The History of Mining. Michael Coulson

to divest from the Transvaal completely. Whether his intervention was decisive or not, Kruger materially reduced the sentences but Barnato’s days were numbered in any case as investors lost confidence in him. His penchant for seemingly divesting from businesses before they crashed and manipulating his own companies with no regard for the interests of his fellow shareholders has an echo of the more recent activities of assassinated robber baron Brett Kebble. It is eerie that Kebble’s master company, JCI, was a successor company to Barnato’s Johannesburg Consolidated.

      In 1897 Barnato, who had become disturbed and erratic, and his family set sale for England from the Cape. During the voyage Barnato fell or jumped overboard and was dead when his body was recovered (a fate suffered more recently by fraudster Robert Maxwell). Although Barney had built and, in part, lost a great fortune from diamonds and gold in South Africa, and earned a place in history, to many in both South Africa and England he was just a spiv from the East End who eventually flew too close to the sun.

      The French Company falls to Rhodes

      Rhodes left for London in early 1887 and there got financial backing to buy out the French Company; he crossed to Paris and after much negotiation his offer for the company was accepted. But Barnato, alarmed by Rhodes’s plan, moved to offer a higher price. This created problems for Rhodes, who was short of cash, but he had an alternative plan and he persuaded Barnato to allow him to complete his purchase of the French Company, which he would then sell on to Barnato’s Central Company for cash and shares.

      Barnato agreed and so Rhodes lost the French Company but gained a 20% stake in the newly expanded Central Company, which by now as good as controlled the Big Pit. So Rhodes controlled De Beers and he had a sizeable indirect stake in the Kimberley Mine. From this point Rhodes began to work on Barnato to persuade him to cooperate in the amalgamation of De Beers with Kimberley on a 50-50 basis. Barnato waxed hot and cold over the proposition but could not bring himself to agree to it as he believed that Kimberley was worth more than De Beers.

      Whilst this was going on the situation in the diamond market was deteriorating. The De Beers and Kimberley mines were producing flat out, selling diamonds into a market that was, as it had been for some years, oversupplied. Diamond prices were weak and when Barnato proposed to float the Kimberley Mine on the London Stock Exchange – which would have intensified the price war and severely undermined Rhodes’s plan for amalgamation of De Beers and Kimberley – Rhodes decided that a frontal assault on the Central Company to try and wrest control of it from Barnato was the only way to resolve things and so regain control of the diamond market.

      In early 1888 Rhodes approached his loyal friend Alfred Beit to help him access the finance needed to enter the local stock market to buy Central shares. Beit responded positively and provided the required funds. Rhodes told Barnato what his plan was and battle commenced. Since both Barnato and Rhodes needed to acquire, either directly or for supporters, sufficient Central shares to take them above 50%, it was inevitable that the price of Central shares would rise sharply, and so they did from £14 to £49.

      Whilst this was going on the underlying performance of the Central Company, and all other diamond miners in and around Kimberley, was deteriorating and most operations were barely profitable. Rhodes’s plan, however, justified his tactics, for if he could gain control of all the Kimberley diamond operations, and Central was critical to him, then he would be able to cut overall production, bring the market back into balance and the mines would once more be profitable.

      The battle for shares raged on but Barnato’s supporters found themselves unable to resist taking profits as the share price of Central rose. Rhodes’s supporters were more disciplined and in the end his holding in Central rose above 50% and Barnato threw in the towel. Though he was personally much wealthier than Rhodes he could not match Rhodes’s tactical skill. The Kimberley diamond diggings were finally amalgamated and merged with De Beers Mining. The new company was called De Beers Consolidated Mines, a name that was to last until the end of the following century.

      Final consolidation of the diamond fields

      In 1889 De Beers gained effective control of Duitoitspan and Bultfontein, and all the diamond diggings in and around Kimberley were finally under Rhodes’s control. Barnato and Rhodes therefore became partners after years of rivalry, but their disagreements were not at an end. Rhodes had sought control of the diamond diggings, not only for the purpose of more efficient working and control of output levels and therefore prices, but also because he wanted to use it as his vehicle for extending British influence into the heart of Africa. Barnato strongly opposed Rhodes’s imperial dream and it is unlikely that the government in London was keen either. But Rhodes was on a winning streak and the new deed of the merged company had at its centre the mission not only to mine diamonds but also to extend British influence throughout the continent using De Beers as the vehicle should the board (i.e. Rhodes) so decide.

      The last years of the 19th century saw the newly amalgamated diamond fields bedded down and some recovery in the market as a more disciplined approach to mining and selling was implemented. At the same time the diamond czars themselves – Rhodes, Barnato, Beit and Robinson – were busy on new fronts in the goldfields of Johannesburg, Rhodesia and, for all but Rhodes, in the acquisition of mansions in London. The Boer War was also looming, which Rhodes welcomed as allowing his dreams of African hegemony to flourish in the wake of the inevitable British victory. The British did indeed defeat the Boers and annexed the independent Boer Republics but it was a very hard fight indeed, and Rhodes died before the victory. Barnato and Beit also died young, Beit made it past 50 but to just 53. Only Robinson survived into old age, dying in 1929 aged 89.

      The 20th century saw the diamond industry go through, varyingly, periods of prosperity and struggle as economies grew and contracted. When the depression of the 1930s threatened the industry Sir Ernest Oppenheimer, building on Rhodes’s amalgamation success, tightened market discipline by setting up the single marketing channel, the CSO. We will look at this in more detail later. It saved the industry and lasted over 70 years before new forces in diamonds led to a break up of what had come close to being a De Beers monopoly. Rhodes would have been highly satisfied that his brainchild had managed to survive so long.

      The Kimberley diamond pipe in South Africa with its hundreds of individual claims and extensive network of haulage ropes, 1877

      Source: Mining