Chapter Sixteen. Defending the Crown.

This chapter deals with current matters of diamond industry strategy. Here are some excepts....

There was no doubt about the threat to De Beers embodied in the coming to power of the black majority in South Africa. The African National Congress (ANC) had said it would nationalise diamond and other mines when it took over. So, once the tide had started to change in the ANC's favour,...

... The Oppenheimers arranged to ship a large amount in untaxed funds overseas every year by having their South African mines pay fees directly into a Swiss CSO bank account for sorting, advertising and selling their diamonds. This method removes over a billion US dollars annually from southern Africa. An investor's profile for the newest of these mines, Venetia, estimated that the fees it would pay to the Swiss CSO would be between US$227 and US$350 million a year, much more than its estimated operating cost of $US167 million a year. This lowers dramatically the'profits' declared and thus the tax payable in southern Africa.

.... What I found was a town where the most dramatic evil consequences of economic apartheid still survived. The town centre contained a small slowly decaying area where only a few whites lived. Next to this lay the large black area with by far the worse living conditions I saw in Namibia. Many lived in tin shacks cobbled together from metal waste. The water services were on the verge of total collapse. Medical facilities were poor and expensive. The roads were dirt tracks climbing over and around rocks and rubble.

  But, now that South Africa has a black government, a wary De Beers could plan to take out as many diamonds as possible from South Africa in as short a time space as feasible as it allegedly had done in Namibia - and then close the mines down over which it has the least control - namely the onshore mines. Their high tech, relatively low staffed, unpoliced and non-unionised boats were far more flexible and looked to provide all De Beers future needs.

In September 1994 De Beers has solemn news for its miners at the rich Klienzee-Koingass mine on the Atlantic coast of South Africa. In their'Namaqualand Mines Chronicle' they said;'It has always been De Beers practice to look no more than 10 years ahead in'life of mine planning', for this reason many people have expressed their disbelief when we now tell them this mine is coming to an end. However the reality is that we have only 10 to 12 years to go before Namaqualand Mines ceases operations.... Kleinzee is planned to cease production in 2004 and Koingnaas in 2005. This is based on current carat production throughout this period.... The geology department does not expect to find any major new reserves that would significantly extend the life of mine... if we want to mine low grade ore, it is essential for us to contain our costs.'

This was disastrous news for a community in a remote location that had no other resources to build on. This mine was legendary for the qualities of its diamonds. A fortune had been produced here. The mine supported 2 towns and other settlements...

It was not that production was dropping. The management were not planning to run the mine down slowly, as might be expected, to give the residents time to adjust. Rather they planned to increase production dramatically from 600,000 to 1 million carats a year for the next 12 years, to get as many diamonds out as quickly as possible. It's statement went on to say:'The increase in production at Tweepad (one of their plants) is a major opportunity. We can use this to get leaner/meaner...'

...The mine manager at Roxton Mine, west of Kimberley, told me eagerly how he would love to get his hands on some nearby De Beers hectares that supposedly were also destined to be a game park. This he believed to contain the diamond pipe from which his diamond rich fissure came. He told me when they found the deposit they were mining, De Beers purchased land each side of them but made no move to mine the continuation of his deposit. It is also notable that De Beers does not bother to mine the fissure deposits found near its own pipe mines.

...Miners at Finsch told me of an unmined diamond pipe deposit nearby owned by De Beers and said to be rich. I heard of other major deposits held by De Beers; one near Koffiefontein, another north of Pretoria and another near Venetia. Bindeman of the South African Diamond Board told me:'We do not say it from the rooftops, but diamonds are not rare except, maybe, for some qualities.' De Beers uniquely knows how many diamonds remain in South Africa. Unlocking this information is a key task for the new government.

...Very low wages were paid to many of these cutters. Mrs M. Steenkamp told me in Kimberley in October 1994 :'The wages at the cutting factory in Kimberley were 40 rands a fortnight. (US$13) The fares to daily travel from the townships were R2.60. After travelling expenses they thus made 14 Rand a fortnight.' (US$4.60) Some owners kept wages down by only employing apprentices.


The Future of De Beers and of the diamond trade.

At the start of this investigation 21 years ago in 1979 I believed that finding a diamond in South Africa was like finding a needle in a haystack - for this was what De Beers had told me. I was informed that the mines in Kimberley had only 1 carat a 100 tonnes. Such a figure made the content of the Argyle mine at 6 to 26 carats a tonne sensational. When I wrote up the Argyle figures for the newspapers, I was published prominently and world-wide. But when years later I learnt that Canada had at least 4 carats a tonne and Russia had over 7 carats a tonne - seven hundred times more than the South African mines, it made me look sceptically at the De Beers published figures for South Africa. Could the South African pipes really be so much poorer than similar pipes elsewhere or had De Beers been lying all the time in order to keep alive the myth of diamonds' rarity - and hide much of the profits from their mines?

I go on to give evidence that De Beers could have been dramatically under-declaring the wealth of its own mines...

....As the Millennium arrived De Beers was basing its future on its corporate image with consumers (and on its lawyers and high placed lobbyists). They hoped that customers would think a "De Beers" branded diamond worth a premium price. They may prove to be right in presuming on the naiveté of consumers. De Beers recently sold many "Millennium Diamonds" despite charging 50% more than for similar stones lacking a Millennium label.

If I could speak of what I would like to see. I would like diamonds to regain their true sparkle, for them to become a symbol of nature's richness, of freedom rather than of avarice. Of themselves, they are remarkable crystals of unique hardness. Those who mine and cut them deserve better treatment, as do the millions of misled customers. This trade is in the greatest need of reform. In this book diamonds have served as a window through which I have taken you, my readers, inside the glitter and greed of the most extraordinary of cartels. Thank you for travelling with me.