Botswana’s diamond industry is centered on the extraction and export of rough diamonds. However, the country also imports a very small number of highly lucrative diamonds. This trade opens up possibilities of round-tripping and transfer mispricing on the re-export of rough diamonds that may possibly include depreciated locally produced rough mixed with imported high value rough. Our investigation will focus on the Botswana’s economy prior to the relocation of De Beers diamond sorting center to ensure that inflow and outflow of rough diamonds is commensurate to, and controlled for, the local economy as opposed to the global economy. Anecdotal analysis of Botswana’s diamond industry reveals potential mispricing of $483 million (at $19 per carat) when controlling for imported and exported volumes and values, using mine-gate prices. The study will investigate potential losses over a period of 5 years (2005-2010) and unpack the mechanisms used.
Debswana, the joint venture between De Beers and the government of Botswana, publishes no financial figures nor are revenues remitted to the government reported by the latter, indicating that the funds entirely bypass the Treasury. Overall Botswana has very weak reporting and disclosure standards circumventing accountability. The licensing process of gold, copper and nickel is subject to the Minerals Act, not so diamonds: companies are allowed to secretly negotiate. Diamond contracts are kept confidential. The Ministry’s financial reports are declared to Parliament with a focus on expenditure, not receipt of revenue. Similarly, there is incomplete data or no disclosure of environmental or other issues. The percentage of revenues remitted to various provinces, including diamond-producing sectors, is internally determined with no specific information on the formula used. These issues need comprehensive investigation and debate is needed on the goings on.