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100 years of diamonds: Anglo American’s century-old link with Namibia

Avatar of inke inke - 25. September 2017 - Economics

Ernest Oppenheimer (right) visiting an Amsterdam diamond factory, 3 December 1945. (Nationaal Archief NL, Koos Raucamp)

One of the biggest global companies in the mining sector, Anglo American celebrates its hundredth anniversary this month. This is a time to reflect on its founder, Sir Ernest Oppenheimer, who started South Africa’s diamond dynasty over a century ago. Anglo American’s wealth is inseparably intertwined with Namibia’s diamond sector and Anglo’s subsidiary, De Beers.

Ernest Oppenheimer registered his company, Anglo American, on 25 September 1917. The aim was to become a big player in the country’s diamond sector. At the end of the First World War a golden opportunity arose: the diamond fields in neighbouring German South West Africa that would inevitably be placed under new ownership after Germany’s defeat. This happened as expected when the Versailles Treaty was signed in 1919 and South West Africa became a mandate under British rule, administered by South Africa.

Diamonds found in 1908

Diamonds had already been discovered in German South West Africa in 1908 when railway worker Zacharias Lewala found the first diamond near Lüderitz. He showed it to his supervisor, August Stauch. A railway line was being constructed from Keetmanshoop to Lüderitz at the time and Lewala was sweeping sand off the tracks when he spotted the diamond. 

After the diamond discovery, the diamond rush began. The government in Berlin declared the area around Lüderitz a ‘Sperrgebiet’ (prohibited area) and set rules for diamond mining quotas and sales. 

Meanwhile in South Africa, the powerful De Beers diamond mining company watched the diamond output in South West Africa with growing concern. They feared lower diamond prices with Germany’s entry into the market. De Beers had been established in 1888 by British business tycoon, Cecil John Rhodes, who died in 1902. 

Changes after 1918

A new diamond magnate would soon enter the field, making major waves in the mining industry. Ernest Oppenheimer was born in Friedberg, Germany in 1880. At just 17 years old, he was sent to London to his uncle Anton Dinkelsbuhler, a trader in gem stones who had interests in South Africa. In 1902, Oppenheimer was sent to Kimberley in South Africa as a diamond buyer for his uncle’s company. He was very successful. In 1912, at the tender age of 32, Oppenheimer became the mayor of Kimberley, the major diamond mining town in South Africa. 

When Germany lost the First World War and its colonies, De Beers was interested in the Lüderitz diamond fields, as was Oppenheimer. On 25 September 1917, twenty-seven months after German colonial forces capitulated to British-South African forces near Otavi, ending the war in German South West Africa, Oppenheimer registered Anglo American, co-financed by the JP Morgan bank in the US, among others.

As it became evident that Germany would lose the war, the German nationals in German South West Africa feared for their wealth and shares in their diamond mining companies. They had been able to continue mining diamonds on a limited scale during the war, under the watchful eye of the South African administration.

The German lawyer, Dr Erich Lübbert, who had come to Lüderitz in 1909, specialised in mining law. Later on, Lübbert would also establish a business partnership with diamond-mining-magnate August Stauch. Lübbert was farsighted enough to recognise that the only way to rescue at least part of their fortune was to establish a merger with South African mining companies after the war ended. According to Olga Levinson in her book ‘Diamonds in the Desert’, this was a tough decision, but it could prevent outright expropriation.

Mysterious bidder for diamond fields

South African businessmen did indeed approach Lübbert in 1919. Negotiations took place over two weeks in Amsterdam in the autumn. Henry Charles Hull and Sir David de Villiers Graaff were the negotiators. They proceeded after having discussed their plans with South Africa’s Prime Minister, Louis Botha, shortly before his death on 27 August 1919 and with his successor, Jan Smuts, who both gave the go-ahead. Before that, there had already been rumours that Hull had established contact with a ‘mystery buyer’ in South Africa.

Out of those negotiations the new company Consolidated Diamond Mines (CDM) of South West Africa was born. CDM started ‘with a capital of 3,75 million British pounds divided into one-pound shares’ writes Levinson. The major German-SWA diamond companies were represented by the negotiators Lübbert, Stauch and Walter Bredow. According to Levinson, ‘Stauch and the other diamond producers would receive 3,5 million pounds, one half in cash, the rest in shares in CDM’. 

Only after the contracts were signed on 9 February 1920 in Cape Town did Hull eventually reveal the identity of the mystery man behind the deal: Ernest Oppenheimer with Anglo-American*. De Beers was not pleased; Oppenheimer had outwitted them.

CDM took over all diamond mining licences and concessions in South West Africa in 1920, mining and selling its diamonds for the next 70 years. When Namibia became independent in 1990, changes were introduced.

De Beers and diamonds

From around 1920 Ernest Oppenheimer, through the Anglo American Corporation, began to buy up shares in De Beers, which was experiencing difficulties at the time. By 1926, Anglo American had become the largest single shareholder in De Beers and Oppenheimer joined the De Beers board of directors, becoming its chairman in 1929. Two years later De Beers bought CDM from Anglo American. Anglo diversified its mining operations by adding gold, copper and coal mining among others. Oppenheimer - through De Beers - concentrated on diamonds, consolidating the company’s monopoly over the global diamond industry and diamond trade. The name Oppenheimer became synonymous with De Beers and the diamond dynasty continued with Harry Oppenheimer, Ernest’s son, and then Harry’s son, Nicky Oppenheimer, keeping it in the family. 

After Independence 1990

CDM mined diamonds for seven decades in South West Africa. After Namibian independence in 1990, the new government made it clear that some profit sharing needed to be put in place. In November 1994, CDM became Namdeb Diamond Corporation (Namdeb). The new company is a 50/50 joint venture, owned by De Beers and the Namibian government. In 2002, De Beers Marine Namibia (Debmarine) was created to mine diamonds offshore along the coast. By 2011, a new shareholding agreement between De Beers and the Namibian government was signed. Namdeb Holdings was created, also a joint venture between De Beers and the Namibian government. It owns Namdeb and Debmarine Namibia. 

End of the diamond dynasty

The 90s heralded the end of a long diamond dynasty. In 1999, Anglo American shifted its headquarters from Johannesburg to London. Soon after, in 2001, De Beers South Africa delisted from the Johannesburg Stock Exchange after 108 years. In the same year, Anglo-American dual-listed on the London Stock Exchange and in Johannesburg. In 2011, the Oppenheimer family sold its entire 40 percent stake in De Beers to Anglo American for US$ 5,1 billion in cash. The diamond dynasty had finally ended. De Beers now only controls about 33 percent of the world diamond trade.

Diamond mining continues in Namibia. In 2016 the Namibian government signed a new ten-year partnership deal with De Beers. Some US$430-million worth of the annual Namdeb and Debmarine production is handled by Namibia’s own diamond trading company, NDTC. Fifteen percent of the diamonds produced are marketed internationally outside of the De Beers system by the government’s new company, Namdia. Namdeb and Debmarine together produce roughly 1,6 million carats per annum. From January to June 2017, Debmarine produced 697,000 carats and Namdeb 166,000 carats, (totalling 863,000 ct).

After many decades of mining, Namibia’s onshore reserves are becoming increasingly depleted. The end of the road might be near for Namdeb’s satellite onshore Elisabeth Bay and Daberas diamond mines. “They are well beyond their original planned life of mine,” Namdeb stated in a press release on 31 August 2017. Namdeb has to “plan responsibly for the possible closure of operations that reach the end of their economic life span,” Namdeb’s acting CEO Mark Lubbe stated.

Oranjemund opens gates

The changes in the diamond industry can be seen in the transformation of the restricted diamond mining town of Oranjemund, which will lose its restricted status on 14 October 2017, becoming an ordinary Namibian town like any other. Namdeb will hand over the ownership and assets of Oranjemund to the town council, ending its long diamond mining history.

* Namibian publication ‘Journal’ (2013), article by Walter Rusch

Brigitte Weidlich

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