two years before we need consider the question of shaft sinking and face the enormous capital outlay involved. . . .9
The
second group of problems related to Namaqualand. The State had, of
course, the right to exploit the State alluvial diggings in the
Alexander Bay area, and the value of the Hans Merensky Association
shares and of the properties acquired by the Cape Coast Exploration
Company depended upon Government action. Moreover, it was vitally
necessary to secure that the diamonds won should be marketed in an
orderly way, so as not to increase the strain already imposed on the
diamond market by the Lichtenburg discoveries. Very large amounts of
money were necessarily involved, for if the principle of sale through a
common centre was to be upheld, finance had to be found, not only to
buy the 'Merensky diamonds' and the Cape Coast output, but the output
from the State alluvial diggings also, and this amounted in 1928 to
over 557,000 carats. Some idea of the risks involved can be gathered
from the comment in Ernest Oppenheimer's letter addressed to the
Government in November 1928, in making an offer to buy, on behalf of
the Syndicate: 'the . . . commitment of the Diamond Syndicate in making
the above offer, and in purchasing the
9
The policy which was thus adumbrated was duly justified to the
shareholders of the Premier (Transvaal) company by Ernest Oppenheimer
himself, at the twenty-sixth ordinary general meeting of the company:
'.
. . I reminded you in the earlier part of my address of the main—in
fact I may say the only —reason why we suspended deliveries during the
second half of the year 1927. I refer, of course, to the enormous
uncontrolled production from Lichtenburg which came into direct
competition with your company's product. I said that the momentous
decision taken by your directors had been justified by subsequent
events. Our action in suspending deliveries undoubtedly checked the
downward tendency of the prices realized for our diamonds, but it was
not sufficient to ensure real prosperity to your company: that, I am
convinced, can only be obtained by realizing higher prices for our
product. A critical examination of the company's accounts disclosed one
outstanding fact, namely, that the accumulation of unsaleable goods in
the hands of the Syndicate had become a very heavy charge in fixing
prices, and would, in course of time, become an unbearable charge.
Therefore, after mature consideration and lengthy negotiations with the
Government and the Diamond Buying Syndicate, we arranged to eliminate
for the unexpired portion of the current contract with the Syndicate,
i.e. two years, all inferior diamonds —so-called 'industrials' and
'boart' —from our deliveries, large quantities of these goods having
accumulated in the hands of the trade. The company locks these
temporarily undesirable diamonds away in its safes and only delivers
saleable diamonds, receiving, of course, a substantial advance in price
for the latter.
'I
may say that this arrangement of eliminating inferiors would have
failed of its object if the De Beers company had not agreed to follow a
similar policy in regard to their deliveries to the Syndicate.
'The
action of the De Beers company and our company in withholding these
inferior diamonds from the market, coupled with the fact that the
Lichtenburg production has declined considerably and is still
declining, can only have beneficial results. At present it is the
intention to stock these diamonds at a nominal figure, but when the
stocks of inferiors held by the dealers are exhausted they should prove
a very valuable asset. . . .'
