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January 12, 1999

INTERNATIONAL BUSINESS: A Diamond Cartel May Be Forever; The Hereditary Leader of De Beers Pursues Post-Apartheid Growth
By DONALD G. Mc NEIL Jr. Correcti on A ppen ded

JOHANNESBURG, Jan. 11 A diamond cartel is forever. Oppenheimers, nearly so. Periodically, the death rattles of the cartel, which sets prices for most of the world's uncut diamonds, are said to be heard. In 1905, it was synthetic diamonds. In 1942, Roosevelt's anger. In 1960, Russian finds. In 1977, Israeli hoarding. In 1983, Australian finds and Zaire's defection. Each time, the cartel outwitted fate. While OPEC has withered and the tin cartel collapsed, diamonds have glittered on. It has different names, but the cartel is De Beers, and De Beers is the Oppenheimers -- as is the Anglo American Corporation, South Africa's dominant conglomerate. In a silicon world, diamonds and gold aren't quite what they used to be, but the Oppenheimers are still the richest of their countrymen and the most important business figures in this country. Now the third generation is officially in charge. Nicholas Frank Oppenheimer, 53 -- also known as Nicky, or N.F.O., or the Cuban because of his beard -became chairman of De Beers a year ago and in November opened its new headquarters, outside the Anglo American complex downtown. It is not an easy time. Last month, the company announced that because of falling Asian demand, it sold fewer diamonds than it had for 12 years, a mere $3.4 billion worth. The mines are cutting back; the executives admit to sleepless nights. But not to panic. This has happened before. In company lore, Mr. Oppenheimer's grandfather, Sir Ernest, was the daring entrepreneur; his father, Harry, the philosopher king, and Nicky is -- well, something different. ''Man of action'' is the take on him, but it seems silly. He is a genial teddy bear who wears funny socks and is relaxed enough to be photographed pounding an African drum with miners at a company
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ceremony. At the same time, he is the helmsman who negotiates billion-dollar deals with the Russians, who insist on dealing with a family member. ''It's much nicer to be known as Mr. Nice Guy than Mr. Nasty Guy,'' he jokes. ''But you've got to have lines -- and when you hit the line, that's the end of the story, nice guy or not.'' In London, where he spends half his time, Mr. Oppenheimer commutes by helicopter, which he pilots. In South Africa, he has his own cricket team and personal stadium, his ''grand folly,'' he says. In return for a $17,000-a-match donation to youth cricket, his team gets the first match with visiting national teams -- if the New Y ork Y ankees played cricket and toured, in South Africa, they would have to take on the Nicky Oppenheimer XI first. There are even statuettes of him inside his stadium, but they're not imperial -- they're goofy, like souvenir salt shakers. Asked why he has his own team, he explains in his typically self-deprecating way, ''If you're as bad a cricketer as I am, it's the only way you get to play.'' In public, Mr. Oppenheimer is modest and often pokes fun at himself. His obligatory military service in the 1960's, he said, was spent as second-incommand of a parking lot near Pretoria, signing vehicles in and out. ''The army taught me to sign my name very quickly, and that's stood me in good stead the rest of my life.'' And he takes umbrage at an old report that as a student, he drove a beat-up little car with a ''Jesus Saves'' bumper sticker. ''Small, yes. Not ''Jesus Saves,' but something like that,'' he said. ''But never beat-up. Never. I take great offense at the idea that I didn't look after my car.'' His own personality is in stark contrast to the ruthless reputation of the cartel's Central Selling Organization in London, which estimates that 70 percent of the world's rough diamonds are bought through it. (The figure was once nearly 100 percent, but Australia's output, Russia's excess gems, stolen stones and many that slip out of war-torn Africa find their own way to cutters.) The C.S.O. is still capable of freezing out diamond dealers who cross it. And as the biggest buyer of diamonds throughout Africa, it is still the ultimate source of funds, whether wittingly or not, for some of the world's most vile killers who control diamond mines, including rebel movements in Angola and Sierra Leone. But Nicky Oppenheimer has brought glasnost to the business, running the C.S.O. since 1985 in a way very unlike that of his uncle Phillip, who was an icy and inflexible figure. He is, for example, not afraid to admit that diamonds are intrinsically worthless ''except for the deep psychological need they fill'' -- a need that hundreds of millions of dollars in De Beers's ''A Diamond Is Forever'' advertising helps create. Nor does he mind calling a cartel a cartel, though he prefers to refer to it as ''single-channel marketing.'' And he views with wry amusement the fact that he cannot visit the United States, by far the company's biggest market, because of a legacy of unresolved antitrust cases stretching back decades. He has been there in the past to ski and to see relatives in San Francisco, but since an indictment charging De Beers with fixing the prices of industrial diamonds was handed up more than four years ago, no De Beers director will enter the United States for fear of being subpoenaed.
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Of American antitrust laws, he says: ''Obviously I'm biased, but I don't think in this case they are sensible. It's a strange thing -- here I am a believer in free enterprise and competition, all the good liberal values, and yet I'm chairman of a business which talks ultimately about single-channel marketing, control, all those sort of things.'' Mr. Oppenheimer says he leads ''a very normal life,'' driving his own car, feeling no need for bodyguards, going out to movies or stores unpestered by paparazzi. ''If you live that life, if you go to the places where people take pictures of you, then you have your picture taken, I suppose,'' he says. ''I'm not sure I necessarily go to the right places. Thank goodness.'' At the moment, he is focused on the reorganization of the De Beers-Anglo-Minorco consortium. Anglo, one of the world's biggest mining companies in gold, platinum and other minerals, is absorbing Minorco, a Luxembourg subsidiary created to evade anti-apartheid sanctions. The resulting company, Anglo American P.L.C., will move its headquarters and stock exchange listing to London from Johannesburg, to give it access to more capital. Mr. Oppenheimer denies what some analysts say -- that the move to London is also a way for Anglo to improve its image in the United States, where it now owns two gold mines, with an eye toward going deeper into that market. As a result of the reorganization, hundreds of De Beers workers on the Anglo payroll are being shifted back to De Beers. And De Beers has moved its head office out of Anglo's downtown headquarters to a south Johannesburg amusement park. But the cross-ownership between De Beers and Anglo is not being undone, nor is the Oppenheimer stake in both, Mr. Oppenheimer says. De Beers still owns roughly 40 percent of Anglo, essentially as a cash cow and as collateral for the billions it must borrow to get through bad diamond years. To keep diamond prices ever rising gently, De Beers must buy and hold raw stones. When jewelry demand sinks that is expensive. Mr. Oppenheimer says it is ''clearly rubbish'' that the family controls both De Beers and Anglo because it ''directly owns'' only 8 percent of Anglo. But that has been the family line for decades. He is also the nonexecutive deputy chairman of Anglo, while his son Jonathan, 27, is rising through the Anglo ranks in Zimbabwe. Nicky Oppenheimer's father, Harry, now retired after leading the companies from 1957 to 1994, celebrated his 90th birthday last year. He spends hours in his library, some of them reading Byron, but still goes into the office most mornings. Harry was a member of Parliament for nine years, a critic of apartheid and later a force behind liberal parties and newspapers. Sir Ernest, Nicky's grandfather, also served in Parliament and got into furious fights with the Government during the Depression, threatening to close his mines if it kept threatening to nationalize them. In later years, the company was often criticized by anti-apartheid leaders for growing rich on underpaid migrant labor enforced by the apartheid system.
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It apologized to the Truth and Reconciliation Commission in November 1997 for ''many missed opportunities and many mistakes made in Anglo's corporate citizenship,'' including failing to house workers with their families, to desegregate workplaces and to promote blacks. In its defense, it pleaded that the apartheid Government forbade it to do so. While professing no interest in politics, Nicky enjoys good relations with the new Government. He is on the board of Nelson Mandela's Children's Fund and he signed the deals that arranged for black ownership of substantial portions of two Anglo subsidiaries, Johnnic and J.C.I. ''There were many years in the 1980's, when there was absolutely no contact between Anglo and De Beers and the Government of the day,'' he says. ''We never saw them, never talked. And that's really weird. With the present Government, things have finally become normal. One feels the Government is doing what it should in supporting business endeavors, and that's extremely healthy.'' What, he is asked, would he like to be remembered for? ''Oh, I always find questions like that terribly difficult,'' he says. ''One doesn't necessarily have a mission. I don't know -- for being fair and reasonable, I suppose.'' It's a trick question, he is told. He was asked it by someone else 15 years before and his answer was noted. He smiles. ''What was it?'' ''For not being boring. For having lived a worthwhile life. For having been polite to people all one's life.'' ''Hmm,'' he says. ''Sounds rather boring, if you ask me.'' Photos: Nicholas Oppenheimer, above, chairman of De Beers. The company, which has operated mines, below left, for three generations, was founded by his grandfather, Ernest Oppenheimer, below right with Lady Oppenheimer, in 1917. (Jon Hrusa for The New Y ork Times)(N.W. Ayer & Son); (Corbis/Bettmann-UPI) Graph ''The Envy of Opec'' tracks the average wholesale price of a one-carat diamond since 1978. (Source: The Rapsport Diamond Report)
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