Did a Tax Dispute Delay the De Beers-Botswana Deal?
After more than five years of negotiations, De Beers and the Botswana government have finally concluded talks over a new sales agreement for rough diamonds. However, despite the agreement being almost final, a few critical details still need to be ironed out. Botswana’s Minister of Minerals and Energy, Bogolo Kenewendo, expressed hope that the deal would be signed by the end of the month, with only the "largely formulaic" process of issuing mining licenses left, as De Beers CEO Al Cook confirmed at a February 3 briefing.
This new agreement marks a stark contrast to the previous lengthy discussions under former President Mokgweetsi Masisi’s administration. While the current government, under President Duma Boko, wrapped up the deal in just 100 days, the BDP (Botswana Democratic Party), which lost the recent elections, suggested that unresolved issues, particularly surrounding a significant tax dispute, had delayed the process for years.
The Tax Issue That Hung Over the Deal
A February 5 statement from the BDP seemed to imply that the tax issue between De Beers and Botswana was one of the primary hold-ups. The BDP raised concerns about whether the new administration had waived a substantial tax bill that De Beers owed. This bill, potentially ranging from BWP 4 billion ($290 million) to BWP 14 billion ($1.02 billion), was said to be a sticking point in the negotiations.
The BDP claimed that the Masisi administration had agreed to all other terms of the deal, but the tax payment remained the only unresolved issue. The party argued that waiving such a large amount would have deprived the Botswana people of crucial funds that could have been allocated to public services such as healthcare, education, and infrastructure.
Tax Dispute History
The tax dispute itself dates back several years. A 2021 report from Botswana’s Unified Revenue Service (BURS) revealed that De Beers owed BWP 4 billion due to tax optimization strategies. In 2023, a decision was reportedly made by President Masisi to write off this bill, but it’s unclear whether the waiver was officially enacted. The BDP’s statement suggests that the matter was still unresolved by the time the government transitioned, leaving the current administration to navigate this complex issue.
Industry sources suggest that the tax dispute had been used as leverage in negotiations, with some speculating that the matter was heading toward a courtroom battle, which could have delayed the finalization of the new sales agreement for years.
Rumors and Speculations
Although the new government has yet to publicly address the tax issue, De Beers has made no comment on the specifics of the settlement. However, the company did state that it operates under a responsible tax strategy, prioritizing transparency and constructive engagement with stakeholders.
The previous De Beers-Botswana contract was set to expire in 2020 but saw several extensions. Beyond the tax dispute, reasons for the delay included the impact of COVID-19 and debates about the share of rough diamonds allocated to Botswana’s state-owned diamond trader, Okavango Diamond Company (ODC).
In the end, the real reason behind the delay could very well have been a simple three-letter word: tax.