NEWS 2005


Living up to diamonds?

Mail & Guardian

Nic Dawes: PROFILE

09 December 2005 07:00

‘The diamond,” says De Beers chairperson Nicky Oppenheimer, “is a fantastic control of error.”

At Montessori schools, he explains, children are given a cognitive development exercise that involves trying to fit tubes of varying sizes into a series of holes.

“The control of error is that if you get the wrong tube it doesn’t fit in the hole. It teaches children immediately, and you don’t have to have a teacher standing over them saying ‘That’s wrong. Do it over again.’”

For De Beers, he argues, diamonds, exert a similar kind of self-regulating ethical force.

“We have to live up to the diamond. We can’t afford to do anything that is going to sully that fact of the diamond, and if we did we would be shooting ourselves not it the foot, but in the heart.”


Father and son:

Jonathan (left) and Nicky Oppenheimer are gearing up for a series of new projects in Africa and elsewhere.

(Photograph: Oupa Nkosi)

It is a claim that provokes guffaws among the company’s critics, who range from human rights activitists angry about the expulsion of Bushmen from diamond prospects in the central Kalahari, to anti-trust hawks, mining regulators, environmentalists and local small polishers.

When Minister of Minerals and Energy Lulu Xingwana (then deputy minister) railed in Parliament against “rich white cartels that are continuing even today to loot our diamonds, taking them to London”, it was pretty clear who she had in mind.

Nicky sounds sanguine in the face of what he describes as the inevitable “baggage” of a company with extraordinary longevity and dominance in its industry, but it is clear that dealing with risks to reputation is close to being a core business for De Beers, and for the Oppenheimers.

His son Jonathan puts the case with more zeal, his irritation a little closer to the surface. “What we sell in De Beers is a memento, which captures significant events in people’s lives, significant events that have a very positive connotation. The worst thing that could happen is if you went to investigate the chain that resulted in that memento and found a really ugly smell along the way.

“We need retailers who are upstanding and honest, we need manufacturers who don’t use child labour, we need a selling system that is legitimate, transparent and has the support of the producers and the buyers, we need a mining environment where we don’t fight our employees, and we don’t destroy our environment.”

To hear the Oppenheimers tell it, there is simply a massive gulf between perceptions of their record on these issues, and reality.

“If you can find me an instance where De Beers has behaved in a way that is materially, concretely extraordinary in a negative sense, and De Beers has not taken action I’ll eat my hat, because I know it never happens,” Jonathan avers.

In the sandy, impossibly remote Central Kalahari Game Reserve, where Bushman groups are facing forced expulsion by the Botswana government, Survival International believes it has smelly evidence indeed.

Survival has organised a series of protests against De Beers, saying the expulsions are designed to facilitate mining prospects.

Iman famously quit as the face of De Beers -- although the company says she had simply come to the end of her contract — Julie Christie has urged a boycott, and stores have been picketed.

This is one issue on which Nicky gives a glimpse of the steel behind the beard and the diminutive name.

“When I talk to Stephen Corry of Survival he’s realising he has to be more careful than he used to be because he realises that he is going to get himself into a legal and factual debate if he says this is all down to De Beers. Whenever he says that, I say, ‘Well really Stephen, could you give me some evidence?’ You see the evidence he produces is a Bushman, whose name he doesn’t know, was told by a Botswana government official, whose name he doesn’t know, that the Bushmen are being expelled to make way for diamonds.”

No one who has ever visited the area, Nicky insists, has ever been able to produce any evidence of De Beers’ role.

In any event, Jonathan adds, mining activity will have a footprint so tiny that it will amount to a pin-prick in the 52 000km2 reserve.

All this is disputed by Corry himself, who maintains that Cabinet ministers have, as in the past, spoken publically of the relationship between diamonds and the expulsions, and that De Beers shares responsibility because it and the Botswana government are partners in Debswana, the diamond company that accounts for the biggest single slice of the country’s revenues.

“There’s no question of Survival altering its message ... This issue is not going to go away [until the Bushmen can move freely in the reserve]; it is going to dog Botswana and it is going to dog De Beers,” he says.

Whatever happens in the Kalahari, and the generally well-regarded government of Festus Mogae, it is clear that the neccessity for partnership with some of Africa’s more dubious rulers constitutes a persistent set of reputational risks for the company. But asked how it is possible to live up to diamonds while restoring ties with an administration like José Eduardo dos Santos’s profoundly corrupt MPLA regime in Angola, Jonathan is adamant that this is when the doctrine really matters.

“We could have repaired that relationship in three weeks, by doing things that we were not prepared to do. You need two to tango and if one person is holding to a standard which is living up to diamonds the other person who wants to tango with us also has to live up to that standard in our domain. And that’s what the Angolan government has come to.”

The South African government, where a considerable body of opinion privately shares Xingwana’s views, has required a fair bit of work too.

The empowerment deal that recently saw 26% of De Beers Consolidated Mines sold to a consortium lead by trusted ruling party figures such as former Northern Cape Premier Manne Dipico and former high commissioner to the United Kingdom Cheryl Carolus, has apparently brought something of a thaw in relations, but some major challenges remain.

The most immediate is over the shape of legislation designed to ensure that more rough diamonds are made available for cutting and polishing locally.

But the nature of suspicion in the upper levels of the government is evident in a discussion of De Beers’ corporate social investment programme and Oppenheimer family philanthropy.

Nicky relates an effort to convince then minister of minerals Phumzile Mlambo-Ngcuka of the good De Beers had done in Kimberley. “That didn’t play into her mindset,” he says, “it’s something one always has battled with, and will always battle with. But, as long as we are living up to the diamond we can always go and have that debate.”

The debate will probably not die down as the family’s other business interests gear up. Freed by the unbundling of AngloAmerican of a requirement that it take a slice of equity in all Anglo projects, its investment company, Ernest Oppenheimer & Sons, is gearing up for a series of new projects in Africa and elsewhere that, Jonathan and Nicky say, will bring to bear the skills they’ve learned in the mining industry.

Just what they are planning to do, they aren’t telling. Ernest Oppenheimer & Sons is a very private company, and they plan to keep it that way.

The work of the Brenthurst Foundation, a think-tank, led by former head of the South African Institute of International Affairs Greg Mills, is much more public advocacy of open markets and good governance.

Aren’t they concerned that it will be accused of being an instrument for policy capture in countries where they have commerical interests?

“What’s wrong with policy capture?” Jonathan asks, “if it’s good policy.”

A last chance for De Beers

Legislation designed to ensure that more rough diamonds are available to local cutters is about to make the next stop on its journey through Parliament next week, when the National Council of Provinces (NCOP) considers the Second Diamonds Amendment Bill.

The original version of the proposed law restructured the Diamond Board to reduce the influence of the industry, eliminated the “Section 59” agreements under which De Beers is able to export much of its production duty free, and reinstated a 15% tariff on the export of rough stones.

The legislation has now been split into three Bills: the National Treasury must produce a money Bill dealing with, and possibly reducing, export levies, while the NCOP considers core provisions that deal with valuation and the export approvals.

The NCOP has flexed its muscle recently, making significant changes to the Independent Communications Authority of South Africa Amendment Bill after it had been through the national assembly.

As such, the provincial chamber represents a last chance for De Beers to win concessions on rules that will seriously complicate the way it does business in this country.

The Oppenheimers deny abusing Section 59 and hint that eliminating it may hurt local cutters.

“Each year we have the Section 59 layout, which the government hates, which determines what is economically polishable in South Africa. Diamonds by legally binding agreement are then exported out of South Africa, and equivalent value is brought back. If we were being strictly compliant with the letter of the law, we would bring back 100% of the value of the diamonds. The reality is that we bring back between 108% and 120%,” says Jonathan Oppenheimer. -- Nic Dawes