Good governance and corruption within diamond-producing companies – or any companies for that matter – are, by definition, a relative phenomena. While one company may have more of the first, another company may have the lion’s share of the latter.

The avalanche of negative publicity pointing to many years of corruption in the higher echelons of Debswana, the world’s largest diamond producer, is indicative not just of the depth of trouble, but of the determination to face these issues upfront and the political will to eradicate any abyss in good governance. On a national level, it will be up to Botswana President Ian Khama to show determination and resolve. On the Debswana level, it is up to the chairman and the board.

Former president Festus Mogae is willing to publicly admit that he was made by the previous Debswana managing director, Louis Nchindo, to choose, between either stopping the prosecution on corruption charges against Nchindo or face revelations of having a girlfriend or having been involved with alleged De Beers-related corruption issues. This has now come out, and the former president chose the law rather than yielding to the blackmail. While Nchindo was a close long-term friend of President Mogae, the president didn’t waver in doing the right thing.

With all the painful disclosures coming out of Botswana, the fact that the press is allowed to report it all without restrictions, and no one seems worried to speak his mind, is actually a most commendable and comforting state of affairs. True, everything is relative – but Botswana is remarkable in this respect.

Yes, a hell of a lot of mud is being slung and I personally expect more to come. But now more than ever, we have reason to believe that the high points Botswana is getting for being one of the least corrupt societies in the world are indeed deserved. None of this seems to undermine democratic principles. To the contrary, political corruption is taking the hardest beating.

In Botswana, it is fair to say that the corrupt practices being revealed seem more tied to specific persons than they are to institutions. This also makes it easier to remedy. There may be a few rotten apples, but the tree remains healthy.

Gareth Penny to become Debswana Chairman

The institutions governing Botswana’s diamond sector have well-balanced two-year power-rotation systems. It is now De Beers’ turn to select the next chairman of Debswana, and we have good reason to believe that the shareholders will soon announce that De Beers Managing Director Gareth Penny will succeed Eric Molale as Debswana Chairman. At the same time, there will also be a change at the DTC Botswana, where the current chairperson, Varda Shine, will make room for a Botswana government appointee, most likely, the Permanent Secretary of the Ministry of Minerals, Energy & Water Resources, Gabaake Gabaake.

In the last few years, Penny has shown that his tolerance for corruption is little-to-none and he will undoubtedly investigate thoroughly any wrongdoings attributed to the organizations for which he is responsible. From that viewpoint, the timing of his appointment is most fortunate.

While the political aspirations of the Botswana government and the desire to develop an active secondary diamond market as well as a flourishing diamond manufacturing industry can easily be interpreted as implying a reduced role for De Beers, the company appears to view this differently.

It seems as an opportunity to be more deeply involved and more committed. A point in case is today’s appointment of former Minister of Trade and Industry Neo Moroka in the newly created position of Resident Director and CEO of De Beers Botswana. Moroka’s brief is to look after and develop the De Beers commercial interest in Botswana. He will report directly to Penny, unlike the outgoing CEO, Sheila Khama, who had a more limited corporate affairs brief, reporting to De Beers Director, Stephen Lussier.

The Renewal of the Marketing Contract

It is significant that these revelations of corruption and the game of “musical chairs” in Botswana’s diamond industry management are taking place well before negotiations of the new Debswana-DTC marketing agreement will commence. The current agreement stipulates that Debswana market all its output through the international and local DTCs.

The downturn in the business cycle has seriously strained contractual provisions related to the Debswana Diamonds Delivery Entitlement. However, it seems that the thresholds of the so-called Sustained Growth Period, the setting of an employment beneficiation threshold of 3,300 employees for 2010 and total sales of $550 million annually will be met.

I personally believe that the largely positive experience of the last few years will lead to a renewal of the marketing contract, with maybe some minor changes. I can certainly see an independent sales window for the Botswana government or some 10 percent of the production to get even a better handle on market prices.

Those who espouse the need for independent marketing of the Debswana production always claim that Debswana goods are sold too cheaply. If they are priced correctly – in a sustainable manner – a market window might either confirm or belie such assertions.

Why bring up the new contract in an article on good governance? The two are related. Debswana is no longer participating in the diamond marketing and promotion budget. If Botswana is becoming a more visible and independent force in the world markets, and if it wants to secure premiums on the Botswana market product, it must be able to differentiate between countries whose reputations are severely impaired.

Botswana’s well-deserved image of being one of the best governed countries on the continent will enhance the success of its downstream aspirations. As negative as the current publicity is, that is how positive we are about the outcome.