Mining focus on Botswana

reputationsafety & health environment security governance 1

A Focus on Botswana

Chairman: De Beers Consolidated Mines Mr. Barend Petersen

Mining Lekgotla: 27 August 2013

reputationsafety & health environment security governance

Points of Discussion

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• Botswana – A Background

• A Formidable Partnership

• Diamonds For Good

• Debswana • Structure• Operations• Leading Corporate Citizen• Strategic Projects – Cut 8• Enterprise Development• Community Development

• Beneficiation

• Conclusion – 40 years on..


Botswana – A Background

“Bechuanaland Poor, Hungry Desert Land,

Independence to come Friday”

Bechuanaland – An impoverished, arid and hungry land without hope

of achieving economic stability makes its debut this week among the

community of nations.

The new blue, white and black flags are flying everywhere in Gaborone,

its incongruous capital city. But elsewhere in the vast, trackless

wasteland that will take the name of Botswana there is little to celebrate.

Two years of disastrous drought and crop failure have brought havoc and

hunger to its widely scattered agricultural inhabitants. More than one

fifth of the population is literally being kept alive by emergency feeding

and the numbers are rapidly increasing.

Edmonton Journal (Canada) 28 September 1966 by Charles King,

Southern News Service, GABORONE



• De Beers commenced prospecting in Botswana in March 1955. The first kimberlite to be discovered was in the Mochudi area in 1966. On 1 March 1967, the first Orapa discovery was made, whilst the main pipe at Orapa was discovered on 25 April 1967. Mines at Letlhakane and Jwaneng soon followed.

• Since independence in 1966, Botswana has transformed itself to become one of the fastest growing economies both on the African continent and in the world.

• Through fiscal discipline and sound management, the country has grown from one of the poorest countries in the world to a middle income country with a per capita GDP of US$ 13 100 in 2010 and an average annual growth rate of about nine percent.

• Returns from diamond mining have been used to develop physical and social infrastructure such as roads, water supplies, electricity, telecommunications, health facilities, schools and supports the government’s HIV/AIDS programmes, including free antiretroviral therapy to citizens.

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• Botswana is the world’s largest diamond producer by value, producing about 21% of global output (2012: 20,216,000 carats).

• In 2006, Debswana recovered a record 34.3 million carats, generating an annual profit in the order of BWP 12 billion, most of which was remitted to the government in the form of dividends, royalties, and taxes.

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A Formidable Partnership

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“Debswana, a 50/50 joint venture between De Beers and the Government of Botswana, is described both confidently and routinely as a ‘unique’ partnership. It’s a relationship that’s been tried and tested, showing that things are possible when government and private enterprise join hands to do good for the nation.”

Debswana Chairman Eric Molale


Diamonds For Good

• Debswana Diamond Company, originally known as De Beers Botswana Mining Company (Proprietary) Limited, was established on 23 June 1969. The name was changed to Debswana Diamond Company (Proprietary) Limited on 25 March 1992.

• As the Government of the Republic of Botswana owns part of De Beers as a whole, it also receives dividend income from this 15% shareholding. Roughly 80% generated by Debswana is accrued as government revenues for the benefit of the people of Botswana.

• The Chairmanship of the Board is rotated between the Government of the Republic of Botswana and De Beers every two years. On 1 January 2012, the Chairmanship revolved to the Government of the Republic of Botswana for the calendar years 2012 and 2013.

• Diamonds are a finite resource and diamond earnings will therefore eventually plateau and decline. Debswana can make a valuable contribution through diligent closure planning, supporting other industries through procurement agreements, strategic social investments, and through support for enterprise development.

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Country Case Study: Botswana from 1966 to 2013 in less than just a lifetime

The World Economic Forum rates Botswana as one of the two most economically competitive nations in Africa. Botswana has an "A" grade credit ratings by Moody's and Standard & Poor's. This ranks Botswana the best credit risk in Africa and puts it on par with or above many countries in central Europe, East Asia, and Latin America.

• Since independence, Botswana has had the highest average economic growth rate in the world, averaging about 9% per year from 1966 to 1999.

• Growth in private sector employment has averaged about 10% per annum over the first 30 years of independence.

• The government has consistently maintained budget surpluses and has extensive foreign exchange reserves.

• By one estimate, it has the fourth highest gross national income at purchasing power parity in Africa, giving it a standard of living around that of Mexico and Turkey.


Debswana Operations

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Botswana's impressive economic record was built on a foundation of diamond mining.

In the unique partnership Botswana has a 50:50 share in Debswana.Owns 15% of De Beers, the Anglo American plc. Company. It has no similar partnership model in the minerals or other sectors, nor does the state manage the independently managed Debswana.


Debswana – Leading Corporate Citizen

• Debswana is the largest private sector employer in Botswana, with more than 4 000 staff members, with just more than 500 fixed-term contractors. 95% of its employees are Botswana citizens.

• Debswana’s diamond revenue accounts for about 50% of public revenue; 33% of GDP; and 70 to 80% of foreign exchange earnings.

• The company's citizen spend and local procurement spend in 2012 amounted to more than BWP 3,5 billion.

• Debswana mines have contributed significantly to the economic growth of Botswana, as well as producing revenues responsible for lifting the country from one of Africa’s least developed to an international development success story. Botswana is now a middle-income country independent in means as well as name.

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Strategic Projects – Cut 8

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• Jwaneng Mine’s Cut 8 project was approved in August 2009.

• Cut-8 will extend the life of mine to at least 2025 and will allow access to approximately 95 million carats, worth an estimated US$15 billion, in approximately 80 million tonnes mined.

• Debswana completed the Jwaneng Cut 8 infrastructure development project on schedule, including the establishment and handover of workshops for earth-moving equipment.

• 51% of Cut 8 contracts have been awarded to citizen-owned or Botswana-based companies, these have already received 46% of all Cut 8 project spend and 86% of the Cut 8 project workforce are Batswana.


Enterprise Development

• Debswana invests in community enterprise development through Peo Venture Capital Proprietary Limited (Peo), which was established in 1997.

• Since Peo’s inception, the shareholders have always been committed to promoting and facilitating the development of commercially viable businesses in Botswana.

• Its shareholders contributed BWP 40 million capital and at least 60 companies have benefited from this funding with a total disbursement of more than BWP 36 million to date.

• About 1,400 new jobs have been created and sustained, generating salary payments of more than BWP 10 million per annum.

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Veterinary and agricultural consultants financed by PEO

Polymex Industries (Pty) Ltd financed by PEO


Community Development

Governance:• The CSI Committee is a sub-committee of the Debswana Board whose role is to consider and approve funding for community projects, as well as to recommend funding for larger national-level projects to the Board.

Education: • The wealth generated from diamonds has enabled every child in Botswana to receive free schooling

to the age of 13.

• The results of this investment are demonstrated in 97% of pupils progressing from primary to secondary education, an impressive figure in comparison with the African average of 67%.

Health: • The company’s fully funded mine hospitals provide medical services to mine employees but also act

as district hospitals for the communities surrounding our mines. At Orapa Mine, the mine hospital provides essential health services to more than 64,000 patients in 2012.

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Beneficiation

• In September 2011, the Government of the Republic of Botswana and the De Beers Group announced that agreement has been reached on a new 10 year contract for the sorting, valuing and sales of Debswana’s diamond production.

• The Agreement includes the relocation of our London-based sales operations, a process that began in 2012 and will be completed by the end of 2013.

• This unprecedented geographic shift in the sale of rough diamonds will strengthen the foundations for the diamond trading, cutting and polishing, and jewellery manufacturing industries across the southern African region. befitting southern Africa’s position as the world’s leading diamond producing region, with a 43 percent share of global production, by value.

• The agreement also provides for an independent sales outlet for the Botswana Government, which will begin this year at 10 percent of Debswana’s run of mine production and rise to 15 percent over a five year period, through Okavango Diamond Company.

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40 years on..

Current Status:

• Botswana is the worlds largest producer of diamonds by value;

• Debswana is the world’s largest diamond producer by value;

• Jwaneng Mine is the richest diamond mine on the planet by value;

• Jwaneng Mine is the richest piece of real estate in the world, valued at five times an equivalent piece of land in Tokyo, Japan;

• It is rated the top sub-Saharan African country in all elements of governance;

• Botswana ranks in the top quartile of various governance indices worldwide; and

• It is the least corrupt country in sub-Saharan African and ranks 36th internationally, according to Transparency International’s Corruption Index (2007).

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Q&A

Mining focus on Botswana

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