by John Buchan
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 chie
f 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 c
ountry 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.
