Hi Vaughn, Goalie, Confluence, and everybody else, another SA Press article: "Tough year ahead for new De Beers boss Nicky O"
Vaughn, thanks kindly for your comments and your information which are very highly valued.
Just following up on the Mail and Guardian (an SA paper with an excellent Web site) articles I posted:
There's another pertinent article entitled "Tough year ahead for new De Beers boss Nicky O" at the Mail and Guardian Web site, from January of this year. The URL is:
mg.co.za
For those who don't have very high bandwidth coming into their office/home, or have slow connectivity, here's the article:
------------------------------------------------------------
ELECTRONIC MAIL&GUARDIAN
Johannesburg, South Africa. January 5, 1998
Tough year ahead
for new De Beers
boss Nicky O
Nicky Oppenheimer takes
over De Beers from this
week -- during one of the
toughest periods in the
diamond cartel's history
with shares down 40%.
[by] Dan Atkinson in
London
CHRISTMAS FOR Nicky Oppenheimer,
chairman-elect of the De Beers diamond
giant, was spent on a farm in South
Africa, incommunicado. The affable,
bearded 52-year-old had, perhaps
wisely, decided to spend his last few
days prior to assuming the chairman's
burden, out of reach of the world's media.
He ought to have made the most of it. Because, as he knows, De Beers equals
diamonds equals big news. Even during
periods of relative calm, the gemstone
group is the focus of huge public interest.
And this not such a period. The nineties
has seen a series of major problems for
De Beers and the industry over which it
presides.
There were the colossal leakages of
stones from Russia, the world's second
largest producer, and the tortuous negotiations to keep
Moscow within the sales cartel. There was recession in the
west - terrible for the jewellery trade. There was the Angolan
civil war and smuggling of diamonds out of that unhappy
country on to the world market, and the spiral of criminality in
De Beers's own backyard, South Africa. There was the
walk-out from the De Beers cartel of the world's biggest
diamond mine, Argyle in Australia.
As these crises were contained, new ones emerged, chiefly
the economic meltdown in the Far East and the consequent
threat to gem sales in Japan and south-east Asia, which
account for more than 40 per cent of all jewellery demand.
Cricket-loving Mr Oppenheimer must feel he is facing a faulty
bowling machine that has begun slinging him one ball after
another - at head height.
Looked at from another angle, of course, the De Beers glass is
half full, not half empty. The cartel - which markets about 80
per cent of the world's diamonds and stabilises prices by
manipulating supply - has survived the nineties.
De Beers still mines half the world's diamonds by value; the
Russians are back on board; overall sales may be down, but
the 1997 total of $4.64 billion was not far short of 1996's
record $4.834 billion, and the company remains engaged in
Angola, even if its attempts to regularise that country's
gemstone industry are having mixed results.
Above all, De Beers and its sisters within the Oppenheimer
empire - mining group Anglo American (of which Nicky is
expected to become chairman in due course) and the Minerals
and Resources Corporation (Minorco) - have coasted the
transition to majority rule in South Africa without the
once-feared confiscatory nationalisation.
Mr Oppenheimer may have hoped for a jollier time in which
to take charge, but - in the calm of January 1, his first day in
office - he must surely have accepted things could have been a
lot worse.
And, if that is the case, one of his most pressing tasks will be
to convince the outside world. Shares have dived since the
summer by more than 40 per cent in Swiss-franc terms. De
Beers has always had fans and devotees in the investment
community.
But for those analysts to whom the trend is their friend, De
Beers looks old-fashioned, not to say archaic. In the world of
"focused" industrial groups, it is part of a sprawling
conglomerate whose activities include travel agency,
insurance and the wonderfully-quaint Rhodes Fruit Farms, a
company vineyard named after founder Cecil John Rhodes
and producer of the splendid Boschendal red wine.
In a world of corporate transparency, the Oppenheimer
empire is a maze of cross-holdings and subsidiaries. In a
world devoted to free markets, De Beers operates a
price-fixing cartel on behalf of most of the world's diamond
producers.
And - there's no nice way of putting it - in a world devoted to
meritocracy, De Beers is now chaired by the son of Harry
Oppenheimer (chairman until 1984) and grandson of Sir
Ernest Oppenheimer (founder of modern De Beers). Not only
that, but the chaps from Kimberley don't even seem remotely
bothered by this absence of open competition for the top job.
When family man Andrew Buxton took charge of Barclays,
the bank's PR machine worked day and night to insist he was
there on his own merits.
So contemptuous does De Beers seem of
such managerial correctness that Nicky
Oppenheimer's official CV, after noting
his education (Harrow and Oxford)
states: "He joined Anglo American in
1968 as personal assistant to the
chairman". Well, he had to start
somewhere.
Furthermore, in a mining industry where
it is de rigeur for executives to stress
their formative experiences at the
deep-level workface, Mr Oppenheimer's
company biography prefers to note his
acceptance of a high award from King
Boudewijn of Belgium for services to the
industry.
But, as Alan Bond found out to his cost when he tilted at
another apparently stuffy, old-boy outfit with African
connections - Tiny Rowland's Lonrho - appearances can be
deceptive. Mr Oppenheimer may not have worked his way up
from a miners' cage, but as head of the company's
London-based Central Selling Organisation (CSO) since
1985, he has had a far from easy time.
The CSO is as important to De Beers as its mines - perhaps
even more so. This cartel, run round the corner from Hatton
Garden, is the instrument through which De Beers controls the
flow of diamonds on to world markets to prevent a glut of
gemstone jewellery and a consequent price collapse. And
some of the toughest times in its history have occurred during
the 12 years since 1985.
The first recession had hit sales and, hardly were prices
recovering, than a renewed bout of disorder in South Africa
intensified international isolation of the Pretoria regime. The
CSO, with its Rhodesian roots, was uncomfortably exposed.
The fashion for cartel-busting had even infected such bastions
of "managed capitalism'' as the European Commission.
Roaring economic growth in the late eighties raised the
spectre of secondary stockpiles of diamonds threatening the
CSO's grip.
But much worse was to follow. Bust followed boom; the
Soviet Union - a reliable partner of the CSO, on Lenin's
principle of "when amongst wolves, howl like a wolf" -
collapsed, to be replaced by rogue capitalism and wholesale
diamond smuggling; Argyle grumbled ever-more audibly
about De Beer's supposed failure to prop up the value of the
sort of cheaper stones in which it specialised.
In the event, the Russians were kept on board - after a year in
which De Beers effectively suspended their CSO membership
- and Argyle was allowed to jump ship. If the proof of the
pudding is in the eating, then both these difficult choices have
been proved right. There were initial doubts about the worth
of the Russian deal, but an in-depth report by London broker
T. Hoare on November 27 concluded: "Overall, the deal
between the CSO and the Russians is good news for both
partners". The report added: "For De Beers it makes clear
that the CSO is still very much in control of the rough
diamond market".
As for the loss of Argyle, it has at least relieved the CSO of
the obligation to buy the mine's stones and given De Beers an
excuse to allow prices at the lower end of the market to sink
by more than half. The fate of Argyle's products on the open
market has, in addition, given De Beers a not-unwelcome
opportunity to demonstrate to would-be deserters the
difficulties of life outside the CSO fold.
That T. Hoare report, while recommending De Beers shares
as a buy, marked Ashton mining - Argyle's co-owner with
giant Rio Tinto - as a sell, bringing, no doubt, a grim smile to
the face of De Beers chiefs in London.
Detractors will suggest Nicky Oppenheimer cannot take all
the credit for the Russian deal or for the masterly retreat from
Argyle.
But one can be sure he would be taking the blame had either
of these crises been called wrongly. Anyone who has faced
down the simultaneous wrath of the Australians and the
Russians - two nations with whom it is inadvisable to enter a
Mr Angry competition - is reasonably well-equipped to
navigate the storms blowing from the Far East, and to handle
looming negotations with diamond newcomer Canada.
Some expect him radically to trim down the sprawling
empire, and concentrate on extraction. Should this be true, his
Christmas sojourn may have been more of a farewell tour than
a holiday.
-- Mail&Guardian, January 5, 1998.
------------------------------------------------------------------
[End of Mail and Guardian article]
Note to all: the above article is actually linked from the original Mail and Guardian article I posted. FYI, that Mail and Guardian is available both in print as a leading article by Mungo Soggot in the Vol 14 No. 22, June 5 to 11, 1998 Mail and Guardian, entitled "De Beers hijacked rival diamond mine" and also on the Web under the heading "Canadians in diamond dispute with De Beers -- A Canadian mining company is locked in battle with De Beers for rights to an unexpected diamond find in Northern Province. Caught in the middle is minerals minister Penuell Maduna." The URL for the latter, which I've already posted, is mg.co.za
Nempela |
