive,” says Lunzer. Lo and behold, two hours later H.O (Harry Oppenheimer) and Julian (Ogilvy-Thompson) arrived in Gaborone in their jet, to be followed by NFO (Nicky Oppenheimer) piloting his helicopter. They were driven straight to State House and all subsequent talks of the five
percent died a very
natural death.”

Masire, on the other hand, states that “the question arose, of course, as to whether we should find an alternative buyer to the CSO for at least a part of the production of Debswana mines. One argument was that we could then have an independent indication of what we might get for our diamonds. But as we looked around, we found that almost everyone had some kind of relationship with De Beers, whether as an associate or a fierce competitor.

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