The Newest “New Era” at De Beers

De Beers has always been an odd mix of powerful corporation and family business. (The company that comes closest: NewsCorp.) Nicky Oppenheimer, who once said his biggest achievement in life was “choosing his parents very well,” stands as the third generation of his family to head the firm; son Jonathan has also done time in the company’s executive suites, serving as chairman of De Beers’ South African arm and now Element Six. 

With last week’s announcement that the Oppenheimers were selling their De Beers shares, it’s clear that the family’s time at De Beers has run its course. (Although Nicky appears to be going, no one quite knows what will happen with Jonathan.) This marks a real milestone, as the Oppenheimers didn’t just lead the diamond business, they basically invented it. Their departure could have huge ramifications for not just De Beers, but the entire industry.

There has been much speculation as to why the Oppenheimers picked this particular moment to finally cash out. According to one report, the family didn’t want to be “tied up in one asset.” But South Africa’s richest family seems to have seen its future at De Beers as limited. As Nicky himself acknowledged a few months ago, the idea that the chairman’s job is automatically passed down from one generation of a controlling family to another is now viewed as an “anachronism” that no longer fits with “proper corporate governance.”

By contrast, the company’s new 85 percent owner, Anglo American—founded by Nicky’s grandfather, but also running without family involvement—has embraced modern corporate governance, and is considered well-run and professional. Just as Rio Tinto and BHP brought some new ideas into the business, Anglo’s greater involvement will likely do the same. All this, as one analyst put it, is another step along the road of “the increased professionalization of the diamond industry.” The trade is becoming more corporate, less chummy and clubby. 

From a business point of view, this deal makes sense. From time to time, rumors bubbled up that disagreement among De Beers’ three owners has prevented things from getting done, and played into the long delays in finding a new CEO and approving the Botswana contract. So the company may benefit from, as Anglo put it, a “simplified ownership structure.”

Still, while change is good, as we saw with Supplier of Choice, any shifts in direction need to be well-considered. It was only September that De Beers hired Philippe Mellier as CEO, its first chief executive with no industry experience. The assumption was the former transportation executive would learn the diamond business from Nicky Oppenheimer, and the experienced personnel at the Diamond Trading Company. But now, within a year, Nicky will be gone, and, with the DTC moving to Botswana, there is expected to be attrition among the staff at all levels there. 

De Beers people tell me Mellier has proved an extraordinary quick learner, who asked some perceptive questions as he toured De Beers’ operations. Still, he isn’t super-human. This industry can take years to figure out. One reason Anglo said it was interested in De Beers was its diamond expertise. So it’s ironic that much of its knowledge base may soon be gone. De Beers could always use a “fresh pair of eyes,” as Oppenheimer said when he hired Mellier. But no one should forget that sometimes older, experienced eyes see a lot as well.

JCK News Director