“In the Union House of Assembly on June 4^th, the Acting Prime Minister (Mr. Malan), replying in the debate on the Bill empowering the establishment of a diamond cutting industry in South Africa, emphasized the point that the Bill laid down that the cutter should pay the open market price for diamonds, and that the producer should not be in a worse position by selling to the local cutter than elsewhere. Mr. Malan believed that after the industry had been started a market in rough diamonds would be evolved in South Africa. There was no reason, he declared, why there should not be a Hatton Garden in South Africa.”

This paragraph appeared in a secret report of a British War Cabinet meeting in July 1919 – some 95 years ago – during which the ministers were briefed on the most important developments in the British Empire and Africa. During this meeting, the British ministers discussed the Diamond Cutting Act of 1919, which had been approved by the South African Union Government. To widen the British War Cabinet’s understanding of the dynamics involved, attention was drawn to the experience gained by the diamond cutting plant in Brighton, England.

States the report: “Sir David Graaff stated that the Brighton experimental factory had convinced him of the practicability of the present enterprise [in England] and he strongly advocated the establishment of a factory in South Africa.”

He couldn’t have been more mistaken.

A Plea for Government Assistance
What both the British and South African governments missed in their discussions was that the London-based rough diamond syndicate was in no mood to give any preferential rough supply treatment to either the British factory or to a factory in South Africa. That British factory was established by Sir Bernard Oppenheimer, a brother of Sir Ernest Oppenheimer. Only a few years later – in 1923 – the government needed to give a financial guarantee to the factory, something that required an Act of Parliament. This turned the matter into a national debate.

According to a declassified British Cabinet report of 1923, the then Minister of Labour, Sir Montague Barlow, pleading for acceptance of the guarantee bill, recalled in the British House of Commons that “as is known to most of the Members of this House, Sir Bernard Oppenheimer and his partners, Lewis and Marks, started this factory during the War. They founded the factory for two purposes. First of all, that it might be of assistance to the disabled ex-servicemen of the country, and, secondly, that we might have established in this country a new and a useful industry. Buildings were constructed and are very elaborate. They are fitted with the most modern appliances for the purpose of carrying on this work of diamond cutting.”

Continued the Labour Minister: “The arrangement was that the men should be trained during a period of six to nine months, during which period the ordinary Government allowances and payments were made in respect of training. After that the trainee passed into the ordinary productive side of the factory, the conception being that the business should be conducted, from the first, on a productive basis and that the men should be paid by piece work, and as they became more expert, the amount of money they could make increased. Managers and instructors were obtained from Holland, and the idea was to establish in this country a permanent form of employment for these men. Unfortunately in the period of 1920-22 there was a very severe depression in the diamond industry, as there was in other industries, and the factory had to close down.”

A Failed Enterprise
Thus, the British experience that was cited in the 1919 decision (and law) to establish a cutting plant in South Africa, would prove to be short-lived in England – and certainly not a good precedent. The discussions in the House of Commons were lengthy and fascinating, but one part stands out. A Member of Parliament opposing the guarantee stated that “of all the fantastic schemes produced from the Treasury Bench this is really the reduction ad absurdum of Governmental interference with business. This is the least businesslike and most foolish proposition we have heard. This £150,000 [guarantee to underwrite the polishing plant] is the latest attack on our national resources. If this is a business proposition we are considering, why was the factory never a success when there was a boom in diamonds and when diamonds were 300 per cent, even 500 or 600 per cent, higher in price. The fact is that there was not even the capacity to take advantage of it. Now when the slump has come and Amsterdam is able to cut cheaper than ever and their prices are cheaper than ever, the British Government is willing to stand in and risk £150,000 of the taxpayers’ money in an enterprise which failed from the beginning when directed by men on business principles.”

This was all about a century ago.

1919: Keeping Indians out of the Trade
The 1919 report on the South African decision to establish a factory was followed by another short item in the War Cabinet’s report. Shortly after adopting the decision on diamond cutting, on the very same day, “the Indian Bill passed the third reading, including the clause proposed by Mr. Collins giving any issuing authority in any part of Transvaal the right to refuse trading licenses to Asiatics without reason assigned. This clause was retained in spite of an appeal by the Acting Prime Minister for its withdrawal.”

The Indian Bill was adopted during turbulent days in South Africa. This period was characterized not only by the formation of the South African Union that disenfranchised what was then termed as “Coloreds,” Indians and Africans, but these were also the early days of protests by Mahatma Gandhi through a passive resistance campaign that started in 1911 and intensified for a greater part of the period. [Ghandi lived some 17 years in South Africa, going home to India in 1914.] The South African cutting industry that was then envisioned was to be for whites only – and it was envisioned (and it actually happened as well) that Belgian cutters would migrate to South Africa to manage the early factories. 

Hindsight
Back to the present. When reading the British War Cabinet Report from a 2014 end-of-year perspective, one ponders many different things, especially how history evolves – and how some things never change. Workers today are still very much paid by piece work. The state of beneficiation in South Africa has seen ups and downs – but when the 1919 principle (“rough to be sold at market prices”) is consistently applied, there is hardly any economic justification for the industry there. The industry is waiting for new South African regulations regarding local rough supplies – as the State Diamond Trader has failed to deliver on its promises.

How many factories are there throughout Africa and in the world that are comparable to the Brighton plant in 1923 – waiting for cheaper rough supplies or a government bailout? As the Parliamentarian stated it, that Brighton plant had really never been profitable. De Beers has never abandoned the rough supply principles that caused the brother of Ernest Oppenheimer to see his British factory go bankrupt some hundred years ago. And then, of course, there was the Indian Bill – applying specifically to what was called “Asiatics.”

Another thought is inescapable. An Indian foreign minister once commented on why the computer software business has risen so successfully in India. His answer: "Government was not involved." The history of diamond cutting, from 1919 until today sees excessive government involvement.

This brings us to the state of diamond cutting today – and who the world’s leading diamond manufacturers and traders are. While I love history, at the same time, I cannot wait to see what the next year will bring for all of us.