Confidential mining contracts blight Botswana’s success story: World Bank

By Mpho Tebele

Gaborone – The World Bank has called on Botswana to make details of its large mining contracts with mining companies public to improve transparency saying failure to do so blights the country’s achievements in managing mineral resources.

A  Mining Investment and Governance review report compiled by the World Bank’s consultant Nils Handler advised Botswana to make details of its large mining contracts with companies’ public arguing that such development will improve transparency in Botswana business dealings.

Handler observed that keeping the negotiation process around contracts for diamond mining and large integrated projects confidential and secretive does not aid Botswana’s case for accountability and inclusiveness.

“Government negotiates the terms and conditions of these agreements, including the percentage of ownership stake it will purchase. These contracts are not published and even the Auditor General is not allowed to audit these agreements,” said Handler.

He added that “A more open process, including published contracts, would assist Botswana in becoming a more transparent and accountable jurisdiction. Further, a ‘Freedom of Information’ Act would provide a ‘de jure’ instrument that the public could use to access this type of information.”

According to Handler, the lack of disclosure of diamond and integrated project contracts has affected the scoring of transparency and accountability in license allocation.

The World Bank Group consultant went on to suggest that the Botswana government should consider publishing mining contracts and subject them to audit by the Auditor General.

But commenting on World Bank’s report, Botswana’s Minerals Minister Sadique Kebonang insisted that “no country signs transparent agreements. Commercial agreements are confidential by nature because of the sensitive of information they have..”

He added that “even the World Bank, when they give us loans some details of the loan agreement are kept secret.”

According to Kebonang, the confidentially and negotiation surrounding big Government mining contracts is fine.

“We have various representatives from the Ministry, parastatal and private sectors Government and private attorneys and mining experts who are part of Government’s negotiating team. The participation of such parties in the negotiation process renders the negotiation process transparent,” he said.

Kebonang further stated that after agreements have been sealed, stakeholder’s such as the media are informed about the outcome of the agreements. He said those who are given a mandate to negotiate on behalf of Government secure maximum benefits for the nation.

One of the biggest contracts signed with De Beers was the 2011 sales agreement that facilitated the transfer of the sorting and marketing of Botswana’s diamonds to Gaborone.

The move secured a new 10-year contract for the sorting, valuing and sales of diamonds from Debswana’s mines by DTC Botswana, and transferred the sorting, aggregation and sale of more than $6 billion of annual rough diamond sales to the office in Gaborone. The deal also allowed Botswana to sell 15% of its production directly to the local market.

But the details of these deals have not been made public.

Despite Botswana’s positive success story of development through diamond mining, according to Handler, the only theme out of the Mining Investment and Governance review of the country’s minerals value chain that scored “low” instead of “high” was accountability and inclusiveness.

In spite this flaw, Handler further noted that the relationship between De Beers and Botswana “has been one of the most successful examples of a country successfully beneficiating raw mineral resources and retaining optimal value and profits.”

The low ranking reflects concerns that have been raised by civil society, some industry members and ministries involved with land and other socio-economic issues. According to the report, concerns raised by stakeholders focused on the lack of meaningful public forums where various land use options, including mining, can be debated and considered at national and local levels.

The report also highlighted that some Batswana in the rural areas might feel somewhat marginalised in the face of the government’s determination to maintain the level of mining revenues from diamonds that have supported the country’s prosperity to date.

Therefore, the World Bank group said that Botswana should consider the Africa Mining Vision’s recommendation that a portion of mineral revenue be returned to local government, through communities where mining has negatively impacted on the people and natural resources of a particular area.

Mining is critically important for Botswana’s economic development and currently accounts for over 24% of Botswana’s GDP and 89% of its exports.

Diamond resources were discovered in Botswana 50 years ago and are credited with rapidly transforming the country from severely impoverished to an upper middle-income success story.

Speaking at the launch of the report, Kgomotso Abi, Permanent Secretary at the Ministry of Mineral Resources, Green Technology and Energy Security said “As a country we have to continue to strengthen performance and address issues of concern to investors. We need to build an environment that will stimulate more investment in mineral extraction.”

Elene Imnadze, World Bank Country Representative for Botswana said Mining can be a powerful and effective engine for development.

“I look forward to seeing more initiatives like Mining Investment and Governance review help Botswana seize opportunities to improve its mining sector and achieve its development goals.”

For her part, Specially Elected Member of Parliament, Bogolo Kenewendo said “We need to find ways for mining revenue to trickle down to the rest of the citizenry and also increase the impact of mining revenues on areas where mines in Botswana are situated. Business linkages and cluster developments need to show evidence at rich mineral areas.”

An economist by profession and the country’s youngest legislator, Kenewendo said Botswana needs to devise ways in which mining revenues would benefit the rest of citizenry apart from free basic service adding that would be archived by sharing national wealth with its people and wealth creation at an ordinary individual level.

May 2017
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