Leadership at
'top level' was originally provided by a small group of men—C. J.
Rhodes and C. D. Rudd, the Ecksteins, Alfred Beit and Julius Wernher,
J. B. Robinson (although he left Kimberley under a cloud and was, in
fact, put on his feet again by the generosity of Beit), the Barnatos,
Sigismund Neumann, the Albus, the Farrers and others (they did not all
come from Kimberley). But whether they were acting as individuals or as
partnerships, their resources, so long as they were not organized on a
joint-stock basis, were theirs and theirs alone, except in so far as
they could borrow from banks or obtain loans from friends: to which
there were obvious limits. If they were to 'capitalize' their
reputations and reinforce their funds, they were obliged to seek the
assistance of the investor. They could, of course, do this by the
simple process of creating separate mining companies, retaining a
certain holding for themselves, and using the proceeds of the issue for
'working capital' and for further company creations. But investment in
individual mines did not necessarily satisfy the investor, who did not
wish to put all his eggs into one basket: the obvious way out was to
create not only individual companies controlling single mines, but
companies holding interests in more than one mine. Such a development
afforded wide scope for diversification of investment: it was possible
to spread the risk by investing not only in gold-mines but in other
enterprises as well—coal, land, diamonds, other industries— just as it
was equally possible to move into gold from these other
directions, for the same purpose of distributing risks. Nor need
investment be confined to any one country. Once the principle was
accepted, it was possible to create sub-groups, or sub-interests, to
group the mines in a particular area, for instance, and to substitute a
holding in such a sub-group for a range of miscellaneous holdings in
individual companies. From the standpoint of securing ultimate control
at the minimum cost of direct capital investment, these sub-groupings
have great advantages, though this aspect of the matter is by no means
the sole, or the most important, consideration to be borne in mind.
Thus
there arose on the basis of private partnerships or individual
businesses the 'finance houses' and the 'mining groups'. But the 'Group
System' came to have important implications other than financial. There
is an administrative aspect. From the administrative point of view the
group system implies the provision, by a single centre, of those
faculties which are the common necessities of a group of
producing units, which, in the absence of such a single centre, would
have to be found and paid for by each producing unit separately.
