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The Diamond Advanture



Emerging from the past

June 2, 1999 saw the passing from office of Nelson Mandela, South Africa's first black president.South Africa's new president, Thabo Mbeki, has the task of following in Mandela's giant footsteps.

Five years after South Africa's black majority assumed political power, economic uncertainty remains,

An arial view of the Finsch Mine today
An aerial view of the Finsch Mine today.

exacerbated by massive unemployment, shortages of housing, and violent crime. Yet South Africa still holds a commanding position in respect to world gem production. As it is home to De Beers, the world's most influential diamond company, South Africa is also the center of the world's diamond industry.

De Beers recently moved from Kimberly, the northeastern town in which, 130 years ago, the richest find in diamond mining history was discovered, to a campus situated outside Johannesburg, at Crown Mines. Up until several months ago, the company shared a high-rise complex with its sister company, the Anglo American Corporation. But all that changed on Nov. 25, 1997-- Anglo American announced a reorganization, which included the consolidating of its interests into independently managed companies.


De Beers now concentrates exclusively on diamond mining and marketing. Anglo American sold its direct interest in the two companies which make up the De Beers group to a jointly owned investment company. Furthermore, Anglo American transferred its interests in the Central Selling Organization to De Beers.

The move to the Crown Mines campus was a component of De Beers' process of disengagement from Anglo American. Last Oct. 15, Anglo American announced that it would be merging with Minorco Societe Anonyme, to establish Anglo American PLC, a company based in the United Kingdom and listed on the London Stock Exchange. In its new form, Anglo American would become one of the world's largest mining and natural resources conglomerates. In a statement condemning the move, the Congress of South African Trade Unions (COSATU) described the Anglo American decision as a vote of no confidence in the future of the South African economy.

But Anglo American's move appeared to have been coordinated with the office of South Africa's vice president. In a statement to the press, Thabo Mbeki said that he remained convinced that the new company's listing on the London Stock Exchange will not reduce Anglo American's contribution to the South African economy, but rather will increase its operations in South Africa.

When De Beers' new Crown Mines campus was officially opened on Nov. 19 -- a month and four days after the Anglo American announcement -- the official guest of honor was none other than Vice President Mbeki, who said in a speech: "[W]e have no doubt that this event is not merely symbolic, but signifies your commitment to the future development and prosperity of our mining industry, and hence to the further development and prosperity of our country." For their part, De Beers officials stressed that they had no intention of shifting the center of the company's operation out of South Africa.

De Beers is aware that its business environment is being altered, and that it too will have to make changes to adapt. Reports of an extensive internal review of its mining and marketing operations have been receiving press coverage, including rumors about the termination of the CSO, which controls distribution of most of the world's rough supply. With other major mining groups becoming more involved in the diamond business .

Diamond Sawing
Training in diamond sawing is provided at 'The Hive'

De Beers may choose to end its policy of maintaining a buffer stock in order to support world diamond prices, and instead concentrate exclusively on selling its own diamonds

Brian Ainsley, De Beers' director of operations in South Africa, dismissed reports about the demise of the CSO as speculative. Nonetheless, he stated, "a process by which we review our organization and its place in the world market is natural and essential." The restructuring of De Beers is an ongoing process, Ainsley explained, and the first stage -- the financial reconstruction -- is now virtually complete, with the establishment of Anglo American PLC and the consolidation of De Beers as a separate economic entity.

"What we are involved with now is the second stage -- organizational restructuring," he said. Ainsley did not deny that De Beers is re-considering its role in the world diamond market, given its slide in share of the rough market. He agreed that the CSO's pilot study, currently underway in Northern England to study the viability of De Beers-branded diamonds, could eventually result in an alternative marketing strategy, which would promote De Beers diamonds instead of all diamonds.

Meanwhile the African National Congress government has dropped much of its former anti-industry rhetoric and has forged a solid -- albeit cautious -- alliance with the industry. But there remain real differences in opinion. In contrast to almost all other countries, private ownership of mineral rights is permitted in South Africa. Over the years, private individuals and companies - almost all of whom were white or white-owned - purchased the mineral rights to most of the known deposits. However, state-ownership of mineral rights lies at the very heart of ANC mining policy, albeit achieved slowly. The Chamber of Mines of South Africa, the organization which represents all South Africa's major mining houses, asserts that to transfer mineral rights at this stage to the state would be counterproductive.

"In principal we are not opposed to state ownership of mineral rights," explained Roger Baxter, the head of the economic department at the Chamber of Mines. "What worries us is the actual process by which the transfer of ownership will take place." Penuell Maduna, South Africa's Minister of Minerals and Energy, has admitted that it could be 20 years before it is implemented, and it would almost certainly face a challenge in the country's constitutional court. The South African constitution protects property rights. However, if the African National Congress gets more than two-thirds of the vote, it then would be free to change the constitution.

In the speech he delivered at the opening of De Beers' Crown Mines campus, Mbeki said for their part, companies like De Beers must work toward allowing entry to new -- meaning "previously disadvantaged"- - entrants into the mining industry. In January, De Beers announced that it was transferring its 60 percent stake in its Marsfontein mine (which it shares with a Canadian firm) to a new company called Newco, in return for $32.3 million. De Beers then planned sell off up to 49 percent of this company to a consortium of black economic empowerment partners.

South Africa is also a diamond cutting center, and the government is keen to expand the number of black entrepreneurs involved in diamond cutting. South Africa's Ministry of Minerals and Energy investigated using apartheid-era legislation to force the diamond producer to sell to local cutting facilities in an effort to promote black empowerment, but the plan was eventually shelved, after a study found that black empowerment would be better achieved through the promotion of sound industrial practices. De Beers currently is promoting a grass-roots program at the Harry Oppenheimer Diamond Training School in downtown Johannesburg.

The program involves a fully-equipped facility in which graduates of the training school can set up shop, and sub-contract on jobs obtained by an administrator working for the school. It is hoped that they will develop the business and managerial skills necessary to make it in the open marketplace.

The manager, principal and chief lecturer at the school is Dawid (Koos) Rademeyer. With more than 30 years experience in the South African cutting industry, he has handled the day-to-day operations since 1996.

"What we are seeking to achieve goes beyond simply providing technical skills," Masebelanga explained. "We are attempting to foster an entrepreneurial spirit. If we succeed, we could eventually change the face of the South African diamond cutting industry."




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