The African Colony: Studies in the Reconstruction

The case may be stated thus. With all assistance from local taxation and from the amended organisation of the Native Labour Association, Africa, south of the Zambesi, will be unable to afford the unlimited supply of native labour which is the sine quâ non of mining progress. It would therefore appear that a new ground of supply must be sought. By those who admit this (and as will appear later, there are some who do not) three solutions have been advocated, none of which is unattended with difficulties. The first is to find a recruiting-ground in the vast district between the Zambesi and the White Nile, a region more densely populated by the aborigines than any other part of Africa. This scheme has been urged by Sir Harry Johnston with all the weight of his unrivalled experience. The advantages of the solution are numerous. Those natives live directly or indirectly under British sway. They are unsophisticated, and the old rate of wages would mean undreamed-of wealth to them. Moreover, the experiment would be of a certain assistance to Central Africa, for on their return home with their wages money would be put into circulation, the standard of living would rise, taxes would be easier to collect, and Government and governed would mutually profit. On the other hand, there are very many reasons against the proposal. Uganda and Nyassaland, to take the two chief instances, are in need of labour for their own development, and will strenuously resist its exportation. Their nascent civilisation will be dislocated if they are made the hunting-ground of labour agents. Nor is it clear that the Central African native is suited for mining purposes, since both in constitution and the food he lives on he differs from his southern kinsman, and, in the opinion of many good authorities, his transplantation to the high veld would mean a swollen death-rate. Overtures have also been made to Northern and Southern Nigeria, but the answer from those territories is still more hopeless. It is too early to pronounce on the future of the Central African scheme. A fair prima facie case can be made out for its success, and the result of the first experiments has not been wholly discouraging. But in any case it is certain that from this source no unlimited or permanent supply can come. A modicum, perhaps gradually increasing, may be secured, and in this day of small things we can be thankful for any increase in native African labour. But great care is necessary in its working. There must be no hint of coercion; the native must be vigilantly looked after from the day he leaves his kraal to the day he returns at the end of his twelvemonth’s service, – for the districts must be nursed, and it is on the report of the first batches that the success of the enterprise depends. The transport will cost money, but it is doubtful if it will work out at more per head than the old premium for importation.

The second solution has roused a storm of opposition, and its adoption would mean the overthrow of the old economics of the mining industry. It is proposed to use Kaffirs only in the deepest levels and in work unsuited for white men (for which the present supply will suffice), and in all other tasks to employ white labour. The white workman on the Rand under present conditions will be more than four times as dear as the native, costing 8s. 6d. as against the Kaffir’s 2s. a-day. Many arguments to justify the expense have been brought forward, of which the weakest is that the white man can do four times the Kaffir’s work. In many branches of unskilled labour he can barely compete with him. The real argument is concerned with the more general aspects of the problem. In a highly organised industry there is bound to be a higher maximum efficiency and regularity from a staff of white employees, who are working intelligently to better themselves and have certain political and social interests at stake in their labour. On political grounds, again, it is most desirable, for apart from relieving the strain on congested home districts, it would provide a feeding-ground for South African development, a material wherewith to colonise the wilds of the north. The sons of the white men would go out to farm and mine for themselves; and in two generations, when the Rand has become a normal industrial centre, we should have that interchange of population between town and country which is one of the buttresses of civilisation.

The white labour movement has roused bitter opposition, partly from the mining houses, and to some extent from white workmen on the Rand, who wish to make a monopoly of their position. Many of the arguments against the scheme need not detain us. There is no objection to white and black labour working side by side, any more than there is an objection on a tropical fruit-farm to a white man digging an orchard and a Kaffir carting manure for it, or on board ship to a white mate and a black cook being part of the same crew. The white man will have the presence of his fellows, the chance of advancement, and a higher wage to support his self-respect, which must be a brittle article indeed if it requires further strengthening. Nor is there much justification for the fears of those who see in white labour the beginning of endless labour troubles, culminating in the tyranny of the working man. The situation would be the same as in any other industrial city – as in Manchester, Sheffield, or Glasgow, where the bulk of the population are industrial employees. Strikes and lock-outs will come, but it is better to have in an English city a free and vigorous English population, than to bolster up the chief industry by an exotic labour system. Besides, there is always the Kaffir as a counterfoil, a very strong argument to inspire moderation in the labourer’s demands. White labour remains the ideal, the proper aim of all right-thinking men; but for the present it is more or less an impossibility. It simply does not meet the economic difficulty. Unless the Mines are content to make the gran rifiuto, curtail production, and play a waiting game, – a decision, as we shall see, quite as ruinous to the country as to the shareholder, – cheap labour under present conditions is a sheer necessity. One argument on economic grounds has been brought forward for white labour, which runs somewhat as follows: Expansion and development depend upon an unlimited labour-supply; white labour gives such an unlimited supply, – therefore it would pay to give four times the present wage and secure expansion rather than keep to the old scale and stagnate. Supposing a mining group to have a capital of ten millions, of which four are sunk in working mines, three held in reserve, and three invested in good but undeveloped claims. The present state of things allows of a dividend of 40 per cent on the first four millions; white labour would reduce the dividend to 20 per cent. But if white labour allowed the exploital of the unworked claims, so that a dividend of 20 to 25 per cent could be paid on the other six millions, it would be good business for the firm. It would, but it is not the problem before us. The argument assumes that the new properties are of the same class as those at present paying dividends, whereas they are in the main of so low a grade or demand such an immense initial outlay that, so far from showing a profit with dear labour, they would be the ruin of their promoters.

The third proposal is to introduce Chinese[17 - Imported labour reduces itself in practice to Chinese or Japanese. Even supposing that the Indian Government consented to the strict form of indenture necessary for mining purposes, the political danger of introducing coolie labour into a country which already contains a considerable coolie population would be very great.] labour under short-time contracts and a rigorous supervision. Its supporters argue with much reason that the Chinaman has been found useful as a deep-level miner; that he is thrifty, intelligent, law-abiding, and tolerably clean; that, supposing 200,00 °Chinamen were employed in the mines, it would still mean not less than 40,000 white workers, so that white labour would increase in a liberal ratio; that a proper compound system and a strict limit to the term of engagement would secure the country against the economic dangers which threaten Australia and the United States. It is not yet certain that this ample supply of Chinese labour can be obtained, the matter being in process of investigation; but there is this to be said for the proposal, that it is the only one which touches directly the needs of the situation. The others are counsels of perfection, ends of policy on which all are agreed; this alone offers an immediate satisfaction to a very pressing want. The only argument which can be brought against it is not economic[18 - An argument often used in this connection is that the employment of Asiatic labourers, repatriated at the end of their contract, would mean that a very large sum of money annually left the country. But the same thing will happen if native African labour is brought from Central or Western Africa or Somaliland. It is happening at present with the natives from Portuguese territory, who form 90 per cent of the existing labour-supply.] but political, – that its use would endanger the success of those very aims on which all are agreed. The Chinese are the born interlopers of the world. Whatever care we take there will be a leakage: a Chinese population, more feared, apparently, for its virtues than its vices, will grow up in the cities, the small trades will be shut to Europeans, the whole standard of life for the masses will be lowered, and the moral and social currency of the nation debased. The real case, therefore, of the opponent of Chinese labour, is that it is not possible to carry out the proposed plan; that we cannot import men on a fixed contract and deport them at the end of it; that we cannot build our compound walls so high as to prevent a leakage into the outer world; that, in short, the law is too weak to do its duty. There is no difference between any of the disputants on the danger of letting the labour loose in the country; but the one side maintains that with proper precaution this peril can be averted, the other that it is like the sea when it has found an entrance into a sea-wall, a little trickle which inevitably becomes a deluge. It is not a very convincing contention, though we can respect the honest political instincts which support it; indeed, there is a touch of that familiar fallacy, the “thin-end-of-the-wedge” argument, which opposes an undoubtedly beneficent reform because of its possible maleficent extension. The conflict is between an instant economic need and a potential political danger, and, with all desire to move cautiously, the wisest course would seem to be to meet the one, and trust to the good sense and courage of the people to avert the other. The problem of alien labour is indeed becoming a familiar one to many Crown Colonies. The Colonial Office has been asked to sanction the importation of Chinamen to Ashanti, and the Rhodesian Immigration Ordinance of 1901 made the enterprise legal for Southern Rhodesia.[19 - I have said elsewhere that there are few South African problems which are not long-descended. The first proposal to introduce Chinese labour was made by Jan van Riebeck, the first Governor of Cape Colony, about the year 1653. He urged the scheme with great persistence, but home opinion proved too strong for him.] In the Transvaal there is a unique field for an experiment on sane and politic lines, and for the creation of a sound administrative precedent for other colonies to follow. There is a result, too, which may reasonably be hoped for from the provision of cheap labour which would be of direct political value. It would enable some of the smaller properties throughout the country to be worked at a profit, and so might in time redeem the gold industry from the capitalist monopoly, which it must remain under present conditions, and create a class of small mine-owners, on the analogy of the small coal-owners in England.

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 - The cost of the acquisition of the present railway systems was roughly 14 millions. This does not, of course, represent an accurate statement of capital outlay, as in the Orange Free State considerable sums were spent out of State revenue. But even if we put the figure at the outside limit of 20 millions, the net profits are still more than 10 per cent of the capital value.] 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.

The old mining revenue was mainly indirect. A tax on profits was indeed imposed by the late Government in February 1899, but war broke out before there was time to organise its collection. The real burden lay in the dynamite monopoly, which at its worst increased the price of explosives by £2 the case, and at its best by about 30s. The mines required an annual supply of 300,000 cases, which meant an annual charge, beyond the cost of material, of £450,000. The average net profits on the annual production of gold may be put at £6,000,000, which, with a 5 per cent profit tax, would return £300,000 a-year. Had the Boer régime continued, the mining industry would have contributed in the form of imposts something between £600,000 and £750,000 per annum (for a reduction of 10s. in the dynamite charge had been promised on the eve of the war). From the standpoint of the mines the whole sum was an impost, but only the yield from the profit tax would have found its way into the Exchequer.

The present charges on the mining industry consist of the prospectors’ and diggers’ licences, the 10 per cent tax on profits, imposed by Proclamation No. 34 of 1902, and the cost of native passes, which was formerly paid by the native himself, but is now borne by the employer. The mining industry will therefore on its present basis pay from half a million upwards in profit tax, about £120,000 for native passes, and about £50,000 in licences. It is difficult to see how this taxation could be fairly increased. To add, for example, a charge of 20s. per case to explosives would be to tax the means of production, – a fatal heresy, – to keep some of the smaller mines out of the profit-making class, and in the long-run to harm the Exchequer itself. The true policy is not to hamper the earning of profits by excessive charges, but to enlarge by judicious encouragement the area over which profits are made. It is of the first importance that European capital should be attracted to, and not scared away from, the country. Under the present system the Government receipts will advance pari passu with any increase in the prosperity of the mines, and to secure the ultimate gain one may well be satisfied to forego a larger immediate return.

There is a fourth source of revenue from mining enterprise which may be roughly described as windfalls. The Government has a moral right, which no one denies, to profit by new discoveries, and in any case, as a large landowner, it will be interested as an immediate participant. The provisions of the old Gold Law have been so often discussed in print that it is sufficient here to give the briefest sketch of them. Legislation by the late Government on precious minerals began as early as 1858, and continued in a long series of resolutions and counter-resolutions till the somewhat confused position of affairs was simplified and regulated by the famous law, No. 15 of 1898. The basis of this law is to be found in the principle that to the owner belonged the ownership of minerals found under his land, but to the State the right of regulating their disposal. It attempted to give to both owner and State a fair share of the proceeds, while at the same time the prospector and discoverer received a moderate reward for their enterprise. There can be no question about the validity of the three rights; the only dispute is concerned with their relative proportions. Besides the matter of share, there is one other question of great importance – how far it is permissible for an owner to refuse to allow the exploital of minerals under his land.

I take the last question first. Under the old law the owner of private property could prospect without a licence on his own land, and could give authority to any licensed person. If minerals were found, the State President, subject to certain compensation, could throw open the land as a public diggings. State land could be prospected and proclaimed in exactly the same way. But if the owner of private land refused to prospect himself or allow others to prospect, the State could not interfere to compel the exploital of his minerals. Much has been said of the right of the public in the shape of the prospector to go anywhere in his search; but no such right has ever existed or can exist. The whole question is one of policy. It is clearly not the interest of the State to leave the chief source of its wealth unworked; nor in any real sense is it the interest of the private owner. But it would be an intolerable burden to a farmer to be subjected to constant trespass by any prospector who cared to take out a licence. We must, however, clearly distinguish between Crown and private land, so far as the steps towards the discovery of the minerals are concerned. Crown land, under strict conditions, should be free to any licensed prospector; but, as the settlement of Crown land by agricultural tenants is a vital part of Government policy, provision must be made for ample compensation to such a tenant for disturbance caused by prospecting. Such provision should refer not only to unproclaimed or hereafter to be proclaimed Crown land, but should be brought to cover areas such as Barberton, Lydenberg, and the Wood Bush, which have been long working gold-fields. If compensation and security is not provided, some of the most valuable agricultural and pastoral lands in the country will be incapable of white settlement, and their only occupants will be the Kaffir, the coolie, and the bywoner, who have no interest in creating permanent homes. It is undesirable to tie up minerals, but it is equally undesirable to tie up agricultural wealth. People have talked of proclamation as if it were an inviolable contract between the Crown and the public, to which no new conditions could be added. There is neither legal nor historical justification for this view. It is right for the Crown, having given permission to the public to go upon its lands for a particular purpose, to impose from time to time conditions under which the permission may be exercised. On private lands the case is different. No owner of a private farm who is in beneficial occupation of it (when he is not, the land should be treated for this purpose as Crown land) should be compelled to allow prospecting unless he has already himself prospected or given authority to others. To enact otherwise would be to make a freehold title little more than a farce. But in order to prevent a reactionary or indolent owner from tying up valuable minerals for an indefinite time, when there are reasonable grounds for believing that such minerals exist, the Commissioner of Mines should have the power to give notice to the owner that he must prospect or allow others to do so, and, if he still refuses, to issue to the public a small number of prospecting licences on the property. When prospecting has taken place, and, after an investigation by the Government, minerals are found to exist in payable quantities, the area, subject to all rights of compensation, should be proclaimed a public digging.

Under the old law the discoverer, if his discovery were made at least six miles distant from a locality already worked, was entitled to mark off six claims which he could work without payment of licence-moneys. He had also the ordinary public right of pegging off not more than fifty claims in the proclaimed area, and fifty additional claims on payment of reduced licences. The only real reward to the prospector for his trouble and expense was the six free claims – hardly a sufficient inducement to undertake laborious, and often costly, enterprises. The Gold Law Commission recommended that the discoverer should receive one-thirtieth of the proclaimed area, provided that in no case such one-thirtieth exceeded thirty claims. This seems a reasonable but not extravagant honorarium to the pioneer. He would be entitled to the first selection, and would hold his claims free of licence-moneys till they reached the producing stage.

The owner, under the old law, was entitled to reserve a mynpacht, equal to one-tenth of the proclaimed area, for which he paid either 10s. per morgen per annum or 2½ per cent of his gross profits. He was also entitled to mark off a werf or homestead area, on which prospecting was forbidden; and on this, too, he could claim a mynpacht from the State. He was entitled to a certain number of owner’s claims, which could not exceed ten. He was entitled, before proclamation, to grant to other persons a certain number of claims called vergunnings. Finally, he was entitled to share equally with the Government in all licence-moneys on claims, and to receive a share, varying from one-half to three-fourths, of all licence-moneys on stands. This system gave the owner about one-sixth of the whole proclaimed area, – an extravagant share, and one complicated by the curious rights into which it was divided. Such unmeaning complexity must be abolished, and one form of title – claim licences – substituted. Werf and vergunning claims should be done away with, and the owner, as the Commission recommended, be allowed to peg out one-seventh of the proclaimed area, which should take the place of werf, mynpacht, vergunnings, and owner’s claims. The Commission has also recommended that, while the owner should retain half of the proceeds of licences, the Crown should have the right, without consulting him, to remit or reduce the licence-moneys in what appear to be deserving cases.

The State, under the old law, received all licence-moneys on claims and stands situated on State lands, and half the licence-moneys from claims and stands on private lands. It received also certain payments from the owners of mynpachts. This in itself should provide for a considerable revenue. But in addition the Crown should have the right of sale of claims in proved districts, where the ground has a certain value. The former method, in places where pegging was out of the question, such as along the Main Reef, was to hold a claims’ lottery, a method which was neither rational nor lucrative. The sale by auction of claims in proved districts would bring in a large additional revenue and do no injustice to the prospector. But in all places yet unproved the public should be free to peg out claims and try their fortune. It is important, also, to revise the present system of licence-moneys, so as to make the licences small during the prospecting and non-producing period, and raise them when mining actually begins. Under the old law all licences were £1 per claim per month, a payment which bore heavily upon the poor prospector who was still labouring to prove his claim. Prospectors’ licences were issued at 5s. per month on private land and 2s. 6d. on Government land. The Commission recommended the abolition of prospectors’ licences, and the substitution of one general licence to search for minerals, on which a stamp duty of 2s. 6d. per month should be charged. When minerals are found and a public digging has been proclaimed, licence-moneys of 2s. 6d. per claim per month should be paid on Government land, and 5s. on private land till the producing stage is reached. After that date the old licence of £1 would come into force.

The Transvaal Legislature will shortly be called upon to consider a new Gold Law based on the report of the Commission, of which I have sketched the chief features. Of almost equal importance, in the light of recent discoveries, is the new Diamond Law, where substantially the same questions of principle are involved. Owner, discoverer, and State should have a fair share of profit – but especially the State. We are none too well off in the ordinary course of things to be able to afford to neglect our windfalls. A serious and permanent increase of revenue can come only from a gradual increase of producing activity; but, apart from permanent needs, many occasions will arise for capital expenditure in reproductive works which are vital to progress. A windfall is a development loan without guarantee or interest or sinking fund to burden the mind of the Exchequer.

The other direct taxes are so few and unimportant that they may safely be neglected. But it is necessary to face the question of adjustment and new taxation, for the time may come when it may be expedient to lower many of the existing duties and to revise thoroughly railway rates, and it is desirable to have alternative proposals to meet the decline of revenue which will follow. It may be desirable, for instance, to abolish wholly the present charge on dynamite, as it most certainly will be necessary to lower still further the cost of transit on the railways. But new taxation must be imposed with the greatest caution. The present population of the Transvaal pays in indirect taxes £10 a-head as against £2 at home; the field for direct taxation is therefore strictly circumscribed. To certain taxes the road is barred. A land tax, however light, would bear heavily upon the impoverished rural districts, and in any case is impossible under the Terms of Surrender. An income tax would make life unbearable if the limit of exemption were low, and if the limit were high the yield would be inconsiderable. A general profit tax on the earnings of both companies and individuals may become feasible in time, but we must first await the return of normal conditions of life. One way may be found in increased native taxation, a matter which, as it is bound up with other questions of native policy, is discussed in another chapter. But the object of all new taxation must be to strike at the untaxed and unproductive elements in society, for reasons quite as much political as economic. On this ground two taxes seem just and desirable, though there are certain obvious difficulties to be surmounted before they can be levied. The first is a tax upon unoccupied lands, a quite possible and equitable tax which would meet with little real opposition. Land companies in the Transvaal alone possess some 12 million acres, the bulk of which has been bought for supposed mineral values. Not 10 per cent of the land is occupied, and nearly 50 per cent is capable of occupation of some kind. Quite apart from revenue considerations, a tax which would compel settlement, or, failing that, would drive some of the more obstinate companies to put good land in the market, would be sound policy. What applies to the companies would apply to the private landowner who has his half-dozen farms, and lives in a corner of one of them. Latifundia bid fair to be among the curses of the land, unless proper measures are taken to check them in time; and if this is done, the land troubles of the Australian colonies and their confiscatory legislation will be saved to South Africa. The machinery would be simple. A permanent commission would have to be established (the judicial committee of the Central Land Board, provided for in the Settler’s Ordinance, could do the work). Each owner of unoccupied land would be summoned before it to state his case. He might show that three-fourths of his land was at the moment incapable of occupation, in which case he would only be assessed on the remainder. The tax might be an ad valorem tax of 2 or 3 per cent. A day might be fixed, say eighteen months from assessment, when the tax would come into operation. In case owners proved refractory and preferred to pay the tax, it might be increased on a sliding scale till settlement became compulsory. There would be no hardship to company or individual, since only land for which a white occupier could be found would be assessable for the purpose. The second tax is of equal importance but far greater complexity. The most difficult person to reach in taxation is the holder for the rise, the speculator who is nothing else, the great class which toils and spins not and grows fat on the energy of others. The basis of his activity is the quotation of shares, and a tax to affect him must be in relation to such market values. You cannot introduce a too cumbrous machinery without acting in restraint of legitimate trade, quite apart from the fact that most of the business is done with bearer shares which pass through fifty hands before registration. But it might be possible – it is a problem for a revenue expert to decide – to affect this class indirectly and curtail its activity by a tax on the profits of companies based on the average quotation for the preceding year. At the best it would be only a half measure, for it would be limited to dividend-paying companies, and the energies of the middleman are chiefly exercised on companies whose profits are still wholly speculative. But with all deductions there seems to be a chance of revenue in such a tax, and a certain general economic value. The tax, again, would be limited to new issues, for in the case of old issues, even when the shares stand at 1000 per cent premium, a high dividend may represent a very moderate dividend on the capital of the investor who bought in when shares were high. If the dividend of a new issue justified a high quotation, the quotation would be high in spite of the tax, but the existence of the tax would tend to keep down the speculative quotation to some reasonable relation to former dividends. If dividends declined, and the quotation fell, the tax would go automatically out of existence. Such a tax, if possible, would not yield in normal years a great revenue, but it would have certain salutary and permanent effects. It would touch companies only in a high state of prosperity. It would indirectly touch the man who buys not for dividends but to realise by taking away in some part the basis of his speculations. It would exercise a steadying influence upon the market, and prevent, at least in one class of security, fictitious rises. But as a means of revenue its position would be really that of a windfall, for it would enable the Crown to profit largely out of any period of great financial excitement. A boom, so eagerly desired by all but in many of its results so maleficent, might be delayed by its agency; and if it came, as no doubt it would in spite of any ingenious taxation, and share values became blindly inflated irrespective of past or present dividends, the Government would perform that rarest of feats, and derive an honest profit from the vices of the multitude.

The Transvaal, till the other day, was the only important South African state not included in the Customs Union. Its customs law was No. 4 of 1894, amended by Ordinance 22 of 1902. The basis was an ad valorem tax of 7½ per cent on all goods brought across the border, with an addition of 20 per cent to the valuation price for the purpose of the tax in the case of goods directly imported from over-sea. The purpose of this provision is obvious, since to goods bought at the coast the cost of over-sea freightage and handling is added in reaching the price on which the tax is assessed. But to this general duty there were two important exceptions. There was a lengthy free list, which included, in addition to goods imported for Government use, all live stock, books, tree, flower, and vegetable seeds and plants, tools and effects of immigrant mechanics, fencing material, mining and agricultural machinery, cement, and unmanufactured woods. There was also a list on which, in addition to the general 7½ per cent, special duties were charged. Beer paid 3s. per gallon, dynamite 9d. per pound, gunpowder 6d. per pound, spirits from 14s. to £1 per imperial gallon, manufactured tobacco 3s. per pound, leaf-tobacco 2s. per pound (when brought from over-sea), wine from 4s. to 12s. 6d. per gallon. The tariff was therefore moderately protectionist. Most articles necessary for the great industries were free; articles of common use were subject only to the ad valorem duty; while articles of luxury, and especially all fermented liquors, were subject to a fair but not excessive special tax.

The difficulty was that the tariff was not a fair guide to the real taxation of imports. The Transvaal has no seacoast; all her imports have to be landed at the ports of other colonies or states, and carried to her borders by alien railways. Moreover, all the seaboard colonies, as well as the Orange River Colony, were banded together in a Customs Union, from which she was excluded. A tariff hostility was therefore smouldering on, which gave acute annoyance to the Transvaal importer. I will take two instances of purely predatory imposts. The coast colonies levied a so-called transit due of 3 per cent on dutiable articles for the Transvaal, a due which was the same in principle as the levies which the barons of the Rhine used to make from the harmless merchants passing through their borders. Again, in the case of the Orange River Colony, the only inland colony in the old Customs Union, the duties were collected at the coast ports, and a collecting charge was made, which was simply another form of the transit due. At one time the charge was as high as 25 per cent of the duties collected; but on the petition of the Orange River Colony it was afterwards reduced to 15 per cent. How far such a rate was from representing the real cost of collection is shown by the fact that the Transvaal duties were collected by the coast colonies from the occupation of Pretoria to the end of 1901 at a charge of only 2½ per cent.

The Transvaal had thus a tariff in itself reasonable, but she was embarrassed by her isolation. It was obviously desirable that she should enter into the Customs Union, which would then comprise the whole of South Africa, for if federation is ever to become a serious policy it is well to begin by throwing down economic barriers. But economics have an awkward way of overriding all other considerations, and the entrance of the Transvaal into the Union could only be a matter of hard business – give and take on both sides. The interest of the two parties was on this matter far apart. The coast colonies are agricultural and pastoral, and their ports are forwarding depots. They are frankly protectionist, and their customs have always been their chief source of revenue. The Transvaal is industrial, and for the present a free-trader; she must have cheap food, cheap raw material, cheap necessaries. While at the moment customs form the largest item in her revenue, it does not overshadow all others, and in time it is probable that it will sink to a second place. The question was, therefore, What of her present tariff would the Transvaal relinquish to meet the wishes of the Union, and what compensating advantages could she expect from her membership?

The Bloemfontein Conference of March 1903 prepared a Customs Convention, which has since been ratified by the several states, and the old Customs Union has been amended and extended to include the whole of British South Africa. How far has this act improved the economic position of the Transvaal? In the first place, there is one solid gain, the abolition of the transit dues, estimated at between £250,000 and £300,000 per annum. There is, too, a gain in the mere fact of union, and the freedom which it gives from the incessant bickerings of conflicting tariffs. Since her duties are collected by the coast colonies at the moderate charge of 5 per cent, a saving may also be effected by the reduction of the customs establishment on her borders. The benefit which she has conferred in return is the opening of her markets without restraint to the products of British South Africa, an opening which should amply repay the coast colonies for the reduction in the protective tariff from over-sea. The actual tariff charges are in the nature of an elaborate compromise. To take first the case of the simple food-stuffs. In 1898, under the old Transvaal tariff, imported flour paid in duty £26,955, and imported mealies £16,290. Under the old Union tariff they would have paid respectively £114,068 and £69,332 – a difference of over 400 per cent. The old Union rate was 2s. per 100 lb. for grain and 4s. 6d. per 100 lb. for flour, while the old Transvaal rate was an ad valorem duty of about 9 per cent. It was impossible that either party could accept the other’s rate, so the present solution of 1s. for grain and 2s. for flour may be taken as a satisfactory compromise, which an industrial country could support. It must be further remembered that all food-stuffs produced elsewhere in South Africa enter free, and that the cost of bread under the new system will be if anything reduced. Article XV. of the Convention gives the Transvaal a further power in times of scarcity to suspend the duty on food-stuffs altogether, and give a bonus to imports of the same class produced in the neighbouring colonies. The ordinary manufactured article, which in a non-manufacturing country plays as large a part in the cost of living as bread, is also reduced for the purchaser. It pays an ad valorem duty of 10 per cent, which at first sight seems higher than the old rate of 7½, which with other charges worked out in practice at about 9. But 2½ per cent must be deducted on account of the 25 per cent preferential rate for British goods, and with the abolition of the transit dues the actual duty will work out at between 7 and 8 per cent. Raw material and the necessaries of industry remain much where they were under the old tariff, which was highly favourable to them; but the charge on dynamite has been reduced from 9d. a-pound to 1½d., which is a reduction of over 30s. on the 50-lb. case.

A mere comparison of tariffs does not show the real cheapening of the necessaries of life; for to get at the practical effect, the abolition of the transit dues, the reduction of railway rates, amounting to at least £300,000 per annum, and the preference rate on British goods, must all be considered. Under the old tariff and railway rates every 100 lb. of flour from Port Elizabeth to the Transvaal paid 9d. to the Transvaal in duty. The freight was 6s. 2d., so that it paid altogether in charges 6s. 11d. Under the Convention the same quantity of flour will pay 2s. in duty and 3s. 9d. in railway rates, so that, in spite of the higher duty, the charge is only 5s. 9d., – a saving to the Transvaal consumer of 1s. 2d., and a gain to the Transvaal treasury of 1s. 3d. There are many instances of a similar kind. Ordinary groceries will be reduced by about 3 per cent, paraffin by 1s. 6d. a case, grease by 2s. 6d. per 100 lb., cement by 2s. 9d. a cask. Tea and coffee, on the other hand, show a slight increase. In one branch there is a very marked increase, and an exception to the inter-colonial free trade, which is the basis of the Convention. Each party to the Union is entitled to levy on the importation of spirits distilled in and from the produce of places within the Union a duty equal to any excise duty which it may levy on spirits made within its own borders. In the Transvaal there is no excise, for the manufacture of spirits is wholly forbidden. It is of the most urgent importance to keep fermented liquors out of reach of the native population, and to suppress all illicit traffic. The importation of Portuguese spirits has been stopped by treaty, and it was clearly impossible for the Transvaal to consent to the importation of spirits on easier terms from the other British colonies. The concluding paragraph of Article XVII., therefore, provides that “where a prohibition exists in any colony or territory of the Union against the manufacture of spirits for sale, it shall be lawful for such colony or territory to levy on spirits produced within the Union a custom duty not exceeding that levied on similar spirits produced outside the Union.” The duty in force is therefore from 15s. to £1 per imperial gallon in addition to the 10 per cent ad valorem rate; which, it has been calculated, is an increase on the former cost of from 4s. to 6s. per case.

The new Union is therefore almost wholly in the favour of the new colonies. The cost to the consumer is lessened, but the revenue does not lose appreciably, since charges, formerly diverted by the coast colonies, now go to its coffers. The coast colonies, in an admirable spirit of statesmanship, have consented to surrender a part of their revenue in order that the chief industrial market of South Africa might be open to their people – an example of that policy of foregoing certain revenues on a narrow basis for the sake of a possible revenue in a wider field which is of the essence of good government. The preference given to British goods, while still further reducing rates in favour of a large class of imports, is also a step towards federation, which does not, as such experiments are apt to do, militate in any serious way against local commerce. The one person who might complain is the farmer of the Transvaal, who sees his markets thrown open to the old grain-lands of Cape Colony; but if the long railway journey which his rivals have to face is not a sufficient handicap to enable him to hold his own, then we need not lament his fall. Vital as agricultural progress is, it cannot hope for protection at the expense of industrial prosperity.

The normal expenditure of the Transvaal may be taken roughly at £3,600,000. This figure is exclusive of debt charges, or any capital outlay on development which may be met out of revenue. It represents merely the day-to-day cost of the administrative machine. As revenue is enlarged the expenditure will follow suit; but it is unlikely that the proportion of costs to receipts, which is roughly three to four, will ever increase. On the contrary, it might be considerably reduced by a more complete administrative decentralisation. At present there are a number of isolated departments – Native Affairs, Lands, Mines – with local representatives wholly independent of each other, and responsible only to the heads of their departments. The resident magistrate, who is really an administrative official, since the legal work is done by the assistant magistrate, and who as a rule is not a lawyer, has a very narrow control over a few subjects like local government and public health. The system is wasteful both of money and energy, for the isolated departments often overlap unconsciously; and since there is no local check, the tendency is for the head of a department to increase his local staff and to vie with other heads in securing large estimates. It also means that a constant inspection has to be kept up from headquarters, and each department supports a force of travelling officials. The Indian precedent might be followed with advantage, and real heads of districts established, who would have a control, direct or indirect, over all administrative work. They should be responsible for the efficient and economic working of their district, prepare their local estimates and reports, and answer for their work only to the Governor and Council. The great departments would exist as before, but their local staffs would be much reduced in number, so far as such staffs were administrative and not intrusted with expert work. Experts, such as inspectors of machinery, customs officers, and veterinary surgeons, would remain directly responsible to their own departments, though over these also the district administrator would exercise a general supervision. In this way a very considerable saving would be effected in salaries, the unnecessarily large force of travelling inspectors could be reduced, and the friction which inevitably attends the working of isolated and independent officials in any district would be saved by the establishment of responsible heads, – deputy administrators, whose business it would be to supervise all district Government work, and control all local expenditure.

III

The natural assets of the country and the existing fiscal system have been roughly sketched in the foregoing pages. It remains to consider what burden these two factors in collaboration are called upon to bear. In view of the peculiar situation of the new colonies, the necessity of a loan for development is sufficiently obvious. The country was desolated by war. Large sums were necessary for compensation to loyalists and for the repatriation of the Dutch inhabitants. The backward system of our predecessors had left public works ill provided for in most places, particularly in the country districts. If the wealth of the provinces, mineral and agricultural, was to be exploited, and the existing industries granted reasonable facilities for progress, a heavy expenditure was imperative for railway extension. If the rural parts were to be developed and their population leavened with our own countrymen, considerable sums must be expended on settlement, and on such reproductive schemes as forestry and irrigation. Finally, certain heavy liabilities awaited the incoming Government. To buy out the existing railways and repay certain military debts and advances from the Imperial Treasury, fully 14 millions were required. The old debt of the Transvaal, amounting to 2½ millions, which carried 4 per cent interest, must be paid off, and the capital required for the repayment made part of a new loan at an easier rate. The liabilities and needs of the country stood therefore as follows: An advance by the Imperial Government to cover the estimated Transvaal deficit of 1901-2, £1,500,000; the old debt of the Transvaal, £2,500,000; compensation to loyalists in Cape Colony and Natal, £2,000,000; the acquisition of the railways and the repayment of the existing railway debt, £14,000,000; repatriation[21 - This figure does not cover the expense of repatriation. There was a free gift for the purpose of £5,000,000 by the Imperial Government.] and compensation in the new colonies, £5,000,000; railway extension, £5,000,000; land settlement, £3,000,000; various public works, £2,000,000, – a total of £35,000,000. This is the sum comprised in the famous Guaranteed Loan.

But this figure, large as it is, does not exhaust our burden. During the year 1901 and 1902 the question of the contribution of the new colonies to the imperial war debt was keenly discussed both in South Africa and in England. Some fixed the payment likely to be required at as much as £100,000,000; others argued that the new colonies were likely to have so many burdens of their own that they could not be called upon to contribute at all. Moderate men on both sides saw that some contribution was equitable, but asked that it should not be fixed so high as to cripple development. There were various proposals, such as the ear-marking of certain sources of revenue and all windfalls, or the allocating of a certain proportion of any annual surplus; but such schemes were liable to the objection from the side of the Imperial Government that there was no certainty in the contribution, and from the side of the new colonies that there was no finality in the liability. The settlement which Mr Chamberlain announced in his speech at Johannesburg in January 1903 was, perhaps, the best possible in the circumstances. The contribution was fixed at £30,000,000, to be raised in three years by contributions of £10,000,000 per annum. The first 10 millions at 4 per cent were underwritten without commission by the great financial houses of the Rand, and there is no reason to doubt that if they are called to make good their guarantee, it will prove a profitable investment. It is difficult to overestimate the merit of an arrangement which tends to bind the great houses to a closer interest in the general development of the country. The War Loan was secured wholly upon the Transvaal, but there is a contingent liability on the Orange River Colony to pay a further sum of £5,000,000 out of the Government share of any discoveries of precious stones and metals.

We have, therefore, to face a total debt of £65,000,000, of which 35 millions at 3 per cent are a charge upon both colonies, and 30 millions at 4 per cent upon the Transvaal alone. It is a heavy responsibility for a white population of a few hundreds of thousands, face to face with a labour problem. That the world at large believes in the future of the country is shown by the way in which the Guaranteed Loan was taken up, the first 30 millions having been subscribed more than thirty times over. On this loan the interest charge, with 1 per cent sinking fund, will amount to an annual payment of £1,400,000: in three years time the War Loan, unless (which is probable) it can be issued at a lower rate than 4 per cent, will mean an annual charge of £1,200,000, with no sinking fund allowed. We have therefore in front of us a possible annual payment of £2,600,000, with a slight increase in the future when a sinking fund is provided. The payment, large in itself, was made more difficult by the circumstances of the two colonies. The larger loan is secured on both, but while the Orange River Colony had a fair claim to a considerable part of the proceeds, it was clearly impossible that she should pay a share of the charge proportionate to her receipts. If she shared in the loan only to the extent of the annual contribution which on her small revenue she could afford, many important public works both of land settlement and railway extension would have to be abandoned. Joined with this general administrative difficulty, there was a departmental one connected with the railways. The main line through the Orange River Colony had acquired, as one of the main feeders of the Transvaal, a purely fictitious value, and the Orange River Colony profited greatly by the receipts. But to have within one system two types of line, one a through line simply, the other connected directly with the great centres of production and consumption, and to have those two types of lines used as revenue-producing agents for two different administrations, was to make a consistent railway policy impossible. The country of the through line, whose fictitious value produced a very real revenue, would reclaim against reduction in rates for the benefit of the other.

Both difficulties have been met by a very ingenious scheme. The Inter-Colonial Council of the two colonies, created by Order in Council of 20th May 1903, is significant in many ways, notably as the first overt step towards federation; but for the present we may look upon it purely as a financial expedient. Two important departments, common to both colonies, were placed wholly under the administration of the Council – the Central South African Railways and the South African Constabulary; and a number of minor common services, such as surveys and education, were added, and power was given to the two legislatures to increase the number when they saw fit. A Railway Committee of Council forms the permanent controlling authority in all railway matters. All net profits of the railways in each year are assigned to Council to form its revenues. Out of these it has to meet the expenditure of the Constabulary and the minor common charges, as well as the annual charge and management costs of the Guaranteed Loan.[22 - The Council is composed of the High Commissioner and Governor (President), the two Lieutenant-Governors, the Commissioner of Railways, the Inspector-General of the South African Constabulary, two official members for each colony, nominated by the Lieutenant-Governors, two unofficial members for each colony, elected by the unofficial members of the two legislatures, and two members nominated by the Secretary of State.]

The financial duties of the Council are therefore twofold. It has the entire administration of the Loan in its hands, it provides for its apportionment among the different services, and it undertakes the payment of its charges. It has also to meet the administrative expenditure of the common departments intrusted to it, and for this purpose it receives the net profits of the chief revenue-producing asset of the two Governments. The first duty is comparatively simple. A body composed of official and unofficial representatives of the two parties to the Loan can allocate speedily and equitably without the constant strife and jealousy which would attend the interference of two different publics. But the second duty, which is concerned with the annual inter-colonial budget, constitutes the index or barometer of the new colony finances. The Budget for 1903-4 shows the following figures: on the revenue side, £2,350,000 from the net railway receipts; on the expenditure side, £1,441,000 for the service of the Guaranteed Loan,[23 - These figures require a word of explanation. Only 30 millions of the loan have been issued, so the charge for interest and management should only be £1,208,000; but as the loan year began in May and the financial year for the budget began in July, interest and management charges for fourteen months were included.] £1,520,000 for the Constabulary, and about £70,000 for minor common services. This leaves a deficit of about £680,000, which, according to the term of the Order in Council, will be met by contributions from the Transvaal and the Orange River Colony in proportion to their customs receipts – roughly, £600,000 from the first, and £80,000 from the second.

Let us take the revenue side of the Budget first. The position of the railways is anomalous. They are virtually a taxing-machine, and in this respect the most effective of Government properties. The normal position of a Government railway should be that of an institution worked for the public benefit, the receipts being little in excess of the working costs plus a moderate interest on the capital involved. In this railway system the net profits, as we have seen, are estimated for next year, allowing for the half-million decrease from the reduction of rates, at £2,300,000. No doubt it is economically unsound to levy a tax of such magnitude on what is virtually a necessity of life and a constituent of production. But bad economics may be sound statesmanship, if they are recognised as unsound – a temporary expedient to obviate a more serious difficulty. Railway profits are the buttress of inter-colonial finance: without them there is no satisfactory provision for the debt charges, and some form of direct taxation, which would interfere far more effectively with nascent industries, would be the only resort. The rates have been already reduced so as to provide, along with the new customs tariff, for a very real decrease in the cost of living. They will be still further reduced, always keeping a limit in view which is calculated on fiscal needs. To so adjust the rates that industrial and rural development will not be hindered, and at the same time to provide an adequate revenue, presents a very pretty problem in railway finance. It is the problem in the customs; it is the problem in direct taxation; it is the essence of the economic problem of the country. But with all reductions there is a good chance of railway revenue increasing. The 5 millions of the Loan which go to development will in a year or two bear fruit. It is difficult to see how the net profits can ever fall below £2,100,000, while it is not unreasonable to hope that in a few years they may rise to £2,500,000 or £3,000,000.

But while the revenue side is likely to increase, the expenditure side of the Budget will inevitably decline. When the full loan is raised the annual charge will be £1,408,000, a stationary figure till the loan is redeemed. The Council is a genuine Caisse de la Dette; its revenues are charged in the first instance with the loan charges, and the liability of the separate colonies to make up any deficiency distributes the weight of the debt equitably among the parties to it. The danger of a Caisse, that it tends to check general prosperity by a too arbitrary appropriation of revenue, is avoided by the very strict conditions of the Council’s power and the nature of its constitution. The minor common services will not increase, and they may very probably decrease, as such branches as surveys and permits shrink to normal limits. The large item of 1½ million for the Constabulary will be lowered in future to about £1,200,000, which, on the present establishment, must be regarded as a final figure. We may, therefore, take £2,500,000 as the average expenditure in two years’ time, which, if railway receipts increase to a like figure in the same time, would make the Inter-Colonial Budget balance.

In the meantime the Transvaal is able to pay any contribution which may be required from her. But in two years all or the greater part of the War Loan will have been raised, and she may have to face a maximum annual charge of £1,200,000, which contains no provision for any sinking fund. In these circumstances, on her present revenue she could pay nothing towards any inter-colonial deficit: she might even have to ask for a contribution. There is every probability that such help could be given, and an automatic system of adjustment might be framed by which any inter-colonial surplus could go to pay the charges or assist in the creation of a sinking fund for the War Loan. This is of course on the most unfavourable assumption, – that the War Loan has to be raised at 4 per cent, that the present industrial depression continues, and that the Transvaal gets no increase of revenue from that prosperity which she has a right to expect. It is far more probable that the Council will be free to devote any surplus it may show to the development of the common services, for which the Loan provision cannot in the long-run be found adequate.

IV

It is idle to deny that the present is a period of financial strain. The new colonies are solvent, but the margin is narrow. Like everything else in South Africa, their finances are on a needle-point, and require strenuous intelligence and constant economy. I have taken the railway profits and customs receipts as incapable of falling below their present level; but it is to be remembered that the past year is not a fair basis for prophecy, since the country has been in process of reconstruction, and the heavy importations for the purpose have swollen receipts in both departments. If industrial progress is still retarded, both figures will sink enormously, and the whole system of finance sketched in the preceding pages will require revision. If, on the other hand, progress is assured, both figures will increase largely, since, while this basis is high as compared with the present situation, it is low compared with any real prosperity. In this case the strain will be of short duration. Ce n’est que le premier pas qui coûte. Industrial development lies at the root of all things. The Transvaal can only hope for a large permanent increase of revenue from the licences and profit tax paid by the mining industry and from Customs receipts drawn from a wider basis of population. Unless this increase comes she may be unable to meet her own war debt, or to contribute anything to an inter-colonial deficit. Inter-colonial revenues, too, can only expand from the same cause, for mining prosperity is at the bottom of railway profits. The State finances depend upon mining development, and mining development depends on labour: this is the true statement of the problem, and all others are involved in a vicious circle. And this is as it should be. On the great industry of the country the chief burden must lie.

There is, of course, the possibility of windfalls. From the Crown share of gold and diamond properties very large sums of money may from time to time flow to the Exchequer. But it is the part of a prudent finance minister to base his forecasts on the normal only, and to accept windfalls as gifts of Providence, to be used for special purposes. It may be necessary to draw upon this source of income to meet the debt charges; but, should this misfortune be spared us, then we have in such windfalls the nucleus of a reserve fund for development. There is need, as we have seen, of a capital outlay on development far beyond that provided for in the Guaranteed Loan. Railway extension alone, before we have done with it, will need not 5 millions, but 10, and, in cases where new lines are built by private companies, we shall have to face sooner or later a considerable expenditure on expropriation. Public works, when all the loan moneys have been spent, will still be badly provided for. It may be necessary, too, to spend money in expropriating land for public parks, for game preserves, for public buildings, for new townships, – expenditure which in the first instance will fall upon the Government. So, too, with other schemes, – irrigation, the search for artesian water, the establishment of colleges and technical schools, and all the thousand activities of government in a new country, which will grow quickly and develop early a multitude of needs. Lastly, land settlement in the two colonies, if it is to serve the social and political purpose which is its chief justification, demands more than the 3 millions allotted to it. Such expenditure is in the fullest sense an investment, since the bulk of it will be returned in time to the Exchequer with a reasonable interest. It is proposed that, in so far as repayments of capital from settlers are concerned, such repayments should form a special fund, which can go out again in fresh advances and further purchases of land. In this way a permanent fund for settlement will be created, and the project will not be dependent upon a share of any annual surplus.

The economic problem of the new colonies finds a parallel in Egyptian reconstruction in more ways than the analogy of the Caisse de la Dette. There is the same undeveloped wealth in the country, the same heavy bondage of debt, the same demand for reproductive expenditure. To cut down the cost of living and the restraints on production, and at the same time to provide money for development and for the charges of an unproductive debt, is the threefold South African problem, as it was the Egyptian. Solvency here, as there, is to be found in an equipoise, and requires a nice and discriminating statesmanship rather than any heroic cutting of knots. In most respects the Egyptian difficulty was far the greater, for there the cast-iron debt regulations and the endless European surveillance frustrated at every turn the efforts of her statesmen. But one danger was absent. In Egypt patience and diplomacy, faith in the country and in the work of time, were so obviously the only cards to play, that, while there were many temptations to lose heart and abandon the struggle, there was no inducement to try short cuts and forsake the true path of policy for those showy and unconsidered measures which in the rare event of their success are called heroic. In South Africa the amateur financier is so abroad in the land that we may look to find many odd nostrums advocated to ensure prosperity. The kind of discussion which arose over the labour difficulty is a guide to what we may expect in the realm of high finance. But in both the one and the other the real problem is plain once the obscuration caused by conflicting interests is cleared away by a little common-sense.

The great questions of economics in relation to state growth are always simple. If high finance means anything it is the power of adding two and two together. Complicated financial adjustments belong to a lower plane: the great financier may have no aptitude in reducing results to a decimal. But there is this distinction, that whereas in the intricate calculations of secondary finance the figures are mere counters, the elaboration of accepted data, in the higher and simpler finance they are symbols. To the statesman they are the gauge of prosperity or decline, and behind them stand the millions of workers, the miles of crops, the floods and droughts and pestilences, the rise and fall of industries, the ore in the mine, the web in the factory, the cattle in the stockyard. The yield of a land tax is to him not a figure but a symbol, and in using it he has regard not only to its formal place in estimates and returns, but to its political meaning. It is, if you like, the quality which in other spheres constitutes the distinction between statesmen and high permanent officials, between economists and statisticians, between all leaders and all subordinates. In the finance of a country which is still in process of reconstruction, this power, so uncommon and so inestimable, of getting behind figures to facts, and keeping the hand on the pulse of national progress, is the only guarantee of ultimate success. In this light the prospects of the new colonies give good reason for hope. The budget of to-day, formally regarded, shows a delicate equipoise, in which a pessimist might find material for dark forebodings; but it is only the symbol of that stress of re-creation which must precede an ample prosperity.

CHAPTER XIII.

THE SETTLEMENT OF THE LAND