Africa 2010 – Pushing the envelope of knowledge – Jules Porges – Part 18 of 20
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(No Ratings Yet) Loading ...By MUTUMWA MAWERE
Published: February 28, 2010
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We are products of our past. We find ourselves challenged by the future and a past that divided us by the color of our skin and not the content of our characters.
Some were lucky to inherit a rich legacy while the majority remembers the pain of life.
There is nothing we can do to change the past. Any strategy that seeks to strengthen the weak by weakening the strong is bound to fail and yet Africa can only advance its cause if the majority of its people lift themselves up.
We all have memories of the past some ugly but others pleasant. We also live in interesting times when nationalization and indigenization are topical matters for which any rational human being must have an opinion.
What masks the nationalization and indigenization debates is a firm belief that the resources of Africa in a post-colonial state ought to be under the control of black people who are in the majority as far as Sub-Saharan Africa is concerned.
The pockets of affluence that exist in Africa are seen as products and natural consequences of injustice and theft.
When I started profiling the individuals who played a part in building the corporate foundation of South Africa, a pivotal African state, I was acutely mindful of the risks and the potential of being misunderstood.
I started my own journey of discovery with the story of Cecil John Rhodes and 9 others followed my articles on the role of these Randlords. As I dug into the past, I released how little I knew of Africa’s business past.
Naively I assumed that the past was shaped by individuals acting as agents of an imperial power but alas records exist that link some of the enduring corporate brands with individuals who breathed the same air that I breath today and more significantly who were mere mortals as I am.
By investing in understanding our business past, I do hope that interest will grow among my contemporaries in the systematic collection, preservation and proper exploitation of business records in Africa.
We need to introduce our own business archival initiatives so that when the kind of challenges that we face regarding the “right” face of business, we are better prepared to engage in meaningful conversations that can inform the choices that need to be made.
One of South Africa’s key and most significant diamond mining pioneer was, Mr. Jules Porges (25 May1839-20 September1921), a Paris-based financier, who played a central role in the rise of the Randlords who controlled the diamond and gold industries of the country, born in Vienna and raised in Prague who was a descendant of a prominent Austro-Hungarian family. His father was a master jeweler in Prague.
He chose to settle in Paris in the early 1860s where he quickly established himself as a principal force in the diamond trade and founded Jules Porgès & Cie.
He built a spectacular château in Rochefort-en-Yvelines, just outside Paris, for his wife and daughter and his residence in Paris was located on the Avenue Montaigne, where he housed an important art collection, focusing on Dutch masters such as Hals and van Dyck.
He connection with South Africa started with the diamond rush. Fortunately, at the time of the diamond rush, he had amassed a tremendous fortune and had acquired a reputation as a leading diamond merchant in the world.
He had no connection with the British establishment but like any businessman he quickly realized the great potential of Kimberley as a diamond-producing centre.
He responded to the opportunity by dispatching in 1873 two of his protégés who would also play in their individual rights a key role in shaping the destiny of South Africa i.e. Alfred Beit and Julius Wernher to act as his representatives in this new venture.
His first visit to South Africa was in1876 and he joined the Kimberley crew where he participated in laying the foundations of the diamond industry as both consumer and producer of diamonds.
He continued to work with his protégés in consolidating claims, financing deals and marketing stones, and in so doing his firm, Compagnie Française de Diamant du Cap de Bonne Espérance, gained a significant portion of the Kimberley mine.
After only three years in South Africa, he not only invested in the mining rights of the four major mines (De Beers, Bultfontein, Dutoitspan, and Kimberley) because of his close association with Rhodes but he almost completely focused his attention on Kimberley.
Jules was a major investor in Mr. Barnato’s company. When it became obvious that Barnato was a threat to De Beers, Rhodes turned to Jules for assistance. He saw the benefit of Rhodes’ attempt to consolidate the disparate mining holdings, and sold the Compagnie Française to De Beers in 1887.
He was also instrumental in the negotiations that led to De Beers buying the Kimberley Central Mining Company (the stake of Barnato).
With the discovery of gold in South Africa, at Barberton and then the Witwatersrand, like many of his contemporaries he turned his attention to gold mining and acquired stakes in many mining claims in and around Johannesburg and developed the financial structures that enabled their exploitation.
With Beit and Wernher, and other partners including Hermann Eckstein and Eduard Lippert, he was one of the founders of the mining and financial group known as the “Corner House” whose offices were on a corner at the site of Market Square in Johannesburg and whose name was also a pun on “Eckstein”, “corner stone” in German.
By the end 1889, the Corner House had large holdings in profitable outcrop mines like Robinson, Langlaagte, Bantjes, Randfontein, Crown Reef and Jumpers. The company started acquiring deep level properties on the dip south of and below these mines at low prices.
This led to the formation of Rand Mines Limited that was modeled as an investment holding company to take over the important assets and administrative services of the deep levels. H. Eckstein & Co., continued to administer its outcrop mines.
Rand Mines Limited was registered and listed in the Transvaal on 22 February 1893, with an issued share capital of £400,000 in 400,000 shares of a nominal value of £1 each making it one of the major events of the 1890s and Wernher, Beit-H. Eckstein’s important flotation.
Rand Mines pioneered the system of consolidation and group administration in the mining industry and this became the standard in terms of business organization. The nature and structure of the geology compelled the mining industry to adopt the Rand Mines model that was in itself an innovation in mining finance.
Under this system, the parent or controlling company is a mining-finance house that had to have deep financial pockets, technical and administrative capacity as well as depth in terms of institutional and human capital.
The holding company provides secretarial and technical services to the mines in the group. It also is a shareholder in the individual mining companies and control is exercised through board representation.
Group administration provides a means of controlling costs as well as oversight on all the expenditure of the group.
H. Eckstein & Co., was responsible for the technical and managerial support to the mines under its control including Rand Mines. Rand Mines in turn provided secretarial and administrative services to its subsidiary companies and after 1910 to Eckstein’s companies.
Without this innovation in mining and finance, the prospect of efficiently and commercially exploiting South Africa’s rich geology would have been doomed.
In 1890, he largely retired from South African business, and his interests were taken over by the firm of Wernher, Beit & Co.
He died in Paris in 1921, having outlived many of his protegé Randlords.
In hindsight, some may argue that this form of organization is anti-competitive without carefully examining the complexity of mobilizing financing for a class of prospectors who individually lacked the kind of balance sheet that would have been required by financiers who were not resident in the country.
The business model assisted in packaging opportunities and presenting them to European and American financiers on a consolidated basis. The consolidation was done at the opportunity source and the financiers only had to deal with one corporate entity that then in turn provided banking solutions to subsidiary companies.
This improved financial intermediation and supply chain efficiency.
The role of Jules goes a long way to prove how complex the economic development of the British Empire was.
The project benefited from the input of a number of actors and if the model was founded on a narrow concept of identity, nationality and nation building, there is no way South Africa would have been where it is today. In a black majority country, a small white population had to appreciate the risks and opportunities of doing business in the country.
In the post-colonial era, we have to find a new mechanism to exploit the abundant resources that Africa offers and yet we seem to have very few people who can think at a wholesale and strategic level.
Many think that answers lie in the minds of state actors and yet experience has shown the futility of placing any faith in the state to drive the agenda of social and economic change.