Botswana: We must go beyond upstream. Cleaver: De Beers to invest $10-11 billion to expand business

Edahn Golan

Botswana’s Minister of Minerals and Energy Lefoko Moagi and De Beers’ CEO Bruce Cleaver set with Edahn Golan for an interview at the opening of AWDC’s Facets 2022 conference.

They spoke of Botswana’s desire to go down the value chain, what natural diamonds have to offer that lab-grown can’t, future diamond supply, the chances of finding a new mine, and smart mining. Above all, they clarified what is standing in the way of De Beers and Botswana renewing their agreements.

Following is the transcript of the interview held September 15, 2022, during the Facets 2022 conference in Antwerp.

Edahn Golan: Good morning, gentlemen. Honorable Minister Moagi, Mr. Bruce Cleaver. Thank you for setting aside some time to sit and talk with us and answer some questions. We won’t start with negotiations, but (Bruce Cleaver: that didn’t take long).

We have a lot of guys here with a background in economics and good agreements, so maybe we’ll get some tips out here.

So, we have a panel later today in the event on how to create sustainable diamond economies. And clearly, we have two people here that have some experience, if not a lot of experience in the field. Minister Moagi, what are your views on what are the keys to success?

Minister Moagi: Thank you very much moderator, and from the perspective of the government of Botswana, the critical success factors really relate to how we use our diamond revenues to actually impact the socioeconomic lives of our people. And to say this, we also use the diamond ecosystem to actually reach out regionally and internationally in terms of how we use our diamond revenues for the people of Botswana.

I’ll give a few examples, and this includes, you know, investing in healthcare because we need our people to be healthy, to actually carry out everything that we need to do for the development of the country.

We use our revenues for the education sector, so as to have the requested skills that we can then use everywhere else in the country to develop our country. We use our revenues to actually improve on the infrastructure, so that we have a fit for purpose, services that we can use for the development of our country.

We also then look beyond that and look to create hubs of innovation or technology hubs that can also then impact just beyond the diamond industry, so that we can have the industries that we need.

But further, we’ve dealt so much in the upstream process. We now need to go down through the value chain, so that we can now start implementing our beneficiation strategy, going through all the facets of the business, so that our people can now start enjoying each and every step of the diamond value chain.

This we do. We believe these are the critical success factors of a relationship like this in using the diamond revenues for our country.

EG: Bruce, you have a company’s perspective. What are your…

Bruce Cleaver: Yeah, I mean, my thoughts are very similar actually to the minister’s. I suppose the way I look at it is it’s not really feasible to have a successful sustainable diamond industry if you don’t have successful, sustainable economies in places like Botswana, where a significant portion of the diamonds are produced.

So, you know, the way I look at it, these gotta be kind of in sync for us to make sustainable businesses for all of us, all of us in the room, and all of us in the producer countries. And I think, you know, some, some good examples spring to mind in the COVID period, a kind of terrible COVID period.

I think there was tremendous cooperation between all sides here in order to keep the kind of long-term sustainability of the industry going. So, you know, we spent a lot of time during COVID talking to the government, talking to Mr. Moagi and his colleagues about how we collectively can work together to keep things going.

The minister mentioned healthcare. One of the things that was really important to us in the period was to try and ensure that we kept our people as healthy as possible in Botswana and all the other countries in which we operate. And, you know, even though retail stores were shutting, you don’t have to think back far, two years ago, it’s very complicated to shut a mine for all kinds of reasons.

It’s very complicated from a safety point of view. It’s very complicated to restart them. They’re not like retail stores [where] you just close the doors in the morning.

So, we spoke a lot, and we determined to keep the mines going. And one of the reasons we did that is we wanted the whole supply chain, which is in Botswana, lots of local participation to continue, you know, to benefit from that. Really important people were healthy, that they had food on their tables, you know, things like that.

And so, if we’d shut all of those things down, all that supply chain would’ve stopped. And I think, you know, we actually carried on buying, buying diamonds at a time when we, I knew we couldn’t sell ’em, and we canceled sights along the way. But we did it in very close collaboration with government, with a clear objective in mind, which is this will pass, and we need to make sure that we can create an economy and an industry that can sustain itself beyond that.

So, I think there are good illustrations in the company, as well as to how we’ve done that. I think in the future, we are going to have to think about different things. And I know we’ll get onto later today talking about kind of topics of the future. But to me, the only way you can do this is if you do it in a way where you all recognize that in this ecosystem, we all can thrive if we can thrive together, and we won’t if we sort of fracture.

I’ll give you one example, which has got nothing whatsoever to do with the diamond industry, but it is an illustration to me of where this all broke down. And people have heard me say this before. I mean, one of the things that I will never forget as long as I live is vaccine inequality.

You know, we had 79 people die in the De Beers group, 78 in the Southern Hemisphere from COVID. And their only real reason is governments in the developing world couldn’t get vaccinations quick enough. And governments in the developed world hoarded them. It’s quite simple, you know, as I’ve often said, why should it be that my 20-year-old son in England should get three doses of a vaccination before my 85-year-old parents in South Africa could get one?

There’s an example, I think, of how this all broke down. So that’s, as I say, it’s not an example relevant to the diamond industry, but it’s an example of what’s going to happen if you can’t collaborate in a more intelligent way to make a sustainable end-to-end business for all of us.

And so, you know, my thought on this is you’re not going to have a sustainable diamond industry unless you have a sustainable Botswana. You’re not going to have a sustainable Botswana unless you have a sustainable diamond industry. And together we can make these things sustainable.

What is keeping Botswana & De Beers together?

EG: Yes. So, this is to both of you, maybe Minister Moagi will start. What has been the secret of the, a kind of a sappy question, what’s the secret to the relationship between De Beers and Botswana? What keeps it alive?

MM: Well, with over half a century of this partnership, which you can equate to a marriage in a way, we believe that transparency, communicating effective communication together, doing things ethically, corporate governance has been part of it, and the role of law is really how we get to appreciate each other. We look each other in the eye, and we don’t necessarily have to agree together all the time, but at least we appreciate each other’s perspectives.

And because we see the value of this business for both of us, it helps us to sit down, around the table, and then we can actually get to resolving a lot of issues together.

One of the key issues also is the agility in terms of how we do things. You know, our business is, is very volatile, is very uncertain, complex decisions to be made, and we need that agility to actually do these things.

Therefore, this brings us to 2020, during the COVID era, where we’ve had to actually look at some of the operational issues that we had to deal with, you know defer in some of the things that we needed to defer, you know. There were no sights where people come together to view our diamonds and things like that.

We’ve had to change the way we do things, and we had to do that together around the table, given the nature of the business. So, this has actually helped us to cement this relationship because we looked into the longer future and said, “If we don’t do this together, we all perish.” So, the need to actually engage each other frankly, so that we can actually resolve an issue has come to the fore in terms of how we build on this relationship.

And we believe that, over the years, there has been a fundamental strength from both ends. Those fundamental strengths are actually what is keeping us together to move beyond where we are today.

BC: I’m not sure there’s much I can add to that, actually, because I think that sums it up. I think, you know, if you take a step back, you know, I mean, I go around the world and people often ask me about this partnership, and many presidents say to me, it’s, you know, “Why can’t we replicate it in our countries?’”

And, you know, it’s a model that I think the minister would agree, people are completely envious of us around the world. And although, you know, as the minister says, of course, there are times when government has a different aspiration than a commercial partner, and we recognize that.

But I think there’s so many things that draw us together here, and Minister Moagi touched on them, and we all want the same thing. We want proper ethical value chains. We want to treat our people properly; we want proper governance.

And we are almost obsessed with governance in the way we operate together. We want the best practices in the world. We want the best for the people. We want to be able to enhance the skills of the people, as the minister says.

But I think, most importantly, is the point that he made, which is, you know, when there are differences in any marriage, as everybody would know, those that are successful are ones where people can sit down and talk about them, and talk about them in an adult fashion and resolve the issues.

And those examples of what happened in 2020 are a good illustration. You know, we, we went to the government and said, “People can’t travel, so we can’t, It’s not possible to have sights in Gaborone.”

And as the minister said, it didn’t take a long time for government and De Beers to agree that we would do them differently.

It didn’t go through a whole long process that required six months of agreements to be written and so on. And of course, the world is recovered, and we all delighted to be back in Gaborone. So, there’s a good example, I think, of flexibility and trust.

So, it’s built on trust. I think it’s built on a very, very common set of values. And notwithstanding the fact that we sometimes have different aspirations, we have the same core values for the businesses that we operate together.

Botswana’s long-term position in the diamond sector

EG: To follow up on this, and on the previous question as well, how does Botswana want to evolve its position in the diamond sector long term? We’re going to get to the question about the contract later, but long term?

MM: Yes. obviously,

EG: Or maybe it’s tied together. I don’t know. You tell me.

MM: Obviously, we realized over the years, that we’ve had the strengths we’ve had, whatever we could get out of this relationship. But we also believe that there’s continuous improvement in anything that we do. We spent a lot of time on the upstream process of our business.

And we believe that as we evolve, it is time that we now go full hawk on the midstream, go full hawk on the downstream of the business, capacitate citizens in terms of getting into the cutting and polishing industry, into the jewelry industry, into the marketing and pricing of our business.

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Photo © De Beers.