South African business leader Ernest Oppenheimer (1880-1957) established what became the modern diamond industry almost single-handedly in the early decades of the 20th century. By gaining control of the large South African mines from which the costly gemstones came, Oppenheimer created an airtight, lucrative cartel that made his family and heirs immensely wealthy. In the late 1930s he devised a savvy marketing plan promoting the diamond engagement-ring custom in order to create a new, middle-class market for De Beers, the world's largest diamond miner and marketer, which Oppenheimer headed. In the Guardian, Dan Atkinson described Oppenheimer as "a legendary figure of astonishing determination."
Oppenheimer was born on May 22, 1880, in Friedberg, Hesse, a state in central Germany. His family was Jewish, and his cigar-maker father, Edward, encouraged Oppenheimer and his brothers to leave Germany and its anti-Semitic tendencies in order to make their fortunes elsewhere. In 1896, when Oppenheimer was 16, he joined his older brother Louis at the London firm of Anton Dunkelsbuhler, a diamond merchant with business interests in South Africa. He first worked in the London office's sorting operations, separating the more flawed stones from the ideal ones, and his talents gained the attention of Dunkelsbuhler himself. After Oppenheimer became a naturalized British citizen in November of 1901, he sailed to South Africa to take over the firm's office in Kimberley, the site of a large diamond mine.
The business empire that Oppenheimer created was linked to the changing political situation in southern Africa and the rapid economic development once that region's tremendous mineral wealth became evident. The diamond rush in southern Africa dated back to the 1870s, and had serious political ramifications both in this part of the continent, where European colonial powers vied for control, and on a more global scale. Foreign settlement in what later became South Africa dated back to 1652, when the Dutch East India Company established their first outpost in the area, joining the San, Khoikoi, and Bantu indigenous dwellers. Waves of British settlers arrived in the early 19th century after the British took possession of the colony in 1814. Cecil Rhodes, an English èmigrè, secured mining concessions from local tribal leaders once diamond riches were discovered, and in 1888 founded the De Beers Consolidated Mines Company, which had a monopoly on a vast mine in Kimberley. Rhodes, who died in 1902, never managed to make a successful diamond cartel to corner the world market for the gemstones. Part of his failure was due to new competition from discoveries recently made in German South West Africa, which later became Namibia. A stretch of that region's beach, rich with diamonds, became known as the Sperrgebiet, or "forbidden zone." There, black workers dug with gags in their mouths to prevent them from swallowing the gems.
Working in the Kimberley offices, Oppenheimer took copious notes on the new and flourishing diamond trade and quickly rose within the firm. His sharp eye for the ideal gem soon made him one of the most successful diamond traders in Kimberley. He also began to make small investments in gold-mining in the Transvaal as a deal-broker for German investors, a venture that would prove immensely profitable when international politics altered the balance of power in southern Africa. "He was," noted Edward Jay Epstein in The Rise and Fall of Diamonds: The Shattering of a Brilliant Illusion, "in many ways the prototype of the multinational businessman: German by birth, British by naturalization, Jewish by religion, and South African by residence." The merchant was even elected mayor of Kimberley in 1912.
When World War I broke out in Europe in the summer of 1914, Oppenheimer began shuttling between South Africa and London; on one occasion, his ship was torpedoed by German submarines and he had to be rescued from his lifeboat by a British destroyer. The war's danger, however, was offset by a unique series of opportunities that allowed him to gain control of the diamond market. Initially, he sought to create an international corporation that would protect German investors from losing their interest in the Transvaal gold mines. With this in mind, in London in 1917 he founded the Anglo-American Corporation of South Africa with some assistance from his brothers and the house of Morgan, the New York City investment bank. Oppenheimer then moved on to the owners of the Sperrgebiet, which had been occupied by South African troops since 1915. He approached its German investors and offered them shares in Anglo-American in exchange for their holdings. Realizing that, should their side come out the loser in the war, their property would be appropriated by the British-South Africa government anyway, the Germans agreed. Thus Oppenheimer's Consolidated Diamond Mines (CDM) of South West Africa came into existence. The leverage he now held forced the De Beers Company into a bargaining position with him. In exchange for the Namibian properties, he asked De Beers for a share of stock and a seat on the board, and its cornered directors were forced to acquiesce.
Derided on Editorial Pages
The following year, Oppenheimer was knighted by England's King George V for his wartime service, becoming one of a small handful of Jews to receive the honor at the time. Back in South Africa, his Anglo-American Corporation prospered. Because of his prominence, he was sometimes the focus of anti-Semitic jibes in South Africa. He enjoyed a close alliance with the prime minister, Jan Smuts, which helped his business dealings flourish. Smuts led the United South African (Unionist) Party, and was pro-British. The Dutch "Afrikaner"-dominated National Party was known for its harsh attitudes towards non-whites in South Africa—attitudes implemented in a brutal apartheid regime after they won the 1948 elections—and fomented against what it viewed as the collusion of British and Jewish interests exploiting South African resources during this era. Anti-Semitic attitudes were vented in pro-Nationalist newspapers and "represented by a cartoon character called 'Hoggenheimer,' universally identified with Sir Ernest Oppenheimer," explained New York Times Magazine writer Joseph Lelyveld.
Over the next few years, Oppenheimer added to his company's increasingly vast holdings. After new diamond riches were discovered in 1927 in Namaqualand and Oppenheimer bought a controlling interest, he was elected chair and managing director of De Beers, which then became part of his Anglo-American Company. In 1929 the U.S. stock market crashed and a global economic depression began. Suddenly, the market for diamonds vanished, and the London diamond-trading syndicate, a successor to the one Rhodes had created, found itself nearly bankrupt by 1931. Via his family connections—three firms were controlled by members of his extended family—Oppenheimer moved to take over the syndicate.
Oppenheimer ordered the Kimberley mine and others in South Africa closed, and the Sperrgebiet area shut down as well. World diamond output was slashed from 2.2 million carats to just 14,000 between 1930 and 1933. He was also forced, however, to buy diamonds that came on the market outside the reach of his companies, mostly from Belgian Congo and Portuguese Angola. The unassailable cartel that endured for decades was formally structured by Oppenheimer in 1934. Its strategy was to keep the supply of diamonds far below the demand, for if large numbers of the gemstones came onto the market the per-carat price would plummet. The cache was kept at De Beers' London offices, and brokers approved by De Beers's Central Selling Organisation (CSO) came every five weeks and met for the day. CSO officials would present to them a box of diamonds for their approval or rejection; the price stated by De Beers was not negotiable.
Devised Engagement-Ring Custom
Diamond sales remained moribund during the 1930s, by 1937 Oppenheimer's De Beers company had stockpiled some 40 million carats, about a 20-years supply. Threatened with bankruptcy, he decided to create a market himself. He first found industrial applications for poor-quality diamonds in manufacturing, and just before the outbreak of World War II Oppenheimer sent his son Harry to New York City to work with Madison Avenue strategists. A campaign touting the four "C's" of diamond perfection—cut, color, clarity, carat—was created, and within two years sales had jumped more than 50 percent. De Beers' ads also began trumpeting the custom of a diamond engagement ring, which was not commonplace at the time at all. The marketing blitz was boosted by De Beers's famous slogan, "a diamond is forever."
The post-World War II years proved hugely profitable for Oppenheimer and De Beers. The company reinvested profit into digging new gold mines in South Africa, and ventured into platinum, steel, paper products, and an array of other industrial holdings. Oppenheimer remained chair and director until 1953, after which he served as board chair only. He was a noted philanthropist, funding the Queen Elizabeth House for Commonwealth studies at Oxford University, and acquiring a priceless collection of art and antiques. His first wife, May Pollack, with whom he had two sons, died in 1934, and his son Frank died after a swimming accident in Madeira in 1935. He underwent a spiritual crisis because of these losses, and converted to Christianity that year. A few months later, he wed Caroline "Ina" Harvey, daughter of an English baron and widow of his nephew Michael, who had died in a 1933 plane crash. Around this same time he founded E. Oppenheimer, a holding company that served to protect his personal fortune. Oppenheimer was, by several millions above his competitors, the richest man in South Africa.
The Oppenheimer Legacy
Oppenheimer suffered one heart attack, and was felled by another one a few months later at his Johannesburg estate on November 25, 1957. Under the leadership of his son Harry, the empire Oppenheimer created continued to thrive, and maintained a legendary level of secrecy. Only Oxford graduates were hired to staff its executive ranks, and the company was rumored to be ruthless in its acquisition of surplus diamonds which found their way onto the world market from mines outside of its control. At one point the CSO and its adjunct, the Diamond Trading Company (DTC) traded 80 percent of the world's diamonds in a business that was estimated to bring in $5 billion annually. The company was often the target of political protests for doing business in South Africa during its brutally oppressive apartheid era; some 250,000 of its black South African employees were restricted by government law to work as only migrant laborers in its mines. They were unable to establish permanent residency in the area where they worked, or to bring their families there to settle. Harry Oppenheimer, who controlled the company and family fortune until his death in 2000, was a surprising advocate of political reform during the 1970s, even supporting the idea of trade-union rights for miners. The Anglo-American Corporation was named in a reparations lawsuit in 2003, a decade after apartheid ended in the country.
By the turn of the 21st century the diamond-trading cartel Oppenheimer created had lost much of its authority. Australia, with its own large and profitable Argyle mine discovered in 1979, dropped out of the DTC cartel in 1996. Still, Anglo-American remained the second largest mining company in the world, and De Beers the largest producer of diamonds, with some 45 percent of the global supply coming from its mines in South Africa. It also had partnerships with the governments of Botswana and Namibia to operate lucrative mines there.
Epstein, Edward Jay, The Rise and Fall of Diamonds: The Shattering of a Brilliant Illusion, Simon & Schuster, 1982.
Gregory, Theodore, Ernest Oppenheimer and the Economic Development of Southern Africa, Oxford University Press, 1962.
Hocking, Anthony, Oppenheimer and Son, McGraw-Hill, 1973.
Economist, July 1, 1989; December 20, 1997.
Guardian (London, England), October 2, 1996.
New York Times Magazine, May 8, 1983.
Time International, July 24, 2000.
Times (London, England), November 26, 1957.