THE decision by the government of Botswana to pass on its pre-emptive rights to take a higher stake in diamond company De Beers should be seen as a lesson to the advocates of nationalisation in South Africa. The African National Congress Youth League has long argued that De Beers' relationship with Botswana should be regarded as a model for South Africa's mining industry as it is still regarded as a safe investment destination internationally, in spite of the majority stake held by the Botswana government.

This understanding is misconstrued, as the decision to pass up on the rights demonstrates. In fact, Botswana was clear-sighted about the diamond industry right from the start. It did not nationalise existing mines but embarked on the enterprise in partnership with De Beers, allowing the company to manage the business in its own way. Both sides contributed to capitalising the mines and, in this sense, the government has acted as an arms-length shareholder rather than operating the company as a division of the state.

The downside is that the relationship has allowed De Beers to dominate the diamond industry in Botswana. But, as it turns out, the relationship has worked for both sides and has underpinned Botswana's economic growth over the years.

It was all going well until the recession in Europe and the US in 2008-09 affected diamond sales. The sudden collapse of diamond prices required the Botswana government to support the stressed company financially through the downturn, which it dutifully did. Mines had to be temporarily closed and the experience was unhappy.

It is presumably partly this experience that is now informing Botswana's decision to cut back its exposure to the diamond industry. It remains committed to the local company, Debswana, but it is understandable that it would not want too many of its eggs in a single basket. Hence, it has decided to maintain its exposure to the international business and consequently saves itself almost $1.3bn.

As a result, the slack has to be taken up by Anglo American, which will now be in a position to conclude its $5.1bn takeover of the Oppenheimer stake in the company. Presumably Anglo would have preferred the Botswana government to take up its pro-rata share of the stake, for simple cash-flow reasons. But having made such a large bet on diamonds, it is obliged to put its money where its mouth is.