#999 1969 · Government of Botswana / De Beers · Mining (diamonds)
Botswana took equity in its own diamond mines instead of settling for a royalty
the problem
A newly independent, deeply poor Botswana had just found diamonds it had no capital or expertise to mine alone
background
Botswana became independent in 1966 as one of the poorest countries in the world, with little infrastructure, a cattle-dependent economy, and per-capita income among the lowest anywhere. When De Beers discovered a major kimberlite pipe at Orapa in 1967, the government faced the standard postcolonial resource dilemma: nationalize the find outright and lose De Beers' capital, technical expertise and access to the global diamond marketing cartel that alone could sell rough stones at scale, or grant a conventional mining concession and collect royalties and taxes while nearly all the long-run upside and control stayed with the foreign company — the pattern that had left many resource-rich nations poor despite their mineral wealth.
Full nationalization risked repeating what had happened to Zambia's copper mines, where the state took over operations and lost the technical expertise to run them profitably. A fixed royalty and tax concession was the safer, more conventional deal — but it capped the government's take at a set rate no matter how spectacularly profitable the mine became. Botswana's negotiators, led by Vice President Quett Masire, asked for something in between: not ownership of the mine outright, and not just a cut of its revenue, but a shareholder's seat at the table.
what everyone would do
The two paths on offer were full nationalization, which had cost countries like Zambia the technical expertise needed to keep mines running profitably, or a conventional royalty and tax concession, which locked government revenue to a fixed rate no matter how much more valuable the mine turned out to be.
what they saw
The real prize wasn't a bigger revenue share, it was a permanent seat where decisions on production and profit got made. Equity ties the return to the mine's success, without renegotiating every time prices moved.
the move
In 1969 the Botswana government and De Beers formed a joint venture, initially the De Beers Botswana Mining Company, with the state taking a 15% equity stake at formation. After De Beers discovered the exceptionally rich Jwaneng pipe in 1972, Botswana renegotiated its position up to a full 50/50 ownership split — giving the government not just a percentage of profit but a direct claim on dividends that rose and fell with diamond prices, and a seat in every major boardroom decision about production levels, reinvestment, and where the country's diamond wealth would ultimately be spent.
why it works
A royalty is a fixed rate locked in at the moment of weakest information, before anyone knows how rich a deposit will really prove to be; equity instead ties the government's return directly to the mine's actual performance, so when the discovery of the extraordinarily rich Jwaneng pipe in 1972 dramatically increased the venture's value, Botswana's 50% stake captured that upside automatically rather than requiring a fresh round of negotiation from a now-stronger but still dependent position. Board representation additionally gave Botswana a say in how quickly the resource was extracted and where profits were reinvested, preventing the kind of extraction-maximizing behavior that a purely arm's-length taxing authority has little power to stop.
the payoff
Botswana went from one of the world's poorest nations to Africa's diamond leader, with decades of the world's fastest sustained GDP growth.
where it breaks
It requires a government with enough initial leverage and negotiating capacity to secure meaningful equity rather than a token stake, and enough institutional stability afterward that the state doesn't simply extract the equity's dividends the way a corrupt regime would extract royalty revenue, leaving citizens no better off than under a pure concession. It also depends on the foreign partner having something genuinely hard to replace — technical expertise, market access, or capital — since without that leverage a resource-rich but institutionally weak government attempting the same equity demand may simply scare off the investment altogether.
what came after
The joint venture, later renamed Debswana, became the world's leading diamond producer by value, and Botswana's transformation is one of the most frequently cited counterexamples to the 'resource curse' in development economics, studied by economists including Daron Acemoglu and James Robinson as evidence that equity-based bargaining over resource wealth, paired with strong domestic institutions, can convert a mineral discovery into lasting national prosperity rather than elite capture.
references
- [1]Inside Diamond Mining Icons: Joint Ventures Between Botswana and De BeersMining Weekly, 2023miningweekly.com
- [2]Our HistoryDebswana Diamond Company, 2022debswana.com