The African Colony: Studies in the Reconstruction

There is one final argument against imported labour which demands a short notice, for it has been used by many serious men who are not given to captious objections. If we take the original capital of most mines we shall find that it has been extensively watered, and that even on the nominal capital there is a huge appreciation. A mine, to take an extreme instance, begins with a capital of £50,000 in £1 shares; subsequently the shareholders receive eleven £5 shares for every £1 share, making the present nominal capital £2,750,000. The quotation of those £5 shares is, say, £10⅞, making the total capital value £5,981,250. A gold output which, under present conditions, is not sufficient to pay a fair dividend upon this capitalisation, would be amply sufficient to pay a dividend on the nominal capital, and more than sufficient to pay 500 per cent on the original capital. The question, therefore, of dividend-paying is out of all relation to the actual margin of profit on the working of a mine. The deduction is that the companies have themselves to blame, and must face a depreciation in their shares; and the unfortunate investor who has bought £5 shares at £10, believing a return of 4 per cent on his capital certain, must console himself with the reflection that every man must pay for his folly. This argument is final against any ad misericordiam plea of the companies, but it does not touch the heart of the question. The working of the large over-capitalised properties is one thing, and the development of low-grade properties, on which large sums have been spent and for which no profits have yet been earned, is quite another. The old well-established mines can afford to fight their own battles, and for the matter of that, in spite of their heavy expenditure out of capital during the war, are mostly paying dividends even under present conditions: the new properties, on which the future of the country depends, are not, as a rule, over-capitalised, and, as we have seen, the margin of profit is so small on each ton of ore, that the question is reduced to its bare essentials – Is it possible to mine ore worth twenty shillings at a cost under a pound? But even as concerns the richer companies the argument is scarcely valid, for it leaves out of account that not inconsiderable factor, the credit of the country. It is so essential that new capital should be attracted for the twenty different needs of development, to which any Government loan can only be a trifling contribution, that anything which tends to shake the confidence of the world in the commercial structure of South Africa is the gravest danger. Is it certain, too, that that much-abused epithet of “bonâ fide investor” is not applicable to the men who bought high-priced securities, not as a speculation, but as a modest investment?

It is often said by opponents of imported labour that its introduction will scarcely have taken place before an agitation will be begun for its withdrawal. So far from being an argument against the experiment, this is precisely the strongest which could be urged in its favour. If the desire of the country is for white labour, then the Chinaman can be tried with little danger. The mine-owners will find in time that work on a time contract by alien labourers is far from satisfactory, and when other circumstances permit they will no doubt readily adopt that system of free competitive labour which only a white industrial class can create. Had there been any chance of the experiment being tried with complete popular approval, then the danger would have been considerable, for the Chinaman might easily have spread from mining to all industries and trades; but since it will be made in spite of an influential opposition, and will be jealously watched by unfriendly eyes, it seems inevitable that when it has played its part it will be willingly dispensed with. By refusing to accept the experiment we are doing our best to frustrate all hopes of a white population by cramping the development of the country at its most critical time and making a livelihood impossible for many of the existing white working men. When mines are shut down because of a lack of underground labourers, what becomes of the Englishmen who work above ground? It is a significant fact that many white miners, who were formerly the most bitter opponents of imported labour, are now its strenuous advocates, since they and their class are beginning to feel the pinch.

But if the importation of Asiatics is undertaken, it should be on a very clear understanding and with a very distinct object in view. The thing is far too dangerous at the best to be made the domain of unconsidered experiments. The ideal of white labour in the long-run must be preserved; and we must take jealous care that by the creation of a foreign labouring class the way is not barred to that industrialisation of the native races on which the future of South Africa so largely depends. A maximum might be fixed by law – say 300,000 unskilled labourers, which could be increased if necessary by later enactments; and in so far as the maximum could not be attained by white and black labour, Chinese might be imported as a complement. The complement would, let us hope, rapidly decrease as new machinery lessened the amount of labour required, and the native districts of Africa were more fully exploited. All imported labour would be subject to rigorous conditions as to compounds, length of contract, and ultimate repatriation – conditions which any ordinary police could enforce without difficulty. At the same time, the Native Labour Association should be made a Government department. As a private organisation it is not more efficient, and it is certainly less respected, than a Government department would be. What is wanted in all proper recruiting is the prestige of the Crown. Natives, who have been often deceived by touts, and regard the offers of the Labour Association agents as so many idle words, would be ready enough to listen to proposals made under the guarantee of the paramount chief. It is a risky game for a Government to embark in private business; but the Native Labour Association is not a business, but a department, conducted on the lines of a Government department, but without its prestige. Under the Crown its organisation would remain intact, but its status would be raised and its efficiency centupled.

The railway system, immature as it is, has worked wonders for the country. With few lines, and those single and narrow gauge, with exorbitant rates of transit and a frequently ineffective organisation, it has still above all other factors made development possible. In former days, when heavy mining machinery had to be brought by waggons from Kimberley or Natal or Delagoa Bay, a mine required to be rich indeed before it could be worked at a profit, enterprise was costly and perilous, and the result was the stagnation of all activities save that one where enterprise was a primal necessity. Under the late Governments one line ran through the two States, from Norval’s Pont to Pietersburg, with small branch lines in the Orange Free State to Winburg and Heilbron, and in the Transvaal to Springs and Klerksdorp. The Natal line was continued from Charlestown to join the trunk line at Elandsfontein, and the Delagoa Bay line from Komati Poort to Pretoria, with a little branch to Barberton and the beginnings of a branch to the Selati gold-fields. The Transvaal had thus three direct outlets to the coast; the Orange Free State two, for a branch ran from the Natal line at Ladysmith to the little eastern town of Harrismith. Two broad necessities of railway policy therefore awaited the new Government. The existing system must be perfected and interconnected, new routes to the coast created to relieve the present strain, the railways of adjoining colonies brought into touch with each other, so as to make one general and consistent South African system. But more important than the perfecting of existing arrangements must be the tapping of the rich and remote districts. Occasionally both needs may be exemplified in one line, but, roughly speaking, they are separate branches of railway policy, undertaken on different grounds and in many cases organised and financed on different methods. The experience of the United States, where railways were regarded as the cause and not the consequence of development, and pushed boldly into desert places which in a few years, through their agency, became centres of industry and population, is a safe guide, within limits, for South Africa, provided that the wealth to be exploited is really there, and railway extension does not cripple other works of equal necessity.

Of the first class we have three chief examples. One – from Machadodorp to Ermelo – is already partially constructed. The second will run from Springs east to some point on this line, and so provide a direct route for the Johannesburg traffic from Delagoa Bay and avoid the awkward circuit by Pretoria. A further extension is projected by which the Springs-Ermelo line will be continued through Swaziland to Delagoa Bay and a complete alternative through route created. The third is the extension of the present Klerksdorp branch to Fourteen Streams, which would provide a shorter route from the Transvaal to the Cape, an infinitely shorter route from the Transvaal to Rhodesia, and would at the same time bring the coal districts of the country within reach of the diamond industry of Kimberley. In the second class there is no limit to the number of possible and desirable railways. The most important is, perhaps, the grain line, from Bloemfontein to Johannesburg by Ficksburg, Bethlehem, and Wilge River, which would bring the great wheat-producing tracts of the Conquered Territory within easy reach of the chief market. Next comes the now completed Rand coal line from Vereeniging to Johannesburg. Another coal line is projected from Witbank on the Delagoa Bay line to Springs, which would bring the produce of the chief Transvaal collieries directly to the Rand and relieve the congested line between Elandsfontein and Pretoria. Of equal importance in the long-run is a line from Krugersdorp by Rustenburg to some point, such as Lobatsi, on the Rhodesian railway, which would open up a district famous for its fruits and tobacco, and give the pastoralists of Bechuanaland, as well as of the more distant Rhodesia, a straight line to Johannesburg. Other lines of the same class are those from Belfast or Machadodorp to Lydenburg, from Nelspruit to Pilgrims’ Rest, and from Basutoland to Bloemfontein. Lastly, and lastly only because of its greater difficulty, the line should be continued north from Pietersburg along the Sand River, brought east between the Spelonken and the Magatoland mountains, past the little township of Louis Trichard, and then turned south across the basin of the Klein and the Groot Letaba to Leydsdorp, where it could join the completed Selati railway from Komati Poort.

The Railway Extension Conference held at Johannesburg in March 1903 sanctioned the immediate construction of most of the lines mentioned above, and recommended the others as objects to aim at when sufficient funds were at the disposal of the Government. As the share of the Guaranteed Loan allocated for railway extension is only some five millions, and as the proportion of any railway surplus which can be devoted to the purpose is, as we shall see later, strictly limited, it is highly desirable to make use of private enterprise so far as possible in new constructions, providing always for an efficient State oversight and an ultimate expropriation. The Klerksdorp-Fourteen Streams and the Krugersdorp-Lobatsi railways have already been arranged for on this principle, and it is probable that the experiment will be adopted in many of the smaller development lines. It is reasonable that a rich company, owning lands or mines, or requiring for its own purposes some special railway connection, should, if it desires a new line, undertake the financing of it. But at the same time the principle of the ultimate State ownership of all railways should be strictly adhered to, for the very good reason that in the railways we have the chief security for development loans, and the most productive of all the State assets. In few countries in the world is the expenditure on construction and maintenance so small, so that under present conditions they yield a handsome return on capital outlay. The Netherlands and the Pretoria-Pietersburg railways have been acquired from their former owners, and the incomplete Selati and Machadodorp-Ermelo lines will shortly follow. If we take the price paid, with the addition in the latter case of the outlay necessary for completion, as the capital value, we shall find that the net receipts, even after the large reductions in rates which have been made and must be maintained, show a generous percentage of profit.20 It will be explained later what part this important asset is called upon to play in the finance of the new colonies. So much for the main lines; but a system of light railways, constructed at small expense, is vital to the mineral and agricultural exploitation of such districts as Bethel, Lichtenburg, Wolmaranstad, and Waterberg, in the Transvaal and the southern part of the Orange River Colony. In a flat upland country, where animal transport for some years to come will be precarious and expensive, where the roads are still unsuitable for steam haulage, and where coal is cheap, perfect conditions exist for an extensive light-railway development.

Railway extension, then, is one of the first demands of the country: it is comparatively easy to achieve, and most of the necessary capital has already been found for it. But the omnipresent labour difficulty appears here as elsewhere, not indeed with the magnitude of the mining problem, but with an equal insistence. To carry out the programme sketched above in any reasonable time, say three years, some 40,000 natives will be required. At the present moment the number employed is scarcely 5000, and 10,000 is the limit which the railways may recruit in South Africa by an agreement with the Chamber of Mines. Many natives, such as the Basutos, will work on railways when they will not go underground; and the agreed limit is fair enough to both parties. But the balance cannot be secured without seriously trespassing upon the supply grounds of the mines. The Uganda railway was built with imported labour, and it seems inevitable that the Central South African railways must follow suit. The limited funds at their disposal, and the difficulties in the way of the country’s absorbing at the moment large numbers of unskilled workmen, make the employment of white navvies alone impossible. The railways, indeed, furnish a fine experimenting-ground for the importation of indentured foreign labour under a short-time contract and a condition of repatriation. The number they require is small: 10,000 will tide them over all immediate needs; the nature of the work enables a complete supervision to be exercised; and while it is still doubtful whether alien labour can be secured for the mines, experience has shown that for surface railway work the supply is certain. In the congested districts of India and China the small cultivator, to whom land is the object of his life, will gladly leave his home for one or two years if he can return with the money to buy a plot of ground; and when the return home is the cause of the setting out there will be no trouble in repatriation.

The premier market, now and for many years, must be the Rand. Its great industrial population and the higher scale of living make it the natural market for all native agricultural and pastoral products. So much so that the farmers in the eastern province of Cape Colony, in spite of heavy railway rates, found it profitable to send the bulk of their produce thither. This is at once the advantage and misfortune of the country: advantage, in having an accessible market which it will take years to glut; misfortune, in that the merits of the market to the country producer mean costly living to the industrial inhabitants. The difficulty will no doubt adjust itself; for if, as all believe, the new colonies take many steps towards feeding themselves, and in consequence the prices of necessaries fall, new and nearer markets will arise in different parts of the country, and a genuinely self-supporting provincial society will be organised. New mining centres in the north and east, possibly, too, in the west, may bring new townships into being; old and semi-decayed dorps will revive; and that novelty in the new colonies, towns like Brighton or Cheltenham, which exist purely for residence, may yet be found at Warm Baths for winter, or on the shores of Lake Chrissie for the summer heats. The Rand, again, will be the chief market for the subsidiary industries which must arise, – for coal and iron, for manufactured articles and dressed produce. It is too early in the day to talk in any serious sense of exports. The Transvaal, at any rate, will be for long a consumer rather than a producer among the nations of the world.

The tremendous cost of living is the subject of the chief complaints among new-comers to South Africa. Before the discovery of gold the Transvaal was a cheap country to dwell in. A bullock which now costs £20 could be bought for £5; and a native, who now draws £3 or £4 per month in wages, was then very well content with 5s. Now there is hardly anything which is not scarcer and dearer in South Africa than in almost any other part of the globe. The causes of this high cost are partly natural and partly artificial; but all, I think, are terminable. The demands of the gold industry, the long distance from ports, the sparse rural population, are obvious natural causes, all of which tend to modification and mutual adjustment. The artificial causes are three: the cost of ocean freightage, the high railway rates, and the monopoly in the hands of a small mercantile class. The first can never be reduced below a fairly high figure, and in the loud complaint of “shipping rings,” which is in the mouth of most traders, there is a little unfairness. It is too often the cloak which they use to cover their own extortions. But reductions will certainly be made, and in any case the chief force of the grievance, so far as necessaries are concerned, will decline with the growth of local production. Railway rates have already suffered a substantial decrease, and will be further reduced down to a certain point, which for the present is determined by the fiscal needs of the country. For railway rates are a form of taxation: the railways are the chief revenue producer, and to lower the rates too far would be merely robbing Peter to pay Paul – a form of relief which would need to be balanced by some new form of taxation. The chief efficient cause of the expense of living is undoubtedly the exorbitant monopoly of local merchants. It is no exaggeration to say that anything sold at 100 per cent profit is to the ordinary trader a form of charity: legitimate business begins for him at 120, or thereabouts. No class is so clamorous about its interests, so ready to identify its profits with national wellbeing, and claim a monopoly of the purer civic emotions. But no part of the economic situation is so radically unsound. The Polish Jew and the coolie make a profitable living throughout the country, not because the white population have no prejudice against them, but because they are driven to their stores by the comparative reasonableness of their prices. This cause, as I have said, is artificial and terminable. The influx of a large population will increase the area of competition, and reduce profits to a normal basis. And this, again, depends on the prosperity of the mines; so that we are brought round to the starting-point of all South African economics. Once this result were achieved its benefits would react on the mines, for with the decrease of the cost of living wages would go down, and what is at present an ideal – an increase in the area over which white labour can be employed – would come within the sphere of practical politics.

The economic situation of the two colonies is therefore composed of a number of perplexing oppositions. The one certain fact is the great hidden wealth. But to make those riches actual there must be labour, and, over and above any question of imported and indentured workmen, to secure labour there must be reasonable cheapness in the necessaries of life and work. Customs tariffs, railway rates, general taxation, must all be calculated on a modest scale. But, on the other hand, if the country is to advance to that civilisation which is its due, money must be spent freely by the State on productive and unproductive enterprises; and in addition to such services, which are the basis of the Guaranteed Loan, there is the War Debt, 30 millions of dead-weight round the neck of a struggling people. To pay the interest on debts and to provide money for day-to-day needs there must be revenue, and so there comes a point where direct and indirect charges, whatever the demands of the situation, simply cannot be reduced further if the mechanism of Government is to continue in action. Heroic persons advocate heroic remedies, such as the cessation of all enterprise in favour of mining progress, or the renunciation of certain charges in favour of cheap living. In one sense all politics are a gamble; but there are limits beyond which statesmanship cannot go in the way of staking everything on a chance, and yet hope to justify itself in the eyes of the world in the event of failure. The real problem for the statesman is not how to plunge wildly – it requires little skill to do that – but how to adjust with nice discrimination. To preserve an adequate revenue, while at the same time giving ample play to the forces of production, is, in a word, the only policy which contains the rudiments of ultimate success.

II

The foregoing is a rough survey of the assets with which the new colonies start on their career. As in all beginnings, a multitude of questions protrude themselves. Every politician has his own nostrum, every interest its own pressing demands. But the main questions are simple, at least in their outlines, and it is permissible to disentangle from the web the chief threads of economic policy. Three postulates there must be before a solvent and progressive nation can be founded. In the first place, life must be made possible, – life on the various scales which a civilised society demands. In the second place, industries – the gold industry and the host of subsidiaries which must follow – should be given free scope for development by enlightened legislation, and the removal of burdens from the raw material of progress. Finally, a sufficient revenue must be secured to meet the vast reproductive expenditure which the country demands. To reconcile these three needs, which in practice often appear contradictory, is the task of the new Government.

Taking the three axioms as our guide, we have to consider the two questions in all administration – the raising of revenue and the apportionment of expenditure. Our inquiry into revenue must be chiefly concerned with the Transvaal. The Orange River Colony is for the present prosperous, and its future solvency seems assured. With a certain income of half a million, and an expenditure of a little less, its fiscal problem is simplicity itself. But the Transvaal presents the case of a country with great potential wealth, which must borrow heavily to elicit its prosperity. Certain revenue-producing charges must be cut down to make life on a proper scale possible, but revenue must also be raised to make this life possible. It is the old story of Egypt – taking out of one pocket to put into the other, with somewhere behind the transaction an economic Providence to enhance values in the exchange. Such a policy is based upon a faith in the land, which by its productive power provides a natural sinking fund to wipe off encumbrances. Loans can be raised at 4 per cent, because the country repays a hundredfold.

The main items, exclusive of railways, which in the financial year 1902-3 made up the revenue of the Transvaal, were customs revenue at upwards of two millions, mining revenue at half a million, stamp and transfer duties at £720,000, taxes on trades and professions and post and telegraphs at a quarter of a million each, and native revenue at a little over £300,000. The total revenue was about £4,700,000. The estimated revenue for 1903-4 has been put at £4,500,000, made up of customs at £1,800,000, mining revenue at £750,000, post and telegraphs at £360,000, taxes on trades and professions at £200,000, native revenue at £500,000, stamp and transfer duties at £700,000, and £200,000 for miscellaneous items. Since the object of the present inquiry is to estimate the financial position of the country, it is necessary in the first place to take the various sources of revenue one by one, and estimate their value and their defects. Several may at once be omitted. Post and telegraphs barely pay for their working expenses, and cannot be counted upon as a source of revenue. Stamp and transfer duties, stand licences and rent, and the bulk of the miscellaneous items, are for the present static figures, or vary within narrow limits, and it is improbable that they will be altered so as to greatly increase their present revenue during the next few years. Revenue questions for the Transvaal are concerned with two items which far excel all others in importance – mining revenue and customs. There is a third, and the largest of the three, railway profits; but, as will be explained later, this item has been excluded from the separate budgets of the two colonies.