Cecil Rhodes, the founder of De Beers. De Beers is active in every category of industrial diamond mining: open-pit, underground, large-scale alluvial, coastal and deep sea. De Beers and the various companies within the De Beers Family of Companies are in the diamond, diamond mining, diamond trading and industrial diamond manufacturing sectors. It is by far the largest company in all these categories.Cecil Rhodes, the founder of De Beers, got his start by renting water pumps to miners during the diamond rush that started in 1871, when an 83.5 carat diamond was found on Colesburg Kopje (present day Kimberley), South Africa. He invested the profits of this operation into buying up claims of small mining operators, with his operations soon expanding into a separate mining company.
He soon secured funding from the Rothschild family, who would finance his business expansion. De Beers Consolidated Mines was formed in 1888 by the merger of the companies of Barney Barnato and Cecil Rhodes, by which time the company was the sole owner of all diamond mining operations in the country. In 1889, Rhodes negotiated a strategic agreement with the London-based Diamond Syndicate, which agreed to purchase a fixed quantity of diamonds at an agreed price, thereby regulating output and maintaining prices. The agreement soon proved to be very successful - for example during the trade slump of 1891-1892, supply was simply curtailed to maintain the price.
De Beers is well known for its monopolistic practices throughout the 20th century, whereby it used its dominant position to manipulate the international diamond market.The company used several methods to exercise this control over the market: Firstly, it convinced independent producers to join its single channel monopoly, it flooded the market with diamonds similar to those of producers who refused to join the cartel, and lastly, it purchased and stockpiled diamonds produced by other manufacturers in order to control prices through supply.
However, the transformation of the company, from the late nineties to present, to a more responsible one is starting to become more widely known. A range of factors contributed to the need for change in the De Beers model in 2000.
In the 1990s, it became increasingly evident that De Beers’ industry custodianship and supply-controlled model was no longer viable. De Beers was also unable to conduct business in several jurisdictions where it had interests or a corporate presence due to their dominance in the diamond industry. In addition, more producers from varied locations such as Russia, Canada and Australia chose to start distributing diamonds outside of the De Beers channel, thus effectively ending the monopoly.
Also, diamond jewellery markets had fallen in comparison to other luxury goods. The behaviour of consumers had changed and the diamond industry had been slow to respond to market dynamics.[citation needed] To address this, on behalf of its own interests and that of the industry as a whole, De Beers conducted a strategic review with Bain & Company, consequently changing its business model from a supply-controlled industry to one driven by demand. De Beers also implemented their Supplier of Choice sales strategy.
The diamond industry of today is markedly different to that of a decade ago, and is a complex and constantly evolving geo-political phenomenon. Current major players in the diamond industry are the African producer countries (i.e. the Government of the Republic of Botswana and the Government of the Republic of Namibia), De Beers, Rio Tinto, BHP Billiton, Lev Leviev, Harry Winston, and Alrosa.
