In this article, Dr. Newbury focuses on the technical and financial reasons for amalgamation at the Kimberley mines in South Africa, drawing on primary records to account for the rise of De Beers as the world's major diamond mining company in the 1880s. He finds that prior experience in local government and on the mining boards prepared company directors for competition in joint stock enterprise, while differences in production policies and performance influenced the pattern of mergers within and among the four Kimberley mines. De Beers's close relationship with diamond merchants and private banks in London, particularly N. M. Rothschild & Sons, was central to its position as a prime mover toward consolidation. Dr. Newbury views De Beers as a firm that relied for its success less on its renowned chairman, Cecil J. Rhodes, than on a combined managerial expertise that reflected the interests of both mining producers and merchant buyers.
1 Houghton, D. Hobart and Dagut, Jenifer, eds., Source Material on the South African Economy: 1860–1970. Vol. 1: 1860–1899 (Cape Town, 1972), 290, 346. A somewhat confusing repetition of names appears in this narrative. Kimberley, or Kimberley Mining Area, is the town in which the mines discussed in this article are located. One of the four diamond “pipes” is also called Kimberley (usually, the Kimberley mine), the other three being De Beers, Dutoitspan, and Bultfontein. Kimberley Central is the mining company that grew out of the Kimberley mine, analogous to De Beers Mining Company at the De Beers pipe. De Beers Mining Company grew into De Beers Consolidated Ltd.
2 For the 1870s, see Turrell, R., “The 1875 Black Flag Revolt on the Kimberley Diamond Fields,” Journal of Southern African Studies 7, 2 (1981): 194–235; Worger, William, “Workers as Criminals: The Rule of Law in Early Kimberley, 1870–1885,” in Struggle for the City: Migrant Labor, Capital, and the State in Urban Africa, ed. Cooper, Frederick (Beverly Hills, Calif., 1983), 51–90; and more generally, Roberts, Brian, Kimberley: Turbulent City (Cape Town, 1976).
3 Kimberley Mining Board 2 Minutes, 1879; De Beers Mining Board, 1, Mining Areas Commission Correspondence, 1883, Archives of De Beers Consolidated Mines Ltd., Kimberley (hereafter cited as DBCA); Cape Colony Parliamentary Papers, G. 86–'82 (hereafter cited as CCPP); The Statute Law of Griqualand West (Cape Town, 1882), Proclamation No. 8, 1880, “Rules and Regulations for the Working of Diggings and Mines”; No. 17, 1880, “Ordinance… for Good Government of Diamond Mines”; No. 21, 1880, “Mining Areas.” I am indebted to De Beers Consolidated Mines Ltd. and especially to the company archivist, Dr. Moonyean Buys, for the opportunity to consult their records, which are still in the process of organization. I would also like to thank the archivists at N. M. Rothschild & Sons Ltd., Charter Consolidated Ltd., London, and Barlow Rand Ltd., Johannesburg, for access and assistance.
4 Statute Law (1882): No. 6 1880; see, too, CCPP, G. 50–'82 (surveyor general's report).
5 The Mining Magazine and Review (London, 1872). 1: (Jan. –June); Theodore Gregory, “History of the Diamond Syndicate,” typescript. 1964, DBCA.
6 Rhodes, Cecil to Merriman, J. X., 16 May 1880, in Yrs. C. J. Rhodes: The Letters of an Imperialist, ed. Baxter, T. W. (transcripts, Rhodes House Library, Oxford); and, for an abridged version, Selections from the Correspondence of J. X. Merriman, 1870–1890, ed. Lewson, Phyllis (Cape Town, 1980), 81.
7 For lists of companies and location of records, see Buys, Moonyean, Archives of Companies on the Diamond Fields of South Africa, 1878–1889, Absorbed in the Big Amalgamation (Kimberley, 1979); The Daily Independent, 1878–88; Diamond Fields Advertiser and Commercial Guide (1878–90).
8 Reports of the Inspector of Diamond Mines in the Late Province of Griqualand West, 1881–90, CCPP.
9 Marriner, Sheila, “Company Financial Statements,” Business History 22 (1980): 203–35.
10 Unless otherwise indicated, company annual reports and financial statements are from the DBCA and the Archives of consolidatrd (Data Retrieval Unit); a complete collection of Compagnie Française reports and statements, articles and meeting reports is in the Archives Nationales, Paris. 65 AQ Lc 1089, which also holds the Paris Rothschild collection.
11 De Beers Mining Company, Annual Reports, 1880–88. The published tables and data furnished by the companies to the inspector of mines feature price per load and average annual prices that were calculated from current monthly returns of carats sold at regular sights to diamond dealers at Kimberley in the 1880s. The difference between real averages of carats sold and calculated averages in the income statements (and in official statistics of the diamond inudstry at this period) is not significant, however, though it makes the terminology of the Reports concerning diamonds “found” (but not all sold) suspect Published data have been compared with monthly sales prices in DBMC 11, 12, 13(Journals) and DBMC 15 (Diamond Register), DBCA, for the 1880s.
12 The stages of diamond production were: excavation and hauling the diamondiferous “blue” clay to the surface; pulverization by weathering on the floors; preparation of concentrates by washing off wastes: final separation of rough diamonds mechanically or by hand; sorting, classification, and sale of stone buyers at Kimberley; and reclassification and sale in London to Continental manufacturers for cutting, polishing, and sale of gem stones to distributors and retailers. C 28–'88 (engineers' and mining inspector's reports), CCPP.
13 “Annual Report, 1883, 10–12; DBMC 2 Minutes, 7 May 1883. DBCA.
14 DBMC 2 Minutes, 1 May, 20 Oct. 1884; Aug. 1885, DBCA.
15 Seiborger, R. F., “The Recruitment and Organisation of African Labour for the Kimberley Diamond Mines” (M.A. thesis, Rhodes University, 1975), 143.
16 Annual Reports; Chief Accountant's Department, vol. 4/3/1, 1888–89; Secretarial Correspondence, 5/1/1, 1888–95, DBCA. Included in labor charges are: compounds, convict barracks, produce, searching and sanitations, wages, and other “working expenses” (excluding plant and maintenance). The wage bill rose from £37,000 in 1883 to £77,352 in 1888, but the comparison is complicated by the use of contractors' labor before 1884. The income statements for Kimberly Central and some of the smaller companies indicate wage costs of between 40 percent and 50 percent of working costs in 1885 and 1886.
17 Kimberley Mining Board 1 Minutes, 6 Legal Records, DBCA; C. 107–'83, CCPP. The loan was incorporated in the Cape Colony's funded debt, 1886–88.
18 Chief Accountant's Department, Standard Bank Diamond Acct. 1887–89; Liquidation Acct. 1888, DBCA.
19 Annual Report, 1887, 3.
20 Ibid., 13.
21 The full complement of De Beers Mining directors in the 1880s, until the formation of De Beers Consolidated in 1888, was, from date of election: R. Dundas Graham (1880–85), C. D. Rudd (1880– ), Robert English (1881– ), G. W. Compton (1881– ), C. J. Rhodes (1880– ), F. S. P. Stow (1881– ), W. Alderson (1880–83), H. W. H. Dunsmure (1880–83), Thomas Shiels (1886– ), Harry Mosenthal* (1886– ), John Morrogh* (1886– ), C. E. Nind* (1887– ), A. Beit* (1888– ), R. Hinrichsen* (1888– ), E. Bruch* (1888– ), and Francis Oats (1888– ). Directors connected with the wholesale trade as buyers or principals are indicated by an asterisk. Twelve remained as directors in the consolidated company. In 1887 at various times an unusually large number of directors were in London—C. D. Rudd, Robert English, Harry Mosenthal, F. S. P. Stow—leaving five in Kimberley: Cecil J. Rhodes (chairman), G. W. Compton, J. Morrogh, T. Shiels, C. E. Nind. Rhodes joined those in London at the end of July.
22 DBMC 3 Minutes, DBCA.
23 Ibid., 31 March 1886.
24 Lewson, Selections from the Correspondence of Merriman. 202; DBMC Minutes, Jan.-Feb. 1886, DBCA.
25 DBMC 3 Minutes, Jan.-Feb. 1886, fols. 14–20; and printed version of Rhodes's scheme, 15 Jan. 1886, DBCA.
26 DBMC 3 Minutes, 1886, DBCA.
27 Annual Report, 1886, 10–11.
28 DBMC 15 (Diamond Register), DBCA.
29 DBMC 3 Minutes, 5 April 1887. Victoria had to pay some £244,000 to meet the increase in De Beers's assets arising from acquisition of 40.5 Gem and Oriental claims. Victorias shafts collapsed shortly afterwards.
30 Annual Report, 1887, 12.
31 Williams, Gardner F., The Diamond Mines of South Africa (London, 1902), 286; Baxter, Transcripts; Rhodes to C. J. Rudd, 5 Feb. 1887.
32 Circulars of Ludwig J. Lippert, sharebroker, Hamburg, 1887, in Rothschild Archives (hereafter cited as RAL), XI/121/19; Diamond Fields Advertiser and Commercial Guide, 1887.
33 Baxter, Transcripts; Rhodes to Stow, [July] 1887, “Private.” It is not clear how Rhodes arrived at this assertion. Lord Rothschild and Leopold de Rothschild held only 4,325 and 1,420 ordinary £10 De Beers shares, respectively, at this date. DBMC 16 (Share Register), DBCA. But he may have already agreed to transfer 50,000 new shares to Rothschild to secure De Beers's loan.
34 DBMC 3 Minutes, 4 Aug. 1887. The “protectrix” shares were to be held for six months and not to be sold under £16, with profits to be divided between Rothschilds and De Beers. Further loans were made against the £225,000 in debentures held by Raphael and Porges.
35 De Beers to Rothschilds, 10 Sept. 1887, RAL 115/21 C; 20 Oct. 1887, RAL 125/15. In effect, the French shareholders were paid Fr 850 or £33 11s for ordinary shares of Fr 400 and Fr 571.80 or £22.11. 4 1/2d for founder shares. The date was later extended to 15 Oct.
36 Baxter, Transcripts: Rhodes to Stow, [Sept.] 1887 (from Lisbon); Meyer to De Beers, 2 Sept. 1887; Meyer to Stow, 13 and 30 Sept. 1887, RAL B 17 Rh.
37 Stow to Rhodes, 8 Sept. 1887, in F. Philipson-Stow Papers, Letter-Book, Sept. 1885 to Oct. 1887, Macgregor Museum, Kimberley; RAL B 17 Rh.
38 DBMC 3 Minutes, 3 Oct. 1887 (joint meeting with Central directors).
39 DBMC 3 Minutes, 19 Dec. 1887 (transfer procedures); cf. Turrell, Rob, “Rhodes, De Beers, and Monopoly”, Journal of Imperial and Commonwealth History 10, 3 (1982): 331. There was no risk of losing Rothschild's support at this stage.
40 Baxter, Transcripts: Rhodes to Stow, 22 Oct. 1887.
41 Dreyfus correspondence, 1888, RAL 116/16.
42 R. Fenton, The Facts Concerning the Amalgamation of the South African Diamond Mines,” Rhodes House MSS Afr. s. 138. Apart from a rough plan dated 19 Nov. 1889 (which the De Beers minutes show was not accepted), Fenton as a former director of Central wrote this memoir in 1911, and it must be treated with some caution.
43 E. L. De Crano to Rothschild, 28 Nov. 1887, RAL 109/126.
44 DBMC 3 Minutes, 30 Dec. 1887, DBCA.
45 Baxter, Transcripts: Rhodes to Stow, 14 April 1888.
46 Rothschild to Barnato, 12 May 1888, RAL T43/23.
47 Julius Wernher to Rhodes, 20 Aug. 1888, Rhodes Papers 9 Finance, Rhodes House.
48 DBMC 3 Minutes, 28 April, 28 June 1888. The committee consisted of Morrogh, Compton, Shiels, and Nind.
49 Baxter, Transcripts: Rhodes to Rothschild, 26 Aug. 1888.
50 Ibid., Rhodes to Stow, 9 Nov. 1888.
51 Accounts Department, Share Stock Register 11/1/1; Journals, DBCA.
52 There were fewer recalcitrants who had not opted, and they were paid £26 (or two De Beers £5 shares) for a Central £10 share.
53 London Board, Minutes 2/7/1, Nov. 1888–July 1889. Baring-Gould continued to claim that he had been promised a life governorship, but this was voted down by the Kimberley board. DBCA.
54 London Board, Minutes 2/7/1, May 1889, DBCA.
55 Baxter, Transcripts: Rhodes to Stow, 22 Nov. 1890.
56 E. L. De, Crano to Rothschilds, 28 Nov. 1887, RAL 109/26.
57 “A Leviathan Scheme,” South Africa, 6 April 1889.
58 Wheatcroft, Geoffrey, The Randlords: The Men Who Made South Africa (London, 1985), 11–76.
59 DBMC 16, DBCA. This does not include some preference shares.
60 Turrell, “Rhodes, De Beers, and Monopoly,” 329.
61 In particular, Chilvers, H. A.. The Story of De Beers (London, 1939).
62 Turrell, “Rhodes, De Beers, and Monopoly.” 311–43; Flint, John, Cecil Rhodes (London, 1976).
63 Innis, Duncan, Anglo-American and the Rise of Modern South Africa (Johannesburg, 1984), 21–44; and, for a eulogy of the entrepreneur. Gregory, Theodore, Ernest Oppenheimer and the Economic Development of South Africa (Oxford, 1962).
64 Especially Reunert, T., Diamonds and Gold in South Africa (London, 1902); Wagner, P. A., The Diamond fields of South Africa (Johannesburg, 1914); Williams, , Diamond Mines of South Africa, and “The Diamond Mines of South Africa,” Transactions of the American Institute of Mining Engineers 15 (1887): 392–417.
65 Gregory, “History of the Diamond Syndicate,” and cf. Gregory, Ernest Oppenheimer, which omits much of this material. For the subsequent evolution of the marketing organization. see Newbury, Colin, “The Origins and Function of the London Diamond Syndicate, 1889–1914,” Business History 29 (1987): 5–26.
66 van der Horst, S. T., Native Labour in South Africa (Oxford, 1942); Smalberger, J. W., “I.D.B. and the Mining Compound System in the 1880s, South African Journal of Economics 42, 4(1974): 398–414.
67 Goodhart, C. A. E., The Business of Banking, 1891–1914 (London, 1972); Cottrell, P. L., Industrial Finance, 1830–1914 (London, 1980).
68 Chapman, Stanley, The Rise of Merchant Banking (London, 1984), 147–49, 173, 121. The principal accepting houses handling De Beers and Central issues were N. M. Rothschild & Sons, T. Henry Schroder & Co., Mosenthal, Sons & Co., Kleinwort, Sons & Co., Jules Porges & Co., Hardy Nathan & Son, R. Raphael & Sons. See Lippert to Meyer. 16 Feb. 1888, KAL 111/18.
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