While De Beers is today recognised as the world’s leading rough diamond company, with unrivalled expertise in the exploration, mining and marketing of quality gems, at its creation more than 120 years ago, the company was something quite different from just an ordinary mining company.

The establishment of De Beers Consolidated Mines was the result of Cecil John Rhodes’ grandiose scheme to amalgamate South Africa’s diamond-mining industry – then consisting of the Kimberley, De Beers, Bultfontein and Dutoitspan mines – under his control.

It was formed in March 1888 to facilitate the final amalgamation of Kimberley’s diamond-mining operations and to incorporate the shareholdings of all four diamond mines.

At its formation, De Beers’ assets were considerable – it was the sole owner of the De Beers mine, and owned three-fifths of the shares in the Kimberley mine and a controlling interest in both Bultfontein and Dutoitspan. In fact, De Beers owned majority stakes in the four mines, which were, in 1888, capitalised at £23-million.

An interesting feature of the new company was that it had four life governors, representing the very highest echelons of Kimberley’s mining industry. They included Rhodes, Barney Barnato, Alfred Beit and Frederic Philipson Stow.

These four men were all significant shareholders and, in terms of the trust deed, were entitled to special financial participation in the profits of the company.

Ultimately, Barnato was allocated nearly 7 000 shares and Rhodes, Beit and Stow were allocated more than 4 000 shares each in the new consolidated concern. This was indeed an exceptional shareholding in South Africa’s richest company.

Moreover, each was entitled to a one-quarter share of the net profits remaining after the distribution of a 36% dividend.

The company also commuted the rights of the life governors, giving them and their descendents shares valued at £3-million at the time.

“I feel, with a company that will be worth as much as the balance of Africa, you must have four or five men for whom you make it worth their while to devote a great portion of their time to it,” explained Rhodes.

In addition to the financial benefits, the life governors wielded considerable powers and were able to operate almost as if there were no other shareholders to whom they had to account.

The importance of the formation of De Beers Consolidated Mines was not limited to its immediate economic aspect. Rhodes was not satisfied with the fact that he had established the richest mining company in the world; he wanted it to be the most powerful company in the world too.

At the time of the company’s formation, Rhodes proclaimed his determination to make De Beers “the richest, greatest, and the most powerful company the world has ever seen”.

Rhodes saw in the control of South Africa’s diamond production the first step in the foundation of a new British empire in Africa. Essentially, he wanted to use De Beers as a vehicle to achieve this grandiose impe- rialist vision.

Indeed, the new company had lofty ambitions – instead of being limited to diamond mining, Rhodes wanted the new company to be able to engage in any business enterprise, to annex land in any part of Africa, to govern foreign territories and to maintain standing armies.

The trust deed of that corporation gave it immense powers, reflecting the enter- prise and imperialist ambitions of Rhodes and Beit.

The terms of the company’s trust deed allowed it to own anything from mines to houses and farms. It could even acquire “tracts of country” in Africa or anywhere, together with rights transferred to it by indigenous rulers, and expend moneys for the pacification and administration of such estates.

It could trade in precious stones, all manner of minerals, and any kind of machinery, patents, inventions and products in Africa or elsewhere. It could construct and operate canals, railways, gasworks, reservoirs, factories, and so on. It could even engage in banking.

It was, in fact, a company equipped with powers like those of the old Dutch and British East India companies.

However, at the time that this trust deed was conceptualised, Barnato had considerable reservations about the company’s entrepreneurial parameters and about Rhodes’ determination to use it as a vehicle to achieve his grandiose aims.

Barnato essentially wanted to restrict the terms of the trust deed to business activity.

A legendary final meeting to discuss the terms of the trust deed was held in Rhodes’ corrugated iron cottage – a meeting that went on all night.

Rhodes produced facts, figures and maps to persuade Barnato of the fabulous wealth to be gained from exploiting other parts of Africa.

Just before dawn, Barnato conceded to Rhodes’ will, stating: “Some people have a fancy for one thing, some for another. You want the means to go north, and I think we must give it to you.”

However, De Beers Consolidated Mines was not really used as a vehicle to satisfy Rhodes’ imperialistic ambitions. Just one year after the company’s formation, in 1889, he established the British South Africa Company, which received a royal charter to colonise and exploit much of south-central Africa.

It should be noted that the profts secured from De Beers’ diamond-mining operations and the life governors’ wealth gained from such operations did facilitate, to a significant extent, the early development of the Witwatersrand gold-mining industry in the late 1880s and early 1890s.

Indeed, without the diamond-mining magnates and the profits secured from Kimberley’s mines, the development of South Africa’s gold industry might have evolved quite differently, and certainly not at the rapid pace at which it did. However, such a subject is a discussion for another day.

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