Saturday, September 9, 2017

Cecil Rhodes as a Businessman

The Rhodes Colossus by Edward Linley Sambourne
Cecil Rhodes left a controversial legacy because of his contribution to British imperialism and apartheid. But behind his racist and imperialist beliefs, he proved himself to be a shrewd talented businessman.

A Colossus of Controversies

Born on July 5, 1853, he was born to a priest with a terrible health. It forced him to take a local school for education rather than a boarding school like his brothers. In 1870, after finishing his basic studies, his parents decided to send him to the Cape Colonies with his brother in hopes of giving him an opportunity to build his fortune and also in hope of improving his heath with the place’s warmer climate.

In 1870, he arrived in South Africa and embarked on a business career. He entered the cotton industry before shifting to the lucrative diamond industry. In the middle of 1870’s he survived a heart attacked and spent time in the wilderness to recover where he developed his imperial vision for Britain epitomized with a railroad connecting Cairo and Cape Town.

Then on, he devoted his wealth to the expansion of the British realm, advancing to modern day Botswana and Zimbabwe, then known as Rhodesia (named after him). He became Prime Minister of the Cape Colony in 1890 and, with a single failed plot heightened tensions, with the Boers which culminated in the Second Boer War in 1899 that damaged British military pride. His disastrous plot of inciting an uprising within an independent Boer state brought his resignation as Premier in 1896 and recalled to London to answer a parliamentary inquiry. He did returned to Africa only to die on March 26, 1902. His subjugation of the rights of blacks and his contribution to expansion of British realm through sinister plots led to criticism of Cecil Rhodes.

Funeral of Cecil Rhodes
A Boss at 18

Cecil Rhodes’ business skills led to his meteoric rise as one of Britain’s empire builders. Although controversial in other endeavors, the company he founded De Beers with its famous slogan “a diamond is forever” continues to be leading in the diamond industry. His impact in politics and diamonds all started in 1870.

In September 1, 1870, he arrived in Durban in hope of improving his health with the warm climate as well as becoming rich. With only £2,000, he set out with his brother, Herbert Rhodes, in establishing a cotton farm in Umkomanzi Valley, just south of Pietermaritzberg. The brothers entered the cotton industry, which they saw as an opportunity after the success of early planters settling in the area. Besides, demand for cotton remained high due to the industrial revolution in textile back in Europe.

The brothers initially met with problems. Their neighbors showered them with pessimism and promises of failure over their planned cotton farm. Their first harvest of cotton failed due to their lack of knowledge. They planted the cotton plants close to each other that spread infestation of bore-worms and caterpillars faster. Moreover, monkeys also proved to be a challenge in their pursuit.

They, nonetheless, persisted and innovated to make their plantation a success. In the next season, they planted their crops farther to each other and placed maize in between to divert the attention of the pest from the cash crop. Their ploughing technique rather than hoeing also helped them. By the end of 1871, the brothers succeeded in harvesting cotton, which allowed them to plan the expansion of their plantation to 100 acres. They made a name for themselves by winning a local agricultural show and becoming a prominent cotton grower in the area.

Cecil learned the basics of business management from the cotton plantation. His adventurous brother always set out in expeditions leaving him at the age of 18 managing the plantation. Surprisingly, he worked well with black laborers and became meticulous and open to new profitable opportunities.

In 1872, the Rhodes cotton plantation met a downturn along with the whole industry. The source of their irrigation dried up and profits started to drop significantly. The brothers abandoned the cotton industry with hope for another profitable venture in the booming diamond industry, where Cecil Rhodes made his name better known.

Diamond Rush

In 1871, Cecil Rhodes received a letter from his brother Herbert convincing him to enter the booming diamond trade that sparked a rush across the Cape Colony. They kept their cotton plantation for another harvest before finally leaving it in favor of a more profitable venture.

Diamonds in the 1870’s commanded great price. For centuries, this beautiful work of Earth’s underground only belonged to the rich, powerful, and royal. Its beauty brought it in high demand but the lack of supply drove its price off the charts. India’s Goloconda mine supplied the diamonds of the world before it was exhausted and Brazil’s Minas Gerais took the leading source of the stone. Yet, the Minas Gerais mine failed to increase the supply of diamond significantly and decrease the price.

The high price of diamond caused the rush that followed after in 1867 when children found a diamond near the banks of Orange River. Following the discovery of the so-called Eureka diamond, diamond boom towns marked the landscape like Hope Town, De Beers, and Kimberly to name a few that hosted thousands of miners hoping for a fortune like Rhode brothers.

In October 1871, Cecil embarked in a trip to follow Herbert in Kimberly. Along the way, he passed several mining towns and saw the environment waiting for him, tent cities complete with hotels, taverns, stores, and diamond trading shop. He witnessed utter chaos from the sounds of thousands of people of various nationalities and dust flying in the air and stuck into everyone’s skin.

When he arrived, his brother already set the foundations for their diamond mine. Their mine in Kimberly was located in a kopje (a hill in the middle of a vast plain). The whole kopje was divided by miners into sections called claims and Cecil’s brother owned 3 claims worth £ 5,000. They then began digging their claims looking for yellow soil in the ground where the diamonds can be found. Little by little, Cecil learned mining and trading diamonds with the help of his newly arrived brother Frank.

Cecil learned to manage the mine single handedly when Herbert went to his adventures in the north and Frank returning to England to enter the military. He supervised his workers scrupulously and even mined diamonds himself. He worked hard to earn more and buy more claims starting a cycle that expanded his diamond mining enterprise. His work, however, took a toil in his health and he had to take a respite in 1872.

He survived a heart attack and took a convalescent trip across South Africa. When he returned, he was a man with a vision – to make the whole Africa a British colony. He believed money bought power capable of realizing his vision and so, he worked hard with a strong purpose.

De Beers Mining Company
Charles Rudd

In 1873, Cecil, who now manage the mining solely, decided to partner up with Charles Rudd to expand his control over more claims in the Old De Beer Mines which he called “nice little mines.” His partnership with Rudd allowed him to return to England to pursue studies in Oxford which lasted until 1881, leaving his business under capable and trusted hands.

While attending Oxford, he usually returned to the Cape Colonies, which he saw as more lively and interesting than his boarding house. In 1874, he visited his mines and found a declining diamond industry because of the sudden depletion of yellow soil that contained the precious stones. Rhodes, however, believed otherwise and showed incredible leap of fate and risk taking. He and Rudd believed the blue soil beneath the yellow soil contained the same large quantity of diamonds. He then started to purchase claims of pessimistic miners and took over significant share of area in Old De Beers that overshadowed his mines in Kimberly, which he later decided to sell.

Now centered in De Beers, he analyzed the problems of the diamond industry. He concluded that the decline in the diamond industry came as a result of over mining brought by competition of numerous small miners. The increase in supply of diamond dropped the prices that translated into lower revenue. The low revenue failed to yield huge profits due to large expenses in maintaining the mine as well as labor. Rhodes then saw amalgamation as a means to attain stability and profitability in the industry.

This objective of his resulted to new ventures, such as water pumping. The open mines continued to be plagued by flooding, which Rhodes saw as an opportunity to achieve amalgamation. He saw pumping service as a building block to work his way up in convincing small miners to join his grand plan.

Rhodes showed great charisma and persuasion skills in starting his water pumping business. He bought a brand new water pump from a farmer that he negotiated with relentlessly for days and weeks. He then faced the problem of transporting it to the mines, only solving it when he convinced a Boer cart driver to deliver the pump with only a check serving an IOU as payment. His water pumping business then helped to give him the capital and the network necessary to advance his plan.

From 1876 till 1878, Rhodes continued his studies in Oxford. While in England, he talked to trading companies and banks on the importance of uniting small scale mining into a large corporation.

In 1880, with his profits from the water pumping business and mining, he convinced remaining small scale miners in Old De Beers to form the De Beers Mining Company with the initial capital of £200,000 and Rhodes and Rudd as main directors.

De Beers Consolidated Mines Ltd.

From uniting the De Beers miners, Rhodes set his sights into uniting the 2 biggest mining centers in the Cape Colony – De Beers and Kimberly. Kimberly mines hosted another amalgamated mining company called the Kimberly Central Diamond Mining Company, led by Rhodes’ biggest rival – Barney Barnato.
Barney Barnato
Barney Barnato or Barnett Isaacs began as a poor Jewish tobacco seller in the Cape Colonies. Slowly, he sold all his tobacco and entered the diamond trading and mining industry. Soon enough he became a formidable diamond businessman with Barnato Diamond Mining Company as his vehicle. Like Rhodes, he saw the value of amalgamation and did so in Kimberly. By the 1880’s small Kimberly miners, Barnato Diamond Mining Company, and the French Compagnie Fran├žaise des Mines de Diamant du Cap formed the Kimberly Central Diamond Mining Company that challenged Rhodes domination of the diamond industry.

The Barnato and Rhodes rivalry became intense in diamond and soon moved to other industries, in particular gold. In 1886, 2 prospectors discovered gold in Witwatersrand, just few files south of Pretoria, causing a gold rush in the area. However, miners soon found out the gold ore was found inside rocks and required crushing by large equipment that small-scale mining lacked. The competing Barnatto and Rhodes both heard the news and problems. Barnatto backed out while Rhodes took the challenge of making the mine profitable. Rhodes invested in area that became known as the Rand and in 1887 established the Goldfields of South Africa Ltd. Miners in the area built a tent city which grew to become Johannesburg. In this field, Rhodes won big time as his gold company grew to become one of the most highly valued company in the world and the Rand as one of the most important mines.

The rivalry of the 2 diamond magnate reached its crescendo in 1888. Rhodes took the upper hand when he received financing from the famous Rothschild and started to purchase shares in the Kimberly Mines. Furthermore, he also took interest in the French company whom Barnato partnered with. His purchase of shares of the Kimberly Central Diamond Mining Company led to rise in its prices that attracted shareholders to sell their stakes to Rhodes. Competition also intensified in production as both companies increased their output and dominate the market. The action led, however, to price decline of diamond that damaged the industry. Finally, Rhodes succeeded in bringing Barnato to the negotiating table.

The negotiation saw Rhodes meeting with Barnato personally. Rhodes respected Barnato as the latter does to the former. Rhodes knew he had the upper hand, but he feared Barnatt’s story of a whole bucket load of diamonds he was prepare to sell to substantially drove prices further down. With the help of Alfred Beit, the negotiation ended and Barnato sold the Kimberly Central Diamond Mining Company for over £ 5 million.

The merger resulted in 1888 the foundation of the renowned De Beers Consolidated Mines Ltd. with Rhodes, Beit, Barnato and F.S. Philipson Stow (another talented associate of Rhodes) serving as life director. Rhodes foundation of De Beers Consolidated Mines marked his domination of diamond industry by controlling 90% of the world’s supply.

With De Beers Consolidated Mines and the Goldsfield of South Africa in his list of achievements, he proved himself an excellent businessman. He used profits to build housing to his workers and do philanthropic works, such as financing scholarships which became known as the Rhodes Scholarship that even to this day helped thousands of students to pursue their studies. 

Aftermath

Cecil Rhodes (1900)
Rhodes success also financed much of his ambitions. He used it to become a politician and even becoming the Prime Minister of the Cape Colony. His diamonds could also be called as blood diamonds as it financed land grabs from local African chiefs either through dubious purchase or by force. He used it to hire mercenaries to crush resistance of those who oppose his northward ambition. He also used the money to purchase arms which he smuggled to Johannesburg and start an uprising by local British against the Boer Republic. His actions eventually backfired leading to tensions that culminated to the Boer War in 1899.

Conclusion

Disregarding what happened to the fortune built by his companies, Cecil Rhodes proved himself as one of the greatest moguls in history. As he consolidated the diamond industry, he stood in par with John Rockefeller who did the same in the oil industry.He showed great perseverance and taste for hands-on management, which meant devotion. He had a goal which helped him to work further to succeed, despite his goal disgust many today. He displayed charisma, persuasion, and skill to make other trust him leading to his successful amalgamation of miners to form the dominant company in the industry – De Beers. Cecil Rhodes maybe despised as an imperialist, racist, or warlord, but he certainly can be admired as a businessman.


Sources:

Williams, Basil. Cecil Rhodes. London: Constable and Company Ltd., 1921.

Le Seur, Gordon. Cecil Rhodes: The Man and His Work. London: John Muray, 1913.

Maurois, Andre. Cecil Rhodes. London: Collins, St. Jame’s Place, 1913.

Woodhouse, Christopher Montague. “Cecil Rhodes.” Encyclopedia Britannica, Inc. Accessed on September 3, 2017. URL: https://www.britannica.com/biography/Cecil-Rhodes 

"Rhodes, Cecil." Encyclopedia.com. Accessed on September 3, 2017. URL: http://www.encyclopedia.com/history/encyclopedias-almanacs-transcripts-and-maps/rhodes-cecil-0

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