04 October 2010

Money Matters: Diamonds in Kimberley

By Carrie Lofty

In writing my upcoming release FLAWLESS, a Victorian-era romance set in colonial South Africa, I became fascinated by the speed of change in the Kimberley diamond mines. This massive change made a select few individuals unbelievably wealthy, while forever changing the politics, culture and future of South Africa. All for a few little rocks...

In 1866, while playing on his father's farm on the banks of the Orange River, young colonist Erasmus Jacobs found a 21.25 carat diamond that eventually went on to be called the Eureka Diamond. Three years later, another colonist found a 47.69 carat beauty, now called the Star of South Africa (right), which promptly sold and resold in Europe for upwards of £25,000 (roughly $2.8 million in today's money).

Thus began the great South African diamond rush. A mere twenty-two years later, Cecil Rhodes (pictured) bought out Barney Bernato and formed the De Beers diamond monopoly. During those years Great Britain went to war in the Cape, annexed territory, and did all they could to secure the land around Kimberley, where miners hoped to strike it rich. In 1882 Kimberley became the first city in the Southern Hemisphere to have electrical street lighting, and it was said that the small, otherwise innocuous frontier town boasted the highest population of billionaires in the world.

However, as with most rushes, the wealth was neither consistent nor equitably distributed amongst those who participated.

Kimberley's Big Hole, a kimberlite pipe stuffed full of diamonds, was still mostly dirt and worthless rock. For every ton of rock excavated, only .22 to .5 carats were discovered. This massive undertaking required roughly 9,000 miners in the Hole on any given day, with a worker replacement rate of 30% annually.

Paying their miners became owners' single most draining expense, and unions were a hotbed of controversy up until the moment of Rhodes' monopolistic triumph. Miners earned roughly £26/year (£13,900 in earnings today), but food and supply costs out on the isolated Karoo, where trains didn't arrive until the mid-1880s, were extortionary. Tradesmen experienced in geology and diamond assessment could earn upwards of a pound a day, which drew adventurous men by the thousands.

The difficulty with this rush also had to do with boom and bust cycles. Brilliants, or gemstone quality diamonds, suffered from massive pricing swings. The Kimberley mines in 1880 produced a total of 3,090,000 carats of diamonds that sold at an average of £1 7s each, for a total of £4,171,500 in gross revenue. In 1881, production increased but the average price per carat dropped to only a pound, for a year's decline of £796,000.

These busts drove out smaller miners. Men and eventually corporations consolidated bankrupt plots into larger and larger mines. By 1879 the number of registered claimants was down from several hundred to just 130. Ten years later only De Beers remained, which halted the boom and bust cycle. The De Beers monopoly meant suppliers could no longer charge such overinflated prices for their goods. Those remaining retailers had to bow to the wishes of the company, as did every employee. Prices stabilized dramatically, but the era of an ordinary miner striking it rich was over.

Carrie Lofty's latest historical romances, SCOUNDREL'S KISS and SONG OF SEDUCTION, are available now. In 2011 watch for Carrie's new Victorian series from Pocket, as well as her "Dark Age Dawning" romance trilogy from Berkley, co-written with Ann Aguirre under the name Ellen Connor. "Historical romance needs more risk-takers like Lofty." ~ Wendy the Super Librarian


Kelly McCrady said...

wow--DeBeers has held diamonds alone since 1889? That's some monopoly!

What year is Flawless set?

wv = "fabant": a diamond mine worker

Carrie Lofty said...

The majority of Flawless is set in 1881, when it was still possible for smaller enterprises to succeed. I manage to get the hero and heroine out of South Africa before the big bust of 1882. It was rather tricky trying to find a moment that contained both opulence (as the later years had in spades for the more successful tycoons) and possibility!

Pamala Knight said...

Fascinating post, Carrie. I can't wait to read Flawless and I'm sure you bring your usual deft hand to blending in the history with an exciting story.


Anne Whitfield - author said...

Carrie, your new book sounds fabulous!

Carrie Lofty said...

Thanks, Anne! I love it and can't wait for readers to journey with me :)