Namibia's Swiss Connection

Namibia’s Swiss Connection

International trade makes for some very odd and unexpected relationships. If you are very boring and spend time reading the country’s trade statistics you will find out some very strange things about Namibia. Our biggest trading partners are pretty much as one would expect. Most imports come from South Africa, with China a distant second place.  But even those figures probably miscalculate the size of South Africa’s exports because many goods coming into Namibia from RSA are of mixed origin. Our exports, on the other hand,  go first to Botswana which buys our diamonds but only because it has an agreement with De Beers (and hence we end up subsidizing Botswana through SACU) and second most import destination for our exports is South Africa. 

But it is some of our smaller trading partners that are not all they seem. The most recent Trade Report from  the NSA for 2015 says that the third biggest destination for our exports is Switzerland and our fifth biggest  source of imports is the Bahamas. Normally in international trade you trade with large and close countries and neither seem at all obvious candidates as significant trading partners for a country far removed from them as Namibia. They are even more improbable when you see what is supposed to be traded. The moment one see names like Switzerland and Bahamas as a major trading partner for a small distant country like Namibia one should become instantly suspicious.

These two countries along with other ‘respectable  tax havens’ like Luxembourg have probably done more  to facilitate the pillage and plunder of Africa than any non-colonial powers. Their secrecy laws and their tax provisions effectively shield companies and people from prosecution for economic crimes committed in developing countries with weak tax administrations. Whereas crime might not pay, helping criminals hide their loot certainly does. These countries have profited handsomely from the assistance to the plunder of their European neighbors as well as developing world as these are amongst the richest nations on earth.  Luxembourg, with no significant resources or industry,  is the second richest country on earth with a GDP/capita  in 2016 of US$ 94,000 based on what economists call ‘purchasing power parity’. ‘Poor’ Switzerland is ranked 10^th with a GDP/capita of US$57,000. The Bahamas, a tiny country that makes almost nothing, has a GDP/ capita of $21,000  ( Namibia was a mere US$8,000 in 2015).

Our trade statistics say that in 2016 we exported some N$ 13 billion (approximately US$1 billion) to Switzerland. While there were other exports such as diamonds, copper in various states,  made up some N$12 billion of our exports.  But when we go to the mirror data, i.e. what Switzerland says it imported from Namibia they say they only imported only US$1.2 million (N$ 17 million) from Namibia and there was no copper. Discrepancies in trade statistics are expected but this is not a minor discrepancy. What the Swiss say is that most of those imports are diamonds and some edible fruits. So if we exported N13 billion to Switzerland and the Swiss say they imported no copper who is not telling the truth? And if someone in Namibia is not being entirely honest in their import and export documentation then perhaps they should be asked to explain why.

But if that sounds curious then the import figures from Switzerland are even stranger. The Namibian trade statistics say that the country imported some N$ 743 million (US$50 million) from Switzerland. What our trade statistics say is that over half this figure in the form of copper ore and concentrate. This is very strange indeed not only because the Swiss figure say they exported no such thing to Namibia, they could not because there are, according to the most recent US Geological Survey report, there are no copper mines in Switzerland.

If you look at the Bahamas the figures become even stranger, if that is at all possible. Bahamas is Namibia’s 5^th largest source of imports and in 2016 it was reported to the NSA that we imported N$2.4 billion of goods from the Bahamas which is surprising given that Bahamas trade figures say they exported nothing to Namibia, not now, and  not in the last  three  years. So what was traded?  According to Namibian data almost all of these imports were vessels which could be vessels used by De Beers in Debmarine or fishing vessels. It is simply not known. Bahamas is what is called a ‘Flag of Convenience’ country like Panama or Liberia and there are numerous reasons, some worse than others, to register vessels in Bahamas. Many have to do with risk, insurance and taxes and fees. But many a sailor’s widow would regret the day that her deceased husband stepped foot on rust bucket registered in a Flag of convenience country,  some of which have only the most minimal of safety standards.

All of this may be perfectly normal as traders may be using Switzerland and Bahamas to defraud the tax offices of countries, other than Namibia and  that is none of our business. This may be the case with our tax free factories. But Mr Obed Kandjoze and Mr Immanuel Ngatjizeko  the ministers responsible for minerals and trade might want to help me, my students at UNAM and the public at large understand where exactly we are actually exporting our minerals to and where they are coming from. Right now it is a complete mystery. If we do not even know where our mineral exports are actually going and imports coming from and at what price it  would be difficult to be sure that we are getting the right amount of tax revenues from those in these businesses.

These are views of Professor Roman Grynberg and not necessarily those of UNAM where he is employed. This article was sent to officials in the Ministry of Minerals and the Ministry of Trade in Windhoek  for comment. Unsurprisingly, no comment was offered. This was also sent to Dundee Precious Metals, the main trader in copper in Namibia as well as to UNCTAD and AfDB and no reply was received. This apparent trade in copper is also happening in Zambia.

 

Saving Diamond Towns

Saving the Diamond Towns

Namibia has its fair share of ghost towns that have come about largely because a mineral deposit or precious stones has gone into terminal decline. The old diamond mines of southern Namibia of Kolmannskoop and Pomona declined purely as a result of the end of diamond deposits. It is said that at the height of the Klondike gold rush in Canada in the 1860’s Dawson (current population 1130) was the fourth largest town in North America. The decline and disappearance of some towns are not always a result of the end of a mineral deposit. The ancient town of Petra in the Jordanian dessert declined as a center it is believed because of  shifts in the spice trade. When the economic foundations of a town disappear, so does the town. But the people who live there hang on hoping that their homes will not suffer the same fate as those of who owned what was once precious property in Kolmannskoop.

Some mining towns do not go into terminal decline such as Johannesburg which has remained a thriving metropolis even as the great gold deposits of the rand mines become deeper and smaller. The continuing wealth of Johannesburg  stems from the fact that some 2 billion ounces, or half the world’s total production of gold  came from the Rand fields. When a mining town is able to continue for 135 years like Johannesburg then other sources of economic activity can replace the mines and prosperity can continue but it takes an extraordinary deposit like the Rand gold fields to sustain these  towns for the length of time needed for transformation.  Johannesburg remains a magnet for economic migrants, globalization has diminished its African trade role as a center for the purchases of manufactured products. In the 1980’s and 1990’s African merchants and traders would flood into Joburg but now the traders fly directly to Ghangzou in southern China and are able to completely undercut anything made or traded directly through South Africa.   Even Joburg will struggle to redefine itself in the world of globalization.

Governments, in fruitless attempts to placate the citizens of these dying towns, often try to help avoid economic reality by financing unrealistic economic diversification strategies through subsidy. In the Botswana town of Selebi Pikwe, the third largest town in the country, the government with the help of the EU has poured countless billions of rand  into resuscitating and diversifying the town away from nickel/copper mining. All the efforts failed and as grades of nickel and copper fell the BCL mine has been closed and the town now awaits what would appear to be its inevitable fate.

The subsidies that were provided to Selebi Pikwe failed to attract an alternative economic basis. The once thriving diamond town of Kimberly in SA has used ‘the Big Hole’ as a tourist attraction and has turned its infamous  history to its economic advantage in much the same way as tours of the ghost towns of southern Namibia attract numerous tourists. But they are no substitute for diamonds though tourism can be.

Swakopmund, which was very much in economic decline following the departure of the Germans and the end of its economic role as the capital of German south West Africa  also used tourism and retirement homes in a relatively pleasant environment as a basis for economic diversification.

The small town of Oranjemund in southern Namibia, at the mouth of the Orange River on the border with South Africa will also face this problem once the mining of diamonds from the  Orange river comes to an end, probably somewhere around 2050. The lesson form the experience of Selebi Pikwe are clear enough, subsidies to build factory shells that are commercially unsustainable won’t work and only end up as kick-backs and bribes to those officials building these rusting white elephants. The possibility of survival rests on connectivity of the town with the outside world and finding a genuine alternative commercial base for the town which is not one reliant on government hand-outs.

So what is the best chance for success?  The problem is that both Oranjemund, like the De Deers diamond town of Orapa in Botswana,  are closed to outsiders and you  require a permit to enter. This has been a policy imposed by De Beers and has been in existence in Namibia since German colonialism and is known as ‘Sperrgebiet’ ( German for ‘prohibited area’). The policy exists to protect the diamond deposits from possible theft. Yet the key to the long term survival of the town  is the opposite of Sperrgebiet- it is openness to the outside world.  In theory Oranjemund can follow the tourism path to diversification given its fabulous location. The key is to invest in the sort of infrastructure that links the border town to South Africa and the outside world. Selebi Pikwe in Botswana also flirted with tourism but after the engineers who built its BCL smoke stack down wind of this small town, tourism has always looked like a remote diversification strategy in a place plagued with acid rain and foul smelling air.

In the end most diversification strategies for one industry towns generally fail and mining towns normally become ghost towns once the minerals are exhausted.  The diversification strategies  are most likely to fail when they focus on the town itself rather than how to focus and change the economic base of the town on the outside world and how this can be done in a  commercially sustainable way.

These are the views of Professor Roman Grynberg and not necessarily those of UNAM where he is employed.

The Death of a De Beers Director ... Seven Years On

The Death  of Louis Goodwill Nchindo - No second Cut of History

Seven years ago this month Louis Goodwill Nchindo, one of the most powerful figures in Botswana’s history, died in circumstances that remain mysterious to this day. His apparent death and the circumstances surrounding it, as reported in the media in Botswana in 2010, constituted the worst political scandal in the history of the country. Yet despite its importance in the history of Botswana and the diamond industry it has been noted but never researched by any scholar. All of the commentary and analysis contained here, like others stems from the newspaper accounts of the time. Despite the undisputed elements of what would normally be perceived  of as corruption at the highest level of the state and the role of De Beers in the removal of an unhelpful leader there was no subsequent investigation in parliament nor did the institutions responsible for  combating corruption appear to have taken any measures to investigate the circumstances surrounding Nchindo’s death. The continuing relevance of the affair stems from several factors that are essential to the diamond industry and Botswana- secrecy and an intimate relationship between De Beers,  the GRB and Botswana’s political establishment. The Nchindo affair is the only case in Botswana’s history where De Beers is alleged to have been financially involved in the departure of a Botswana Head of State.

The death of Louis Nchindo is also the defining political and economic event that shaped the popular perception in Botswana that to involve oneself in diamonds or the study of the diamond industry would result, as the Tswana metaphor says,  in one being ‘eaten by lions’. Diamonds remain the single largest export of Botswana and yet despite their obvious importance to the national economy they are incredibly under-researched by Batswana academics. This stems in no small part from the secrecy and absence of reliable public data  in the global diamond trade but also the palpable sense of fear amongst scholars. Diamonds were always discussed in hushed tones, behind closed doors.  

As a result of the popular fear of diamonds, De Beers  and the industry and the cultural unwillingness of Batswana to either investigate, let alone punish those who might have attained high office means that the only source of information regarding this affair is the very extensive newspaper coverage of the events as they unfolded. It is often said that journalism is the first cut of history but in this case there will almost certainly never be a subsequent cut. For those who were in Botswana in 2009/10 the affair was simply a breath-taking event for many reasons but certainly mostly because it served as such a dramatic counter-point to the image of Botswana as being the least corrupt country in Africa[1].

Even though the only research sources are newspapers the known facts of the case require discussion because they have come, rightly or otherwise, to be seen in the popular imagination in Botswana as defining the relationship between the state and De Beers. More importantly this now long ago event needs to be remembered by a younger generation that knows nothing  of this part of the nation's history  

1. Background

Louis Goodwill Nchindo was of Zambian origin but was born in Tlokweng in 1941 and  went on to study both politics and economics at Oxford. At Oxford Nchindo was already in close association with many of Botswana’s independence leaders . Following his studies he returned to Botswana following  stints in Caracas Venzuela and other parts of Africa with Proctor and Gamble. His career went through banking and finance and he rose to head Barclays in Botswana as well as Director of the Botswana Stock Exchange. He went on to become the resident director of Anglo-American and was instrumental in the establishment of Debswana in 1991 as a 50/50 joint venture between De Beers and the GRB. Nchindo joined the ruling Botswana Democratic Party and rose to a position commensurate to his commercial position becoming a presidential adviser. He was widely considered to be the ‘Kingmaker’ in Botswana politics. This was in large measure a result of the role he was to play in the departure of President Masire and coming to power of President Mogae and the then Vice President Seretse Khama Ian Khama.

Having seen what could be done by such a Kingmaker , President Mogae removed Nchindo in September 2004 from the position of CEO of Debswana. Following his 'retirement', Nchindo was awarded Botswana's highest honour, the Presidential Order of Honour Award, by President Festus Mogae during the country's Independence Day celebrations, although he reportedly did not attend to ceremony[2]. At this point Nchindo assumed a private function as a property developer. The corruption scandal which ensued in the post-2008 period stems from Nchindo’s private land dealings as well as his time at De Beers.      

2. The Case Against Nchindo

Nchindo, both in his private position as property developer as well as earlier Managing Director of Debswana, was reported to have attempted to acquire relatively large tracts of land throughout Botswana for the purposes of tourism development. Some of these tracts of land were in the capital Gaborone. It was on the basis of his alleged corruption of public officials in the acquiring of that land in Gaborone that Chief Magistrate Lot Moroka heard some 32 charges, including corrupting public officials, against Nchindo, his son and two others for their corrupt and improper acquisition of that land. These charges stemmed not only from Nchindo’s time in private business but also from his activities with De Beers and Debswana[3]. At the time of his death he was slated to return to court by April 2010.  

3Masire and the Corruption and Impropriety Allegations

But what followed  in this case were allegations of corruption and impropriety made by Nchindo regarding President Ketumile Masire whose company, GM Five, had lost considerable amounts of money and  these losses, if made public would be an embarrassment to the ruling Botswana Democratic Party. It was alleged that masire had received considerable assistance from De Beers.

The financial assistance provided to Masire by De Beers was not a one-off event event. He and his company had been continually bailed out by De Beers in his time in office. Prior to the 1984 election De Beers facilitated a loan for Masire of P186,000 and it had also arranged a professional farm manager to assist Masire and GM5.  Had this been public at the time it had the potential to undermine the BDP at the 1984 election. Nevertheless, the BDP won and Masire remained President. Masire’s financial woes continued until 1987 when De Beers had secretly loaned GM Five P805,910 via a shelf company, Clairemont Corporation, located in Panama[4]. The loans provided by De Beers did not halt the financial problems faced by Masire. However, by the 1990’s after many years in office De Beers began to see President Masire as an electoral liability. De Beers reportedly commissioned a report from University of Natal academic Professor Lawrence Schlemmer,  who suggested a way to assist the BDP win the 1999 election when it was facing unprecedented opposition[5]. Facilitating the departure of Masire from the presidency, after he had been in power for 18 years was at the heart of the strategy. According to the public reports of Schlemmer’s strategy, Masire was to be replaced first by President Festus Mogae and then Lt General Seretse Khama Ian Khama, the current president and son of the founder of Botswana, Sir Seretse Khama. It was envisaged that Khama would also leave the army and assume, at least initially,  the role of Vice President.

 

While this certainly would have assisted the BDP and possibly De Beers by the mid-1990’s,  Masire was in such debt that his departure from the presidency would have almost certainly have meant personal bankruptcy. It is alleged that President Masire received a transfer of P3.7 million in 1998 (approximately USD 1.3 million at the exchange rate in  1998) in the form of a preference share injection by Clairemont into GM5. Unsurprisingly, Clairemont which was allegedly listed as a Panamanian company was not part of the 94 De Beers ‘legacy companies’ that were announced in 2016 during its Tax Report. Furthermore, the name Clairemont does not appear on the current registry of De Beers firms and in all likelihood it was either renamed or delisted after the affair.

 

While President Masire did not subsequently deny  receiving the financial assistance from De Beers he denied that it was a quid pro quo for him leaving office and he also stated that the funds were received after he had left office.  His press release at the time suggested that accepting the money from De Beers, had been ‘an error of judgement’.

 

4 Enter President Festus Mogae    

 

The scandal pertaining to President Ketumile Masire and his debts and the role played by De Beers took a sharply different turn when former President Festus Mogae was publicly interviewed on 17^th January 2010 when it was revealed by the Sunday Standard, that De Beers had sought to get rid of President Masire from office in 1998 because he had become an electoral liability and it was felt that the BDP would lose the up-coming 1999 election if he were not replaced. However, in light of his considerable debts it was felt that without some financial assistance, Masire was unlikely to leave office of his own volition.

           

The public policy issue surrounding this case became clear when former President Festus Mogae was interviewed in January 2010 and publicly admitted that Nchindo had approached him and requested that[6]:

‘I should stop the prosecution (for corruption )and if I fail, he would reveal that President Ketumile Masire was bailed out, that BDP had been sponsored or funded by Debswana during elections. …. Nchindo even threatened to reveal ‘my personal private life that I have a girlfriend whom I used to meet at his lodge and so on and so forth…. So I said its OK you can go ahead. I cannot commit a criminal offence just to have those things hidden including issues of personal private life….( italics added)

‘ The second time around Kwelagobe (an MP and senior BDP official) came accompanied by BDP party treasurer, Satar Dada. Mogae says the mission was to persuade him to stop the prosecution against Nchindo as he threatened to spill the beans on the activities of De Beers and BDP.

‘Even if I were to do that, he would then keep on coming with more demands and ultimately he would reveal whatever secrets he knows. I told them (Kwelagobe and Dada) to tell him (Nchindo) he should go ahead, that I cannot destruct (sic) a government structure, commit criminal offences and violate the constitution in order to protect my embarrassment, so he is doing as he so pleases’

To his credit President Mogae resisted the demands of Nchindo to end the prosecution  against him and his family members. In a subsequent press release Nchindo denied the accuracy of President Moagae’s recounting of events[7]. De Beers in a response to a questionnaire put to it by Sunday Standard was quoted as saying [8]:

… the purpose of the loan was to help the then Head of State by relieving him of the burden of debt and providing him with resources for the farm to be independently managed and so enable him to attend to duties of his office and matters of national interest. Louis Nchindo put the idea to Sir Ketumile and also recommended the assistance to the company. This was done in his capacity as an employee of the company at the time. In the present day and age, the De Beers family of companies operates in a completely different environment with clear policy guidelines governing donations and for disclosure.

In response to queries on how and why De Beers used Clairemont Corporation used a company based in Panama, a secret tax haven, as a conduit for bail out money for GM Five Morapedi (De Beers spokesman) stated that:

… it is true that De Beers was once again approached by Louis Nchindo to grant financial assistance to the former Head of State shortly after his retirement.(emphasis added). Not only did this specific transaction take place after Sir Ketumile left office it was not at all linked to any negotiations between the company and the Government of Botswana for current or past commercial arrangements. As such De Beers did not benefit from the transaction in any way.’   

5 The Death of Louis Nchindo

Barely a week after President Mogae had made the startling allegations of official corruption and blackmail by Nchindo and two days after the public retraction Nchindo disappeared on or around February 10^th. On or around February 11^th parts of what were reported to be Nchindo’s remains were found next to his car in Pandamatenga in Northern Botswana. It was reported that most of Nchindo’s body had been devoured by wild animals.  A cartridge from a gun was reportedly found near the body. The press in Botswana reported that the official police verdict of his death was suicide. There was no official enquiry as the family accepted the verdict of the police enquiry that the death was suicide and the remains were quickly cremated and buried[9].

6) Conclusions

The death of Nchindo, a man of very substantial wealth and enormous political power and influence has entered into the domain of legend and myth in Botswana.  Whether Nchindo’s death was actually suicide or his behaviour had finally caused elements of the political elite to have him removed, as was widely  held at the time, or more fancifully, that Nchindo is alive and well and living elsewhere as is so commonly believed in Botswana, will likely never be known. From a public policy standpoint all that mattered were the unchallenged facts of the case. De Beers had significant amounts of secret funding to allow it to maintain a considerable slush fund, and it was ready to use those funds through companies based in secret tax havens like Panama. De Beers had subsidiaries operating in many secret tax havens.  Whether the existence of these tax haven companies and the transfers was to avoid tax or rather to manipulate the political system to assure the continuation of governments that De Beers considered favourable to its interests cannot be known. Further, whether in fact it used transfers through these jurisdictions as De Beers has argued, as merely an act of generosity to assist a financially troubled Head of State, is left for others to decide.

The most disturbing element of the Nchindo case was the haste with which the matter was laid to rest. In the tradition of Botswana there would be no parliamentary enquiry into the relationship between De Beers and the political elite. The institutions of governance in Botswana rallied behind the political elite and the hard questions that should have been asked in any democracy after such an affair were never asked. If one accepts the explanation of Nchindo’s death as suicide and the payments made to President Masire merely a way of helping a financially troubled friend then the view, so commonly held by the international community, that there is no serious corruption in Botswana can be supported and that the relationship between De Beers and Botswana as one that has been entirely and undisputedly beneficial to Botswana. If once accepts the alternative view that Nchindo was killed after he pushed the ruling elite too far and after having blackmailed a former president over the bribery to leave office of another, completely undermines the commonly held view of Botswana.

In defence of Botswana, few countries in Africa or elsewhere for that matter would have done anything other than sweep this sordid matter under the carpet. In Africa only neighbouring South Africa has sufficiently vigorous democratic institutions that it would have been possible to really investigate so  scandalous a case. But there is also  a pan- African issue regarding Nchindo. There would seem little doubt that if Nchindo  had been a European director of De Beers, rather than an African,  and had he died under such suspicious  circumstances there would by now likely have been at least six books written, two Ph.D. theses , an  EU inquiry and at least one Hollywood movie. But  Nchindo was an African and sadly in Africa, 'black lives don't matter as much as white ones' and so this this  affair remains an almost forgotten footnote  in Botswana's  history.
 

 

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[1] Molebatsi R.M & Dipholo K.B.  (2014) ‘Least corrupt Botswana: image betrayed?, Journal of Public Administration, Vol. 49,, No 3. Much of the Nchindo affair is also discussed in Chapter 6 and 7 Yolande Kyngdon (2014) From Ultimate Rent Seeker to Positive-Sum Stakeholder? The Ethical Evolution of the Modern Diamond Industry –Ph D thesis University of New South Wales. In all academic citations in the above,  the sources are from newspaper accounts at the time. 

[2]Former Debswana chief receives top honour. Daily News (Gaboronne) 4 October 2004.

[3]Tshepo T. GwatiwaIntelligence operations as terrorism: Emerging state terrorism in Botswana Journal of African Studies and Development Vol. 3(9), pp. 176-186, September, 2011

[4] Sunday Standard Reporter (2010,  18 January). ‘De Beers, Masire in shady deals.’ Sunday

Standard. Retrieved 18/07, 2013, from

http://www.sundaystandard.info/article.php?NewsID=6698&GroupID=1 downloaded

[5]  Sunday Standard (2010, 24 January). ‘BDP in De Beers, Debswana slush funds scandal.’ Sunday Standard. Retrieved 20^th April  2015, from

http://www.sundaystandard.info/article.php?NewsID=6793&GroupID=1.

[6] Ramadubu D ‘ The Fallout- Mogae speaks out about his soured relationship with Nchindo’  Botswana Guardian, Friday 29^th January 2010. The substance of the quotation and the allegation contained in it have  not been denied by President Mogae.  It should be noted that it had  long been suggested that in the press that there was considerable pressure on government to withdraw the charges against Nchindo though there was no public discussion of how this pressure was felt. The Guardian interview with Mogae was the first substantive allegation of how Nchindo had been pressuring Mogae.

[7] E. Tsimane’ De Beers Saga – Khama, Nchindo repond , Botswana Guardian, 5^th February 2010.   

[8] Sunday Standard ‘ Nchindo- closer to the president, closer to the bullet’  January 17,  2010, page 8. The title of the article is chilling in light of Nchindo’s death three weeks later.

[9] It is the author’s understanding that Louis Nchindo’s father had also committed suicide therefore adding some credence to the allegations.