The Early History of De Beers

When one thinks of diamonds, one thinks of De Beers, founded in 1888, it is now one of the largest diamond concerns in the world. Since inception and today, they have controlled 85% of the rough diamond trade, only losing some foothold to competition in recent decades. They still control 29% of the market. De Beer’s was founded in a dangerous time of war, discovery and excitement and succeed through the daring of the founder and the help of the British government.

The name comes from two Dutch brothers, Diederik Arnoldus De Beer and Johannes Nicolaas De Beer, farm owners and settlers. Who were forced to sell by the British government when a large diamond deposit was found on their farm.

The path to global domination taken by Cecil Rhodes was through shrewd use of business take-overs, mergers and acquisitions. During the 1869 diamond rush, Cecil went from hiring water pumps and using the earnings to buy smaller claims to owning the entire diamond production for the country. He did this via a calculated gamble and at the time financed his operation with a vast loan from the Rothschild Family.

Monopoly

In history, very few monopolies’ have existed. They tend to be broken up as fast as they can be formed. They tend to drive the price of the goods much higher and while they exist for a reason. Often, they are formed by the first company in a region or if the cost of entering the market is very high. The story of the De beers monopoly is very simple.  By 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. This supply agreement was large enough to form a lasting monopoly.

This deal soon proved very lucrative when during a trade slump he simply lowered the level of diamond production. By lowering the number of rough diamonds in the market he was able to control the price.

The Second Boer War

We now see the impact the coronavirus is having on business and many people are drawing parallels to wartime. Cecil Rhodes and the then-fledgeling De Beers company existed in a time when war was all around. The battle was about British control of the country and whether he, a British-born capitalist, would retain ownership of his purchased land. It is part of the legend that he moved to a city at the onset of siege to pressure the British government to defend it. It is also recorded that he turned the business to help the war effort. Producing shells, an armoured train, a long gun and defences. One can imagine the personal pressure he was under, a vast loan to pay and success hanging on the outcome of the war.

A Diamond is Forever

Having weathered the storms of war, competition and deaths. The De Beers group turned the massive power of its organisation to marketing. They coined the term “A diamond is forever” and in 1947 had the bigger marketing spend than anyone else in the industry. If you have a diamond you’d like to borrow against let us know. We specialize in fine jewellery pawnbroking and lending against diamond rings.