Are diamonds not forever for the Oppenheimer family? Market experts ask this question of historic implication for the global diamond industry.
Twice in less than one year, they announced that diversified mining group Anglo American plans to take complete control of the world’s diamond mining leader, De Beers, by purchasing this company’s shares, which at the moment belong to the Oppenheimer family.
According to market analysts, the transfer of this South African diamond mining company under the control of Anglo American will result in floating De Beers’ shares on the stock exchanges in London and Johannesburg. According to Cailey Barker, an analyst at Numis Securities, an investment bank, if De Beers goes listed this will give it a chance to become fully transparent and more comprehensive to investors.
Anglo American headed by Cynthia Carroll now owns 45% of De Beers’ stock. The Oppenheimer family, which controls the company since 1927 and owns 40% of its shares, according to experts, is ready to hand over the reins for not less than $8 billion.
The remaining 15 percent stake in De Beers is owned by Botswana, whose economy is almost entirely dependent on diamond mining.
The 2010 hike in diamond prices by 27% fetched De Beers $546 million of profit, while in 2009 the company’s loss was $743 million. The “health” of De Beers, which sells about 40% of all rough diamonds in the world through its division, Diamond Trading Company, is seen as the main indicator of the diamond industry state.
The Oppenheimers, the richest family in South Africa, built their diamond empire in the early 20th century. Ernest Oppenheimer at the age of 17 started to work as a broker in the diamond market in London, and at 22, his employer sent him to South Africa as a representative, where Oppenheimer was going to establish ... Anglo American.
Today, the business of the diamond dynasty is run by Ernest Oppenheimer’s grandson, Nicky, who is the head of De Beers.
At 66, and after four decades of work with Anglo American, he announced earlier this year that he would withdraw from the administrative council of the Group so that, in his own words, “to allow others to carry the baton.”
If Nicky Oppenheimer will refuse to run De Beers this will mean the end of the diamond family’s history, despite the fact that it will retain its stake in Anglo American.
However, despite the statement by the Group’s CEO Cynthia Carroll about her commitment to the diamond business, we cannot but take into account the fact that in the next two decades natural diamond reserves may peter out in Botswana, whose government was vested by De
Beers with all the powers for diamond aggregation and sales. London was running these operations since 1888.
According to analysts, the Oppenheimer family now seeks to diversify its activities by making them less dependent on diamond mining.
For this purpose, the Oppenheimers have already created a private equity fund with Temasek, Singapore's sovereign fund, which will invest mainly in consumer goods and agricultural products throughout Africa. The initial contribution to the joint venture is $300 million.
This step is seen by observers as part of a broader international strategy for the long term, which, inter alia, aims to protect oneself in an increasingly alarming situation in African politics.
The steady growth in popularity of Julius Malema, a populist politician, whom the Forbes Magazine placed among the ten most influential young Africans and who preaches a "black" version of racism, is probably disturbing the Oppenheimer family, which during the 20th century was a symbol of social inequality between the rich white and poor black population in South Africa.
Maleme is now regarded as a potential future president of South Africa.
Meanwhile, the Guardian, commenting on a possible withdrawal of the Oppenheimers from the diamond business quotes James Teager, one of the De Beers directors, who said that the dynasty was quite satisfied with its share of ownership in the company and was not going to sell it.
Alex Shishlo, Editor in Chief of the European Bureau, Rough&Polished
