Flaws in Botswana’s Diamond Industry - Khadija Sharife
▻http://wpj.dukejournals.org/content/33/2/77.full
A contract negotiated between De Beers and a prominent sightholder, Diacore, showed that De Beers traded high-value diamonds through corporate structures that operated entirely through tax havens such as the British Virgin Islands. For instance, say a diamond is exported from Botswana and classified as “exceptional.” Exceptional, here, refers to a gem-quality rough diamond that is valued at more than $250,000.
In this instance, De Beers, through an unknown set of criteria, values it at $19.5 million with the sightholder paying half. The sightholder is incorporated in the British Virgin Islands as a holding company with financial advisers based in Switzerland. The company maintains over two-dozen shell entities, constantly changing names and forms.
(...) Through this process, De Beers can essentially set its own tax rate by determining the value of the diamonds on which government fees are levied.
(...) In Botswana, democracy has been perverted. A company needs a country to thrive; a political party needs the company to maintain its hold on the government; and a company benefits from a friendly party in power. Within this incentive structure, De Beers will help Botswana to a certain degree, and as long there are diamonds in the mine, revenue will continue to be generated. Yet Botswana’s paper success does not translate to the kinds of gains that the country should be receiving. Disclosure of key information and ending De Beers’ monopolistic practices would liberate the economy and its democracy.