Kimberley In Transition

RAPAPORT… Once the crown jewel of South African mines, Kimberley is trying to create a new identity beyond De Beers and diamonds.

In Kimberley, the town of its birth, De Beers Consolidated Mines Ltd. is still perceived as the creator and destroyer. And diamonds, which gave birth to Kimberley in the 1860s, remain a mainstay of the community.

In September, two announcements made jointly gave new hope to Kimberley that it will survive De Beers 2005 decision to close its underground mines. First, De Beers announced a deal to sell its idle Kimberley mines to smaller operators, Petra Diamonds and its joint venture partner, Sedibeng Mining, a Black Economic Empowerment (BEE) company, increasing the possibility that the mines could be reopened. “Even if De Beers were to leave, there will always be smaller mines,”says Sharon Steyn, chief executive of the Northern Cape Chamber of Commerce, a business trade group in Kimberley.

Secondly, De Beers announced plans to further enhance the Big Hole, the town’s historic mining district. The new $17-million project would construct an auditorium, amphitheater and conference center to host cultural as well as sports events. To date, De Beers has spent a reported $7.9 million on the site, which includes a viewing platform at the Big Hole’s edge, an IMAX film theater, museum exhibits and an interior mall of locally owned shops and concessions. With the recent improvements, the Big Hole attracted 80,000 visitors in the past year, boosting tourism in a town that had once been dependent on diamond mining.

The work, set to begin in April, is expected to employ as many as 400 people by its completion in mid-2009. De Beers also says it is turning over ownership of the Big Hole to a trust that will manage the property on behalf of “the people of Kimberley.”

GIVE AND TAKE

Steyn remembers De Beers abrupt announcement in late 2005 that underground mining was no longer profitable and that the mines, a large employer in the town of 270,000, would be closed. At the time, the impending layoffs created “a lot of doomsday talk. A lot of businesses said if De Beers moved out of Kimberley, Kimberley would die,” recalls Steyn.

The blow from the loss of approximately 1,000 underground mining jobs in the past two years has been cushioned somewhat by the steady growth in local and regional government jobs that has, in turn, created demand for new homes and shops. Since 1994, when apartheid ended and South Africa’s new democracy began, says Johan du Plessis, editor of Diamond Fields Advertiser, the town’s newspaper, “our own government has become the largest employer in the Northern Cape.”

Nearly 700 people in Kimberley still get their paychecks from De Beers for sorting and grading diamonds, mining the tailings left in the big hills of dirt surrounding Kimberley and performing administrative jobs.

STILL PLENTY OF NEGATIVES

That is not to say that all the recent news has been positive. The town’s unemployment rate of 40 percent is still among the highest in South Africa. The upgrade of the mining site to what De Beers calls “a world-class tourist destination” has not been without glitches and controversy. Tourism sagged during the renovations in early 2006, and some tour operators lost business. The bankruptcy of Fuse Communications, a De Beers contractor on the project, made newspaper headlines early in 2007.

Despite its economic commitment to the town, the swiftness of De Beers decisions and the secrecy of its operations irk some Kimberley residents, including du Plessis. “We were very critical of the way they handled the final phase of the underground mine closings,” he says. “In one day, they came in and threw the switch. There was a lot of reaction and a lot of negativity. People were predicting the end of the city, but it was more the end of an era.”

Like the rest of South Africa, Kimberley is preoccupied with a high crime rate, and its population is polarized between the affluent and the poor. Its isolation in South Africa’s arid, sparsely populated interior also gives Kimberley a provincial feel. The city’s first shopping center, the Diamond Pavillion Mall, opened less than two years ago.

Any mention of De Beers winding down its mining operations in South Africa rankles some company officials. “In Kimberley, this is a mine that has 30 years to go,” says Tom Tweedy, De Beers media relations manager in Johannesburg. He was referring to the aboveground extraction of diamonds from De Beers dumps or tailings. The company built a $143 million recovery plant to sift through these excavations using high-tech equipment not available in the late 1800s and early 1900s. Once stones are collected, the old mines’ gaping holes will eventually be filled — thus restoring the environment.

SOME CONTROVERSY

“The press gets this consistently wrong. We’re not winding down,” Tweedy says. “We want to develop. We’re bringing in new players for the diamond mining business.”

Once its own mines become only marginally profitable, Tweedy says, the company is forced to look elsewhere. “We’re desperate to find new sources of diamonds. We spend more than $100 million a year looking for diamonds.” De Beers recently formed mining partnerships with the governments of Angola and the Democratic Republic of Congo (DRC). In early 2007, De Beers launched a $143 million ship designed to find diamonds off South Africa’s West Coast, between Cape Town and Namibia.

NEW VENTURES

During 2007, De Beers resumed conducting “sights” in Kimberley, which had not been held there for at least 15 years. The company has pledged to help the South African government establish a diamond market in Kimberley, which is expected to generate stone cutting and jewelry manufacturing enterprises nearby.

Creating an economy less dependent on diamonds puzzles some of Kimberley’s business leaders and entrepreneurs. “Kimberley is all about diamonds. De Beers offices are still open. Quite a few tourists come here because of diamonds,” says Richard Ndlovu, general manager of the Savoy Hotel downtown. Ndlovu, along with his partner Wynand Enslin, decided to manage the Victorian era property in 2006, just as De Beers was laying off workers and the Big Hole was closed for renovations.

“We saw opportunity here. Kimberley is growing,” Ndlovu says, referring to the construction of homes, shops, hospitals, commercial centers and government offices. South Africa is scheduled to host the World Cup in 2010, and that’s likely to bring more tourists to town, he says. Talk of a government-sponsored diamond market and free trade zone could draw more business travelers.

Whatever decisions De Beers makes, whether it gives or takes going forward, Steyn says, “Kimberley is very much a diamond city.”