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Diamond Portraits: Alfred Beit

Diamond Portraits: Alfred Beit

When thinking of De Beers, we automatically think of the Oppenheimer family. That is the name most people know and associate with the diamond mining giant. Those that know a little more are usually familiar with Cecil Rhodes, and they are very familiar with the history of the company, they may have even heard of Barney Barnato. Yet few have ever heard of Alfred Beit, the financial wizard behind the unification of diamond claims into a single company that formed De Beers.

Beit was different than Rhodes and Barnato in many ways. They were British and he was Germen, they came from modest backgrounds while he was the son of a rich merchant, they had large personalities and considered charismatic, while he was considered rather unassuming. And though they stumbled into diamonds by accident, Beit was in the diamond industry from the very beginning of his career.

They also shared a few similarities. They were about the same age, arrived in Kimberley, South Africa early on, and all three were shrewd businessmen with a flair for diamonds and far reaching visions.

Alfred Beit was born in Hamburg, Germany in 1853, the eldest son and second of six children of an affluent Jewish-German textile trader and merchant. According to several accounts, Alfred was not seen as very bright, and instead of being sent to a university to expand his horizons, the aimless youngster was sent to Amsterdam to work as a diamond polisher at the diamond dealership of Robinow. Robinow was a well-known diamond dealer and related to him through his sister Pauline’s husband.

Working with diamonds came naturally to Beit, who quickly displayed a great talent for diamond sorting and valuation, an essential knowledge for anyone who wants to develop a strong business in the diamond industry. He had a great eye for rough diamonds which allowed him to identify their commercial potential, as well as an excellent memory. After a period with the diamond firm of one in-law, 22 year-old Beit moved to the diamond firm of another in-law, DJ Lippert and Co. recognizing his talents, the company sent him to South Africa to buy diamonds at Kimberley, where the diamond rush was in full swing.

In 1875, when he arrived at the Kimberley area, the Kimberley and De Beers mines were already operating for a number years, and two smaller resources, Bultfontein and Dutoitspan in what became Beaconsfield, were also being mined. The tents that were originally erected to house people, kitchens, and dealers were being replaced with corrugated iron buildings. The population in what was an open field just five years earlier reached more than 50,000, most of them black laborers. Yet the place was so underdeveloped to accommodate the growing crowed that it was said that the smell of this diamond colony could be picked up from far away.

According to one historic account of Kimberley, “The approaches to Kimberley were lined with the carcasses of exhausted pack animals, which had been left to rot where they had perished; the latrines were open ditches infested by flies; and, as water was scarce, taking a wash remained a luxury. It was as hot as an oven in summer, bitterly cold in winter, and swept by sand storms. When it rained, the ever-present dust disappeared only to be transformed into mud. ‘Camp fever’ (dysentery) took hold with attacks of diarrhea, and swept away large numbers of the diamond diggers. Everyone was plagued by fleas. There were shortages of food, especially fruit and vegetables and even wood was hard to come by to make a fire. The land for miles around, was denuded of trees to sell the wood in Kimberley for the mines and to keep people fed.”

Despite the poor conditions, Beit flourished. His skills quickly gave him an edge over most other local sellers and buyers. “I found that very few people knew anything about diamonds; they bought and sold at haphazard and a great many of them really believed that the Cape diamonds were of an inferior quality,” Beit is quoted as saying. “Of course, I saw at once that many Cape stones were as good as any in the world, and I saw, too, that the buyers protected themselves against their own ignorance by offering generally one tenth part of what each stone was worth in Europe. It was plain that if one had a little money there was a fortune to be made.” And a fortune was made. Beit started out as a diamond buyer for the Lipperts, travelling to the different diamond digging sites to buy rough diamonds, and slowly learning what type of goods came out of each site. After building a good name for himself as a generous and honest diamond buyer, he set up a buying office in a tent, and diggers came to him to offer their goods. It did not take long before Beit was the leading diamond buyer in Kimberley.

Beit became an independent trader for a time, until in 1884 he became a partner and sole representative of the Parisian firm Jules Porgès and Co., one of the most important and leading European resource trading firms of the day. Beit did not limit his activities to trading. He used his savings also to invest, mainly buying diamond claims whenever the opportunity arised. At first, this gave him first access to mined diamonds, but it was not long before this purchasing pattern gave rise to another opportunity.

Alfred’s father started to support his son’s endeavors and sent him money to allow him to keep buying diamond mining claims in the area as well as other real estate opportunities. At one point Beit bought land and built offices with barred windows and rented them out to other traders that needed secure holdings. 

It did not take long for Beit to understand that for diamond mining in the region to evolve, a consolidation of claims was needed. Such a move would give him better access to diamonds, reduce mining costs, and resolve issues such as adjacent claims collapsing over each other. It was around this time, that he met Cecile Rhodes, who like Beit and Barney Barnato had a similar idea about the future of the mines.  It was not long before Beit and Rhodes became close friends.

The consolidation process that took place reduced the number of claim holders in the Kimberley diamond mine from 1,600 in 1872 to only 300 in 1877. Of the 300, 20 of them jointly owned more than half the mine. Jules Porgès held a quarter of the claims. Two years later, in 1879, three quarters of the mine were in the hands of just 12 companies. Taking control of claims required capital and Beit had easier access to financing than Rhodes or Barnato who competed for control of the diamond mines. Beit’s friendship with Rhodes led him to align with Rhodes in his effort to take over as many claims as possible and form a consolidated diamond mining firm. It is possible that it was he that introduced Rhodes to Jules Porgès in an offer to buy Porgès stake in Kimberley.

It was Rhodes last effort to gain control of a majority of the claims at Kimberley, after a purchasing war with Barnato led to dropping diamond prices as a method of hurting each other’s financials. Rhodes offered to buy the Porgès stake for £1.4 million. Barnato heard of the offer and made a counter offer of £1.75 million. At this point, Rhodes presented Barney with an interesting deal: withdraw the higher bid so Rhodes could buy the French held claims at his original bid price and, in return, Rhodes would sell it to Barnato for £300,000 plus a 20% holding in Barnato’s publicly traded Kimberley Central Diamond Mining Company.

Barnato recognized that partnering was the logical outcome if consolidating all the mining activities was to succeed. What he did not know was that Rhodes had already purchased a large chunk of shares in Barnato’s company, apparently with Beit’s backing. Together with the additional 20% holding, Rhodes was close to gaining a control of Barnato’s company. Eventually, the two merged their companies to form De Beers Consolidated Mining Company on March 12, 1888. The company was named after the De Beer brothers, who owned a farm in the area where diamonds had been discovered in 1871, just a couple of months before the Kimberley resource was discovered. Beit was named 

In the annals of diamond history, Rhodes is credited as the leading person to form De Beers Consolidated Mines, however according to testimonies from the time, Rhodes was the person up front due to his personality and great drive to reach that goal. Beit, however, while often viewed as “just” the guy that got the financing, many claimed at the time, that the less ambitious Beit stood all along behind Rhodes, framing the consolidation strategy, working out the intricate financial problems encountered along the way.

After Rhodes succeeded in bringing the De Beers mine under single ownership, and appointing Beit a director of the firm, Kimberley was brought under a single ownership too and together they formed the De Beers Consolidated Mining Company, appointing Rhodes, Barnato, Beit and a fourth partner, Frederick Philipson Stow who owned a large stake in the Dutoitspan diamond mine.

Over the following years, Beit invested in gold mining and became known as a gold and diamond magnate. He decided to return to London, determined to enjoy his riches and benefit others. He focused much of his attention to philanthropic activities and became a patron of the arts. However that was not long lived. Like his friends and partners Rhodes and Barnato, Beit died at a young age. In 1903, Beit he a stroke and died in England on July 16, 1906 at the age of 53. He left much of his fortune of £8,049,886 (more than £810 million in today’s value) to a wide range of charitable causes.

 

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