Modern diamonds got their origins from the fourth century BC. It was at this time that India was trading diamonds for the country’s wealthy. These gemstones were discovered in the streams and mudslides throughout the country, and were at first considered just another stone. Slowly, the geologists of the day discovered that these very hard, “clear rocks,” were so scarce that they could not find a consistent pattern of them in nature. It was their scarcity (then and now) that made them valuable, not their color, cut or clarity. Very little changed for almost 1800 years; however, by the 1400’s diamonds from India found their way to Europe and Venice in medieval markets. It was at this time that diamonds from India became a fashionable accessory for the European upper class. Still un-cut (at least into precise shapes as they are today) they were cleaned up and buffed by hand.
By the 1700s the diamond supply in India began to decline, and it was replaced by a growing supply out of Brazil. Miners sifted through the gravel of the Amazon River and found hordes of diamonds. This discovery allowed the country to dominate the diamond market for the next 150 years. Then, in the mid-1800s, the modern diamond market was born…
The story began in South Africa, and the diamond mines of the Kimberley region. It began in 1866 with the discovery of a 21.25 carat diamond in the rough, named the Eureka, which drew the attention of many to South Africa and its vast resources of diamonds. Several years went by without any new major discoveries, but in 1869, the Star of South Africa, an 83.50 carat rough diamond, brought diamond fever to the African continent.
Diggers from all over the world arrived in the country to stake their claim in the African continent’s diamond supply. An estimated 10,000 people combed through the gravel in an area called the Vaal River at the start of the “diamond rush,” later expanding significantly throughout the region.
In 1878, a 128-carat fancy yellow diamond was cut from a 287-carat diamond rough from a Kimberley mine claim. The population of the Kimberley area reached as high as 50,000 people and included diggers, laborers, and family members. At approximately the same time, Cecil John Rhodes, just 17, joined his older brother in South Africa to help work the Rhodes family claim. Cecil was an enterprising individual and sold water to thirsty diggers to enhance the family’s monetary returns. By age 19, in 1872, Cecil Rhodes was financially independent and a dominant presence in the mining fields of South Africa.
One thing led to another and by 1888 Cecil Rhodes owned all the diamond mines in the Kimberley area. It was then that Cecile established De Beers Consolidated Mines Limited to control his diamond empire. While Cecil was consolidating mines into a diamond powerbase on the South African continent, he was also pursuing a political career which may have help “clear the path in his favor,” on certain matters related to the diamond trade. In 1881 at age 28, Cecil Rhodes was elected to the Cape colony Parliament. By 1890 he became Prime Minister of the country.
With his empire firmly established, in 1896 Cecil Rhodes resigned from his position as Prime Minister, and continued to promote his pan-African diamond empire. Rhodes passed away at age 48 and 1902, and he is buried on a hilltop in “Rhodesia,” a territory in South Africa, named after him and subsequently renamed ZimbabweJust prior to his death, (circa 1900), De Beers controlled 90% of the world’s production of rough diamonds. Around that same time the “London Diamond Syndicate” (aka The Syndicate) was formed to match diamond production to consumer demand. In other word’s it was a cartel designed to limit supply to keep prices up.
While the Syndicate did not have complete control over diamond production and distribution, it controlled most of it, and did a reasonably good job with the substantial resources that it owned or controlled. There were however, a number of independent mines, owned and operated by German companies, that helped thwart off complete control by the De Beers company of the diamond trade globally.
In the following years new discoveries of diamonds were made in areas such as the Belgian Congo, Lichtenberg, Angola, and elsewhere in Africa, but a demand decline occurred when the stock market in the United States dropped 80% in just 24 short months. By 1929 the Great Depression hit. Along with the Great Depression came a near collapse of diamond demand globally. Sir Ernest Oppenheimer was chairman of the De Beers Board of Directors at that time. Oppenheimer made the decision to shut down the De Beers mines in 1932 on the back of low diamond demand worldwide. Cutting costs and propping up pricing for diamonds already in inventory. In 1935, three years after the closure of the De Beers mines, the company still had $56 million in unsold diamonds. Worldwide sales that year were stuck at 15 million, which meant the De Beers mining company had three years of inventory in stock waiting to be sold. And that assumed that no new diamonds were dug out of the ground anywhere. The reality was that diamonds were still extracted by competitors. This created even more of a glut. The backlog became so large that it took it until 1952 to sell off the De Beers stockpile of diamonds and for the company to return to normal.
At that time, two organizations were created to help the company with marketing efforts: the Diamond Information Center (DIC) in the Diamond Promotional Service (DPS) the DIC was a public relations firm, and the DPS supported the diamond industry with promotional activities and related point-of-sale material and training programs.
In the lore of the diamond industry there exists two major De Beers created concepts: Sights and Sightholders. Starting in 1939 the De Beers company set up trading events called Sights for the purpose of selling high-quality diamond rough to special dealers and manufacturers. Each “Sight” was a week long event where Sightholders arrived, by invitation only, to view and purchase diamond rough. At its peak there were as many as 300 worldwide Sightholders, and at its low point as little as 120. The CSO was the operator of Sights and held 10 viewings per year.
In the ensuing years, competition from new mines in Russia, Canada, and Australia ensued.
By the 1990s diamonds from these regions began to dilute South Africa’s dominance in the world’s diamond market. Today, the industry is fragmented in many ways, with diamond manufacturers having sources from all around the world, not just South Africa. More importantly, buyers receive the same high quality diamonds from Australia, Canada and Russia as they did from South Africa and India. Today, dynamic changes to the global diamond market mean that buyers have choice. In its heyday the De Beers company had a virtual lock on anything diamond related and today they are still an important part of the diamond industry, but not the linchpin that holds it all together.