Icons & Innovations: De Beers: Goodwill Hunting
Jonathan Oppenheimer, the scion of the De Beers diamond dynasty, is used to addressing negative perceptions about his family’s business. The first time he met his wife, he recalls, she said, “You’re the guy who sells diamonds out of a shoe box,” referring to De Beers’ unorthodox method of distributing its vast cache of diamonds in small cardboard boxes to a selected group of international dealers known as sight holders.
The industry goliath has been the target of criticism and protest for decades, facing accusations of fixing prices, strong-arming the competition, and displacing people from their native lands in Africa. But the boyish-looking 36-year-old Oppenheimer, who is managing director of De Beers Consolidated Mines, recently was the recipient of public praise instead of derision for his company’s practices. The Global Business Coalition (GBC), an organization of international corporations using their resources to combat AIDS, honored Oppenheimer for De Beers’ efforts to stem the HIV/AIDS pandemic in South Africa, Botswana, and Namibia, three African nations in which it operates diamond mines. “We do this incredible work in HIV/AIDS for our employees, not for some ambition for recognition, and we did not expect anyone to recognize us,” said Oppenheimer, who was visibly overcome with emotion as he accepted the award last September during a high-profile event at the Kennedy Center in Washington, D.C., attended by Sen. Hillary Clinton and Secretary of State Condoleezza Rice.
Oppenheimer shared the spotlight with his young American wife, Jennifer, who is chairman of the De Beers Fund, the company’s philanthropic arm, which spent 22.9 million rand (about $3.5 million) in 2004 on social, economic, health, and educational projects in South Africa. She and her husband, who are the parents of three young children, are on the front lines of a battle being fought around the world—and most desperately in their own backyard.
Southern Africa has been devastated by the HIV/AIDS pandemic: An estimated 21.5 percent of South Africa’s population is infected, and in Botswana, that number soars to an estimated 37.3 percent. Of the 24,000 De Beers employees, some 17,000 are in southern Africa, and the company estimates that 10 percent of them are HIV-positive.
In the late 1990s, De Beers began offering to its employees voluntary testing and counseling. In 2003, it started offering free preventive care and antiretroviral medications to all its employees and their spouses or partners. Retired employees and contractors also receive these benefits.
De Beers modeled this program on an initiative that it had implemented in 2001 at its Debswana establishment, where the company, operating as a partner with the Botswana government, mines and distributes diamonds. The Debswana mining operation organized one of the first large-scale efforts to fight and treat HIV/AIDS. Since the program began, both the rate at which the disease is spreading in Debswana and the rate at which people are dying from it have slowed.
“The fact is, in Africa, most infected people don’t know it,” says Oppenheimer. “By testing, we can help treat the disease and prevent spreading.” In 2004, the company held a voluntary testing program at its Koffiefontein Mine, southwest of Johannesburg, and more than 90 percent of its employees participated, an astronomical turnout in a region where AIDS-based discrimination in the workplace causes many to fear divulging that they have the disease.
“We are winning the battle,” says Oppenheimer about the company’s recent success. “The trend is in the right direction, people are testing earlier, they’re coming into the programs healthier, and we are seeing results. But that’s not to say we can relax for one millisecond.”
Fighting HIV/AIDS is a core directive for the De Beers Fund, but it is just one aspect of a broad philanthropic platform that includes vast environmental and educational programs. The company’s philanthropic projects, though, have been overshadowed by the controversy that has circled around De Beers, which has historically monopolized the diamond industry. In the 1980s, the De Beers mines once produced 85 percent of the world’s diamonds, but in the past two decades that figure has dropped to about 40 percent as a result of increased competition. Despite the company’s declining market share, De Beers generated $5.7 billion in revenue and $498 million in profits in 2004, contributing to the Oppenheimers’ standing as the wealthiest family in South Africa.
The diamond industry’s most powerful force distributes its inventory of stones to its sight holders through its marketing arm, the Diamond Trading Co. (DTC). Five years ago, De Beers partnered with LVMH (Moët Hennessey Louis Vuitton) to launch a branded jewelry collection sold through its own stores, the first of which opened in London in 2002. For decades after World War II, De Beers was prohibited from operating a business in the United States because of antitrust claims against it. De Beers recently settled the lawsuits, and it opened the first U.S. De Beers LV store, on Fifth Avenue in New York City last summer, followed by a Beverly Hills venue in December.
Another indication of the changing times at De Beers is the company’s recent sale of 26 percent of its South African mining operation to Ponahalo, a newly formed black-owned company. The transaction was part of an effort to comply with South Africa’s Mining Charter, which established minimum black-ownership quotas that companies must meet by 2009.
A once-secretive company, De Beers is now forthcoming about its business and philanthropic efforts. “In the past three to four years, we got much better at facing up to both our successes and failures,” Oppenheimer says. Rather than cultivating philanthropic initiatives internally, he explains, the company has enlisted community leaders, local residents, and private groups to help build a self-sustaining program.
Oppenheimer believes the company’s newfound sense of social responsibility emerged when De Beers went private in 2001 following a $3.6 billion leveraged buyout. “That was a big moment when we could contemplate our future in a longer term, and did not have to be quite so responsive to short-term markets,” he says. “Now, we can focus on doing the right thing at the right time and in the right place to ensure maximum value.”
Part of doing the right thing is tending to the communities in which De Beers operates its diamond mines. “To exist in a community, you have to embrace and include a holistic approach to people and the environment,” says Oppenheimer, whose company’s operations include South Africa’s Kimberley Mine, where it has been extracting diamonds since 1871 and expects to continue doing so for at least another 30 years. “We can’t afford not to respect the community, because we would have to live with the consequences.”
Oppenheimer says that De Beers is intent on working with the various local communities and African countries’ governments to protect and restore land, and to educate its inhabitants and improve their quality of life. “It’s a little-known fact that Botswana has been the fastest-growing economy in the world over the past 25 years,” notes Oppenheimer, “and that is built on the back of a successful diamond business.”