De Beers Diamonds

History
Scarce sources of diamond only in riverbeds of India and

jungles of Brazil diamonds were rare

Accidental discovery of diamonds in South Africa in 1866
Formation of De Beers Mining Company by Cecil Rhodes

in 1880 (by 1887 he had bought all the major mines)

Rhodes wanted to control the production and distribution
Diamond Syndicate was formed in 1890 (all members

pledged to buy from Rhodes, sell at specific quantities

and prices). Cartel was in place.

 Evolution of the Cartel

Ernest Oppenheimer of Anglo-American forged
permanent links between producers and distributors.
Other diamond-producing states sold rough diamonds
only to De Beers at De Beers price (stable prices,
guaranteed purchase for those companies)
Central Selling Organization (CSO) in London was the
main distribution point for the world diamond trade. De
Beers Sightholder Sales were held with elite merchants
(no cherry-picking of stones)

 Stockpiling, Oppenheimer empire and the US Antitrust Law.

Threats from Zaire (small industrial grade stones) and Russia ($1 billion loan
to Gorbachev govt. for stockpile)
1997 Asian crisis (Japan sales fell from 33% to 18% of the total world market)
Relative importance of the US market grew from 30% to 46% of retail diamond
sales
Depressed De Beerss sales and a reduced share price (start of 1998 De Beers was
selling down 45% from a high just six months ago)
A new wave of value investors from the US saw an opportunity for financial gain

80% of worlds rough production of diamonds fell to 60% in 100 years with a
$4.8 billion stockpile (end of 1998)
The power of the brand shift in strategy towards branding, high-end
fashion accessories and the reduction of stockpile.

 Speech by Nicky Oppenheimer in 1999 at Harvard Business School

A review of the US Antitrust Laws and the Department of Justice
Economic development of South Africa by discovery of diamonds
Namibia: 40% of countrys foreign exchange earnings are through diamonds
Botswana as Africas success story. After the startup of the Orapa mine the
economy grew at an average rate of 14.5% per annum.
75% of the diamonds come from Africa and 46% of the worlds diamonds
are sold in the US, where De Beers cannot do direct business.
America wants a strong South Africa. America needs a strong South
Africa. President Clinton.
De Beers, a truly African company, should be part of any effort involving by
the USA to use diamonds to help the renaissance of Africa. Nicky
Oppemheimer