An­glo's cen­tury of twists and turns

The Op­pen­heimer be­he­moth is in­ex­tri­ca­bly linked with SA his­tory

Sunday Times - - FRONT PAGE - By JIM JONES

● When An­glo Amer­i­can cel­e­brates the cen­te­nary of its of­fi­cial in­cor­po­ra­tion on September 25, it will be a com­pletely dif­fer­ent crea­ture from the one punted to US fi­nanciers by founder Ernest Op­pen­heimer back in 1917.

For although An­glo’s pa­tri­arch, a Jewish Ger­man im­mi­grant, had cut his busi­ness teeth in the di­a­mond fields of Kim­ber­ley, he sold the con­cept of his new com­pany on the prospect of min­ing gold on the then new East Rand gold­field. He had am­bi­tions to con­trol South Africa’s di­a­mond in­dus­try, but on the prom­ise of gold he suc­ceeded in rais­ing ini­tial cap­i­tal of £1-mil­lion. The rest is his­tory.

To­day An­glo is one the three re­main­ing ex­am­ples (Gold Fields and, in­di­rectly, BHP are the oth­ers) of the rise, growth and de­cline in just over a cen­tury of South Africa’s once-great min­ing houses.

To­day there are no Op­pen­heimers in the busi­ness that two gen­er­a­tions, led first by Ernest and sub­se­quently by his son Harry, de­vel­oped into the world’s largest min­ing group. The third and fourth gen­er­a­tions, Ernest’s grand­son and his great-grand­son, had nei­ther the busi­ness acu­men of Ernest and Harry nor, ap­par­ently, their an­ces­tors’ in­cli­na­tion to con­tinue the group’s advance.

Di­a­monds are for­ever

Although Ernest’s ini­tial in­vest­ment sales pitch had only men­tioned di­a­monds as some­thing for the fu­ture, they came quickly. To­day they re­main the sole prod­uct linked to the past that forms one of the three com­mod­ity pillars on which An­glo now fo­cuses its de­vel­op­ment in South Africa and abroad. But we are get­ting ahead of our­selves. Within a year of in­cor­po­rat­ing his new com­pany, Ernest had used the money he had raised to plunge into the casino that was then the Johannesburg Stock Ex­change, buy­ing con­trol­ling in­ter­ests in three of the 11 mines al­ready op­er­at­ing on the in­creas­ingly promis­ing Far East Rand (Brak­pan, Dag­ga­fontein and Springs) and win­ning the lease ar­eas of New State Ar­eas and West Springs.

It was this lat­ter prop­erty that was to be­come the first mine de­vel­oped by the nascent An­glo, and the mines to the east of Johannesburg were to pro­vide the ba­sic funds for the group’s rapid ex­pan­sion.

Fruits of war

The real coup came, how­ever, in 1920 when Ernest per­suaded South Africa’s “cus­to­dian of en­emy prop­erty” to al­low him to take con­trol of the di­a­mond op­er­a­tions for­merly owned by Ger­man-owned com­pa­nies in the then South West Africa, to­day’s Namibia.

His toe was well and truly in the di­a­mond door and, as di­a­mond production from the for­mer Ger­man colony had been man­dated to South Africa’s gover­nance by the League of Na­tions, his game plan could de­velop.

At that time, a syn­di­cate that co-op­er­ated with De Beers set di­a­mond production quo­tas and con­trolled the sup­ply of di­a­monds to the world, ad­just­ing sales so as not to flood the mar­ket and ham­mer prices. The syn­di­cate had to al­low Op­pen­heimer into its close-knit group and, by 1925, a new syn­di­cate was formed to re­place the old, a syn­di­cate that in­cluded De Beers and the Namib­ian mines.

The own­ers of De Beers were not en­am­oured of Ernest and re­buffed An­glo’s early at­tempts to ac­quire con­trol. But by 1929, Ernest had raised more cap­i­tal in the US, enough to quell the De Beers own­ers’ reser­va­tions. With that con­trol, Ernest was ap­pointed chair­man of De Beers.

Far-sighted leader

If this ap­pears to be a per­nick­ety look at the corporate wheel­ing and deal­ing al­most a cen­tury ago, it is worth re­al­is­ing that Ernest had laid the foun­da­tions that would sup­port the An­glo struc­ture un­til the end of the cen­tury. An­glo’s Namib­ian mines would be placed un­der the ef­fec­tive, if not the tit­u­lar, con­trol of De Beers and, as time elapsed, De Beers and An­glo would es­tab­lish cross hold­ings that would ren­der the com­bined group im­preg­nable to hos­tile ap­proaches.

Ernest was noth­ing if not far-sighted. Be­fore the decade of the ’20s was out he had taken An­glo into the newly dis­cov­ered cop­per belt of the then Bri­tish colony of North­ern Rhode­sia, a move that led to the es­tab­lish­ment of the great Rhokana and Nchanga mines.

But while some of South Africa’s lon­ger­estab­lished min­ing groups were mak­ing un­suc­cess­ful in­vest­ments rang­ing from min­ing to oil and rail­ways in the Amer­i­cas and Spain, An­glo con­fined it­self through­out the ’30s to the re­gion it knew best, south­ern Africa — es­pe­cially in gold and di­a­monds.

Ul­tra-deep pi­o­neers

With the out­break of World War 2, An­glo’s world changed. There would be no money to de­velop the new gold prospects that had started to show up in the Free State and on the Far West Rand.

An­glo it­self was flush with cash fol­low­ing the gold boom that had de­vel­oped when South Africa left the gold stan­dard in 1932, and its East Rand mines were coin­ing money. Yes, there was the ef­fect on costs as (white) min­ers de­manded and won higher wages from the prof­itable mines, but that was lit­tle more than a pin­prick.

The war halted new mine de­vel­op­ments and it wouldn’t be un­til the im­me­di­ate post­war years that An­glo could de­velop the jewels of the Free State and the Far West Rand where, par­tic­u­larly, the group would pi­o­neer ul­tra-deep min­ing at the West­ern Deep Lev­els prop­erty.

Ernest died in 1957, but such was the con­trol of the group that his suc­ces­sion as chair­man by Harry was seam­less. Harry would sur­round him­self with a trusted group of well-qual­i­fied young men, bound by the knowl­edge that they owed their po­si­tions to him. It was the well-tried sys­tem of con­trol used to this day by many ab­so­lute rulers.

The decades that fol­lowed the 1948 ac­ces­sion to power of the Na­tional Party were a pe­riod in which the group ex­tended its reach into vir­tu­ally ev­ery in­dus­trial and fi­nan­cial sec­tor with the de­vel­op­ment of new in­dus­tries and new min­eral ven­tures. But, im­por­tantly, the pe­riod soon gave rise to the re­al­i­sa­tion that, to quote from Giuseppe di Lampe­dusa’s novel, The Leop­ard, “If we want things to stay as they are, things will have to change.”

Happy birth­day, Harry

Afrikaner-run Fed­erale Myn­bou wanted a greater in­ter­est in min­ing. And, rather than lose con­trol of the trou­bled Johannesburg Con­sol­i­dated In­vest­ment group with its cru­cial in­ter­ests in di­a­mond mar­ket­ing and plat­inum min­ing, in the early ’60s Harry came up with a deal that handed con­trol of Gen­eral Min­ing to Fed­erale.

JCI, stripped of its plat­inum and di­a­mond in­ter­ests, was trans­ferred to Mzi Khu­malo in 1996 in one of the first black em­pow­er­ment deals. It was a fail­ure. Khu­malo would be out­ma­noeu­vred for con­trol of JCI by Brett Keb­ble who ef­fec­tively looted the group for his own gain.

In 1989, some of An­glo’s Young Turks would seek to curry favour with their ul­ti­mate boss by ini­ti­at­ing what even­tu­ally proved to be an abortive at­tempt to ac­quire Gold Fields for the An­glo Group through An­glo’s off­shore sub­sidiary Mi­norco.

It was an am­bi­tion whis­pered to be an at­tempted, if slightly be­lated, 80th birth­day gift for Harry. That at­tempt per­haps sowed the seeds of An­glo’s later de­ci­sion to re­move it­self from gold min­ing, merg­ing its mines in 1998 and hiv­ing them off to form the nu­cleus of what is now An­gloGold Ashanti.

Pulling out of gold was the start of an in­sid­i­ous de­cline. Harry had of­fi­cially re­tired as chair­man in 1983, to be re­placed by his anointed suc­ces­sor Gavin Relly, though real power re­mained, as ever, in Op­pen­heimer hands.

It was a time when An­glo was a leader in white busi­ness’s early ef­forts at corporate and po­lit­i­cal change. There was the 1983 recog­ni­tion of black min­ers to com­bine un­der the lead­er­ship of the Na­tional Union of Minework­ers, founded a year ear­lier by Cyril Ramaphosa, and clan­des­tine meet­ings with the ex­iled ANC in Lusaka.

But once Relly re­tired in 1990 to be suc- ceeded by Ju­lian Ogilvie Thomp­son, the dis­man­tling of An­glo be­gan in earnest. Ap­par­ently em­u­lat­ing the process of sell­ing non­core, non-min­ing as­sets over­seen by Brian Gil­bert­son at Gen­eral Min­ing, An­glo set about the same lum­ber­ing process.

Gil­bert­son ini­ti­ated and com­pleted a num­ber of corporate moves cul­mi­nat­ing in the merger with Aus­tralia’s BHP to cre­ate the world’s largest di­ver­si­fied min­ing group.

New blood at the top

Harry was de­clin­ing — he died in Au­gust 2000 — and Ogilvie Thomp­son over­saw An­glo’s 1999 change in domi­cile from Johannesburg to Lon­don. All sorts of good rea­sons were given for the move, among them that it would help the group raise money less ex­pen­sively over­seas than in Johannesburg for fu­ture in­vest­ment in South Africa.

It didn’t. Am­bi­tions lay else­where. Un­der Ogilvie Thomp­son and his suc­ces­sor Mark Moody-Stu­art, An­glo re­mained what has been de­scribed as an un­fo­cused, bu­reau­cratic sprawl un­til, in 2007, Cyn­thia Car­roll was re­cruited as CEO to re­struc­ture the com­pany. A woman as chief ex­ec­u­tive of a pa­tri­ar­chal group still largely run by South African men who had be­gun their ca­reers un­der the chair­man­ship of Harry Op­pen­heimer!

An­other cen­tury of An­glo?

Car­roll seemed to lose di­rec­tion, em­bark­ing on some debilitating for­eign ven­tures, no­tably the ac­qui­si­tion of the Mi­nas Rio iron ore ven­ture in Brazil which, to put it mildly, proved to be tech­ni­cally chal­leng­ing. Its de­vel­op­ment ex­ceeded the bud­get, and production has still to reach its ini­tially ex­pected level.

Car­roll had to go, and a new no-non­sense CEO was brought in — Aus­tralian min­ing en­gi­neer Mark Cu­ti­fani, who had been mak­ing a pretty good fist at run­ning An­gloGold Ashanti. Cu­ti­fani is now deep into the re­struc­tur­ing of An­glo, re­build­ing the group on the three main pillars of plat­inum, cop­per and di­a­monds. Vir­tu­ally every­thing else is for sale at the right price, although the re­cent com­mod­ity gains have eased the pres­sure to sell these as­sets.

So, An­glo seems to have come al­most full cir­cle in its first 100 years. Di­a­monds are cur­rently the group’s main rev­enue con­trib­u­tor, though De Beers doesn’t have the mar­ket power it en­joyed way back when Ernest Op­pen­heimer was set­ting in mo­tion his grand strat­egy.

What the group will be like when it reaches its sec­ond cen­tury is in the lap of the gods.

No one watching when Ernest started out is alive to see An­glo to­day, and no one watching the group now will be alive to see what it will have be­come on September 25 2117. Oh for a crys­tal ball.

Pic­tures: TMG

Min­ers pose un­der­ground in an un­dated pic­ture at West­ern Deep Lev­els gold mine. The mine was built by An­glo Amer­i­can and the main shaft sunk in 1957.

Sir Ernest with Bri­tish roy­alty at the Big Hole in Kim­ber­ley in 1947.

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