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Kimberley by Jeffrey Blancq
April 19th, 2006
In May of 1871 organized digging had already taken place at De Beers farm. A mile away however another pipe
was being explored. This pipe was even richer than that of Colesburg kopje. The Kimberley mine, also known as
the Big Hole was about three miles southwest of two lesser mines, the Bulfontein and the Dutoitspan.
At the time the earth consisted of soft yellow dirt, but late in 1872 after many claims and constant
digging the miners had run out of earth. Below this soft yellow dirt lie a hard blue material that
nobody quite understood. A new type of digging began to take place, one in which ropes and pulleys
were used along with labourers in the pits to bring up the earth. The pit looked like a giant cob-web.
Then finally on July 5th, 1873 the English Secretary of State for the Colonies, Lord Kimberley, decided
that the name of New Rush, the town where the digging took place, and that of Vooruitzigt, were no longer
to be named as such. This was of course because once the news of wealth
came out of this "sleepy and vulgar" town something had to be done to preserve its "dignity and wealth".
However His Lordship would never publicly be associated with such vulgarity, and the names of New Rush
and Vooruitzight were just that. Therefore thanks to a subordinate of his His Lordship decided that the
town of New Rush would from that day forward be named after himself. The town of Kimberley was born.
Cecil Rhodes
Cecil John Rhodes first went to South Africa in 1870 at the age of eighteen. As a younger boy Rhodes
suffered from ill health and was advised by a doctor that a warmer climate would suit him better. For
this reason as well as new opportunities Rhodes decided to head down to South Africa with his brother.
Farming cotton with his brother in Natal in 1870 did not prove to be successful. The two brothers then
began to hunt for diamonds and became prospectors. Rhodes' brother Herbert first bought three claims
at Colesburg, near the original De Beers diggings. From there success wouldn't be long in following.
Slowly but surely Rhodes began buying up claims in the De Beers mine and before long would control
the mine for himself.
In the early 1880's Cecil Rhodes met a man by the name of Alfred Beit. Beit
was a diamond buyer who had arrived in South Africa in 1875. Beit's intelligence was far superior
to those he was in contact with when he first arrived. It did not take him long to set himself up
as a diamond buyer. After a short time he partnered up with a representative of a Parisian diamond
buying concern named Julius Wernher. It was inevitable that Alfred Beit would at some point meet
Cecil Rhodes. On the evening of their meeting it was said their conversation went as follows:
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Rhodes passed Beit's office and said, "Do you ever take a rest?" "Not often", was Beit's reply.
Rhodes responded, "Well, what's your game?" Beit coolly answered, "I intend to control the whole
diamond output before I am much older". With this Rhodes answered back, "That's funny, I have
made up my mind to do the same; we had better join hands".
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The match of these two quick minds
was destiny. They went everywhere together. Rhodes kept a large account with Beit's firm.
Rhodes began to see and feel the one word that was a part of his being, Power. With it Rhodes
thought he could dominate all the intellect of South Africa, or even the world.
Barney Barnato
In 1873 at the age of 21 Barney Barnato, along with his brother Harry, known as the Barnato Brothers,
set sail aboard the Angila headed for Cape Town. Barney Barnato began as a street tough actor, doing
odd jobs to survive. Despite a rough beginning Barney showed the wits to make it among all the lonely
souls looking or dreaming for a better life. Eventually Barnato partnered with a man by the name of
Louis Cohen to become diamond prospectors. Barnato was never at the office, a small iron shanty 9' X 6',
instead he was always found out in the field with the miners, paying as little as possible for the best
possible stones. Barnato was a quick study and within three years would come up with an idea that would
make him the millionaire he had always wanted to be. For Barnato the first three years were tough and
prospects did not look good. In1876 the Barnato Brothers had made a last desperate gamble. By now the
soft yellow earth that was no longer there turned into hard blue earth. This blue earth dented the
shovels of the workers and many thought that this was the end of the diamond trade. Diggers had thought
that diamonds had come from a prehistoric flood, coming to rest in the first 100 feet of pliable soil.
Barnato thought differently. He thought that diamonds came from a tube below the earth, and that this
new hard blue material should be explored further. Little did he know that his curiosity would pay dividends
in the end. At the Kimberley, De Beers, Dutoitspan, and Bulfontein mines, exploitation had made life hazardous.
Walls kept caving in, men died, and materials were lost. Things were not going well and prices began to plunge.
There were labourers who wanted more, laboureres who went on strike. Things had to change, there had to be some
type of central authority to regulate the production of diamonds. This central authority would have to acquire
the most valuable claims, then dominate the lesser holders and therefore take control of the market. Barney Barnato
knew he was that man.
Porges and the French Company
In the late 1870's life began to change in South Africa. In Griqualand series of minor wars and rebellions broke
out among various tribes. We must remember that life was different for blacks than for whites during this time.
Black labourers were treated poorly, as slaves one might say. Under the imperialistic scheme black tribes were
also subject to unjust treatment. The labourers wanted better working conditions, higher pay, and more freedom,
something that the white controlled diamond industry was not willing to give. Due to the uprisings volunteer
regiments had to be raised because there were not enough troops under Her Majesty's service to keep the peace.
Before long the uprising was put down, but after this things began to change back in the town of Kimberley.
In Kimberley these events had the effect of stricter segregation, or the localization of the natives. Another
consequence was a new breed of men who started pouring into town. These men were financiers, not diggers like
Kimberley had seen in years passed. An important step was about to shape the future of the diamond business in
South Africa. One of the men who came to South Africa was Julius Porges. Porges had been brought to South Africa
by Alfred Beit's partner Julius Wernher. In 1880 Porges learned of a scheme by two successful immigrants to
South Africa, Sammy Marks and Isaac Lewis. Their plan was to form the French Diamond mine company, of which
would turn out to be one of the largest claimholders in the region. Porges was considered a ruthless man. Shortly
after the formation of the French Company he collected enough votes to force Marks and Lewis off the board of their
own company. This was not enough for Porges. His next step was to take control of the entire Kimberley Mine. There
were others who had this same goal. Every time a holding came up for sale all of these men followed suit and
tried to buy up all the holdings, merging claims, and forming new companies overnight. Shares began to double
and triple in a matter of weeks. A new diamond rush was born. However this time it was with investors who held
deep check books, not shovels. Kimberley had grown so fast that a new system had to be implemented. In February
of 1881 the Kimberley stock exchange was officially established. The French Company was the first Kimberley based
joint stock company to be floated in Europe.
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Cecil Rhodes, who in 1880 officially created the De Beers Company
followed by floating De Beers on the stock exchange. These giants new that things were just getting started.
They new that the Kimberley mine was an important part of the future of this country and of the world. What
they did not know yet was how much or how deep the mine could take them. Another capitalist in the region was
Barney Barnato, who along with his brother formed Barnato Brothers upon their return from London in 1880.
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In the years following investors made money and lost money. People continued to flow into South Africa with
hopes of striking it rich. Only the strong of heart and more importantly of mind and money could survive in
this land of sunshine. After years of manoeuvres, manipulations, and amalgamations four companies dominated
the Kimberley Mine by 1886. These four were the Standard, (J.B. Robinson), the Central, (Baring-Gould), the
French (Porges), and the Barnato Mining Company (Barnato). Barney Barnato knew that his time was now. He began
buying blocks of shares whenever they became available. The Standard was the first to fall, then the Central.
By this time Cecil Rhodes knew he had to do something and do it fast. Rhodes needed funding and he knew just
where to get it.
Amalgamation: the Beginning of the End
The Rothschilds were a great London banking family as those who know history will attest. It was the same Rothschilds
that were to finance Cecil Rhodes on his quest to rule the world. It was difficult to receive an appointment into the
House of Rothschild, but for Cecil Rhodes it came quite easy. The proposal was to completely amalgamate the entire
Kimberley Mine into one company, the De Beers Company. At first Lord Nathan Rothschild was not convinced, however
it did not take him long to warm to the idea. The one man Rhodes had to overcome was Barney Barnato.
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Rhodes knew it would not be easy, but he was confident in his ability. At the time one company, the French Company was still
outstanding. Rhodes knew that to have the possibility of amalgamation he needed to have a hold in the French Company.
Rothschild told Rhodes to go to Paris and see what he could do, and in the meantime Rothschild would raise the
capital, £1,000,000, that Rhodes would need. There was one hitch in the scheme though, Barnato owned one fifth
of the French. Rhodes knew he had to come up with a plan. In fact the plan had already been formed back in Paris.
Barnato himself wanted complete control of the French and was willing to pay £1,700,000 for it, £300,000 more than
Rhodes opening offer. Rhodes and Barnato were playing cat and mouse. They both knew that the other would keep on
bidding until one of them had to stop. Barnato's money was his though, while Rhodes' money was borrowed. Both men
knew this and so finally Rhodes gave way in the autumn of 1887.
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Rhodes plan, his real plan was now about to take
place. Barnato never saw it coming and would even comment on it later. Rhodes' plan was to buy the French Company
outright and then he would sell it to Barnato's Central Company for £300,000 cash plus 70,000 Central shares.
Barnato must have thought this to be the bargain of his life, that he could save money. To everyone, except Rhodes of
course, Barnato had won a resounding victory. The only catch was that Rhodes had traded his way in Barnato's territory.
When the deal was done Rhodes had acquired one fifth of the Central. Rhodes then instructed his brokers to bid on all
of the Central's outstanding shares. In the end it took £2,000,000 to get them all, but he got them, thanks to the
help of his old colleague and friend Alfred Beit. Beit helped Rhodes get the money and in February of 1888 a share
in Central was listed on the London and Kimberley stock exchanges at £14. Barnato was confident his friends and
colleagues would hold fast, but the truth is loyalty follows that which can make a man rich, money. In the end
Barnato had been sold out and lost his own company. Rhodes had now owned three fifths of the Central. Barnato
was now short of cash, but he had an idea. He would consolidate all of his shares and make it a public company.
He would then sell it on the London Exchange for £1 a share. A move such as this would reduce the value of diamond
shares and of course diamonds themselves, but Barnato was known to be a self-destructive man. Rhodes thought it was
a bluff, but he could not take any chances, and stalled for a time. He started planting stories that he was still
short on cash and that he would sell a large selection of De Beers' surplus diamonds. Prospective buyers came around,
including Barnato, but in the end Rhodes' price was eventually paid. To the amazement of all of Kimberley the deal
went through. Barnato could now flood the market with diamonds and possibly ruin De Beers. It was time for Rhodes
to pull his stunt. People said it was childish, but even a child knows how to play like an adult. Rhodes tilted
over a stand that held Barnatos' diamonds and they all went pouring into a large bucket. It took six weeks to sort
them all out into their proper classes. This was the move, the simple childish move that changed the course of the
diamond industry in South Africa. On a cool, breezy night four men, Cecil Rhodes, Barney Barnato, Alfred Beit, and
Woolf Joel, gathered together in a cottage to change not only the destiny of the South African diamond industry,
but also of South Africa, and the world itself. Both Rhodes and Barnato did not want to give up. Bargaining went
on back and forth, with neither man wanting to give in. Rhodes wanted entire control of the Central Company because
without it he knew that amalgamation would be impossible. Rhodes offered Barnato all kinds of emoluments, a
membership at the Kimberley Club, Life Dictatorship of De Beers, public office, etc. There have been many things
said about that historic night, most of them false. What we do know is that 28 hours after these four men entered
that cottage Barney Barnato finally succumbed and in March of 1888 the amalgamation of the Kimberley Mine took place.
The company name that was formed was De Beers Consolidated Mines Ltd. Shortly after a small group of Central
stockholders filed an official complaint with the Supreme Court of the Cape Colony, but in the end it was to no
avail. On July 18, 1889 the Central Company was finally put to bed. De Beers bought its scattered assets for
£5,338,650. The amount was astonishing and to this day that same check still hangs on the wall of the De Beers
boardroom.
Prologue
Cecil John Rhodes, the man who at eighteen had gone to South Africa for the first time, went on to become an
icon in South African history. A man who began by buying and selling claims in the Kimberley and De Beers' mines
and who within a few years of his arrival had gained control of the De Beers mine through partnerships, purchases,
and amalgamations, left a legacy all his own. With the formation of the De Beers Mining company in 1880 he knew
that complete amalgamation was not out of his reach. A reach that stretched long and far both literally and
figuratively. After consolidating the entire Kimberley Mine in 1888 with the formation of De Beers Consolidated
Mines Ltd, Rhodes went on to other interests such as politics and other imperialistic desires, but finally on
March 27th, 1902 Cecil John Rhodes died due to poor health. In his will Rhodes left his legacy with the creation
of the Rhodes scholarship. Barney Barnato began performing on the streets with his brother. With the dreams of
riches and opportunity he went to South Africa. He may not have had the proper education of an Oxford man, but
he did have the intellect of the street. It was this intellect, along with his capacity to act that brought
Barney Barnato to the forefront of the South African Diamond Industry. With his brother Harry he formed the
Barnato Brohters, a company that eventually controlled most of the Kimberley Mine. Who knows if it was really
Barnato's true intention was to amalgamate the entire South African diamond industry. The truth is it does not
really matter, he was first and foremost an actor and a player, and the only man who gave Cecil Rhodes a run
for his money. Barney Barnato had a tragic end however. He eventually became a paranoid man and on July 4th,
1897 he committed suicide by Jumping off the boat that was carrying him to London.
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