Does Botswana still really have control over its diamonds?

Second diamond-producing country in the world, Botswana is a world benchmark in the sector. However, Botswana diamonds are gradually coming under the control of a single private player.

In Botswana, the mining sector, dominated by diamond mining, is one of the most efficient and profitable. It alone brings in 22% of gross domestic product (GDP) and 38% of state budget revenues, and represents 80% of exports and 23% of customs revenues. Gaborone is the diamond capital par excellence. Botswana is the first African producer of diamonds, and the second in the world after Russia. In the diamond world, Gaborone competes with Antwerp, Belgium, and Mumbai, India.

However, the recession due to the Covid-19 caused a contraction of 8,3% of the Botswanan GDP in 2020. This inevitably reminded local populations that their economy was dependent on private national players, but especially foreign ones, in the sector. The International Monetary Fund (IMF) expressed concern last May, saying that "heavy economic dependence on diamonds and intensive contact-intensive activities has resulted in the largest GDP contraction in sub-Saharan Africa."

However, it seems difficult for the State of Botswana to diversify when we know the financial windfall brought by diamonds and the taxation of mining companies. Botswana levies 22% taxes on mining companies and between 10 and 15% royalties on profits. But as Botswana's foreign partners suffer from the economic recession, the country is feeling the impact, as are other states dependent on a raw material whose prices fluctuate. And if Young Africa describes with some satisfaction "the South African success story" of De Beers, which allowed the construction of a sorting and marketing center in Gaborone, not sure that the group, whose head office is based in Luxembourg , does so much good in Botswana.

De Beers, king of diamonds… and of finance?

The mining company De Beers has been the country's first partner for decades. And in a virtual monopoly situation: if the De Beers company harvests 65% of the diamonds mined in Botswana, the group actually holds more market share, since it is a 50% shareholder in the two major public companies of the sector, namely Diamond Trading Company Botswana (DTCB) and Debswana.

The two companies, founded in 2006 and 1969 respectively, have done everything to increase government earnings in recent years. In this case, the sorting center for diamonds, initiated by the DTCB, immediately represented a jump of 2% net of state revenue.

But in 2011 everything changed and the profits from diamond production began to dwindle for the state. Blame it on public-private partnerships (PPP). Financially, Botswana has not really been a loser in this story. Two years ago, the president of the Chamber of Mines, Charles Siwawa assured that this PPP had been beneficial for the country. “If we look at the partnership between the De Beers conglomerate and the Botswana state, we see that the government receives 85% of diamond revenues, and De Beers 15%. This relationship between the government and De Beers has been very beneficial for us, ”he told RFI.

Botswana's rationale for letting private companies invest in public conglomerates was the state's shortfall in the export of diamonds to London for sale there. De Beers, by taking shares in public companies, then promised to initiate the construction of a sorting and marketing center in Gaborone. For a few hundred dollars more per carat, Botswana has decided to give up its sovereignty.

And the consequences, if they are almost invisible in the state coffers, are more important than they appear: Nicky Oppenheimer, the boss of De Beers and Anglo American has bought, in eight years, 50% of the two Botswana companies. That's not all, because by taking over 45% of De Beers via Anglo American, Oppenheimer achieved two other goals: first, he diluted De Beers and turned it into a transnational corporation; secondly, he transferred the head office of De Beers to Luxembourg, concentrating there the currencies produced by the conglomerate in investment funds of which he is also a shareholder. Finally, despite the disagreement of the Botswanan state, Oppenheimer reintroduced Anglo American on the London Stock Exchange, after Brexit, in order to take advantage of fluctuations in the diamond market, where he is one of the absolute masters in Great Britain.

Johan Rupert Billionaire
Koos Bekker-Billionaire
Nicky Oppenheimer-Billionaire
Together they control 90% of our mines, economy, media .. The Zuma's don't even have a 1% control .. But your math makes sense .. https://t.co/wKzT9yqwGa pic.twitter.com/U2Rq81Kth2

— Sean Mr G #RemoveMask #VaccinesAreAFlop! (@SeanGoss31) July 14th, 2021