Diamonds Industry of South Africa Essay Example | Topics and Well Written Essays - 5000 words

Diamonds Industry of South Africa - Essay Example It discusses the cartel's behavior during the apartheid era, specifically its observance of human rights and corporate responsibility under a fascist and racist regime. Chapter V discusses the agreement reached between the ANC government and the De Beers cartel on the status of diamond mines and mining industry in South Africa, and how the cartel can help in the country's development program. It also contains recommendations on how the agreement can help in promoting black economic empowerment, and economic and political democratisation throughout South Africa. De Beers is a monopoly and the cartel of the diamond world. Monopoly is a term that translates literally into "single seller,"1 which means a corporation that dominates the production and distribution of a particular service or product (such as diamonds). There are various forms of monopolies and a cartel is just one of them. A cartel (such as De Beers) is a formal or informal group of corporations that have agreed to avoid and minimise non-productive or destructive competition among them in order to dominate the market and maximise profits. that maximum strictly, to avoid flooding the market with products which usually results in a decrease of their prices. To guarantee their profits, members of the cartel can either agree on a common product price for their entire area of operation or set up local Diamonds of South Africa 4 monopolies where they may or may not apply a common price structure.2 The price is of course higher than what it would be if production was not regulated by the cartel, and if prices were determined, not by the cartel, but by genuine competition and the interests of the consumer. De Beers for instance set an artificially high price for its diamonds despite the fact that there was already a large supply of diamonds in the mines of South Africa (which were discovered as early as 1867) and other African countries. The supply increased astronomically following the discovery of mines in Russia, Canada and Australia. De Beers kept prices high by cultivating the myth that diamonds are valuable and scarce and should be priced accordingly. The cartel has not lowered the prices of its diamonds in its entire existence. Many countries have legislated against price fixing cartels to encourage competition, which theoretically should lower prices and improve product quality. The European Diamonds of South Africa 5 Commission, in its 2005 Report on Competition Policy, proclaimed that "(c)ompetition is crucial for the whole partnership for growth and jobs."3 In fact, "the fight against international price-fixing and market-sharing cartels has become a top political priority in Europe."4 B. The Birth of De Beers De Beers can be viewed as an exceptionally innovative and long-lived cartel. On the other hand, it has been criticised and even condemned as "the most