ALL EYES ON BOTSWANA- DE BEER NEGOTIATIONS
This week Botswana celebrated her 53 years of independence, a sterling economic marathon and democratic transition that began over 5 decades ago, anchored and pivoted on dedicated civil service and selfless leadership across the political divide.
Much credit goes to stalwarts in nation building, right from the immerse contribution of tribal leaders, politicians to early post-independence civil servants who started building the landlocked country’s economy from absolutely nothing. Fundamental to Botswana‘s rapid economic transformation is the discovery of what would later become one of the world’s key rough diamonds mining operation ,bolstering infrastructural development and birthing an upper middle income country widely celebrated across the globe today.
Immediately after independence was declared in 1966,British administration slowly removed its aid and financial assistance, Botswana now , though still assisted on setting up was left by in large to fend for itself, however sooner than later a complete turnaround would emerge.
Three years post-independence, after over 10 years of immerse geological prospecting, Botswana‘s first diamond mine was found in Boteti District. A team of De Beers’ geologists discovered what today is the largest diamond mine by area and one of the most important industrial diamonds mining operation in the world, the bold and magnificent Orapa mine, loosely translated to mean a resting place of lions in Sesarwa language.
This birthed what would later become the world’s leading rough diamond producer and a globally celebrated Private-Public Partnership, between Mining giants De Beers Group and Government of Botswana, De Beers Botswana Diamond Mining Company was formed in 1969. In 1971 Orapa Mine was officially commissioned, four years later a small gem pipeline discovered few kilometers from Orapa, Letlhakane Mine popularly known today as DK1 was commissioned. But behold a sparkling upswing came into light in 1972 when a rare gem pipe was found beneath a 40 metre layer of sand and calcrete in the Naledi River Valley birthing Jwaneng Mine, the prince of mines , what is today believed to be the richest diamond mine by value.
FAST FORWARD TO 2019…
These two partners, Government of Botswana and De Beers Group are meeting to review and renew their vows, circumstances have changed, the global diamond industry has evolved, and various factors are at play. Key to negotiations which are reported to be ongoing in discrete places at London and in Gaborone is the Sales Agreement. The Botswana-De Beers diamond sales deal was last renewed into a 10 year union in 2010 and it lapses next year September 2020.
Recently reports have been rife that Botswana is being ripped off along the way as the stones leave Debswana operations crossing borders to diamond trading centers across the globe. However De Beers Group has constantly denied these reports. Government is yet to clearly comment on the reports.
To date on the overall, the De Beers-Botswana marriage has birthed Debswana Diamond Mining Company, the partnership’s flagship entity. This year the company celebrated 50 years of existence. Debswana is Botswana‘s largest private sector employer, only government employs more people than Debswana. The company is directly owned by Botswana Government and De Beers on 50-50 shareholding.
Another offspring of the partnership is Diamond Trading Company Botswana (DTCB), also a 50 -50 venture between the two parties .DTCB sorts and values diamond from Debswana mines. If there are to be changes from these multibillion dollar serious negations it’s likely to be from DTCB going up the pipeline.
DTCB avails 85 % of their sorted and valued diamonds to De Beers Global Sight holder Sales (DBGSS) and 15 % to Okavango Diamond Company (ODC) which is wholly owned by Botswana Government .This was birthed by 2011 agreement with ODC established in 2012. Another key change in 2011 was the relocation of DBGSS from London to Gaborone, transferring De Beers’ operations consolidated rough diamond sales into Gaborone, bringing alongside professionals, skills, and the world’s biggest rough diamond transactions to Africa.
ANTICIPATED INCREASE IN ODC UPTAKE
One of the highly earmarked outcomes to possible emerge from the negotiations is increase in percentage volume of ODC‘s uptake from DTCB. The argument has always been that Botswana as one of the largest diamond producers in the world has the capacity and ability to develop its own price book through its own independent window outside De Beers’ channels. Before ODC was establishment in 2012 all diamond recovered from Debswana mines were made available to De Beers for dispatch into the sight holder market.
Currently ODC rakes in sales in the region of $500 Million annually (approximately P5 billion). This according to Minister of Mineral Resources Eric Molale demonstrates beyond reasonable doubt that Botswana has independent capacity and ability to be a major player in the sight holder space outside De Beers’ bracket.
“The Marcus Te Haar led company was a great accomplishment for us a country, it ended a perception that we cannot sell our diamonds, and its sound performance since establishment will have direct impact in the current negotiation with a view to potentially increase its uptake form 15 % to a larger percentage” he said last year at a mining conference in Gaborone
DTCB TO SORT AND VALUE DIAMONDS FROM NON DE BEERS OPERATIONS
In 2006 the then sales agreement before the 2011 deal, saw the setting up of the world largest and most sophisticated sorting and valuing operation in Gaborone, the Diamond Trading Company Botswana. DTC Botswana was birthed from Botswana Diamond Sorting & Valuing Company, an entity that operated for many years at the famous Orapa house. DTCB is now located in a magnificent high rise cube in the Diamond Hub along the Gaborone airport road, a state of the art infrastructure clinched between Debswana Corporate Centre & DBGSS Buildings .
In 2017 DTCB commissioned a new facility of unparallel global standards, a laboratory of sophisticated chemical processes of quantum physics operations and complex scientific techniques for cleansing and sorting the diamonds. In February last year then Managing Director of DTCB Tobake Kobedi said DTCB with this set up intends to be the world‘s number 1 by 2020. He said by 2020 when a new sales agreement is penned down, DTCB intends to have improved its efficiencies and effectiveness as a rough diamond sorting and valuing operation and thus desires not to only be limited to receiving Debswana rough diamonds.
“Currently our shareholder agreement dictates that we sort diamonds from De Beers mines in Botswana only, but we want to say let more from elsewhere come because we have the capacity” said Tobake when addressing members of the media last year. The DTCB plant has sorting and valuing full capacity of over 45 million carats of per annum but currently only receives around 22 million carats from Debswana mines annually.
“Why can’t we take rough diamonds from other mines locally and in the region?” Kobedi posed these questions explaining the intention of DTCB strategy 2020 and its vision towards ensuring that Botswana remains a Diamond Hub beyond depletion of the stones. Later in 2018 during Zimbabwean President, Emmerson Mnangagwa’s state visit to Botswana it was noted that talks would begin for Zimbabwe to process, sorts and value its diamonds in Botswana.
GOVERNMENT WANTS DEBSWANA TO RIGOROUSLY INVEST IN OTHER SECTORS
Sources close to the echelons of power have revealed to this publication that one of the issues to be posed at the negotiation table by Botswana is that Debswana; the country’s largest company should start investing in other sectors outside its core business of mining diamonds.
The argument suggested by this information is that Debswana has the necessary capital, technical capacity and shrewd corporate governance to do that “There are discussions that Debswana should lead economic diversification by investing in solar energy, plant and equipment assembly and machinery equipment amongst others” shared a source from the highest corridors of government enclave.
Debswana has over the years of its existence invested in other establishments outside diamond mining. Morupule Coal Mine was a wholly owned Debswana operation before it was disposed to government owned Mineral Development Company in 2017.
Botswana Accountancy College, the country’s premier business academic institution was established as a joint venture between Debswana, Ministry of Finance and Economic Planning and the Botswana Institute of Accountants in 1996.Within its fold Debswana also wholly owns Sesiro Insurance Company, a bespoke insurance services outfit for its employees.
“ This is clear evidence that Debswana should do more , it has done it before , so Government wants the shareholders being itself and De Beers to permit Debswana to rigorously invest in more commercial viable sectors that this country desperately needs for employment creation and economic diversification like ICT , modern and innovative Agriculture amongst others” shared a source.
INFLUENCING FACTORS: BOTSWANA GENERAL ELECTIONS OUTCOME, GLOBAL ROUGH DIAMOND MARKET DOWNTURN, DE BEERS SYNTHETIC DIAMONDS
The negotiations usually comprise a team of 5 from the two parties. From Botswana side common picks are Attorney General, Bank of Botswana Governor, and Minister of Minerals amongst others. These highly anticipated negotiations will however have more influencing factors, experts observe that the global rough diamond market downturn will have an impact, in the main, it is said that the recent De Beers lab grown diamonds announcement will have a play. The Mining giant invested $100 million (Over a billion pula) in a manmade diamonds facility in the United States early this year.
After assuming power in April this year President Masisi noted that he would be eyeing more participation of Botswana in the diamond business, sentiment constantly reiterated his Minister of Minerals Eric Molale. “We have had a wonderful relationship with De Beers and we expect that relationship to be even more cemented, there is a way of actually achieving a win-win for both, we want to participate more on cutting, polishing and retail,” Masisi said when talking to Bloomberg in May 2018.
In the bottom line government has reiterated that De Beers will remain its partner “As partners in this industry, it would shock the world if we were to part; the diamond industry would never be the same again,” Masisi said. Botswana is however going into one of the closely contested general elections in history of its democracy. Since independence one party has ruled the country, It remains unclear what would happen to this partnership should government change. Government of Botswana is a direct Shareholder in De Beers Group, owning 15 % with the larger balance owned by Mining conglomerate Anglo American.
You may like
Grit divests from Letlole La Rona
Grit Services Limited, a member of the pan African real estate group, London Stock Exchange listed Grit Real Estate Income Group is divesting from Letlole La Rona Limited (LLR), a local real estate company established by government investment arm Botswana Development Corporation over a decade ago.
The Board of Directors of Letlole La Rona Limited this week announced in a statement to Unitholders that Grit Services Limited (‘Grit’) has informed them of its intention to exit its investment in the company.
Grit has been a material shareholder in LLR since 2019. On 07 March 2023, Grit sold 6 421 000 linked units, representing 2.29% of the Company’s total securities in issue, at a market value of BWP 22 537 710.
This trade follows previous sales of 6.79% in December 2022, as communicated to Unitholders on 10 January 2023, as well as a further sale of 4.78% (representing 13 347 068 linked units) on 24 February 2023 to various shareholders.
In aggregate, Grit has sold 13.9% shareholding in the Letlole La Rona between December 2022 and March 2023, resulting in current shareholding of 11.25% in the Company.
Letlole La Rona said in the statement that the exit process will take place in an orderly manner so as to maintain stability of the Company’s share price.
The statement explained that Grit’s sale of its entire shareholding in LLR is in line with its decision to exit investments where it does not have majority control, or where it has significant exposure to currencies other than US dollar, Euro or hard-currency-pegged revenue streams.
“Grit has announced similar decisions pertaining to certain of its hospitality assets in Mauritius recently. The Company would like to advise Unitholders that it remains focused on long-term value delivery to all stakeholders” LLR said
In July last year as part of their Go-to-Africa strategy Letlole La Rona acquired an initial 30% equity stake in Orbit Africa Logistics, with an option to increase this investment to 50%. OAL is a special purpose vehicle incorporated in Mauritius, owning an industrial asset in a prime industrial node in Nairobi, Kenya.
The co-investment was done alongside a wholly owned subsidiary of London listed Grit. The Orbit facility is situated on a prime industrial site on Mombasa Road, the principal route south of Nairobi center, serving the main industrial node, the port of Mombasa and the industrial town of Athi River and is strategically located 11 kilometers south of the international airport and 9.6 kilometers from the Inland Container Depot.
Grit shareholding in Letlole La Rona was seen as strategic for LLR, for the company to leverage on Grit’s already existing continental presence and expand its wings beyond Botswana borders as already delivered by Kenya transaction.
Media reports have however suggested that LLR and Grit have since late last year had fundamental disagreements on how to go about the Go-to-Africa strategy amongst other things, fuelled by alleged Botswana government interference on the affairs of LLR.
Government through LLR founding shareholder – Botswana Development Corporation has a controlling stake of around 40 percent in the company. Government is the sole shareholder of Botswana Development Corporation.
Letlole La Rona recently released their financial results for the six months ended December 2022, revenue increased by 4% to P50.2 million from P48.4 million in the prior comparative six months, whilst operating profit was up 8% to P36.5 million. Profit before tax of P49.7 million was reported, an increase of 8% on the prior comparative six months.
“We are encouraged by the strong results, notwithstanding a challenging economic environment. Our performance was mainly underpinned by annual lease escalations, our quality tenant base and below average market vacancy levels, especially in our warehouse portfolio,” Kamogelo Mowaneng, Letlole La Rona Chief Executive Officer commented.
LLR reported a weighted average lease expiry period of 3.3 years and escalation rates averaging 6.8% per annum for the period ended 31 December 2022.Its investment portfolio value increased by 14% year-on-year to close the period at P1.4 billion, mainly driven by the acquisition of a 30% stake in OAL in July 2022.
The Company also recorded a significant increase in other income, predominantly due to foreign exchange gains on the OAL shareholder loan. “We continue to explore pipeline opportunities locally, and regionally in line with our Go-to-Africa strategy and our interest remains on value-accretive investments,” Mowaneng said.
An interim distribution of 9.11 thebe per linked unit was declared on the 6th of February 2023 for the half-year period to 31 December 2022, comprising of a dividend of 0.05 thebe and debenture interest of 9.06 thebe per linked unit which will be paid to linked unit holders registered in the books of the Company at the close of business on 24 February 2023.
Stargems Group establishes Training Center in BW
Internationally-acclaimed diamond manufacturing company StarGems Group has established the Stargems Diamond Training Center which will be providing specialized training in diamond manufacturing and evaluation.
The Stargems Diamond Training Institute is located at the Stargems Group Botswana Unit in Gaborone.
“In accordance with the National Human Resource Development Strategy (NHRDS) which holds the principle that through education and skills development as well as the strategic alignment between national ambitions and individual capabilities, Botswana will become a prosperous, productive and innovative nation due to the quality and efficacy of its citizenry. The Training Centre will provide a range of modules in theory and in practice; from rough diamond evaluation to diamond grading and polishing for Batswana, at no cost for eight weeks. The internationally- recognized certificate offered in partnership with Harry Oppenheimer Diamond Training School presents invaluable opportunities for Batswana to access in the diamond industry locally and internationally. The initiative is an extension of our Corporate Social Investment to the community in which we operate,” said Vishal Shah, Stargems Group Managing Director, during the launch of the Stargems Diamond Training Center.
In order to participate in this rare opportunity, interested candidates are invited to submit a police clearance certificate and a BGCSE certificate only to the Stargems offices. Students who excel in these programs will have the chance to be onboarded by the Stargems Group. This serves as motivation for them to go through this training with a high level of seriousness.
“Community empowerment is one of our CSR principles. We believe that businesses can only thrive when their communities are well taken of. We are hoping that our presence will be impactful to various communities and economies. In the six countries that we are operating in, we have contributed through dedicating 10% of our revenues during COVID-19 to facilitate education, donating to hospitals and also to NGOs committed to supporting women and children living with HIV. One key issue that we are targeting in Botswana is the rate of unemployment amongst the youth. We are looking forward to working closely with the government and other relevant authorities to curb unemployment,” said Shah.
Currently, Stargems Group has employed 117 Batswana and they are looking forward to growing the numbers to 500 as the company grows. Majority of the employees will be graduates from the Stargems Diamond Training Center. This initiation has been received with open arms by the general public and stakeholders. During the launch, the Minister of Minerals and Energy, Honorable Lefoko Moagi, stated that the ministry fully endorses Stargems Diamond Training and will work closely with the Group to support and grow the initiative.
“As a ministry, we see this as an game changer that is aligned with one of the United Nations’ Six Priority Sustainable Development Goals, which is to Advance Opportunity and Impact for Diversity, Equity, and Inclusion (DEI). What Stargems Group is launching today will have a huge impact on the creation of employment in Botswana. An economy’s productivity rises as the number of educated workers increases as its skilled workmanship increases. It is not a secret that low skills perpetuate poverty and widen the inequality gap, therefore the development of skills has the potential to contribute significantly to structural transformation and economic growth by enhancing employability and helping the country become more competitive. We are grateful to see the emergence of industry players such as Stargems Group who have strived to create such opportunities that mitigate the negative effects of COVID-19 on the economy,” said the Minister of Minerals and Energy.
Food import bill slightly declines
The latest figures released by Statistics Botswana this week shows that food import bill for Botswana slightly declined from around P1.1 billion in November 2022 to around P981 million in December during the same year.
This content is locked
Login To Unlock The Content!