The Journal of Imperial and Commonwealth History

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Rhodes, de beers, and monopoly

Rob Turrell

To cite this article: Rob Turrell (1982) Rhodes, de beers, and monopoly, The Journal of Imperial and Commonwealth History, 10:3, 311-343, DOI: 10.1080/03086538208582623

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Published online: 01 Jul 2008.

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by Rob Turrell

'Poor Rhodes', wrote John Merriman, the distinguished Cape Parliamen- tarian; '[his] was a curiously duplex nature and the best side was very good — the worst was due to finance'.1 The bulk of the literature on Rhodes has concentrated on is 'best side'; it has genuflected to the diamond mines as the source of his wealth and moved on to worship at the shrine of imperialism or the personal image of the Colossus.2 'Remarkably', Ian Phimister wrote in an important article, 'despite the considerable attention paid by historians to the career of Cecil Rhodes, it would seem that equally their studies have been based on no more than a cursory glance at Rhodes' financial interests and especially the interaction between them'.3 Phimister succinctly spelt out the interaction between two apexes of Rhodes' triangular interests — Southern Rhodesia and the Rand — and concluded that Rhodes 'utilized British imperialism for the benefit of his private fortune'.4 Phimister ignored the genesis of Rhodes' wealth in the diamond mines and this essay hopes to provide the missing apex to Rhodes' financial interests. One of the ways in which Rhodes' financial interests have been side- stepped by historians is through an emphasis on Rhodes as a colonial statesman of world renown. It is impossible, however, to grasp the significance of Rhodes' career as a politician without an understanding of the accumulation of capital in the diamond mines. 'His great success', Merriman wrote, 'was a very dubious one, to have shown the power of money in politics'.5 Rhodes introduced a new element into political discourse: he represented the triumphant emergence of productive capital in the Cape and its ascendance to political dominance and command of the colonial state. Control of the colonial state served in turn to expand the accumulation of productive capital. To protect the value of investment in diamond mining, the Cape mineowners entered the metropolitan capital markets for the financial means to centralize control of production in Kimberley, Wesselton, Jagersfontein in the Orange Free State and even further afield in Brazil. It was Rhodes' substantial stake in De Beers Consolidated Mines that signally determined his interest in expansion to the north in search of new diamond mines and surplus profits for metropolitan investors and financiers. The accumulation of productive capital has to be set in the context of the European diamond market and diamond-cutting industry and we need to sketch, briefly, those particular features that led to the establishment of a 312 THE JOURNAL OF IMPERIAL AND COMMONWEALTH HISTORY monopoly in Kimberley diamond production. Rough diamonds were imported by London merchants who sold them to the diamond-cutting industry in Amsterdam, Antwerp and Paris. In turn the j e w e l l e r y market of Paris was the centre for the sale of cut diamonds. Between 1845 and 1870 Brazil was the greatest diamond producer with an average output of 200,000 carats a year. Diamonds were produced by slave labour and processed in a cutting industry dominated by the Diamantslijperij- Maatschappij, a combination of jewellers, who hired out steam-driven polishing mills to workers. Throughout this period there was a secular increase in the price of rough diamonds which manifested itself in a declining rate of profit in the cutting industry. The rise in the price of diamonds was part of a general trend for the share of the cost of raw materials in the production of the average commodity to rise in the mid- nineteenth century. The search for cheaper raw materials was a causal "determinant of the imperialist export of capital. Mandel has summarised this relationship: The production of raw materials by primitive, pre-capitalist means in the overseas countries — symbolized by the slave economy in the Southern States of the USA — reinforced this tendency for raw materials to become relatively more expensive and hence led to attempts by metropolitan capital to transform its initial hunt for raw materials into cheaper, i.e. capitalist production of these raw materials.6 The discovery of diamonds at Kimberley in 1871 and the development of mining under capitalist relations of production increased the annual output of diamonds to over 1,000,000 carats by 1873 and to nearly 4,000,000 carats by the late 1880s (see Appendix). In this period the price of rough diamonds exhibited a tendency to decline. The enormous increase in output, the limits of'effective demand', the luxury nature of diamonds as a commodity and the radar-like sensitivity of the diamond market to seasonal fluctuations, political disturbances and wars, made it necessary to limit market competition.7 Monopoly in the first instance meant the ability to control the diamond market for a given length of time. With growing joint stock company concentration in mine production in the 1880s large diamond merchants reached 'agreements' over pricing in their sales to European cutting factory buyers. But price 'agreements' were temporary and failed to stabilize the market. The producers needed to be assigned a specific share of the market and in 1887 the diamond companies formed a 'diamond pool', the proceeds of which were sold to one merchant at monthly intervals. Ultimately market control was determined by what happened in the sphere of production. The final form of this process was the centralization of the ownership of the four Kimberley mines by the De Beers Consolidated Mines Limited, which was capped by the creation of a cartel of rough diamond merchants — the diamond syndicate — who took periodical contracts to buy the majority of De Beers' diamonds. In common with all RHODES, DE BEERS, AND MONOPOLY 313 monopolies — copper and tin cartels, for example — De Beers was able to produce more efficiently, that is, to exploit and increase the productivity of labour, while in periods of declining prices it was ableto restrict the number of carats put into the market.8 The body of this essay will concentrate on how Rhodes made his money and came to play a leading role in the creation of De Beers Consolidated. Contrary to one writer's recent assumption, the 'climactic consolidation of the late 1880s' has not been 'fairly exhaustively treated by Chilvers and Gregory'.9 An alternative interpretation of how the amalgamation came about will be presented which challenges the version of Chilvers and Gregory, which is the version De Beers Consolidated has passed down to posterity.

I Rhodes' biographers have not taken the trouble to investigate the nature of the partnership between Charles Dunell Rudd and Cecil John Rhodes. It is believed to have begun in 1873 and to have continued in a supportive fashion — the most common erroneous reference is to Rudd's supervision of Rhodes' affairs while he was a student at Oxford in 1873 and between 1876 and 1878 — through to the Rand and Rhodesia.10 There is little doubt that it was Rudd's commercial connections and capital that set Rhodes up with the pumping contract and it was the product of this venture that was invested in De Beers claims. Later it was Rudd who went to London to float the Gold Fields of South Africa and it was Rudd who secured the Lobengula concession. But Rudd never became a Life Governor of De Beers Consolidated and it is this fact that invites a closer look at the collaboration of Rudd and Rhodes on the Diamond Fields. Cecil Rhodes followed his brother Herbert out to Natal in South Africa in September 1870 and learned to grow cotton in the Umkomaas Valley. 'There is great satisfaction', he wrote, 'in having land of your own, horses of your own and shooting when you like, and a lot of black niggers to do what you like with ...'." For Rhodes, aged 18 years, the new experience of colonial life was based on a pleasing sense of proprietorship. But with Herbert searching for diamonds near the Vaal River, the Diamond Fields soon became an 'awful enticement' to him. In July 1871 the fabulously rich 'Colesberg Kopje' was discovered and Herbert was one of the pioneers to dig the pit. By October he had found between £5,000 and £10,000 in diamonds and in the face of such good fortune Cecil Rhodes could wait no longer.12 He left the farm and arrived in Kimberleyin November 1871. T h e market value of diamond claims was prohibitive to newcomers with little capital. Rhodes advised a friend that 'the only chance is to bring up plenty of Caffres, as labour is still very scarce, and then get a claim on a percentage'.13 But Herbert Rhodes owned three claims in 'Colesberg Kopje' (renamed Kimberley mine), one of which Cecil worked on shares, organising the digging and taking half the diamonds while the other half went to Herbert. In January 1872 he claimed to be averaging £100 a week 314 THE JOURNAL OF IMPERIAL AND COMMONWEALTH HISTORY and the money he made in this period he took home to England at the end of 1873, where he invested it in landed property in Hampstead. It is important to note that Cecil Rhodes was no ordinary digger seeking his fortune. Herbert and Frank, his two elder brothers, had been to Winchester and Eton respectively. Through such a schooling their clergyman father had bought them not only a good education but access to men of wealth and power. The public school old boy network on the Diamond Fields overlapped with the officer corps in the British army. When Herbert was in residence at the diggings he lived and messed with the 'Twelve Apostles' and introduced his younger brother to this group. They were a collection of gentlemen who speculated in joint ventures concluded over cigars, p o r t and whist in the congenial atmosphere of the Craven Club. One member of this group was John Xavier Merriman, Member of the Legislative Assembly for Aliwal North, who took 'a great fancy' to Rhodes and 'turned his ideas to politics as being the only intellectual occupation in South Africa'.14 Merriman introduced Rhodes to his close friend, John Blades Currey, Secretary to Government in the Crown Colony of Griqualand West from 1873 to 1875. Currey, thirty-three years Rhodes' senior, provided him with a home from home on the Fields and his first working insight into politics and administration.15 But despite Rhodes' desire for an 'intellectual occupation' he turned his hand to making money and served an apprenticeship with some of the most influential colonial merchants. Rhodes had in fact met Rudd in the Umkomaas Valley in 1871 where a neighbour of the Rhodes brothers was related to Rudd. Having failed as a merchant in Pietermaritzburg, Rudd set off for the Diamond Fields in March 1871. He dug a claim unsuccessfully and soon entered the firm of R. E. Wallace and Company, which was supported by Jones, Rudd and Company of Port Elizabeth, in which Thomas Rudd, brother to Charles, was the senior partner.16 R. E. Wallace and Company was involved in numerous commercial ventures in partnership with many different firms and individuals, but not with Cecil Rhodes. The firm speculated in diamonds, tried to buy 200 claims in De Beers mine, operated a 'wire tramway' in Dutoitspan mine, built a telegraph between the towns of Kimberley and Dutoitspan, ran a bottling and ice-making business, and were part owners of the Craven Club. In 1874 the firm was put into liquidation in a general run of failures as the European economic crisis forced coastal merchants to scuttle their various exploratory ventures on the Fields, but Charles Rudd remained in Kimberley as a commission agent, selling provisions on consignment from his brother's firm in Port Elizabeth.17 Charles Rudd had the singular distinction of promoting the first joint stock company on the Fields in January 1874. It was called the Old De Beers Mining Company and modestly enough it was formed to buy 18 claims for £1,900. By the end of the year it held 60 claims in the mine but had become a private company owned by Jones, Rudd and Company and Bayly, Tarry and Company. Although Charles Rudd was not a partner in RHODES, DE BEERS, AND MONOPOLY 315 the Old De Beers Mining Company, his brother was effectively the largest • holder in the mine at the time Rhodes and Rudd won the contract to pump the mine dry. This gave them a significant advantage over other tenders. Rudd's interests, however, did not remain in this pumping venture and his fortunes were to be materially merged with Bayly, Tarry and Company.18 Edward Wallace Tarry had joined Captain Zachariah Bayly as wholesale traders in Kimberley soon after the mines were discovered. They were supported by Anderson and Murison of Cape Town, 'second to no other house in South Africa'.19 This commercial giant bound together an elite of colonial merchants through the careful placing of their numerous daughters in matrimony. Captain Bayly was the son-in-law of Captain Murison and this facilitated the support Bayly, Tarry and Company received in Kimberley. At the beginning of 1874 Bayly returned to Cape Town as partner in a new firm and Tarry took over the property of the partnership in Kimberley for £20,000. This included the claims j o i n t l y held with Jones, Rudd and Company in De Beers mine, and claims held with Charles North in Kimberley mine, claims soon to be merged in the private concern of Daniel Francis and Company. Tarry, 'a respectable, shrewd man' established on his own, retaining the generous support of Anderson and Murison, began to specialise in the importation of mining machinery. It was through this interest that Rudd persuaded Tarry to take a third share in the pumping contract for De Beers mine.20 In the latter half of the 1870s the acquisition ot new steam technology in the mines became critical in the process of economic recovery after the commercial crisis of mid-1876. Rudd, as catholic as ever in his commercial tastes, soon began to tread a similar path of machinery importation to Tarry. Their paths formally converged in 1881 when they became partners in E. W. Tarry and Company, the largest ironmonger and machinery im- porters on the Fields, an event which none of Rhodes' biographers consider of any importance. The firm was converted into a joint stock company in 1884 with a capital of £325,000 in which Rudd held a quarter interest. Rudd opposed the amalgamation of the mines as it threatened the expanding market for machinery that a multiplicity of companies provided. When he could no longer obstruct the vigorous policy of amalgamation pursued by Rhodes, he sold nearly all his De Beers shares and sought the Rand and further afield as compensation for the loss of the Kimberley market. By the time of the amalgamation struggles Rudd was no longer a shareholder of importance on the Diamond Fields.21 Rudd never entered a formal partnership with Rhodes. In fact in the early 1870s, Louis Cohen, early partner of Barney Barnato, remembered Rhodes affectionately and probably correctly as a 'clerk with Wallace and Rudd'.22 The occupation of clerk in late Victorian times was not the de- skilled category of work it is today and many clerks, through a process of commercial fission, established themselves as their own masters with the support and blessing of their previous employers.23 Others were taken into partnership by their principals or allowed an equal share in the prosecution of specific ventures. The latter was the case with Rhodes in late 1874 in 316 THE JOURNAL OF IMPERIAL AND COMMONWEALTH HISTORY relation to a number of tenders to pump the mines clear of water. As a result of the pumping contract in De Beers mine Rudd joined Rhodes in a digging venture which matured into the De Beers Mining Company. He served this company for eight years and went to Parliament to represent its interests. But Rudd's primary allegiance during the first two decades of diamond mining lay with three commercial firms in turn: R. E. Wallace and Company of Kimberley; Jones, Rudd and Company of Port Elizabeth; and E. W. Tarry and Company of Kimberley. Throughout this period Rudd remained a merchant with a merchant's promiscuity in relation to speculation. Rhodes, with no commercial background, set about the supervision of pumping engines and diamond digging: he was a digger who became a mining capitalist.

II Expanded diamond production depended on the availability of cheap water for diamond washing. Water was scarce on the Fields and well- owners controlled one of the most valuable mining resources. Drainage and springs in the mines, however, obstructed digging as water gathered in ponds at the bottom of the pits. Consequently, control of the pumping contracts bestowed a position of great power on the contractors. William Archibald Hall held the contract for Kimberley mine between 1874 and 1879 and he dictated the price for his services as, initially, he owned the only effective pumping machinery on the Fields together with a block of 18 claims in the mine. Rudd and Rhodes attempted to challenge Hall's position as Kimberley contractor in 1874. When they failed they turned their attention to Dutoitspan mine, where with a little help from influential friends they were awarded the contract. The often quoted deal, concerning a £1,000 six horse-power engine, that Rhodes made with farmer Devenish of Victoria West was to enable him to carry out this contract for which he was eminently unprepared.24 'The poor schoolboy', as Rhodes was called by Hall, made the Dutoitspan contract pay and it matured into the Le Jeune Diamond Mining Company. Based on the profits of the pumping contract, the company began as a partnership between three influential diamond merchants and Rhodes — Rudd had dropped out — and it was floated as a joint stock company in the 'share mania' of 1881.25 This development was duplicated in De Beers mine, but whereas the Le Jeune Company has been forgotten the name of De Beers was to become synonymous with diamonds throughout the world. In 1874 the De Beers Mining Board had a choice of two possible methods of clearing their mine of water. They chose to buy pumping machinery and to organize pumping themselves rather than offer a contract to a private party. The pumping engine, which Rudd had turned into a handsome profit by selling to the Board, answered well until the rainy season at the end of 1874. When it failed to clear the mine, Cecil Rhodes and James McKenzie, engineer to the Kimberley Mining Board, won a private contract to clear the mine of water in two months and to keep it dry for the following two RHODES, DE BEERS, AND MONOPOLY 317 months. By May 1875 it was clear that they had failed to keep the mine dry. In the following month Rhodes entered a conditional contract, which was based on the future arrival of new pumps he had ordered from England. In the interim the pumping task reverted to the Board, who in July appointed a 35-year-old Mauritian engineer, Mr Huteau, to superintend the pumping operations of the Board. He kept the mine dry effectively during the wettest months at the end of 1875 and kept working expenditure below Rhodes' contract price. In the face of this performance and the fact that Rhodes' pumps were on a ship on the Atlantic Ocean, the new contract began to appear unnecessary. On 26 December 1875 the plunger, gland and collar of the pumping engine were removed, sabotaging the engine and flooding the claims. Earlier it had been revealed that an attempt had been made to bribe Huteau to damage the engine and the anger of the claimholders forced Huteau to expose the culprit. The propitious moment arrived on 5 January 1876 before an open court conducted by Colonel Crossman investigating all manner of grievances surrounding the eruption of the Black Flag Revolt. Rhodes was named and called to account. He denied the charge and to emphasize his innocence he had Huteau arraigned on a charge of perjury. Huteau was committed for trial in the High Court but at the end of January, Sydney Shippard, the Attorney-General, declined to prosecute and dismissed the case.26 The Huteau bribery charge had never been mentioned by historians before Brian Roberts exposed it in 1972. 'The fact that the charge was unproven does not detract from its interest', wrote Roberts; 'it epitomises the uncertainty that was to accompany many of Rhodes' business and political involvements'.27 Roberts, however, weighed the scales of doubt against Huteau, largely in the belief that he stood to lose his job when Rhodes took up the contract. But Huteau stood to gain nothing by destroying his own efficient work and the livelihood of those claimholders who depended on his water extraction. On the other hand, Roberts did regard the refusal of Shippard to prosecute the suit of perjury that Rhodes brought against Huteau as suspicious. Rhodes messed with Sydney Shippard, Advocate Halkett and Recorder Barry, who presided over the High Court, and it was probably their idea to file a case against Huteau, which effectively quashed any public discussion of Rhodes' conduct. The fact that his honour was not pursued to legal judgement in a litigious society where such concepts were important and under advice from men at the hub of colonial law is very damning. This combined with the possible loss of the contract swings the scale of doubt decisively against Rhodes. The damage done to the Board's engine substantially retarded the process of keeping the mine dry. In February 1876 a majority of claimowners voted at a public meeting to have Rhodes' contract annulled if his pumps did not arrive within a month. This pressure came from diggers in Schwab's Gully, a rich section of the mine, who began to assert the necessity of having a pump in their ground. Rhodes guaranteed the imminent arrival of his pumps and agreed to pump from both Baxter's Gully and Schwab's Gully for an additional fee. He agreed to a nine-month 318 THE JOURNAL OF IMPERIAL AND COMMONWEALTH HISTORY contract at £650 per month and in March left the Fields for England. 'My character', he wrote, 'was so battered at the Diamond Fields that I like to preserve the few remnants'.28 Rhodes entrenched his position as absentee water contractor by shipping a twelve-horse-power Ransome and Sims engine and a Blake's steam pump through the good offices of Rudd and Company in London. In Kimberley E. W. Tarry was induced to take a one-third share in the water contract and they pumped effectively through to the end of 1877. At this point they were successfully challenged by James Ferguson, wealthy Kimberley merchant, who in August 1875 had purchased the 60 claims of the Old De Beers Mining Company for £2,100 and became the largest claimholder in the mine. But Ferguson failed to conquer the flow of water— his new pumps were on the road from Port Elizabeth — and he caused a great loss to claim- holders. The contract passed temporarily back to Rhodes, but in April 1878, Rudd refused to sign a new contract in the hope of extracting a higher price, and the Board decided once again to pump under its own auspices. They purchased powerful machinery for £2,000 and set about the pumping of water. At the end of the year Rhodes sued the Board for breach of contract and the affair was settled out of court in his favour. It was revealed that his working expenses were £256 each month, which left a monthly profit of £294 or an annual income of £3,528. Rhodes, Rudd and Tarry resumed the contract and in the next decade bequeathed it to the De Beers Mining Company.29 The value of the contract did not lie simply in the tidy profit. The great advantage of possession of the contract lay in the possibility of regulating the value of the claims. Submerged claims sold cheaply on the market and gained remission of rates and licence fees. They possessed a dormant value which erupted in the late 1870s as the water was extracted. With a steady income from the water contract, Rhodes in partnership with Rudd and Robert Graham bought claims in potentially the richest ground in the mine, which formed the reservoir of their pumping operations. Rhodes' biographers have been content with the description of De Beers as a 'nice little mine' without providing the slightest indication of why this should have been the case. In fact, in Kimberley mine less labour time was expended in creating a far greater wealth: each load of soil contained twice as many carats as in De Beers mine, though the richness of De Beers was to increase with depth. Between 1875 and 1877, Kimberley mine, with 400 claims, doubled in assessed value to £ 1,000,000, while De Beers mine, with 612 claims, was valued at £272,250 in its first assessment in 1877.30 De Beers mine, for the first five years of its intermittent existence, was largely immune from the seismic swings in claim prices that affected its wealthier neighbour. It never suffered the fate of Dutoitspan mine — twice its size with a market value of £54,037 in 1877 — in passing for latrines, but to the eye of the capitalist, the prospects of De Beers mine before 1876 were jaundiced to say the least. It is not known exactly when Rhodes, Rudd and Graham began to buy claims in De Beers but it is likely that it was in the latter half of 1875. RHODES, DE BEERS, AND MONOPOLY 319 Rhodes paid the low price of £8 for a claim in October of that year. In the following year they bought abandoned ground to form a block of claims in Baxter's Gully. In September 1876 the block was worth £600. In 1877 the mine began to take on the form of a basin. 'The time when a "gully" was sunk in an immense mass of ground and none but the enchanted hole touched', wrote the De Beers special commissioner of the Diamond News, 'is past'.31 But the gullies still remained the richest sections of the mine. When the mine was subdivided up for assessment in 1878, most claims in Baxter's Gully were valued at £1,800; in Schwab's Gully and Poor Man's Gully at £ 1,200; and in Australian Gully at £900. The value of the Rhodes, Rudd and Graham block had risen to £9,000. But the market price of most claims did not fetch 75 percent of their assessed value, while in Kimberley mine claims were selling for 25 per cent over their appraised value. As claims were concentrated in fewer hands in Kimberley mine, capitalists with a few thousand to invest turned to De Beers.32 In the late 1870s De Beers was on average a quarter of the depth of Kimberley mine and it was far cheaper to work. The profits from De Beers ground valued at £ 1,800 equalled the profits from Kimberley claims valued at £3,000. 'We are in as good a position as North and Tarry block with Francis', Rhodes argued with Rudd, 'and average the ground through as rich' [sic].3i In 1880 the average value of Kimberley claims was £3,681 while De Beers had an average value of £1,333. By this time the Rhodes partnership had extended its mine proprietorship to 40 claims through further purchases in Baxter's Gully and more extensively in the poor ground in the West End, where claims were valued at £150 each. After the Diamant Commandit Gesellschaft Georg[e] Lippert, which held 116 claims—based on the nucleus created by the Old De Beers Mining Company and expanded by Jame Ferguson — Rhodes, Rudd and Graham were the largest holders in the mine.34

Ill The first industrial cycle of production on the Fields( 1877-1885)began with the extensive acquisition of fixed capital in the form of steam machinery which stimulated the process of economic recovery after the commercial crisis of mid-1876. Between June 1878 and June 1879 £100,000 was spent on steam machinery and by June 1881 it was estimated that £750,000 worth of machinery was in place on the Fields.-35 Productivity grew, not only in terms of output (see Appendix), but in terms of a reduction in mining costs, central to which was an intensification of labour in the pits and an attempt to tighten industrial discipline. The years between 1878 and 1880 were a very prosperous period for digging. Diggers reaped the enormous return of 30 per cent on their invested capital.36 But as the expansion of production accelerated, the high rate of profit encouraged the extension of credit and increasing speculation. Beginning in 1880, but largely concentrated in the first half of 1881, sixty-six joint stock companies were formed with a nominal capital of £7,365,390.37 This feverish activity of company 320 THE JOURNAL OF IMPERIAL AND COMMONWEALTH HISTORY promotion had little to do with raising working capital for the mines. Crucially claimowners were able to transform their individual proprietorship of the mines into shares at vastly increased prices. Once a new price of the mines had been fixed in this way, these shares were traded in the 'secondary market' where they rapidly climbed to between 200 and 400 per cent over their par prices. The boom, known as the 'share mania', which spanned the first six months of 1881, successfully concealed the looming crisis of over-production of diamonds. There were five major constellations of company promoters who made money out of the 'share mania'. First and foremost, there was a group of European diamond merchants and brokers led by Jules Porges and Company. They had originally invested in Kimberley mine in 1876 and combined their interests with the local diamond merchants, Lewis and Marks,38 and Paddon Brothers. A second European group clustered around Charles Posno, whose base lay in the Amsterdam cutting industry and in the urban land owned by the London and South African Exploration Company on the Diamond Fields.39 Given that the great bulk of European capital was invested in the Dutoitspan and Bultfontein mines on this company's property, it was not surprising that Charles Posno was prominent in nearly all of the fifteen companies floated in London. The majority of capital came from diamond merchants whose focal location was Hatton Garden, but whereas Posno's capital contacts seem to have been limited to London, Jules Porges had well-established links with European financiers and Parisian bankers in particular. The remaining three groups tapped local capital resources. Joseph Benjamin Robinson was a capital force on his own with substantial interests in Kimberley and Dutoitspan mines. The fourth group was dominated by the diamond merchants, Barnato Brothers, and included the sharedealers David Symons and Charles Moses. The last group was composed of professional men, merchants and local entrepreneurs, and Cecil Rhodes came to be their best-known representative. It is with the company promotions and financial reputations of Cecil Rhodes and Barnato Brothers that this section is concerned. Rhodes was instrumental in forming the De Beers Diamond Mining Company in March 1880. It was floated with a capital of £200,000 in 2,000 shares of £100 each, of which only 100 were offered to the public. The major shareholders were:

shares nominal value % of Ton W. Alderson 631 £63,100 31.55 C. D. Rudd 280 £28,000 14.00 R. D. Graham 280 £28,000 14.00 C. J. Rhodes 280 £28,000 14.00 W. H. Dunsmure 209 £20,900 10.45 L. Hoskyns 54 £5,400 2.70 W. Puzey 53 £5,300 2.65 P. B. Jones 25 £2,500 1.2540 The company owned 90 claims, which were bought for £ 175,369. But at the time of formation the Standard Bank Manager valued all the claims at RHODES, DE BEERS, AND MONOPOLY 321 £40,000 and disbelieved the promoters when they predicted a dividend of between 12 and 18 per cent per annum.41 The value of the Rhodes, Rudd and Graham block of claims had, however, soared from £ 10,000 to £84,000 in two years. Rhodes disposed of 49 shares during the 'share mania' at prices of between £105 and £130, Graham sold 69 shares and Rudd sold half his holdings.42 This was the position of the original core holders in March 1881 when the claims of Frederick Philipson Stow, Robert English and George Compton were merged with the De Beers Company. Frederick Stow, later a Life Governor of De Beers Consolidated, was to play a crucial role in the affairs of the De Beers Mining Company. He had been a digger at Dutoitspan when the 'dry diggings' were first discovered. After July 1873 he had concentrated on his occupation as an attorney. Attorneys and advocates were the most prosperous of professional men on the Fields, where the law was constantly invoked to decide conflicting claims on the enormously concentrated wealth of the mines. By the turn of the decade, Stow and his partner, Harry Caldecott, had the largest practise earning £5,000 a year. Two years before he had invested in claims which by 1881 formed a solid block on the east flank of the De Beers Company, cutting off their expansion into the rich ground of Schwab's Gully. When Stow merged his claims with those of the De Beers Mining Company, he forced it to shed its poorer ground in the West End. The value of De Beers claims, however, was increased to £424,300, while Stow's ground was put into the company for £241,250. The De Beers Company came out of the merger with a capital of £665,550 in £10 shares and was the most highly capitalized company in Kimberley.43 None of Rhodes' biographers has noted the fact that despite the massive increase in the value of De Beers claims, Stow emerged from the merger as the largest individual shareholder. In March 1881 Stow held 16,114 shares; Alderson ranked next with 10,810 shares; English followed with 5,608 shares; while Rhodes, Graham and Rudd held 4,560,4,316 and 2,955 shares repectively. By December 1882 Stow had sold 5,900 shares, the majority at high premiums in the 'share mania'. Alderson was in severe financial trouble at this time through rash speculation in the Jagersfontein diamond mine in the Orange Free State. In September 1883 the Bank of Africa forced him into insolvency and placed an interdict on the 10,946 De Beers shares he had transferred into his father's name. Robert Graham had also run into difficulties and was forced into bankruptcy in September 1883 by the Cape of Good Hope Bank. Stow, Rhodes and Rudd weathered the collapse in share prices and held on to their shareholdings in De Beers.44 Rhodes and Graham were the most prestigious company promoters on the Fields. In 1881, Rhodes and Graham were the directors of six and nine colonial diamond-mining companies respectively but they also sat on the boards of tramway, steam laundry, theatre, water, loan and coal companies. Looked at from the point of view of age, Rhodes' ascent to company promoter of these proportions was remarkable. In 1876, aged twenty-three years, he had bewailed his lack of a career and promised that he would become 'a most perfect speculator' if he had two years in which to 322 THE JOURNAL OF IMPERIAL AND COMMONWEALTH HISTORY learn a profession.45 Lacking a profession, however, but having served a fruitful commercial apprenticeship, he became a Director of the Kimberley Share Exchange Company four years later.46 He had been associated with it since its formation in October 1880, and when Rhodes went to the Cape Parliament as a Member in April 1881, it was the deft dabblings in company promotion of this small undertaking that had raised Rhodes to prominence. Rhodes' reputation was founded on his stake in the De Beers Mining Company, but the dishonest promotion of the Beaconsfield Diamond Mining Company has been ignored by historians. The Beaconsfield Company was formed out of 12 claims assessed at £40,395 in 1881. The claims were put into the Company for £10,000 each and the promoters were paid three-quarters of the £132,000 capital. To those who knew the value of the claims it was a case of buying discarded claims and selling them to a public company under cover of the 'share mania'. Inspector Rennie of the Standard Bank commented that bogus concerns '... should be sorted out as soon as possible, and an example made of a promoter here and there. One of the notorious companies under this head is the "Beaconsfield" amongst the promoters and directors of which is the Bank's solicitor, Mr R. D. Graham'.47 Graham held 1,406 £10 shares, while of the other promoters, Rhodes held 1,053 shares, William Alderson 2,464 shares, August Rothschild 2,107 shares Anthony Gold- schmidt 924 shares, and Octavius Skill, Manager of the Kimberley Share Exchange Company, 578 shares. It is unclear whether Rhodes made any money out of his shares in the secondary market. Goldschmidt, prominent local sharedealer, was still caught with his shares in late 1883 and they were worthless. The profits and failures of speculation of this-kind, rather than the incessant charges of diamond theft, were at the root of the failure of so many companies to pay dividends.48 Barnato Brothers were not as prominent as Cecil Rhodes in the promotion of diamond-mining companies. The firm floated five companies with a total capital of £493,000 through the Royal Stock Exchange in early 1881. They lost £28,000 in their two ventures in Dutoitspan, while the Frere in De Beers was an equally dismal failure. The jewel in their crown of companies, however, was the Barnato Company in the Kimberley mine, and Barnato Brothers held all the £115,000 capital of the Company. They sold half their holdings during the 'share mania' at a premium and when shares collapsed to a tenth of their par value in the aftermath of the boom, they bought in again until they held three-quarters of the scrip. The Barnato Company returned the spectacular dividend of 54 per cent in its first two years of work, before its claims were covered with reef. This equalled the performance of the premier company in the mine, the Kimberley Central, and was only surpassed by William Knight's British Company which repaid its capital in two and a half years. There were rumours that this output was not wholly the proceeds of its own production but, whether this was true or not, the Barnato Company was the hinge on which the firm swung to great wealth. In 1881 Barnato Brothers kept £30,000 on fixed deposit at the Standard Bank and were worth £100,000.49 RHODES, DE BEERS, AND MONOPOLY 323 Barnato Brothers, unlike Cecil Rhodes, was suspected of involvement in illicit diamond buying. More particularly the accusing fingers were pointed at the Barnato nephews, Isaac and Wolf Joel, who worked for their uncles. In 1884 Isaac Joel was arrested on a charge of illicit diamond buying, but he jumped bail and assumed the name of Jack Joel and a new life in the London Office of Barnato Brothers. Brian Roberts has meticulously reconstructed the events in this affair together with its sequel, the sacrificial dismissal of John Fry, then the Chief of the Detective Department, for trying to expose the illegal intrigues of Barnato Brothers.50 The Joel charge was the closest Barnato Brothers ever came to breaking stones on the Cape Town breakwater. Their dupes were rumoured to be well acquainted with that fearful sentence. The whispers that circulated in the Kimberley Club — and kept Barney Barnato without its precincts — were openly aired in the official comments of the Manager of the Standard Bank: The firm is not regarded as a respectable one as the partners are considered to be unscrupulous and are suspected of being illicits, but we have never had any trouble with them. Their transactions with us have been numerous and extensive, and their engagements have always been promptly met. I have asked them for their balance sheet, but they refused to give it... Wolf Joel is closely allied with the IDB fraternity and might therefore come within the reach of the law at any time.51 Barney Barnato was treated as a pariah in respectable circles. Stow branded him a thief in his Memoirs and seriously considered refusing the life Governorship of De Beers Consolidated if Barnato was included among his fellow Governors; Merriman attacked Barnato's character throughout the 1880s and on public platforms when Barnato ran for Parliament in 1888. 'I would sooner go to hell alone', wrote Merriman, 'than arm in arm with Barney Barnato'.52 To summarise, Rhodes and Barnato, who were to play the most important role in the formation of a monopoly in diamond production, did not, as has been shown have clean records in financial dealings on the Fields prior to the final negotiations. Swindles and theft were not part and parcel of speculation and stood condemned by the business morality of the day. In the case of Rhodes, his biographers have largely been content to bury dishonest dealings under the magical wand of imperialism. In the case of Barnato, his biographers have either ignored his involvement in illicit diamond buying or referred quaintly to his lack of reputation.53 There is little value in chronicling swindles in themselves, though they tarnish the conventional historical image of Rhodes, the great imperialist. More importantly swindles and the greater returns of illicit diamond buying organized on a grand scale focus attention on the process of capital accumulation, which was dictated not by the greater glory of the British Empire, but by the simple pursuit of profit. 324 THE JOURNAL OF IMPERIAL AND COMMONWEALTH HISTORY IV Cecil Rhodes is probably best known for his Parliamentary activities, but these have seldom been interpreted in the context of the demands the diamond-mining industry made on the Cape state. Rhodes, as a representa- tive of the mining industry, went to the Cape Parliament to secure the conditions for the expanded reproduction of mining capital. First and foremost the mineowners wanted a railway from the Cape. This was their primary motivation for agreeing to annexation by the Cape in October 1880.54 Secondly, they sought a barrage of protective legislation for the diamond industry, central to which was a Diamond Trade Act. Thirdly, they wanted to ensure a constant labour supply through control, directly or indirectly, of the labour migration routes. The mineowners had to accommodate themselves to migrant labour which increasingly threatened capital accumulation through its unregulated abundance and scarcity. Lastly, they asked for legislative sanction to increase the coercion of African labour in Kimberley, the most important institutional device being the compound system. This essential demand made of the Cape Parliament was succinctly summed up by Charles Rudd who wrote: 'I gave 8 of the best years of my life night and day to De Beers unpaid and served 5 years in Parliament to carry the compound system'.55 The mineowners presented diamond theft to Parliament as a haemorrhage the diamond industry could no longer bear. The Diamond Trade Act of 1882 was the draconian measure conceived to staunch the internal rupture in the mines. It abolished trial by jury in IDB cases and placed the onus of proof of legal possession of a diamond on the suspected party. Though important to the mineowners, who by this time were in a minority in the Kimberley bourgeoisie, it was positively inimical to the tradespeople who benefited enormously from the amount of money the illicit trade threw into local circulation. They argued that the Act was a weapon wielded over the town population that decreased trade and property values and made Kimberley a city under the siege of suspicion. They organised to resist the mineowners' demands for special legislation and in particular the mineowners' desire to lock up their most lucrative market, that is, African labourers, in closed compounds. With the support of coastal merchants they vetoed the mineowners' attempt to place the compound on the statute book. In fact, by the middle of the 1880s commercial members dominated Parliamentary representation from Kimberley and provoked the mineowners to seek an alliance with the Afrikaner Bond or the 'brandy interest': Rhodes is in great form as a Dutch advocate [wrote Merriman]. All this playing up to ignorance is very pitiful but it is the price of democracy and we see it repeated in England on a far larger scale. People excuse themselves to their own conscience by saying, 'I can do good with power and in order to get power I must do things I despise', and when they begin the path is so easy. I remember when Rhodes used to propose to maintain British influence by using the native vote RHODES, DE BEERS, AND MONOPOLY 325 — now he descants on the theme of the integral race difference between black and white and I should not be surprised to find him an ardent advocate for the restriction of the franchise.56 This alliance prefigures what Trapido has called the 'uneasy union of gold and maize' in the post South African War Transvaal.57 It symbolized the growing concern which both farmers and mineowners were expressing over the supply of labour.58 Atmore and Marks have emphasized that Carnarvon's confederation schemes for South Africa in the mid-1870s were based on the need for a uniform 'native policy'.59 Etherington has expanded this argument to highlight the particular influences of Theophilus Shepstone in Natal and Governor Southey in Griqualand West on Carnarvon.60 The political fragmentation of South Africa posed problems for the movement of African labourers to the mines. Coming from the two largest catchment areas, the north-eastern Transvaal and Basutoland, Africans were harassed by the Boers in the Transvaal and the Orange Free State. The annexation of the Transvaal by Britain in 1877, the repression of the Griqualand West Rebellion in 1878 and the destruction of the Zulu and Pedi policies in 1879 made government recruitment a more secure undertaking. But the new decade opened with a series of disastrous colonial wars in the independence struggles of the Transvaal Boers and the disarmament polities of the Cape in Basutoland, which severed the labour supply to the mines. In many cases white labourers were employed at five times the African wage to keep the mines in production. Whereas the Carnarvon scheme had run aground on the Cape's refusal to incorporate Griqualand West, in the 1880s the mineowners went into the Cape with firm plans to use the old Colony for precisely those integrative purposes outlined in the 1870s. Cecil Rhodes was able to draw on the labour experience of cotton farmers in Natal and in particular his brother Herbert and his close friend Frederic Elton. On his own part he had learnt that Africans were 'indepen- dent fellows' and the 'greater part of them [would not] work'.61 On his cotton flat he had overcome this problem by employing African refugees, and paying the hut tax of others; he had found that debt peonage was the best way to get 'a good name among the Kaffirs'.62 From Herbert Rhodes he learnt why Africans were so 'independent' and ways in which Africans could be separated from rural conditions of existence. In Herbert's peripatetic career as explorer and prospector he had become close friends with Frederic Elton to whom 'service in Natal and Zanzibar had shown... the profound inter-relation of labour supply, mining development, the suppression of the slave trade and the opening of East and Central Africa'.63 It was one thing, however, to seek a constant supply of labour but another thing to retain a full complement in Kimberley. Based on the example of barrack housing for slaves on the Brazilian Diamond Fields the mineowners evolved a peculiar system of closed compounds. It was the special contribution of Cecil Rhodes and the De Beers Mining Company to perfect this institution through the construction of a convict station and the employment of convict labour. 326 THE JOURNAL OF IMPERIAL AND COMMONWEALTH HISTORY Rhodes' colonial African policy was shaped by his mining interests. As early as 1881 he had clearly formulated the ideas of the future Glen-Grey system and incorporated them in his election platform. 'I should not support', he pledged in respect of Basutoland, 'a measure for confiscation of territory, but would advocate that the chiefs power be broken — the Russian village system introduced, namely a headman, agricultural land held individually, and a general commonage — and that the cost of the war should be represented by a loan, chargeable on the revenues of Basuto- land'.64 The country was not only important as a labour reservoir. It was also the granary of the Diamond Fields and so the Cape's disarmament policies in Basutoland, which led to the Gun War, cost the Fields an estimated £480,000 in inflated grain prices in 1881. In addition Basutoland provided a considerable amount of wood for the Kimberley market. In July 1882 while Rhodes was part of the compensation commission for loyal Basuto, he traversed the country valuing trees for export to Kimberley. Rhodes believed that the only solution to an impotent Cape administration of a rebellious Basutoland lay in imperial intervention and in 1883 Britain resumed direct responsibility for the country. It has too often been taken for granted that Rhodes' interest in the Road to the North was of strategic importance for the expansion of British influence.65 It is important to emphasize that there were various interests to which Rhodes appealed, various resources which were required for mining purposes in Kimberley, and that Rhodes' pursuit of northern expansion was not simply dictated by the El Dorado he hoped to find there. Firstly, the Afrikaner free-booters in Goshen and Stellaland threatened to obstruct labour migration down the western route at a time when the mines were encouraging the employment of Tswana labour, as South Sotho, Pedi and Tsonga labour migration had been hindered by wars. Secondly, Rhodes was quick to emphasize the importance to merchants of maintaining easy access to the resources and vast commercial market of the interior. Thirdly, Bechuanaland was the major source of firewood before the railway allowed cheap coal to flow to the steam machinery on the mines in 1886. Fourthly, Rhodes was always afraid of the discovery of new diamond mines. This fear determined his speculation in Orange Free State mines and his land purchases in Barkly West; it determined his desire to have access to mineral information about land in Bechuanaland and further north. Overall it is important to emphasize that Rhodes did not acquire a fortune in order to expand to the north; rather, he was forced to expand to the north because his capital was invested in the diamond mines at Kimberley.66

The struggle over the amalgamation of the diamond mines has been personalized by Chilvers and Gregory, amongst others, into a titanic battle between Rhodes in De Beers mine and Barnato in Kimberley mine. The story they tell has become a legend and is basically as follows. Between 1880 and 1887 Rhodes absorbed all the diamond companies in De Beers mine RHODES, DE BEERS, AND MONOPOLY 327 with the De Beers Company. The process of centralization in Kimberley mine was slower but by 1887 Barnato held a controlling interest in the Kimberley Central, which owned the whole of the mine with the exception of the 90 rich claims belonging to the Compagnie Francaise. Rhodes, in pursuit of his dream of total unification on his own terms, bought the Compagnie Francaise for De Beers. In a brilliant manoeuvre he then sold the Compagnie to the Kimberley Central and placed a Trojan Horse in the enemy camp. It gave De Beers a one-fifth share stake in the Kimberley mine. Then, after a battle of attrition in production, which provoked a collapse in the diamond market, Barnato and Rhodes fought each other in the share markets for a controlling interest in Kimberley mine. The battle for share control, the legend continues, began in earnest in October 1887 and Rhodes emerged as triumphant victor in March 1888. In the struggle Barnato's supporters deserted him for quick profits while Rhodes' allies remained firm in the share markets for De Beers. Rhodes frequently attempted to buy off Barnato during the struggle, but it was only when Rhodes and his friends controlled three-fifths of the Kimberley Central stock in March 1888, that Barnato capitulated to Rhodes' terms for the amalgamation of the De Beer and Kimberley mine and pledged his support for the formation of De Beers Consolidated Mines Limited.67 This story of the amalgamation struggle is pure mythology. It is almost a biblical parable with Rhodes, representing the forces of Christianity, capitalism and progress overcoming Barnato, representing the forces of evil (Judaism), criminal antecedents and small-minded greed. Not only has the legend constructed a struggle between the wrong antagonists but the struggle itself has been misplaced and misunderstood. It is only through a structural analysis and a depersonalization of the different positions of the De Beers and Central companies, that the process of concentration and final centralization of diamond production can be understood. The 1880s opened with the boom and bust of the 'share mania' and newly formed companies looked hopefully to European bankers to pick up the pieces. Baron Erlanger entertained a proposal from Rhodes for the amalgamation of De Beers mine, but the companies failed to agree on valuations. A scheme of N. M. Rothschild and Sons for the amalgamation of Dutoitspan mine, in which they had invested heavily,68 failed to bear fruit and the local banks were left to recover advances through forced sales at deflated prices. This process facilitated the centralization of local companies and a group of influential European diamond cutters and cut diamond merchants hoped to reap the rewards of a complete amalgama- tion of the four mines. The Unified Mines scheme, with a proposed capital of £10,000,000, was the brain-child of Charles Roulina, owner of the largest diamond-cutting establishment in Paris. In late 1885 he put together a financial syndicate which included the Comptoir d'Escompte, the Banquede Pahs et de Pays-Bas, and the Swiss banking house of Hentsch. The project foundered, however, on the opposition of mining capitalists such as Cecil Rhodes (De Beers), Francis Baring-Gould and Richard Day Atkins (Kimberley Central): men who had no stake in the diamond trade. 328 THE JOURNAL OF IMPERIAL AND COMMONWEALTH HISTORY Merriman, who went to Kimberley in January 1886 as a representative of Unified Mines, was mortified to cross Rhodes. ' I feel sure he means well but has a perfect vice of indecision in him', Merriman wrote to his wife; '[but] in politics as in this matter Rhodes is utterly selfish and entirely regardless of the interests or feelings of anyone but himself.69 What was rational from the standpoint of diamond production as a whole, however, was not necessarily rational from the standpoint of each mining company. Rhodes' self-interest did not arise from an inability to see the necessity of monopoly production but from a particular structural position in the mines. This position was the product of the uneven development within and between each of the mines. The depression wreaked different patterns of havoc on different mines. The decreasing margin between prices and costs of production sent twenty- nine mining companies, over-capitalised with vendors' shares at £2,389,100, to the wall. The average selling price of diamonds collapsed by 42 per cent between September 1882 and September 1885. But this decline in diamond prices did not reduce the aggregate revenue of De Beers, Dutoitspan and Bultfontein mines. The paralysis of Kimberley mine production through the collapse of the reef provided a natural limitation of output and granted a honeymoon period to the De Beers and Dutoitspan mines. They increased their share of the total revenue and output through reducing wages, increasing productivity and retrenching labour.70 Their lead in production, however, was only temporary. Kimberley mine, the richest and deepest pit, was a pioneer of new production technology. Unable to continue open-mining the three giant Kimberley companies, the Central, the Compagnie Frangaise and the Standard, went underground between 1884 and 1886. The potential productive capacity of Kimberley mine when it came back 'on stream' threatened the profit margins and even the existence of the other mines. Rhodes' wealth was in the poorer De Beers mine and in order to protect the value of that investment he tried to present his mine to European investors as the best base for a total unification of the diamond industry. The support of European bankers and financiers was required to make diamond shares, and De Beers in particular, a 'household article amongst the continental middle classes'.71 The relationships between share prices, dividends, debts and loans had to be carefully calculated and conflicting interests reconciled or concealed to make De Beers attractive to the investing public and large speculators. In early 1887 Inspector Rees of the Standard Bank commented that the De Beers Company 'picked the eyes' out of their ground: The De Beers Company is said to be burrowing regardless of ultimate consequences into the rich veins wherever they can be found. Already there are rumours of government interference on account of the reckless disregard of human life which is displayed, and sooner or later it is said the company will have to pay dearly for its present hand-to-mouth policy.72 RHODES, DE BEERS, AND MONOPOLY 329

In fact it was 178 African labourers and 24 white miners who paid with their lives in the following year in a mining disaster.73 This was the terminal outcome of trying to increase output to keep pace with Kimberley mine. There were differences in the De Beers directorate over this pursuit of quantity and an open split erupted in late 1886. Both sides aimed at the amalgamation of De Beers mine and the ultimate fusion of all four mines, but differed over the way in which to achieve their goal. One faction led by Frederick Stow supported a policy of firm foundations, solid investment and rapid debt liquidation, while the other faction led by Cecil Rhodes pushed an adventurous policy of company take-overs by share purchases. In the pursuit of his ends Rhodes allied himself with Alfred Beit, whose links with the diamond merchant firm of Jules Porges and Company provided Rhodes with the financial alliance he required for diamond production dominance. Although Beit and Porges brought 'better financial arrangements', Stow felt that they possessed less compelling attributes. 'They are pure speculators', he wrote; 'I believe it could be made worth their while to dispose of their interests to opponents if it suited'.74 Alfred Beit, who became a life Governor of De Beers Consolidated, has so often been identified with Jules Porges and Company that it is worth noting that he was an independent diamond merchant until he became a partner in the firm in December 1888. Beit first went to the Diamond Fields in 1875 as clerk to Max Gammius, who represented the diamond operations of the Hamburg merchant house of David Lippert and Company. Beit soon established himself as an independent local diamond buyer, investing in diamond offices and speculating on a small scale in diamond shares and claims. In 1883 he began to represent Jules Porges and Company in Kimberley and took a third share of the profits from the diamonds he shipped to them in London. His capital in late 1884 was a moderate £35,000, of which £5,000 was invested in fixed property and the remainder in diamonds and diamond shares. During the speculative boom in both gold and diamond shares beginning in late 1886 he increased his capital substantially. In June 1887 he was reputed to be worth £ 100,000 and he had moved into the top rank of Kimberley share dealers.75 The strength of Beit in the local share market was matched by the strength of Jules Porges and Company in the European diamond share and capital markets. Jules Porges' former partner, Charles Mege, had joined the serried ranks of Parisian private bankers, while his brother was a partner in Ephrussi and Porges, a member of the haute banque in France.76 With intimate access to the idle money reserves of Europe, Jules Porges had become a financier constructing share syndicates and floating debentures and loans.77 Rhodes first called on the financial muscle of Jules Porges in late 1886 when he wanted to complete the amalgamation of De Beers mine in the face of opposition from the Victoria Diamond Mining Company, which was holding out for a higher price for its property. To force an amalgamation, De Beers and Jules Porges bought a 6,000 share stake in the 15,000 share Victoria, a company managed by Francis Oats and financed by the London merchant bankers, J. H. Schroder and Company. Once this 330 THE JOURNAL OF IMPERIAL AND COMMONWEALTH HISTORY take-over had been consummated in June 1887, and De Beers mine was virtually owned by the De Beers Company, the De Beers directors turned their attention to Kimberley mine.78 The greatest threat to the De Beers Diamond Mining Company's projected control of the industry was a unification of Kimberley mine, followed by its flotation on the London Stock Exchange as a separate mine. Only the Compagnie Frangaise remained outside the absorbing reach of the Kimberley Central by late 1887. The Compagnie was the premier foreign company on the Fields and had originally been promoted by Jules Porges, whose firm had continued to shape the policy of its Board. Its productive performance had been particularly dismal, and unlike the other major companies, which set about increasing profits through the concentration and centralization of capital, the Compagnie made half its profits through selling its claims.79 For the purpose of buying a voice in the future of Kimberley mine, De Beers contracted to purchase the Compagnie Frangaise in August 1887. Despite Stow's suspicions of Porges and Beit, he wrote from London with admiration: Rhodes has turned up looking as fit as ever. He has j u s t returned from Paris after his coup d'etat. The French Company that was is now practically in our hands and the Rothschilds have at last arranged to finance for us. We have a stay or sheet anchor to our stock.80 With the merchant bankers N. M. Rothschild and Sons committed to their shares, the possibility of moving the intrinsic values of the mines in favour of De Beers seemed far stronger. But De Beers paid heavily for their 'sheet anchor'. Rothschilds guaranteed the CompagnieFrangaisepurchaseprice of £750,000 in cash and £200,000 in debentures, for which they were to receive a £100,000 commission. There were, however, additional prizes for the bankers to collect. As part of a syndicate Rothschilds bought 50,000 £10 shares from De Beers for £ 15 e a c h — this provided the £750,000 cash to pay the Compagnie Frangaiseshareholders — andarrangedforthe28,000shares of the Compagnie Frangaise to be opted for the 50,000 new De Beers shares. The exercise of the option right was to be at the London market price on 5 October 1887, provided that the price was not below£16 and not higher than £20 per share. The profits between these two figures were to be divided between the Rothschild syndicate and the De Beers Company. De Beers earned £100,000 from this and in effect the Rothschild syndicate was paid £250,000 for advancing £750,000 for the purchase.81 Meanwhile the Kimberley Central had been trying to buy the Compagnie since 1882 but had failed in the face of the latter's demand to be paid in cash. Struggling to overcome reef problems, overburdened with debt and racked by internal policy rifts over financial reconstruction in London, the Kimberley Central could find no bank to finance such a purchase for their company. When De Beers contracted to buy the Compagnie in August 1887, the Kimberley Central tried to outbid them with a straight £ 1,300,000 offer in cash. In practice, but unknown to De Beers, the Central would not have been able to raise this money as the Standard Bank had already RHODES, DE BEERS, AND MONOPOLY 331 refused them both a loan of £ 1,500,000 a n d a guarantee of £500,000 similar to that given by Rothschilds to De Beers. Consequently the Central was elated when the Compagnie was offered to them by De Beers for 35,600 £10 shares in the Central and £300,000 in cash. As a bonus Rothschilds agreed to finance a £500,000 loan for the Kimberley Central. In effect, De Beers bought off Central opposition to their purchase of the Compagnie before its ratification in October, by contracting to re-sell it to the Central at half their tendered price. Rather than the myth of the Trojan Horse, this was the price De Beers had to pay to avoid running the risk of losing Rothschilds' financial support, in the event of Central opposition being strong enough to induce a majority of Compagnie shareholders to refuse to ratify the sale of their property to De Beers. After tense lobbying and hefty payments by Ludwig Lippert and Carl Meyer for Rothschilds, the deal was clinched.82 With the Kimberley mine under one command it was the general opinion that the Central would soon acquire the De Beers Mining Company. There were a number of men who controlled the policy of the Kimberley Central, but most prominent among them was Barney Barnato. His firm had become the largest holder of diamond scrip in early 1887, when the Barnato Company and the magnificently rich Stuart claims were absorbed by the Standard Company. The Standard had in turn been amalgamated with the Kimberley Central. After this Barnato's firm devoted its substantial resources — with the exception of £200,000 invested in Consols and £40,000 in London East End property — to the purchase of both Central and De Beers shares.83 In October 1887 Rhodes acknowledged the strength of Barnato's position in a remarkable letter written in the first flush of optimism after the re-sale of the Compagnie Francaise. Before the legendary struggle between Rhodes and Barnato had even begun, Barnato had already thrown in his lot with Rhodes: The great comfort I feel now is that the goal is reached. Barnato who has 8,000 De Beers and 1,500 one hundred Centrals or roughly £600,000 of parent stock [£3,500,000] is working in everything with me and has given his pledge to go to the end with me and Baring- Gould though a weak man has made up his mind to go with the tide. Whatever Porges may be I feel for self interest alone Beit has burnt his boats and would sooner quarrel with his home firm than sell me and he is working heartily for the same object. It rests with you [Stow] now to do everything with Mosenth'al to amalgamate the balance of Home Companies on Griqualand West in Dutoitspan and French and D'Esterre in Bultfontein ... I must have the four mines and I will allow no foreign vulture to step in at the end and form a separate mine on the Stock Exchange apart from us to get a flotation on our name and again sell the English public.84 Throughout October Rhodes and Beit met frequently with Barnato and Baring-Gould to discuss the amalgamation of Kimberley and De Beers on the basis of the equal value of both mines. In the beginning of November, Baring-Gould finally refused to accept this basis, believing in the greater 332 THE JOURNAL OF IMPERIAL AND COMMONWEALTH HISTORY intrinsic value of Kimberley mine.85 Consequently, De Beers decided to buy shares in the Central and induced Barnato to desert his company while Baring-Gould defended the interests of Kimberley Central shareholders. In early 1888 it was whispered abroad that 'thanks to the "squaring" of B. I. Barnato' the Kimberley Central was 'on the point of being absorbed against their will by the De Beers Company'.86 The legend of the struggle between Rhodes and Barnato gives great prominence to Barnato's election to Parliament and to the Kimberley Club as part of the price that Rhodes paid for Barnato's capitulation. Election to Parliament and Club were seals of respectability and essential window dressing for the formation of the monopoly company, De Beers Con- solidated Mines in March 1888. The 'squaring' of Barnato, however, lay elsewhere. In November 1887, when the De Beers Company decided to buy Kimberley Central shares, it used the excellent services of both Barnato and Beit in the share markets. There was no share struggle between Rhodes and Barnato: Barnato was buying shares for De Beers. The price of £100 Centrals soared to £375 by the end of 1887 and reached £460 in March 1888. Barnato and Beit bought from whomever was in the market, notably Sir Donald Currie and Edward Tarry. De Beers spent over £1,000,000 on 22,000 £10 Central shares, borrowing £635,728 from the local banks and £389,000 from Jules Porges and Company. Barnato did not, however, only buy for De Beers: he sold to De Beers as well and at prices far above the going market rate. In January 1888 Barnato sold 11,333 £10 Central shares for £750,000, each share realizing the excellent price of £66.87 In the same period the highest market values of such shares were:

Central De Beers 1 Jan. 1888 £38 £27 1 Feb. 1888 £46 £35 1 March 1888 £48 £36 1 April 1888 £42 £47

1 May 1888 £40 £38'/2 1 June 1888 £34 £32'/2 3 8! 30 June 1888 £3iy, £26 /4 Just how much money Barnato made out of this pre-amalgamation speculation it is impossible to tell. He made the claim to the Manager of the Standard Bank in Kimberley that he realized £750 for each of his £100 Central shares, but it is not clear how he calculated such a vast profit.89 Even though he bought and sold both Central and De Beers shares, in March 1888 he owned 27,000 £10 shares out of a total of 178,500 Central shares.90 The De Beers attempt to take over the Kimberley Central by share purchases dominated the South African share markets in early 1888. Speculation in diamond shares was enormous and the market value of the diamond mines soared to a mammoth £25,000,000. The largest share broker in Kimberley, Tallerman and Ansell, had a monthly turnover of £1,000,000 in share sales and £100 was a poor day's profit for them.91 Diamond speculation in Kimberley attracted capital from the newly RHODES, DE BEERS, AND MONOPOLY 333 discovered Rand and the Orange Free State. Rhodes financed the purchase of Central shares by diverting funds from other concerns over whose financial policy he had control. Gold Fields of South Africa put £141,907 into diamond shares and the New Jagersfontein Diamond Mining Company spent £216,000 on Central shares. Phimister followed Cartwright in arguing that Gold Fields invested in diamond shares to escape faulty investment on the Rand.92 The interaction between Rhodes' interests, however, allowed him to invest capital where it was needed most and the diamond mines were his main concern in early 1888. The fortunes of both gold and diamond shares were to remain intertwined precisely because of the transformation of diamond magnates into Randlords.93 In London the 'bulls' ruled in that part of the Stock Exchange called the 'diamond diggings'. Stockjobbers were attracted from other markets but for the most part 'a crowd of forty or fifty men' controlled the speculation. 'They are buckram Titans', wrote the Statist, 'carrying on their shoulders a fool's paradise'.94 The colossal inflation in share prices was indeed dangerous and no more so than to the Colonial banks, which had lent vast sums of money against the security of scrip. They feared deliberate attempts to bear shares: It was only last week [first week of February 1888] that Beit and Barnato, assisted by their London firms, attempted to bear De Beers' shares, but Van Beek had previously made arrangements with a German syndicate and on his cable to them every share thrown on the market was bought up and the bear was defeated. Powerful French syndicates would also step in if a serious fall were anticipated 95

In April the bears were successful and a panic set in. Rhodes publicly blamed the banks for withdrawing credit and privately pointed his finger at the diamond merchant, Harry Mosenthal; the banks denied any instrumental role and privately explained the collapse through the detrimental impact of Rhodes' speech to the De Beers Mining Company on 31 March 1888, in which he threatened to subdue his opponents by collapsing the price of diamonds to 14/- a carat.96 'I had no idea it was so bad', wrote Herman Eckstein, 'Porges and others have come forward so well and this must break the back of the bear movement'.97 But shares continued to plummet and Mosenthal, Porges, Barnato and Rothschilds mopped up shares at low prices in the trough after the boom created by the formation of De Beers Consolidated Mines Limited.98 One of the most controversial aspects of De Beers Consolidated was the provision for five life Governors — Rhodes, Beit, Barnato, Baring-Gould and Stow. Originally it was proposed that the life Governors were to take all the profits after a 30 per cent dividend had been distributed to ordinary shareholders. These terms were haggled over and under the influence of Lord Rothschild the distribution was raised to 36 per cent before the Governors took the remainder. Others believed the whole system of life Governors was open to abuse. The Economist wrote that 'the principle of 334 THE JOURNAL OF IMPERIAL AND COMMONWEALTH HISTORY paying the directors by results' was 'impolitic and objectionable' at all times, for the interests of the directors would be 'so to manipulate matters as to be able to pay a dividend which will entitle them to take their fees'." But in Rhodes' view the object of the Governors was to have men with a large stake in the company to conserve and advance its interests.100 Barnato certainly came to believe this and emphasized that he was an investor and not a speculator in De Beers. He considered it the 'finest property in the world' and intended to keep 'the major portion' of his fortune in De Beers stock. He wrote to Lord Rothschild: If I had been but a temporary speculator I should long ago have agreed to the very suggestive plan for the flotation of Kimberley mine on the London Stock Exchange and I feel sure that for an immediate profit it would have been a much more remunerative operation.101 The rich rewards of the office of life Governor were intended to entice Barnato away from such a 'suggestive plan'. The offer of a Governorship to Baring-Gould was intended to overcome his opposition to amalgamation on equal terms between De Beers and Kimberley, but Baring-Gould refused to betray his shareholders in the way Barnato had done. As a result of his sincere commitment to his company, he was denied the profits of the fifth governorship by Rhodes, Beit and Barnato. When the De Beers Consolidated Mines was formed it controlled over 100,000 Central shares. After March 1888 De Beers stopped buying Central shares and negotiated for the option of the remaining Central shares into the De Beers Consolidated. Baring-Gould opposed option on the terms offered by De Beers until October 1888, when he won a better deal for his shareholders, reflecting the greater value of their property. A small minority of Central holders opposed amalgamation on any terms and they managed to obstruct unification until February 1889. In this month the Central was put into liquidation after the vast majority of shareholders had opted their shares into De Beers Consolidated. On 28 September 1889 the Central liquidators deposited a cheque for their credit on De Beers Consolidated for £5,338,650 and on the same day drew in favour of De Beers for £5,326,260 representing the largest financial transaction in the history of the Cape. The share capital of De Beers stood at £3,950,000 with an additional £4,508,900 in debentures. A practical monopoly of the four mines was achieved only in 1891 at a total cost of £14,500,000. De Beers Consolidated, to be worth 'the balance of Africa', had asserted its control of the commanding heights of the Cape economy.102

VI Rhodes always regarded himself as a digger. This conception, although somewhat anachronistic after 1880, marked the key difference between himself on the one hand, and Beit and Rothschild on the other. Rhodes was worth £750,000 in shares, predominantly De Beers', in 1893, and the life Governorship promised substantial profits in the future.103 His private RHODES, DE BEERS, AND MONOPOLY 335 fortune was invested in diamond shares and it was the class interests of productive capital that he represented and defended. He regarded with horror the suggestion of Lord Rothschild that the Colonial state should 104 buy out De Beers in exchange for 3'/2 p e r cent government stock. He did not feel so keenly the risks of diamond-mining that induced Beit to prefer the secure return of 20 per cent on capital invested in Transvaal land and gold mines.105 At times it appeared that De Beers was the milch cow for diamond merchants who absorbed surplus profits in the sphere of exchange at the expense of productive capital. But they were only able to do this because the syndicate, which controlled the rough diamond market, also controlled the behaviour of the share market. In opposition to the manipulation of speculators, Rhodes strengthened the monetary reserves of De Beers by selling a portion of diamond production secretly and investing the proceeds in Consols. However it appeared in the short term, it was De Beers' control of production that enabled the company to extend its control throughout the industry. In the 1890s Rhodes became a politician of immense influence. Un- doubtedly he had personal qualities that commanded the allegiance of many supporters and won over opponents. But the dual position that Rhodes held as Prime Minister of the Cape and Chairman of De Beers increased his power immeasurably. He regarded De Beers as partners with the Colony, so substantial was the contribution of diamonds to colonial exports. De Beers loaned money to the state and supported Colonial credit when the banking system was damaged through the collapse of the Cape of Good Hope Bank in 1890. Wide powers had been written into the De Beers Trust Deed, which had been modelled on the charters of mercantile monopolies, notably the East India Company. Amongst these powers De Beers could govern any country, annex territory in Central Africa and maintain a standing army. The British South Africa Company in which De Beers took a one-fifth holding exercised these powers more effectively, Merriman made an apt comparison between the process of conquest and violence that Rhodes presided over from the Cape, determined by his investment in the Kimberley diamond mines, and the swathe of destruction that the feudal conquistadors cut in South America. 'You might draw a curious picture of Rhodes and his friends', he wrote to Basil Williams, able biographer of Rhodes, 'in the pre-venal days at Kimberley plotting the ruin of the Matabele as a comparison to. Pisarro, Alamaque and Luque before the conquest of Peru'.106 The disastrous clash with President Kruger, a 'rural Cromwell', in the Jameson Raid and the 'venal' acquisition of Matabeleland for white settlers could not be counted as mere events in the two-century-old expansion of colonialism from its roots in the Cape, but formed part of the penetration of industrial capital into the interior of Southern Africa and the establishment of monopoly capitalism in Kimberley. The formation of De Beers Consolidated signified a fundamental change in the nature of British imperialism in South Africa. This transformation was clearly indicated by the changing ownership of De Beers. In January 336 THE JOURNAL OF IMPERIAL AND COMMONWEALTH HISTORY 1885 the number of European shareholders in De Beers was insignificant; in October 1886,50,000 shares were held in Europe while 70,000 were held in South Africa; and by 1891 European holders held the bulk of the capital.107 The predominance of metropolitan capital in the company subjected colonial economic development to the interests of imperial investors and speculators and had severe economic and social effects on the Kimberley community. Diamond output and the costs of production were reduced; the closed compound system was applied to all African workers; white workers were subjected to 'cantonment' in the secluded village of Kenilworth; and labourers were laid off and wages reduced. The value of landed property fell, the circulation of money in the local economy dwindled as dividends were paid in Europe and the diamond market was moved to London. The turnover in the commodity market declined substantially as the surplus population, where it was possible, left for the Rand. The establishment of a monopoly in diamond production was disastrous for the Kimberley community and the diamond metropolis became a company town for the benefit of overseas financiers, investors and speculators. School of Oriental and African Studies, London.

NOTES

1. Rhodes House Library (hereafter RHL) Ms. Africa, S 134, Merriman to Basil Williams, 10 April 1914. 2. The biographies are littered with factual inaccuracies in relation to Rhodes' career on the Diamond Fields. These errors have become embedded within the historical record as second-hand popular works have proliferated in the imperial growth industry. It would be tedious to trace all these errors — see my forthcoming Ph.D. dissertation, 'Capital, Class and Monopoly: the Kimberley Diamond Fields, 1871-1889', School of Oriental and African Studies (1982). 3. 'Rhodes, Rhodesia and the Rand', Journal of Southern African Studies, I, 1, 1974, 86. 4. Ibid., 75. 5. RHL, Ms. Africa, S 134, Merriman to Williams, 10 April 1914. 6. E. Mandel, Late Capitalism (London, 1975), 58. 7. For the cutting industry and the diamond trade see Th. van Tijn, 'Geskiedenis van de Amsterdamse diamant handel en nijverheid, 1845-1897', Tijdschrift Voor Geskiedenis, I, 87, 1974 and II, 87, 1974: and G. Lenzen, The History of Diamond Production and the Diamond Trade (London, 1970), 131-35, 140-44. 8. For the establishment of a class of mining capitalists, see R. Turrell, 'The 1875 Black Flag Revolt on the Kimberley Diamond Fields', Journal of Southern African Studies, VII, 2, 1981. For an analysis of De Beers and monopoly capitalism see D. Innes, 'Monopoly Capital and Imperialism in Southern Africa: the role of the Anglo-American Group', unpub. Ph.D. thesis, University of Sussex (1980). 9. C. Newbury, 'Out of the Pit: the capital accumulation of Cecil Rhodes', Journal of Imperial and Commonwealth History, X, 1 (Oct. 1981), 25-49. 10. Lockhart, J.G. and Woodhouse, C.M., Rhodes (London, 1963), 57; Roberts, B., The Diamond Magnates (London, 1972), 41; Michell, L., The Life of the Right Honourable Cecil John Rhodes (London, 1910), 60; Williams, B., Cecil Rhodes (London, 1921), 36; Flint, J., Cecil Rhodes (London, 1974), 4 0 - 4 6 . In fact, John Dick-Lauder was his agent in Kimberley in late 1873 and Charles North held his power of attorney from 1876 to 1878. RHODES, DE BEERS, AND MONOPOLY 337

11. RHL, Ms. Africa, S 115, Rhodes to Mother, 11 Sept. 1870, 11. 12. Natal Archives Depot, Hathorn Papers, 2/27, Ken Hathorn to Father, 8 Oct. and 22 Oct. 1871. 13. Michell, L., Life, 37, quoting Rhodes to Dr Sutherland, 17 Dec. 1871. 14. RHL, Ms. Africa, S 130 Merriman to Wlliams, 4 July 1919. 15. South African Library (hereafter SAL) J. B. Currey, Halfa Century in South Africa, Ms., Chapter XII, 17-19. When Mrs Currey arrived on the Fields in late 1873, Rhodes shared lodgings with the Curreys and George Paton, a farmer, large claimowner and gold digger with past experience in Australia and California. 16. Jones, Rudd and Company had a capital of £44,000 and its sales turnover in the early 1870s was about £100,000 a year. It was supported by Sinclair, Hamilton and Company of London, who extended them an open credit of £20,000, and Henry Rudd, wealthy London barrister and father to Charles and Thomas, who provided a credit of £10,000 (Standard Bank Archive, Johannesburg (hereafter SBA), Inspection Report (Port Elizabeth), 31 July 1876, ff 529-35. 17. RHL, Ms. Africa, S 115, R h o d e s to Mother, 17March 1871, 6 3 ; Diamond Field(hereafter DF), 26 Aug. 1874, Thomas Rudd and others vs. Thomas Grant and others (Court of Queen's Bench); Cape Archives Depot (hereafter CAD) GLW 41, R. E. Wallace and Company to J. B. Currey, 20 J u n e 1873; DF, 12 J u l y 1873, Report of Diggers Association Meeting; Diamond News (hereafter DN), 5 Sept. 1874, advert, for sale of wire tramway; SAL, Merriman Letter-Book I, Merriman to North, 20 April 1874, f 14, 30 July 1874, f 93, 16 Jan. 1875, f 187; DN, 7 Nov. 1874, Supplement, advert, for sale of Craven Club; DN, 19 Dec. 1874, notice re. bottling business; DN, 2 April 1874, advert, for sale of ice. 18. DN, 3 Jan. 1874, Prospectus; SBA, General Manager to London Office, 22 Jan. 1874; DN, 29 Aug. 1874, 'Old De Beers'; DN, 2 Sep. 1875, Local & General. 19. SBA, Inspection Report (Cape Town), 11 May 1871, f 69. 20. SBA, Inspection Report (Cape Town), 12 Aug. 1874, ff 121, 133, 2 2 1 ; K i m b e r i e y Branch P/O Book, Manager to General Manager, 19 Dec. 1874; SBA, Inspection Report (Kimberley), 23 June 1875, f 104; N. Rouillard (ed.), Matabele Thomson: His Autobiography and Story of Rhodesia (Johanneburg, 1957), 107. 21. SBA, Inspection Report (Kimberley), 12 Nov. 1881, f 407; Inspection Report (Kimberley), 2 Nov. 1882, f 484; Inspection Report (Port Elizabeth), 17 J u n e 1885, f 132; Inspection Report (Kimberley), 3 Oct. 1891, f 137; M e r r i m a n Letter-Book, Merriman to Bensusan, 12 Feb. 1886. 22. L. Cohen, Reminiscences of Kimberley (London, 1911), 46. 23. See G. L. Anderson, 'The Social Economy of Late Victorian Clerks' in G. Crossick (ed.), The Lower Middle Class in Britain 1870-1914 (London, 1977). 24. RHL, Ms. Africa, S 134, VI, Rhodes to Rudd, 7 and 8 Dec. 1874. 25. DF, 24 Oct. 1874, Report of the Kimberley Mining Board; DF, 28 Oct. 1874, Letter from William Ling, 'Economy vs. Monopoly'; DN, 15 March 1879, Report of the Kimberley Mining Board (13 March 1879); CAD, GLW 51, From Mining Board Dutoitspan, John Fry to J. B. Currey, 28 Nov. 1874; DN, 8 Dec. 1874, Letter from James Hall; DF, 9 Dec. 1874, Letter from C. D. Rudd; DN, 15 Dec. 1874, Letter from James Hall; DN, 17 Dec. 1874, Letter from John Fry; SBA, Inspection Report (Kimberley), 20 March 1877, Copy of partnership deed 26 May 1876, f 59; Inspection Report (Kimberley), 12 Nov. 1881, f 371. 26. DN, 30 July 1874, De Beers Mining Board (21 July & 23 July 1874); CAD, GLW 64 Letter Miscellaneous, from C. D. Rudd and others, 6 Aug. 1874; DN, 1 Aug. 1874, Occasional Notes; DN. 5 Sep. 1874, De Beers Mining Board (1 Sep. 1874); DN, 2 Feb. 1875, De Beers Mining Board (28 J a n . 1875); DN, 9 Feb. 1875, De Beers Mining Board (4 Feb. 1875); DN, 6 April 1875, Local & General; DN, 25 May 1875, De Beers Mining Board (21 May 1875); DN, 8 July 1875, Advert, for Engineer; RHL, Ms. Africa t 14, Rhodes to Frank Rhodes, 19 Aug. 1875, f 243; C A D , Confidential African Print, No. 96, Crossman Report, 46, 47; DN, 11 J a n . 1876, De Beers Mining Board (27 & 28 Dec. 1875); UCT, Barry Papers, BC 127, 3, 20 Jan. 1876. 27. The Diamond Magnates, 58. 28. RHL, Ms. Africa S 134, Rhodes to either E. W. Tarry or William Alderson, circa Oct. 338 THE JOURNAL OF IMPERIAL AND COMMONWEALTH HISTORY

1874, ff 14, 15; DN, 10 Feb. 1876, Resolutions of Public Meeting (3 Feb. 1876), DN, 7 March 1876, De Beers Mining Board (23 Feb.). 29. N. Rouillard (ed,), Matabele Thomson, 107; DN, 2 Oct. 1877, 'By Our Special'; DN, 9 April 1878, 'De Beers'; DN, 28 April 1878, De Beers Mining Board (10 April 1878); DN, 5 Nov. 1878, Rhodes vs. De Beers Mining Board (High Court, 31 Oct. 1878); DN. 28 Nov. 1878, De Beers Mining Board (22 Nov.). 30. CAD, GLW 104, Records, No. 1414, 16 June, 1877. 31. DN, 24 April 1877. 32. RHL, Ms. Africa, t 14, Rhodes to Rudd, 9 Oct. 1875; DN, 15 April 1876, abandoned claims for sale; BA, Inspection Report (Kimberley), 1 Sept. 1876, f 211; Plan of Assessment, De Beers Mine, 1878; Inspection Report (Kimberley) 31 Dec. 1877, ff 76, 134, 138, 183; DN,. 6 Oct. 1877, 'By Our Special'. 33. RHL, Ms. Africa t 14, Rhodes to Rudd, 11 April 1876. 34. DN, 24 April 1877, Diamond Fields Association, Report of Oats; DN, 22 Sep. 1877, 'By Our Special'; DN, 6 Oct. 1877, 'By Our Special'; SBA, General Manager to London Office, 3 Feb. 1880; CAD, GLW 153, Records, No. 730, Petition for Fixity of Claim Tenure, March 1880. 35. DN, 8 J u l y 1879, 'The Bank Statements'; Mining Journal, 4 June 1881, L e t t e r from R. W. Murray. 36. SBA, Inspection Report (Kimberley), 15 March 1879, Report. 37. SBA, General Manager to London Office, 29 April 1881. 38. The Manager of the Standard Bank in Kimberley said of the diamond merchants, Lewis and Marks, in 1881: 'About the most wealthy firm on the Fields. We estimate they are worth over £300,000. They are interested in almost every good venture which takes place here. They are shrewd and careful men' (SBA, Inspection Report [Kimberley], 12 Nov. 1881, f 333). 39. The London and South African Exploration Company was registered in London in 1870 with a capital of £50,000. For Posno, see also van Tijn, 'Geskiedenis', 28. 40. CAD, DOK 3/2, Deed of Settlement of De Beers Mining Company, 24 June 1880. 41. SBA, Inspection Report (Kimberley), 3 Feb. 1880, f 135; General Manager to London Office, Half Yearly Report, 6 Aug. 1880. In fact the dividends of De Beers were:

1881 — 5'/2% (£11,600) 1885 — V/2% (£62,666) 1882 — 3% (£19,966) 1886 — 12% (£121,814) 1883 — 5%% (£37,714) 1887 — 16% (£199,349) 1884 — 7% (£52,148) 1888 — 25% (£508,042)

42. De Beers transfers for April 1880 to March 1881 are missing from the Cape Archives but holdings are given in DOK 3/2 Deed of Settlement of De Beers, March 1881, Annexure C. 43. McGregor Museum (Kimberley) (hereafter MM), F. Stow, Memoir of the formation of the De Beers Mining Company Limited and its subsequent transformation into the De Beers Consolidated Mines Limited with five Life Governors, ff 4-10; SBA, Inspection Report (Kimberley), 2 Nov. 1882, f 474. 44. CAD, DOK 3/2 Deed of Settlement of De Beers, March 1881, A n n e x u r e C; C A D, DOK 2/1-2/4 De Beers share transfers; SBA, Inspection Report (Kimberley), 29 Sept. 1883,ff 103, 225. 45. RHL, Ms. Africa t 14, Rhodes to Rudd, 1 June 1876. 46. The Kimberley Share Exchange Company had a capital of £20,000 and on 30 June 1882 Rhodes held 15 £50 shares, while O. J. Skill held 233 shares out of a total 400 (CAD, GDM, 1/5 Kimberley Share Exchange Directors Minute Book). 47. SBA, Inspection Report (Kimberley), 12 Nov. 1881, f 482. 48. CAD, DOK 3/1, Trust Deed of the Beaconsfield Diamond Mining Company, 4 May 1881; SBA, Inspection Report (Kimberley), 29 Sep. 1883, ff 231, 236. 49. SBA, Inspection Report (Kimberley), 12 Nov. 1881, f 229. 50. The Diamond Magnates. 107, 108, 117-25, 139-52. 51. SBA, Inspection Report (Kimberley), 29 Nov. 1884, ff 37, 115. RHODES, DE BEERS, AND MONOPOLY 339

52. P. Lewsen (ed.), Selections from the Correspondence of J.X. Merriman (Cape Town, 1960), Vol. I, Merriman to J.B. Currey, 28 Oct. 1887, 272. 53. Raymond, H. B. I. Barnato: A Memoir (London, 1897); Jackson, S. The Great Barnato (London, 1970). 54. Annexation to the Cape had been in the pipeline since 1877 but was delayed until October 1880 because of Cape fears over the increasing Griqualand West public debt. In 1880 the debt stood at over £500,000 of which £200,000 was war expenditure. Britain agreed to waive the war expenditure to overcome the Cape's reluctance to annex Griqualand West. The strongest imperial pressure appeared to come from the Bank of England over the £90,000 they had raised to compensate the Orange Free State for the loss of the Diamond Fields. Annexation meant the attachment of Griqualand West to the better credit of the Cape (PRO, CO 107/7/19807, Comments on Warren Despatch, 13 Dec. 1879). 55. RHL, Ms. Africa, S 134, VI, Rudd to Rhodes, n.d. 55. 56. P. Lewsen (ed.), Selections, J.X. Merriman to A. Merriman, 16 J a n . 1886,205. Rhodes' own path to Parliament was described by Matabele Thomson: Natives were then allowed the vote with purely nominal qualifications and constituted what was called the 'blanket vote', meaning voters who were dressed only in blankets. In this election Rhodes was opposed by Dr Murphy and the deciding factor was my mustering two hundred and fifty natives and taking them to the poll to vote as I suggested. Murphy was a strong candidate and without my natives Rhodes would probably not have won (N. Rouillard [ed.], Matabele Thomson. 109). 57. S. Trapido, 'South Africa in a Comparative Study of Industrialization', Journal of Development Studies. VII, 3 ( 1 9 7 1 ) 3 1 1 . 58. The arguments in this paragraph are expressed at greater length in R. Turrell, 'Kimberley: Labour and Compounds, 1871-1888'; in S. Marks and R. Rathbone (eds.). Industrialisation and Social Change: South Africa 1870-1930 (London, 1982). 59. 'The Imperial Factor in South Africa in the 19th Century: towards a Reassessment', Journal of Imperial and Commonwealth History, III, 1, 1974. 60. 'Labour Supplyand the Genesis of South African Confederation in the 1870s', Journal of African History, 20, 1979. 61. RHL, Ms. Africa, S 115, Rhodes to Aunt Mary, 13 Feb. 1871, 52. 62. Ibid., Rhodes to Mother, 20 April, 76. 63. Etherington, 'Labour Supply', 251. 64. DN, 24 Feb. 1881, Election Manifesto. 65. The most recent exposition comes from J. E. Flint, Cecil Rhodes, 61. 66. See K. Shillington, 'Land Loss, Labour and Dependence." the Impact of Colonialism on the Southern Tswana 1870-1900' (unpub. Ph.D. thesis, London School of Oriental and African Studies, 1981), Chapter 5. 67. Chilvers, The Story of De Beers (London, 1939) is the standard history of the De Beers Diamond Mining Company and its successor De Beers Consolidated Mines Limited. The chapter on the formation of De Beers Consolidated is based almost exclusively on the Stow Memoir, which Chilvers was the first to find and use. But he misread the document in crucial sections and ignored the moral condemnation Stow expressed over the inclusion of Barnato as a life Governor of De Beers. The Memoir was written in 1898 and was based on Stow's private and official papers supplemented by research Stow commissioned into newspaper reports covering the period in which the amalgamation negotiations were conducted. The purpose of the Memoir was to present a case against Rhodes, who Stow believed had 'defrauded' Baring-Gould of his right to the fifth life Governorship. The Memoir was written soon after Barnato committed suicide in 1898, in an attempt to force Rhodes to do the right thing by Baring-Gould. In Stow's own words: My object in preserving and collecting into this form the facts connected with the affairs of the Company is to have a record manifesting the part played by others and myself as Diamond Diggers and subsequently Life Governors in building up a monopoly which has on the one hand been roundly condemned while on the other it has met with approbation if not applause. And further to establish the 340 THE JOURNAL OF IMPERIAL AND COMMONWEALTH HISTORY

fact that there were five actors entitled to share the credit though perhaps in different degrees, of having carried to a successful issue a mining achievement which is almost without parallel in the annals of mining enterprises, and to demonstrate that one of these by the action of a colleague has been defrauded of the fruits of his labour; that two of the others apparently view with indifference this nefarious transaction and by their inaction lend weight to the supposition that they intend to retain all the advantages accruing from the mala fide conduct referred to (Memoir, ff 1, 2). The Memoir presents the amalgamation from the point of view of De Beers and has to be compared and contrasted with the Fenton Memorandum and Fenton's The True History of the Amalgamation of the Diamond Mines (written in 1911 and acquired by the Rhodes House Library in 1956), which gives a concise view of the negotiations as seen by a director of the Kimberley Central. Sir Theodore Gregory, author of Ernest Oppenheimer and the Economic Development of South Africa (Oxford, 1962), did make a comparison between the Stow and Fenton versions of the amalgamation. This is clear from his research papers deposited in the Anglo-American Corporation Archive (Johannesburg), Gregory Papers, Box 40, which show that he realized Barnato had thrown in his lot with Rhodes as early as October 1887. But Gregory does not deal with the amalgamation in any detail in Ernest Oppenheimer (52, 53) and gives no indication of how Rhodes and Barnato 'came to terms', though he seems to imply it was through the legendary leviathan struggle in the share markets. Gardner F. Williams, General Manager of De Beers and author of The Diamond Mines of South Africa (New York, 1902), certainly contributed to the story of the share struggle, but he re-told the version Rhodes and Barnato agreed to present to their shareholders in 1888 and 1889. This version gets its first complete treatment in a secondary account in Paul Emden's Randlords (London, 1935), 54-56. This version has been repeated and embellished over the past forty-five years, most recently by Brian Roberts, The Diamond Magnates(1912), 202 and John Flint, Cecil Rhodes (1974); 84-92. The re-interpretation offered here is based on a close reading of the Stow Memoir and the Stow Papers supplemented by new material from the Standard Bank Archive. 68. The Rothschild sponsorship of the 1883 Dutoitspan amalgamation scheme was generally known. But the reason for their involvement — the heavy investment in Anglo- African Diamond Mining Company shares in 1882 — has only recently come to light in the correspondence of Albert Gansl with N.M. Rothschild and Sons (Rothschild Archive, 4/47). 69. SAL, Merriman Papers, No. 63, J. X. Merriman, to A. Merriman, 19 Feb. 1886. 70. SAL, 'To the President and Members of the Board of the Compagnie Française', 4. 71. MM, Stow Papers, Lippert to Stow, 4 Jan. 1887. 72. SBA, Inspection Report (Kimberley), 12 Feb. 1887, Report, f 174. 73. CPP, G66-'88, Commission of Enquiry into De Beers Fire Disaster; CAD, LND 1/327, Memorandum, 8 July 1889, f3330; University of Cape Town, Judge Papers, B 76, E A. Judge, An Autobiographical Account of His Life in South Africa, Ms. ff 443-51. 74. MM, Stow Papers, Stow to Rhodes, 23 Dec. 1886, f 50. 75. SBA, Inspection Report (Kimberley), 29 Nov. 1884, f41; 7 Nov. 1885, f. 179; Inspection Report (Port Elizabeth), 4 July 1887, f 29; Barlow Rand, HE 49, 31 Dec. 1888. 76. See David Landes Bankers and Pashas (London, 1958), 1-40 for a good description of merchant and investment banking. 77. When Jules Porges retired from his firm at the end of 1889 he took out £750,000 in cash, £1,000,000 in shares and left £500,000 in the firm to be paid out in two years. Jules Porges and Company was left with a capital of £1,000,000 in cash, diamonds and other non- speculative investments and between £1,500,000 and £2,500,000 in various shares and interests of a speculative nature (SBA, African Banking Corporation, Vol. I, General Manager South Africa to Chief Manager, 31 Dec. 1891, f 174). 78. PRO, BT 31 15498/2825, Victoria Diamond Mining Company; RHL, Ms. Africa t 14, Rhodes to Rudd, 12 Dec. 1886; MM, Stow Letter-Book V, Stow to De Beers Company, 29 Nov. 1886, ff 119-125, 19 May 1887, f 319, 26 May 1887, f 333. RHODES, DE BEERS, AND MONOPOLY 341

79. SAL, 'To the President and Members of the Board of the Compagnie Française', 9, 10. 80. MM, Stow Letter-Book V, Stow to Caldecott, 4 Aug. 1887, f 400. 81. CAD, DOK 3/2, Provisional Agreement between N.M. Rothschild and Sons and De Beers Mining Company, 11 Aug. 1887; Diamond Fields Advertiser, 30 Sept. 1887, Special Meeting of De Beers Mining Company; MM, Stow Letter Book IV, Stow to Rhodes, 18 Oct. 1887, f 76; MM, Stow Papers, Rhodes to Stow, 22 Oct. 1887. The details of the sale were: (1) £750,000 in cash for claims, machinery, plant and Mining Board paper; (2) £200,000 in debentures bearing 6 per cent per annum against first hypothecation of Compagnie's claims, repayable in five years; (3) Compagnie to receive 35,000 loads of 'blue' ground from De Beers and to continue working for a year. On 1 M a r c h 1888 De Beers can cancel second six months of working against a payment of £15,000 per month; (4) Compagnie shareholders can subscribe for 50,000 De Beers at maximum price of £20 and minimum of £16 per share (Daily Independent, 8 Oct. 1887). 82. SBA, Vol. 21, General Managers to London Office, 14 Sept. 1887, f 777 and 28 Sept. 1887, f 836 and 2 Nov. 1887, f 945; Vol. 30, London Office to General Managers, 22 Sept. 1887, f 9 and 29 Sept. 1887, ff 2, 3 and 6 Oct. 1887, f10; Daily Independent, 2 Nov. 1887 and Diamond Fields Advertiser, 5 Nov. 1887, Special General Meeting of Central Company; MM, Stow Letter Book V, Stow to Rhodes, 27 Sept. 1887, ff 450-454; SBA, Vol. 22, General Managers to London Office, 14 March 1888, f 489. The £500,000 loan was arranged by Jules Porges and Company in a syndicate with Rothschilds. It was for 7 years at 5 1/2 p e r cent per annum: £150,000 to repay the Standard Bank loan; £200,000 to settle the take-over of the Compagnie; £100,000 for De Beers commission to Rothschilds; and £50,000 to remove reef and revert to the open system of mining. 83. SBA, Inspection Report (Kimberley), 21 Jan. 1888, f 21. 84. MM, Stow Papers, Rhodes to Stow, 22 Oct. 1887, f 3. 85. Anglo-American Archive, Gregory Papers, Box 40, FD-5, Reginald Fenton, The True History of the Amalgamation of the Diamond Mines, 6. 86. SBA, Inspection Report (Kimberley), 21 Jan. 1888, f 181. 87. Stow, Memoir f 54; SBA, Vol. 22, General Managers to London Office, 30 Nov. 1887, f40: Inspection Report (Kimberley), 21 Jan. 1888, f21. 88. SBA, General Managers to London Office, Half Yearly Report, 8 Aug. 1888. 89. Ibid, Vol. 22, 14 March 1888, f 492. 90. MM, Stow Memoir, ff 56-59; Stow Papers, De Beers Directors telegram to London, 14 March 1888. 91. SBA, Inspection Report (Kimberley), 21 Jan. 1888, f 180. 92. Phimister, 'Rhodes', 76; A. P. Cartwright, Gold Paved the Way (London, 45; SBA, Vol. 22, General Managers to London Office, 14 March 1888, f 490 and 23 May 1888, f 760.- 93. Barlow Rand, HE 13, J . B. Taylor to Beit, 26 July 1888, f 350: '... the diamond share business being so identified with the gold share business affects it very much and Mr King usually keeps Hanau informed sometimes twice a day. This naturally gives Hanau a position in the market which he never had before, and if he is better informed he must be able to work to an advantage over us.' 94. 10 March 1888, 'The Diamond Rig', 274. 95. SBA, Inclosure to General Manager to London Office, 8 Feb. 1888, paragraph 22. 96. MM, Stow Papers, Rhodes to Stow, 14 April 1888; SBA, Vol. 22, General Managers to London Office, 16 May 1888; ' A s you will have gathered from our previous remarks, Mr Rhodes is in our opinion very unscrupulous in his efforts to obtain his desired results. He is pretty generally known to be extreme and uncertain in his views, and it is not we think necessary to take action in the matter beyond instructing Mr Smart to quietly check any glaring attempt to misrepresent the Bank.' Sir Percy Fitzpatrick remembers this meeting, and says that afterwards Rhodes told Beit'... tomorrow they will sell like hell' (South African Memories, London, 1932, 32). 97. Barlow Rand, HE 50, H. Eckstein to J. B. Taylor, 19 April 1888, ff 174, 175. 98. SBA, Vol. 31, London Office to General Managers, 7 J u n e 1888 and 14 J u n e 1888. For example, Lord Rothschild increased his De Beers holding from 17,366 shares in March 1888 to 36,850 in July 1888 (De Beers Share Register, Open Mine Museum, Kimberley). 99. 2 June 1888, 295. 342 THE JOURNAL OF IMPERIAL AND COMMONWEALTH HISTORY

100. MM, Stow Papers, Rhodes to Stow, 14 April 1888. 101. N. M. Rothschild Archives, T43/25, 14 May 1888. 102. SBA, Vol. 24, General Managers to London Office, 9 Oct. 1889; Inspection Report (Cape Town), 4 Oct. 1890,f 50; P. Emden, Randlords, 265, 2 6 6 ; T . Reunert, Diamonds and Gold in South Africa (Cape Town, 1893), 40. 103. SBA, Inspection Report (Cape Town), 16 Dec. 1893, f 165. In 1892 Stow sold his life Governorship to Rhodes and Beit for £35,000. The first sum the life Governors received was£120,400 in 1896 and thereafter: £158,000 in 1897;£103,206 in 1898;£159,851 in 1899 and finally £316,000 in 1901. 104. RHL, Ms. Africa S 228, C27, No. 9, Rothschild to Rhodes, 7 Aug. 1891. 105. Ibid., C7A, Beit to Rhodes, 1 Dec. 1891. 106. Ibid., Ms. Africa S 130, J. X. Merriman to Williams, 4 July 1919. 107. MM, Stow Papers, Stow Letter-Book V, Stow to Pickering, 15 Jan. 1885, f 3; Stow to Whitehead and Coles, 27 Oct. 1886, f 68; T. Reunert, Diamonds and Gold, 63 gives the following figures for dividends and debenture payments in 1891: Paid in Colony Paid in Europe Dividends £300,000 £588,000 Interest on Debentures £3,000 £253,000 RHODES, DE BEERS, AND MONOPOLY 343

APPENDIX

EXPORTS AND IMPORTS OF THE CAPE COLONY INCREASED BY THE EXPORT OF DIAMONDS: 1869-1888

Exports Diamonds Exported Total Total exclusive of computed computed Diamonds carats value av. price exports imports £ £ s d £ £ 1869 2,200,966 16,542 24,813 30/- 2,225,779 1,953,091 1870 2,416,039 102,500 153,460 30/- 2,569,499 2,352,043 1871 3,128,260 269,000 403,349 30/- 3,531,609 2,585,298 1872 4,451,453 1,080,000 1,618,076 30/- 6,069,529 4,388,728 1873 3,882,626 1,100,000 1,648,451 30/- 5,531,077 5,130,065 1869-1873 16,079,344 2,568,042 3,848,149 19,927,493 16,409,225

1874 4,225,413 1,313,500 1,313,340 20/- 5,538,747 5,558,215 1875 4,206,544 1,380,000 1,548,634 22/6 5,755,178 5,731,319 1876 3,499,196 1,513,000 1,513,107 20/- 5,012,303 5,556,077 1877 3,633,743 1,765,000 1,723,145 19/6 5,356,888 5,158,348 1878 3,456,330 1,920,000 2,159,298 22/6 5,615,628 6,151,595 1874-1878 19,021,226 7,891,500 8,247,490 27,278,744 28,155,554

1869-1878 35,100,570 10,459,542 12.105.667 47,206,237 44,564,779

1879 3,805,637 2,110,000 2,579,859 24/6 6,385,496 7,083,810 1880 4,342,294 3,140,000 3,367,897 21/6 7,710,191 7,662,858 1881 4,220,706 3,090,000 4,176,202 27/- 8,396,908 9,227,171 1882 4,514,098 2,660,000 3,992,502 30/- 8,506,600 9,372,019 1883 4,408,828 2,413,953 2,742,470 22/8'/, 7,151,298 6,470,391 1879-1883 21,291,563 13,413,953 16,858,930 38,150,493 39,816,249

1884 4,138,345 2,263,606 2,807,329 24/9'/2 6,945,674 5,249,000 1885 3,321,785 2,439,920 2,489,659 20/4'/4 5,811,444 4,772,904 1886 3,620,600 3,135,061 3,504,756 22/4 7,125,356 3,799,261 1887 3,616,504 3,598,930 4,242,470 23/7'/2 7,858,974 5,036,135 1888 4,854,278 3,841,937 4,022,379 20/11'/, 8,876,657 5,678,337 1884-1888 19,551,512 15,279,454 17,066,593 36,618,105 24,535,637

1879-1888 40,843,075 28,693,407 33,925,523 74,768,598 64,351,886

1869-1888 75,943,645 39,152,949 46,031,190 121,974,835 108,916,665

Sources: Max Bauer, Precious Stones (London, 1904), p. 236; A. Michielsen, De diamant- economie. Waarde, prijs en conjunctuur (Antwerp, 1955), p. 125; CPP, G15-'89, Trade Returns, p. 5; CPP, Gl 1—"90, Reports of the Inspectors of Diamond Mines for 1889, p . 36.