Bulls n Bears Entrepreneurship Zone :: Billionaire Christo Wiese’s impeccable timing: Judging the diamond market just right

[Bulls n Bears]

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As a young man, South African businessman Christo Wiese cut his teeth at
Pep Stores. Over the years he built a mighty empire, which included Shoprite
and a number of other enterprises. His recipe for success: an endless love
for cutting deals, a fearless appetite for risk and a keen eye for a
bargain. In this extract from Christo Wiese: Risk and Riches, business
journalist and writer TJ Strydom tells the story of Wiese’s stint as diamond
mine owner in the late seventies.

[The 1976 Soweto uprising] pummelled investor confidence. But it also
created opportunities. “During the Soweto uprising, I bought a business from
someone who’d given up on South Africa,” says Christo Wiese. It was a
bargain, he adds.

The business wasn’t a little café on the corner: it was a diamond mine.

For those who think that only De Beers is allowed to own such mines, Wiese
says: “That’s a fallacy. Anybody can own a diamond mine.” The business was
called Octha Diamonds and the mine was on the banks of the Orange River,
about 80 kilometres from where it meets the Atlantic Ocean. The operation
was initially developed in the 1930s by Otto Thaning, an adventurer who had
left Europe for Africa. Thaning had a daredevil streak in him and loved
aeroplanes, suffering injuries on more than one occasion on his pioneering
flights. He was later a Danish diplomat in South Africa.

When Thaning passed away, his son was not interested in such a substantial
South African investment. “He gave an attractive option on the mine to a
22-year-old articled clerk, Johan de Villiers, who had only R400,” says
Wiese. De Villiers made an offer nevertheless, but it was rejected at around
16:30 on a Monday afternoon. He then approached Wiese and asked him to come
in as a partner. This was just the opportunity Wiese was waiting for. He had
long had a fascination with gems, especially as he came from Upington. The
town has always suffered from a bit of diamond fever, he says. By 08:45 the
next morning, the deal was sealed.

“I risked everything to buy it with him.”

Moustaches, bell-bottoms and broad-collared shirts might have been popular
in the 1970s, but it was the decade’s other big trend that gave the diamond
trade a boost: inflation. Before 1973 a barrel of crude oil traded at around
US$3. But during that fateful year, the Arab countries of the Middle East
took serious offence at the West’s support for Israel in the Yom Kippur War.
These large oil producers decide to close the taps. Within a year the price
of crude oil quadrupled, causing unprecedented price increases worldwide.
Not only did transport costs spike, but most products became noticeably more
expensive. And the oil price kept climbing, reaching $40 per barrel by the
end of the decade.

High inflation gnaws away at purchasing power year after year, motivating
investors to look for asset classes that will retain value. The result in
the 1970s was that billions of dollars flooded into gold and diamonds after
the oil price shock. Wiese’s timing was impeccable.

He also did his homework. He set out to learn from the experts in Antwerp,
the hub of the diamond industry where stones have been traded, cut and
polished for four centuries. He visited his mine three times a month.
Sometimes he took Caro (his wife) along, flying out and making a weekend of
it. Wiese and De Villiers set up offices in Antwerp and Zurich, and also had
plans for New York and Sydney. Wiese also devised a strategy to turn the
local market on its head, because he saw more opportunities than just those
presented by the international market.

The Soweto riots poured cold water over affluent South Africans. Widespread
fears that the country would go up in flames convinced Wiese that the rich
would be nosing around for the best way to invest in highly movable assets.
“A man carrying a handful of diamonds can leave everything and make a new
start somewhere else,” he said. So he started Cape Town Diamond Investment
Brokers.

And the money cascaded in. But greater powers were at work. The hunger for
a proper asset of value attracted investors of the speculative sort, who
pushed up prices to dizzying heights. “At the height of the 1980 diamond
boom, I sensed the market was unhealthy and sold to Johan.” According to
reports, Wiese received R5.8 million for his stake.

He sold in February. In August his partner hit a pothole (it sounds bad,
but in diamond mining it’s a good thing), which yielded R30 million in
diamonds. “He paid me out with ease.”

Two years later the diamond market collapsed and the company was
liquidated. Wiese got out at just the right time.—Howwemadeitinafrica 



Christo Wiese

 

 

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