Strategic Partner or Shot Caller?: The De Beers Factor in Botswana’s Development

Introduction

The relationships between African states and multinational corporations have been hotly debated. Proponents of multinational activity in developing states contend that states whose policies do not actively promote foreign direct investment are often less developed than their open-market counterparts. As a result, states have become heavily reliant on multinationals to integrate their economies into the world market in order to boost economic development. However, one of the main problems created by the growing influence and power of multinational corporations is the erosion of state sovereignty. Multinational corporations are among the greatest threats to the sovereignty and autonomy of small states. Due to their capital sway and being profit-making in nature, multinationals usually lobby and manipulate governments to maintain obstructive measures so they can secure maximal benefits from distorted markets. In addition, certain companies have been embroiled in accounting scandals and allegations of egregious labor practices,¹ suggesting that multinational corporations do not always encourage development, but sometimes seek to corrupt governments and destroy domestic economies in the name of profit.

Multinational corporations are money-making entities that have indubitably shaped the economic and political development of many African countries. In contemporary Africa, military and diplomatic interventions, foreign direct investment, and external aid have all reinforced the continent’s dependence on outside agents to address their current developmental problems. As a result, African states suffer from a crisis of sovereignty. Botswana is no exception. At the time of independence in 1966, the country faced the daunting task of crafting an autonomous development policy. Its economy was dwarfed by Apartheid South Africa, the regional powerhouse that controlled a significant amount of trade through its hegemony within the Southern African Customs Union. The Botswana economy was still highly dependent on external aid from its former colonizer, Britain, bolstered by preferential beef export arrangements.² The discovery of diamonds soon after independence, however, became a great challenge to Botswana’s autonomy with the introduction of the powerful diamond multinational corporation De Beers into the arena. This would profoundly transform the state and catapult it to a position as one of the fastest growing economies in the developing world for over 40 years, a feat that the country could not have achieved alone. The relationship between De Beers and the Botswana government has been lauded as a strategic, mutually beneficial partnership.³ However, De Beers’ influence in Botswana has not remained apolitical. At various pivotal moments in the country’s political history, De Beers has intervened and seemingly “called the shots,” begging the question, exactly what is the nature of this relationship?

This paper analyzes the asymmetrical relationship between the Botswana government and De Beers and challenges the prevalent literature contending that the relationship is a strategic mutual partnership. It argues that at many crucial points in the country’s history this highly intrusive multinational maintained significant control of both economic and political choices. Although Botswana possessed leverage as the world’s premier producer of rough gem diamonds, it remained the more passive actor within the partnership. De Beers used its means and access to influence Botswana’s political and economic development to make the country a better investment environment for cartel behavior and profit-maximization. As a result, the relationship between De Beers and Botswana was one of manipulation of government policies in favor of maintaining the economic and political status quo.

Conceptual Framework

The Developing State and the Multinational – An Asymmetric Relationship

The relationship between small states and large multinational corporations can best be described as asymmetric. The institutional development of most African countries has been shaped and influenced by skewed relationships with external actors whose established structures are fashioned to cater to the needs, not of the territories themselves, but of the national and business interests of larger states. Multinational corporations are by definition organized corporations that acquire cost advantages through centralized production in places where cheaper resources are available.⁴ While these corporations provide developing countries with the critical financial infrastructure and capital needed for economic and social development and integration into the global economy, they...