# Regulatory Compliance Category > BEE and Employment Equity Forum >  De Beers, SA to set up black-run gem firm

## Dave A

The world's top diamond producer De Beers and the South African government will form a new black-controlled diamond mining company, they said on
Friday.

The new company, which might later be listed on the
Johannesburg stock exchange, would combine the assets of state mining group Alexkor and the Namaqualand mine unit owned by the South African unit of De Beers.

To help forge the new firm, De Beers would give a 20 percent stake in Namaqualand Mines - which last year produced one million carats - to South Africa's mining ministry at no cost to the government.

De Beers said it would not operate the new unnamed company and would dilute its stake over time. Both Alexkor and De Beers' Namaqualand are involved in mining diamonds on South Africa's north-west coast.
full story from Business Report here

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## duncan drennan

> To help forge the new firm, De Beers would give a 20 percent stake in Namaqualand Mines - which last year produced one million carats - to South Africa's mining ministry at no cost to the government.


Hmmm...but why? Not much in life is for free - and 20% of a diamond mine is definitely not on that list.

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## Dave A

Yeah. This one makes no attempt to pretty up the ugly underside of these deals. The trade-off is obviously renewal of mining licenses. No hard currency is changing hands, but clearly there is an exchange of value.

But when we get down to it, what *is* the difference between this deal and one where the "beneficiaries" receive shares financed by the company and the "loan" is to be repaid out of dividends?

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## duncan drennan

> Yeah. This one makes no attempt to pretty up the ugly underside of these deals. The trade-off is obviously renewal of mining licenses. No hard currency is changing hands, but clearly there is an exchange of value.


I'm a bit confused  :Confused:  Isn't this tantamount to bribery? I give you "cash" (in this case 20% shares), you give me a mining license? Yet it is hailed as a wonderful BEE deal ??????? Am I stupid, or naive?

And another thing, who really owns the shares if they belong to the "government"? Who gets the dividends? ANC? Parliment? DA? What can "government" do with those shares?

The problem, as I see it, is that as soon as government holds equity in private companies there is no longer any way that they can be objective wrt any licenses/tenders/etc. This applies to the Telkom saga too. How can government represent the people if they have a vested interest in certain industries??




> But when we get down to it, what *is* the difference between this deal and one where the "beneficiaries" receive shares financed by the company and the "loan" is to be repaid out of dividends?


I thought that this wasn't allowed? Don't the BEE investors have to get an independant loan?

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## Dave A

> I thought that this wasn't allowed? Don't the BEE investors have to get an independant loan?


What. And lose the points for financing the deal!  :Whistling:  
The loan will be in the "investor's" name, or wiser still, in a trust or other vehicle that can be dropped if the deal goes sour. And the debt is all paper - the only money changing hands is when the company buys the shares from the market to sell *cough* give away to our new "investor."



> I'm a bit confused  Isn't this tantamount to bribery?


With the shares going to government it definitely isn't bribery. Bribery is when you gift a connected person or organisation for influencing a favourable outcome. I _think_ government as an organisation is exempt as a beneficiary of bribes.

I suppose it could be seen as a form of nationalisation, maybe? Political expedience? Blackmail?

Whatever. Responsible corporate citizen sounds so much better, don't you think.

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## duncan drennan

A rose by any other name.....

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## Dave A

.... smells just as sweet? 

Not much of an expert on roses, but does the sweetness have any relation to colour? It would certainly complete the irony  :Stick Out Tongue:

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