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Copperbelt Merger: The Formation of the Rhokana Corporation, 1930–1932*

Published online by Cambridge University Press:  11 June 2012

B.W.E. Alford  and
C.E. Harvey
B.W.E. Alford
Affiliation:
Reader in Economic History, University of Bristol
C.E. Harvey
Affiliation:
Lecturer in Economic History, Bristol Polytechnic
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Abstract

The concerted actions of giant companies operating on the international stage, notably in mining and petroleum, rival the Schleswig-Holstein question in complexity. In the absence of any clear understanding of the reasons for huge mergers such as that which took place in the southern African copper mining industry at the depth of the Great Depression, rationalizations that reflect Marxist-Leninist simplism and populist paranoia have been popular. Messrs. Alford and Harvey undertake to unravel the reasons for the copper merger, concluding that this merger defies modern, formal merger theory and teaches that there is no substitute for a close study of the motives of “corporate insiders.”

Type
Research Article
Information
Business History Review , Volume 54 , Issue 3 , Autumn 1980 , pp. 330 - 358
Copyright
Copyright © The President and Fellows of Harvard College 1980

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References

1 The best comprehensive treatment of this subject in an historical context is provided by Chandler, Alfred D. Jr, The Visible Hand: The Managerial Revolution in American Business (Cambridge, Mass., 1977).Google Scholar

2 For the U.K. evidence on this, see Hannah, Leslie and Kay, J.A., Concentration in Modern Industry: Theory, Measurement and the U.K. Experience (London, 1977).CrossRefGoogle Scholar The results of this study differ somewhat from other investigations into concentration: see Prais, S.J., The Evolution of Giant Firms in Britain (London, 1976).Google Scholar

3 Full details of the early development of. the Copperbelt are to be found in Gregory, Theodore, Ernest Oppenheimer and the Economic Development of Southern Africa (London, 1962)Google Scholar; Coleman, F.L., The Northern Rhodesian Copperbelt, 1899–1962 (Manchester, 1971)Google Scholar; Bradley, K., Copper Venture (London, 1952).Google Scholar

4 Rio Tinto Company Private Archives (hereafter R.T.C.): “Rhokana Debenture Issue,” April 20, 1931.

5 The rate of discount was taken at 7 per cent throughout the production period with 85 per cent of the gross profit taken as divisible. Each property was assumed to he able to produce 2.1 millions tons of ore per annum for 40 years with 90 per cent of the copper content being recoverable. N'Kana and Mufulira were assumed to come on stream after three years, N'Changa after four years, and RCBC after five years. Further details are available from the authors.

6 For more details of Bancroft, see Gregory, Oppenheimer.

7 R.T.C.: G.W. Gray, “Notes on Comparative Valuation of Bwana, RCBC, and N'Changa Properties,” October 31, 1931.

8 For details of Oppenheimer's life and career, see Gregory, Oppenheimer. For Rio Tinto, see Avery, D., Not on Queen Victoria's Birthday — the Story of the Rio Tinto Mines (London, 1974).Google Scholar

9 The next few paragraphs rely heavily on Gregory, Oppenheimer, 422 et seq.

10 Beatty was originally an American mining expert who subsequently developed a number of major financial interests in mining in southern Africa. He later became a British citizen and Knight of the Realm.

11 Gregory, Oppenheimer, 424–425.

12 The companies were British South Africa Company, British Metal Corporation, Johannesburg Consolidated, Rio Tinto, N.M. Rothschild and Sons, Union Corporation, Anglo Metal Company, Minerals Separation, and Rhodesian Anglo American.

13 This at least involved him closely with an American company, the Newmont Mining Corporation of New York, which was an important shareholder in Rhodesian Anglo American.

14 Gregory, Oppenheimer, 433–434.

15 A euphemism for over-committed.

16 For details of Rio Tinto's history, see D. Avery, Not on Queen Victoria's Birthday.

17 R.T.C.: File 10–F–38. Calculated from a list of shareholders drawn up in May 1929 on the issue of 50,000 additional ordinary shares.

18 This holding was built up during the 1929 N'Changa affair. Unpublished manuscript supplied by Foseco-Minsep Ltd., “History of Minerals Separation Limited, 1903—1969” (1970). Also, R.T.C.: document headed “List of Investments,” dated (as at) August 10, 1930.

19 The merger was opposed by the American Mayflower Associates (represented by R.E. McConnell) who held 14.3 per cent of RCBC ordinary shares and by the British Union Corporation which held 4.6 per cent of RCBC ordinary shares.

20 Gregory, Oppenheimer, 437.

21 Cf. Gregory, Oppenheimer, 422–438; Coleman, Northern Rhodesian Copperbelt.

22 For an insight into the character of Sir Auckland Geddes, see his autobiographical study, Forging of a Family (London, 1952).

23 R.T.C.: A.J. McNab, “Comparative Valuation of Mines.”

24 These calculations are available from the authors on request.

25 Very significantly. Dr. Bancroft, Oppenheimer's close business and technical colleague, was firmly of this view.

26 R.T.C.: R.M. Preston and G.W. Gray, “Report on Visit to the Company's Property in Rhodesia, August to November 1929.”

27 R.T.C.: R.M. Preston, “Memorandum of Discussion between Messrs. Wetzler, Taylor, Buchanan and Preston,” September 11, 1930; R.M. Preston, financial projection headed “Copper Companies Amalgamation: Estimated Cash Requirements to bring Combined RCBC and N'Kana Properties to Treatment of 10,000 tons a day and Period in which Required,” November 25, 1930.

28 R.T.C.: A.C. Geddes, “Address to RCBC Shareholders,” December 17, 1930.

29 Gregory, Oppenheimer, 437, n. 35.

30 Morgan Grenfell was also nominee for the Newmont Corporation, which had a substantial interest in RAA.

31 Average for the month calculated from The Times daily lists.

32 R.T.C.: A.C. Geddes, “Address to RCB Shareholders,” December 17, 1930.

33 Metallgesellschaft A.G., Metal Statistics (Frankfurt am Main, 1938).Google Scholar

34 See Herfindahl, O.C., Copper Costs and Prices, 1870–1957 (Baltimore, 1959).Google Scholar

35 R.T.C.: C.C. Madden, “Notes of Discussion on Rhodesian Finance at 3 Lombard Street on Wednesday, October 30, 1929,” November 8, 1929.

36 See Berger, E.L., Labour, Race and Colonial Rule: the Copperbelt from 1924 to Independence (Oxford, 1974).Google Scholar

37 R.T.C. — A.C. Geddes, “Address to RCBC Shareholders,” December 19, 1930.

38 R.T.C.: E. Oppenheimer to A.C. Geddes, August 19, 1930.

39 For a general introduction to the political background referred to here, see Walker, Eric A., A History of Southern Africa (London, 1957 edition, revised with corrections, 1959), 607–694.Google Scholar

40 R.T.C.: R.M. Preston, “Note on the Northern Rhodesian Situation,” October 22, 1929.

41 See Avery, Not on Queen Victoria's Birthday.

42 R.T.C.: “Report of the Transactions at the Extraordinary General Meeting of Shareholders on May 9, 1929.”

43 R.T.C.: “Rhodesian Properties: Shares held by Rio Tinto Company,” June 28, 1929.

44 R.T.C.: Two main deputations were sent to report on Copperbelt development in 1929. G. Vibert-Douglas, the company's chief geologist, reported directly to Geddes on all questions between May and September, 1929. Throughout August 1929 Preston and Gray investigated fully all aspects of Rhodesian mining.

45 R.T.C.: G.W. Gray to J.N. Buchanan, December 28, 1929, and enclosing a “Comparative Valuation of Roan Antelope, Bwana M'Kubwa, Rhodesian Selection Trust, N'Changa and RCBC.” Previous to this there had been another report from Gray and three from Douglas: R.T.C. — April 7, April 25, May 25, July 7, July 24.

46 R.T.C.: C.C. Madden, “Notes of Discussion on Rhodesian Finance at 3 Lombard Street on Wednesday, 30 October 1929,” dated November 8, 1929 (C.C Madden was personal assistant to Sir Auckland Geddes at the time of the merger negotiations); R.T.C.: J.S. Wetzlar to A.C. Geddes, February 14, 1930, enclosing telegrams of February 13, 1930 from E. Oppenheimer in Johannesburg; R.T.C.: J.N. Buchanan, “Notes on Sir Auckland Geddes Scheme,” February 24, 1930.

47 R.T.C.: Report of the Transactions of the 57th Annual General Meeting, April 14, 1930.

48 Gregory, Oppenheimer, 430–431.

49 Ibid., 431–433.

50 Gregory, Oppenheimer, 160–383. This account could be a little fuller on the detailed financial state of Anglo American, but as a survey and discussion of the diamond industry Gregory's book is impressive.

51 See, in particular, Horwitz, Ralph, The Political Economy of South Africa (London, 1967)Google Scholar; also, Walker, A History of Southern Africa.

52 Gregory, Oppenheimer, provides abundant and telling direct evidence, 22, 29–32, 415, 417–418, 444, 595.

53 R.T.C.: G.W. Gray, “RCBC Position Revised,” April 7, 1930.

54 The Rio Tinto side was handled by J.C. im Thurm and Sons, a stock-brokerage house controlled by the company.

55 R.T.C.: Letter dated April 8, 1931.

56 Investor's Review, April 18, 1931.

57 Put another way, before the merger Rhodesian Anglo American held 23.9 per cent of RCBC (or 16.2 per cent of its voting capital). At the merger this was increased to 32 per cent (12.6 per cent plus just over a half share in Bwana M'Kubwa). By December 31, 1932 its share was 44 per cent (32.3 per cent plus just over a half share in Bwana M'Kubwa). In 1935 Rhodesian Anglo American made an offer to the remaining “outsider” shareholders in Bwana, and 92 per cent by value accepted. This enabled the Company to acquire the remaining shares by legal right, and Bwana M'Kubwa went into voluntary liquidation.

58 Cf., Coleman, Northern Rhodesian Copperbelt; Gregory, Oppenheimer.

59 Gregory, Oppenheimer, 407–408. Davis, who was well into his sixties by this time, was a much older man than Oppenheimer who was 49 in 1929.

60 See Gregory, Oppenheimer, 440–445.

61 For the basic details see Walker, A History of Southern Africa, 634–637, 769 et seq.; Horwjtz, The Political Economy of South Africa, 104–105.

62 A good survey and analysis of merger theory is provided by Aaronovitch, Sam and Sawyer, Malcolm C., Big Business: Theoretical and Empirical Aspects of Concentration and Mergers in the United Kingdom (London, 1975).Google Scholar

63 Marris, R., The Economic Theory of “Managerial” Capitalism (London, 1964).CrossRefGoogle Scholar

64 There is a growing literature in this field, and for surveys of it, see Hogarty, T.F.; “Profits from Mergers: The Evidence of Fifty Years,” St. John's Law Review, Special Edition (1975), 44, pp. 317–327Google Scholar; D.C. Mueller, “The Effects of Conglomerate Mergers: A Survey of Empirical Evidence,” Journal of Financial Economics, forthcoming; Utton, M.A.. “On Measuring the Effects of Industrial Mergers,” Scottish Journal of Political Economy, XXI (February 1974), pp. 13–28.CrossRefGoogle Scholar

65 Hannah and Kay, Concentration in Modern Industry, 87.

66 Cf. this point with Hopkins, A.G., “Imperial Business in Africa: Part II — Interpretations,” Journal of African History, XVIII (1976), 279.Google Scholar

67 Cf. Hopkins, A.G., An Economic History of West Africa (London, 1973), 237–267.Google Scholar

68 Cf. Arrighi, G., The Political Economy of Rhodesia (Mouton, The Hague, 1967)Google Scholar; Galbraith, John S., Crown and Charter; The Early Years of the British South Africa Company (London, 1974).Google Scholar

69 In particular, Aaronovitch and Sawyer, Big Business, 159–164.

70 Hobson, J.A., Imperialism: A Study (London, 1938 edition).Google Scholar