Question

De Beers and the conflict diamonds: A monopoly doesn’t last forever. What viewpoint does De Beers take regarding their own business ethics? Do you agree with their stance why or why not?

Answer 1

The diamond industry, from the initial days was structurally flawed because the De Beers controlled prices of all diamonds present in the market. This led to the market share reaching almost 90% in the late 1980’s, a series of events over the next 25 years led to the erosion of the De Beers monopoly. Post that De Beers no longer has control of the diamond industry and for the first time in almost a century, the diamond prices are driven by market supply and demand dynamics.

In the late 19th century a massive diamond discovery in South Africa led to a diamond rush. Businessman Cecil Rhodes bought as many diamond-mining claims as he could, and this eventually became De Beers Consolidated Mines Limited. De Beers managed to withhold the industry not just from mining but also by expanding the business into every facet of the industry with a focus on monopolizing distribution.

De Beers successfully converted all the world’s rough suppliers to sell production through the De Beers channel, this led to controlling the supply of diamonds globally, giving De Beers the power to influence diamond supply and thus diamond prices.

The De Beers had a secretive distribution channel, under an organization called Diamond Trading Co. (DTC). This gave De Beers complete control and discretion to distribute most of the world’s diamonds. Later, in the second half of the 20th century new diamond mines were discovered in various parts of the world such as Russia, Australia, and Canada and it became increasingly difficult for De Beers to control these newly discovered mines, affecting their global supply.

In 2011 an international business consultant named Tandra Aldridge published an article focussing on the link between the notorious diamond mines and child labour problems and the civil war within countries where diamonds were mined. This article spoke of how the De Beers company took advantage of cheap labour and forced their workers to work long hours for little pay and forced them to live in these working villages with sub-standard living conditions.

Children aged between 5 and 16 were used in mining the diamonds, for ten hours a day; suffering from vision problems, malnutrition, and respiratory problems. Because of ineffective labour laws in Africa, De Beers could get away with such inhumane actions.