362
SIR ERNEST OPPENHEIMER
diamonds
to the extent that they were required for resale. Against this the
Trading Company "would guarantee to the association a minimum sale in
each accounting period sufficient to enable each producer to continue
operations.34
One
important consequence followed. The whole purpose of the plan was to
secure to the members of the association a minimum take-off 'sufficient
to enable each producer to continue operations'. Hitherto, the amount
deliverable by each producer to the association, i.e. its sales quota,
was based, bargaining power apart, on its productive capacity and
though, obviously, productivity as such and the capacity to 'continue
operations' were related, they were by no means identical magnitudes.
(In fact the guarantee proposed, as the memorandum pointed out, 'is
sufficient only to enable De Beers to work one mine in Kimberley and
Cape Coast, and the Premier to work one shift'.)
Therefore,
in periods of depression, the Diamond Producers' Association would no
longer be bound to take from each producer in proportion to its
established sales quota. 'It must be provided', set out the memorandum,
that the deed of constitution of the Diamond Producers' Association be
so amended 'that when the trade is so low that the minimum provisions
of the [proposed] sales contract apply, sales must be allocated in the
manner set out . . . and not according to quotas. The over- and
short-delivered positions brought about in this way would be rectified
later when the trade improved.'
The
memorandum had, naturally, to deal with matters of more temporary
importance, such as the adequacy of the quotas allotted to individual
producers. So far as long-run considerations are concerned, it is
necessary to deal only with two points. First,
in
order to secure flexibility and to prevent so far as possible the undue
accumulation of stocks (particularly in the hands of the Diamond
Corporation) it should be provided that any members of the association
should be free to buy and sell quotas between them. It should be laid
down, however, that if the Diamond Corporation buys quota from any
other members, the consideration payable should be the full additional profit accruing from the increased delivery made. The
Diamond Corporation would thus not be able to make increased profits
through buying quotas, but the power to buy quotas would operate to
prevent the accumulation of excess stocks.
34The
amount involved amounted, per annum, to £1,435,000, without taking into
account production from the Premier Mine, then not producing; making
allowance for future production from this mine, the amount would rise
to £1,835,000, or ,£917,500 for each six-monthly 'accounting period'.
These amounts included a figure of £210,000 for the State diggings.
