De Beers: Creating a future on 120 years’ experience
De Beers has a strategy to operate only globally competitive mines that produce profitable carats for the company plans for the future. De Beers has recently opened four new mines, upgraded others, and sold several older mining assets better suited to specialists in marginal deposits. The company has been investing, to the extent of over R3bn in South Africa alone. Modernisation of the Finsch plant at the already advanced underground mine, production from South Africa’s first deep-sea mining vessel, the Peace in Africa, followed up late this year with a new mine opening in the Free State, all point to a company on the move.
DE BEERS is 120 years old this year. Founded in Kimberley in 1888, it’s part of South Africa’s mining heritage, and synonymous with diamonds. It’s one of the few mining companies that’s survived to celebrate its centenary let alone its 120th year. Albeit in a different guise to the company it started life as.
Its survival now appears to be a function of its being a privately held company, with Nicky Oppenheimer the chairman. It was his great grandfather – Ernest Oppenheimer – who became chairman of De Beers in 1929, having established Anglo American in 1917.
De Beers delisting from the JSE, together with its move away from its role as custodian of the global diamond market – and its expansion into partnerships from the exploration stage to top end high street branded jewellery – have been the most significant changes at De Beers over the past decade.
Perhaps the most important development in the recent evolution of De Beers was its realisation it was restricting its growth potential by remaining custodian of the world’s diamond market.
A few years ago De Beers established a new business model for the group. De Beers is now prospering from the competition of
both miners and suppliers of diamonds in the market. Increased competition vigilance has also compelled the company to change. The European competition authority ruled that De Beers’ buying agreement with the Russian state diamond company Alrosa be phased out. And De Beers has settled a long-running anti-trust dispute in the United States.
As the company has changed the way it operates internationally, there have also been significant changes at home in South Africa. As diamonds have been mined since 1866 and fewer major deposits found, SA has ceded its position to Botswana, Russia and Canada as the largest source of diamonds.
The end of apartheid in 1994 also demanded that SA companies rethink the way they conducted business, with businesses transforming to address the inequalities of the past and build a broader-based economy.
In late 2005 Ponahalo Investment Holdings bought a 26% stake in DBCM. Of that 26%, DBCM employees and pensioners own exactly 50%. The remaining equity was split between three broad-based trusts: benefiting disadvantaged women, people with disabilities and the communities living around DBCM mines.
The next year David Noko succeeded Jonathan Oppenheimer as MD of DBCM who together established and implemented tough performance benchmarks and a minefocused profit sharing rewards systems in the company.
DBCM is now a very different business to the one when Noko arrived almost three years ago. And the De Beers’ group as a whole has evolved into a sophisticated global mining company reacting to the vagaries of supply and demand in the world’s leading luxury diamond market.