When Frederick Boyle, an author, returned from diamond diggings in 1871, he wrote about the need for monopoly in the industry, thus: You cannot drown the market with an article only appertaining to the highest luxury without swift and sudden catastrophe
By royal monopoly alone, or by means of great and powerful companies, can jewel digging be made a thriving industry, he proposed. Citing this, Martin Meredith writes in Diamonds, Gold and War (www.landmarkonthenet.com) that several attempts at amalgamation had since been made. Two companies had emerged by 1885 as the most likely nuclei for a diamond mining monopoly: Kimberley Central and De Beers, he narrates. Both set about crushing smaller rivals by producing as many diamonds as possible; in the words of a Standard Bank report, by swamping them with production.
De Beers developed its operations at breakneck speed, doubling the amount of ground it excavated in the process and showing, according to the Standard Bank, a reckless disregard for human life, informs the book. With accidents multiplying and disease rife, the death rate in the mine reached 150 per thousand employed.
Within a few years, at Cecil Rhodes behest, a new company was set up De Beers Consolidated Mines Ltd.
Instead of being limited to diamond mining, Rhodes wanted the new company to be able to engage in any business enterprise, annex land in any part of Africa, govern foreign territories and maintain standing armies. At the first annual general meeting of the company, held on March 31, 1888, Rhodes triumphantly proclaimed his determination to make De Beers the richest, greatest, and most powerful Company the world has ever seen.
By September 1889, he had achieved a complete monopoly of all Kimberleys mines 90 per cent of the worlds production. Together with the worlds principal diamond merchants, he then set out to achieve a marketing monopoly of the diamond trade to ensure that the market could be manipulated to the best advantage, keeping supply in line with the highest price available
Sparkling economic history.
Inherent limitations of internal control
Internal control, no matter how well designed and operated, can provide only reasonable assurance to management, concedes Guide to Internal Controls over Financial Reporting from the Committee on Internal Audit of the Institute of Chartered Accountants of India (www.icai.org).
There are inherent limitations in any internal control systems, the publication reminds.
Examples of such limitations include faulty human judgment in decision-making, considerations of relative costs and benefits when establishing controls, and breakdowns because of human error or mistake.
As with most crimes, collusion too can foil controls, observes the ICAI. And more depressingly, the management has the ability to override the internal control system.
Internal control is not one event or circumstance, but a series of actions that permeate an entitys activities, notes the Guide. These actions are pervasive, and are inbuilt in the way management runs the business, it explains. In the final analysis, internal controls are a tool used by management and not a substitute for management. Only, the tool can cut both ways.