Under pressure from the South African government, De Beers has sold 26 percent of its South African division, De Beers Consolidated Mines, to a black empowerment group, Ponahalo Investment Holdings.
Ponahalo, a new company meant to benefit what are called HDSA (historically disadvantaged South Africans), will pay $570 million for the 26 percent share. The new company will be owned 50 percent by De Beers’ employees and pensioners in South Africa and 50 percent by a consortium of HDSA-owned companies.
In a teleconference, De Beers chairman Nicholas Oppenheimer called the deal “innovative, new, and sustainable.” The assembled crowd particularly applauded the decision to turn over part of the company to De Beers’ workers.
“We believe it is those people, who are working for De Beers and who have worked for De Beers, that have made this the great company that it is today, and it is right and proper that they should be recognized in this transaction,” Oppenheimer said.
The National Union of Mineworkers and South Africa’s minister of mines and energy Lindiwe Hendricks mainly welcomed the deal, noting that it had avoided most of the “usual suspects” commonly a part of South Africa’s black empowerment deals. Critics say many of these deals simply create a new business elite without benefiting the truly underprivileged.
Ponahalo’s chairman, Manne Dipico, is the former premier of the Northern Cape Province but began as a worker in De Beers mines and served as the local NUM shop steward. His introduction at the deal’s unveiling included jokes that he was the “devil [De Beers] knows.” He will own 5 percent of De Beers Consolidated Mines and become its vice chairman.
In setting up the deal, De Beers was guided by South Africa’s mining charter, which requires that companies transfer 15 percent ownership of their local assets to black South Africans within five years and 26 percent by 2014. The arrangement puts De Beers ahead of schedule; the company wanted to meet all its commitments in one transaction.
De Beers managing director Gary Ralfe drew parallels to the changes going on at De Beers and in South Africa.
“Under our old business model, De Beers was mostly about control, about monopoly, and we had the reputation for being opaque and secretive,” he said. “Our transformation has been running parallel with the much more important transformation happening here in South Africa. The new South Africa cannot survive without transformation just as De Beers [could not].”
The event was billed as “the most significant change of ownership of [De Beers Consolidated Mines] since its formation in 1888.” However, it is worth noting that De Beers Group, the far-larger entity that controls DBCM, the Diamond Trading Company, and other parts of the company, has had no change in ownership. It is owned by mining giant Anglo American; the Oppenheimer family; and Debswana, the De Beers–Botswana joint venture.