Debswana Bars Eight Companies Over Fronting Violations
Debswana has barred eight companies from doing business with the diamond producer for two years after an external investigation found that they had violated anti-fronting provisions under its P21 billion Citizen Economic Empowerment Programme (CEEP).
The companies were among 22 entities investigated following allegations of widespread fronting within the programme, which was established to increase the participation of citizen-owned businesses in Debswana's procurement.
The eight companies collectively received P66.7 million from Debswana since 2024, according to company officials. They said the amount represented about 0.27% of Debswana's annual total expenditure.
“Despite the sizeable amount, the expenditure represents about 0.27 percent of Debswana’s annual total spend,” officials said in responses to enquiries from Mmegi. They added that the majority of citizen business partners comply with Debswana's and statutory anti-fronting requirements.
The companies may apply to be considered for inclusion in Debswana's supplier database once the two-year exclusion period has ended.
Investigation Follows Fronting Concerns
The investigation was commissioned amid concerns about the extent of fronting within the CEEP, with earlier estimates from Debswana executives suggesting the practice could involve a significant proportion of participating suppliers.
The CEEP was designed as a major mechanism for transferring economic value from mining to Botswana's citizens. Its target was to direct P20 billion in Debswana procurement towards citizen enterprises between 2019 and 2024, while creating 20,000 opportunities.
Debswana has historically been one of the country's largest procuring entities, although citizen-owned businesses have faced competition from established multinational and foreign companies.
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Debswana's latest findings have confirmed fronting in eight of the 22 companies examined, according to officials.
The company's Head of Supply Chain, Phillip Lisindi, had previously raised concerns about the practice.
“We have found that 90% of service providers are fronting for companies outside the country,” Lisindi said at an earlier meeting.
He cited instances where individuals presented as company owners were unable to answer technical questions during project appraisals, while foreign partners handled the discussions.
Lisindi also alleged that some companies participating in the programme did not maintain bank accounts in Botswana and that salaries and other liabilities were paid from outside the country.
He further identified changes in shareholding shortly after citizen-owned companies were awarded contracts as another potential indication of fronting.
According to Lisindi, some citizens involved in such arrangements may hold formal ownership but lack effective control over business decisions and project management.
Debswana Strengthens Procurement Controls
The investigation comes as Debswana continues to strengthen oversight of its supplier base and citizen economic empowerment initiatives.
In 2024, the company spent P5.39 billion with citizen-owned companies, accounting for 50% of its total procurement expenditure for the year.
Debswana has also entered into a Memorandum of Understanding with the Directorate on Corruption and Economic Crime (DCEC) to strengthen cooperation in preventing, detecting and investigating corruption-related matters.
Officials said the partnership would support information sharing, capacity building, awareness programmes and advice on managing corruption risks in areas including supply chain and procurement.
Asked whether the DCEC was involved in any ongoing investigations at Debswana, executives said the company engages appropriate law-enforcement authorities where matters fall within their mandate.
“Where matters fall within the mandate of law enforcement agencies, Debswana engages the appropriate authorities, including DCEC in accordance with established protocols and legal requirements,” officials said.
Debswana said it applies a risk-based process to identifying and investigating possible fronting. Investigations can be initiated following warning signs detected during procurement processes or information submitted through the company's Ethics Hotline.
“Debswana reassures the public, shareholders and investors that it continues to monitor its business environment and adopts a risk-based approach when investigating instances of possible fronting,” the company said.
