De Beers, the world’s largest diamond conglomerate, partnered with the government of Botswana in 1969 to form Debswana Diamond Company, Ltd.  After 40 years, it seems that the working relationship is on the verge of collapse after a confidential Slaughter and May report was leaked, showing that De Beers has made tens of millions without sharing their profits.  Botswana, a country rich in diamonds, lacked the knowledge and equipment to mine their natural resources.  De Beers, which was already the primary diamond mining company in Africa, stepped in and made a deal that ended up blowing up in the collective faces of the Botswanans.

Former Managing Director Louis Nchindo and seven other De Beers executives—including Nicky Oppenheimer and Gary Ralf—made over $72 million, while the Ministry of Minerals and all other Botswana partners received nothing.  Dr. Akolang Tombale, former Secretary in the Ministry of Minerals explained that the agreement was faulty from the start, with De Beers bonuses being based on production levels without taking into consideration the market price for diamonds.

Even when diamond prices fell over the past several years, De Beers boosted production at the shared Debswana mines.  In short, even as the carat/ratio plummeted, De Beers was mining more and more diamonds and making piles of money.  The Ministry of Minerals found themselves with hundreds of thousands of carats of unsellable diamonds. 

In a separate, but related, business transaction, De Beers made moves to go private and was eventually absorbed into the London-based mining giant Anglo American.  Suddenly, there was no one to answer for the financial loss that the government and people of Botswana took in De Beers’ less-than-honest dealings.  Aside from the obvious issues, it was discovered that Oppenheimer, Nchindo and other De Beers officers shouldn’t have been involved in Debswana at all, since many of them had a personal financial stake in the deal.  According to the leaked report, “Hence, the more attractive the deal was for De Beers, the more [each of them] would gain”. 

Why would Botswana ever agree to a partnership on such terms?  The fact is that they really didn’t.  When it was written in late 200, present at the signing were former President Festus Mogae, Louis Nchindo, and Nicky Oppenheimer.  No representatives from the Ministry of Minerals, Energy, and Water Affairs were there, and no documentation was made of the notes of the meeting.  Oppenheimer claims that Nchindo was there representing the government of Botswana, fully knowing that both had financial interest in making the agreement. 

Debswana was to receive 5% interest in De Beers, but, once De Beers went private and became a part of Anglo American, Botswana found themselves high and dry with a 15% stake in an unlisted, much smaller division of De Beers which was, itself, deeply in debt.  Oppenheimer is quick to place the responsibility on Nchindo, who was said to have “usurped” powers from the board members of Debswana, many of whom have little or no experience in the diamond industry and believed he would act in their best interest.  The De Beers partners, naturally, said nothing about the imbalance of power in the company, as they would reap huge profits from Nchindo’s personal greed.  In an effort to do some damage control, De Beers claims that Nchindo forced the retirement of former Botswana President Ketumile Masire and the succession of Festus Mogae in his place.  There is, however, documentation that De Beers provided the money to buy President Masire out of his post, setting off the chain of events. 

Now Botswana as a country finds itself with thousands upon thousands of carats of diamonds in a depressed market.  What will happen next in the small, land-locked country that is bordered by South Africa at the bottom, Zimbabwe to the northeast, and Namibia to the west, is unpredictable at best.  Hopefully, we will not see another Zimbabwe emerge from the ashes of what was once a resource-rich, profitable country.  Time will tell.