How Botswana Leverages Growth

By teaming up with DeBeers—as China's CNOOC did with oil giants—the country's government has created jobs and extra opportunities

by Alyson Warhurst

In 1984 I went to China to undertake a dream research project in collaboration with a Chinese team. Our aim was to understand why the Chinese National Offshore Oil Corporation (CNOOC) was frustrated in its efforts to persuade the growing number of oil majors looking to invest in exploration licenses to transfer proprietary technology to CNOOC in return for oil exploration concessions.

It was all going terribly wrong. On the one hand, CNOOC (CEO) felt patronized by Western oil companies that wanted its employees to attend tedious classroom lectures by the hundreds. On the other hand, Western oil companies felt CNOOC had significantly overstated the "20 years of experience" of its engineers. They argued that in reality CNOOC's engineers had had one year's experience 20 times.

We recommended that the Chinese trainees and their Western counterparts collaborate as integrated teams of innovators on specific mid- to long-term research and development projects, which they did. Over the next several years, exciting innovations were developed in geophysics exploration and in complex-basin modelling.

A Chance to Gain Global Status

Nearly 25 years later, CNOOC has grown from producing less than 100,000 tons to more than 40 million tons (oil equivalent) per year and has made investments throughout Africa. If allowed it would have bought U.S. oil company Unocal (CVX) in an $18.5 billion all-cash bid. Such is CNOOC's appetite for expansion and enterprise. What the company is doing today should come as no surprise: Chinese cash reserves and the predicted end of easy oil in the Middle East, the North Sea and the Americas gave it an unequivocal negotiating edge.

China isn't the only place where ambitious national enterprises have the opportunity to gain global status through smart stewardship of natural resources and their wealth-creation capacity. There is perhaps no better example today than the African country of Botswana, which is looking to leverage its leading position in diamond mining into a host of ancillary businesses, from diamond processing to banking, security, information technology, and even tourism. As with CNOOC, a quarter century from now we may see this as a critical step in Botswana's—and indeed Africa's—economic development.

This story starts for me in 2007, when I went to Botswana for the first time to conduct a social audit and write a report about the role of diamonds in the country's national wealth. Even though I had traveled extensively through Latin America and other natural-resource-dependent countries in Africa, for me Botswana stood out. Its development path since independence has been built on diamond wealth, and its revenues have been managed and spent prudently on education, infrastructure, and health care.