Anglo's century of twists and turns
The Oppenheimer behemoth is inextricably linked with SA history
● 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.
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.
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.
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.