PUBLIC RECORD OFFICE
Reference :-
C.O. 882
8
PUBLIC RECORD OFFICE, LONDON
ALLY WITHOUT PERMISSION OF THE BE REPRODUCED PHOTOGRAPHIC-
COPYRIGHT PHOTOGRAPH-NOT TO
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This is not an expression of my personal opinion, but is common knowledge to those who are seriously considering the situation. The inevitable suggestion has been made that the payment of the first instalment should be postponed for two years, from this year, 30th June, 1904, to 30th June, 1906, the second instalment falling due 30th June, 1905.
The consequence of this would be that the Treasury would have to pay the amount. due in London. Allowing a large estimate for those estates which may pay, the amount which the Treasury will be called on to pay cannot be less than Rs. 1,000,000. The causes which have brought about the want of money are two- fold: the expenses of erecting tramways and the low price of sugar. There are no signs which might lead one to hope that the prices will be any better next year; the general tendency of the market for some time has been downwards. The ex- penses for tramways will not recur, but there will still be heavy expenses for pur- chasing animals, some being still essential on all estates: and above all the next crop cannot be up to that of the present year. There is, therefore, no intrinsic cause which would tend to increase the profit on sugar in Mauritius.
2. It seems to me that the prospects of payment of the second instalment are no brighter than those of the instalment now falling due. The crisis, therefore, will in all probability recur in 1905, the facts will be precisely identical and there will be no possibility then of repeating the postponement, for the Treasury balances will have disappeared. The postponement for a year, therefore, cannot do more than stave off the evil day: and what is far more serious, there is no certainty that there would be sufficient in the Treasury in 1905 to pay the amount due on the loan in London. The alternative which lies on the surface of things is to allow the law to take its course: as would be said in England, the mortgages would be foreclosed.
3. The security for the advances-in-aid is a contract charge, and if we had only this Ordinance to deal with, the Government might, so far as its security is concerned, not be affected. Nor would the fact that on the estates which were sold there was a second contract charge, under the Mechanical Transport Ordinance, affect the Government position: the laws are so drafted that the Government would ⚫ only claim the instalments due, and would not look to recover the whole of the principal of the loans.
4. The danger arises in the case of estates on which there is also a Hurricane Loan, with either one or two contract charges. Here there is a mortgage, and the seizure under the Advances-in-Aid Ordinance would inevitably lead to the fore- closure of the Hurricane Mortgage, and, of course, entail the ruin of the estate.
5. I have used the English term " foreclosure" of the mortgage for con- venience. I mean by it, of course, the procedure of sale by forcible ejectment under the law of the Colony. That procedure is sale at the Master's Bar, and if there is no higher bidder, the mortgagee is bound to buy in the estate at the amount of his claim in order to protect his advance, which is then repaid to him out of the proceeds of the sale.
6. There are 42 estates on which there are "advance-in-aid" contract charges, and of these 19 have also Hurricane Loan mortgages. If only 10 estates in this predicament were to go, the result would be disastrous to Government. First, the capital would have to be paid by the Treasury in cash, for the Hurricane Loan, being under Imperial guarantee, is administered by means of a fund, and although under the Ordinance power is given to the Governor as administrator of the fund to buy in mortgaged estates, yet I have great doubts whether the Treasury, which I presume has a preponderating voice in the matter, would be satisfied to have a large amount of the capital locked up in estates. But then there is this further complication, if the Treasury is depleted to pay the amount due on the first instalment in London, it is by no means clear that there would be enough left in the Treasury to supply the purchase price of the estates.
7. This brings me to the second point. These estates in the hands of Govern- ment would be comparatively worthless. I have assumed that Government would have to buy in the estates. The general financial condition of the Colony now is such that even assuming no catastrophe, such as would be the result of many estates coming on the market, it is doubtful whether the amount of the Government mort- gage claim would be covered by outside purchasers. But in the presence of such a catastrophe it is certain that no purchasers would come forward; if it is improbable that there would be any purchasers at the sale before the Master, it is certain that
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there would be none after Government had acquired the property. The Govern- ment would have the estates on its hands; it would be practically impossible for them to be worked with advantage as Government estates, and there would be nothing left but morcellement. In some districts the want of transport and the absence of railways would make the possibility of even this being done effectively more than problematical.
8. But apart from the position of the Government as a creditor, the position of anairs which would result from a compulsory sale of many estates could not but cause it the greatest anxiety as a Government. The unsecured creditors of the estates would lose considerable sums, for the Government, if it were compelled to purchase, would only cover its own claims, and as I have said, there are not likely to be any other purchasers. Some of these creditors would undoubtedly come to bankruptcy, and many smaller bankruptcies would follow; and this again would re-act prejudicially on the Government, as Customs duties would fall off, and many other items of revenue; and, by the estates going out of cultivation, further revenue in the shape of export duty would be lost. I have assumed that 10 of the 19 estates would have to be seized; I believe this to be possible. But even if five only were sold, this would still bring in its train disaster of considerable magnitude, which no one can look forward to without feelings of dismay. The seizure of many of the remaining estates on which there is only an advance-in-aid" contract-charge, would also cause or add to the disaster; but in these cases there are other mortgagees who would have to buy in the estates, and the unsecured creditors would fare as badly as before.
9. Is there another remedy?
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There is, of course, additional taxation; but I put this on one side as it would be putting the financial difficulties of the few on the shoulders of the many. believe there is another remedy.
The financial position is in so acute a state, that I believe the only remedy would be to convert the present two instalments into 10 annuities, payable half- yearly like the loan for mechanical transport. This by itself seems so unsound a financial proposal that it does not seem possible to suggest it.
10. But there is another element in the situation of the sugar industry which has a very intimate connection with the present crisis. The price of sugar is so low as to leave only a small margin of profit on the working expenses. It is not necessary for the present purpose to go so far as some do and say that the margin of profit has almost vanished, it is sufficient to say that the profits at the present prices are very small compared with those which would have been made even at last year's prices. I do not think I am wrong in saying that it is only the fact of there having been a record crop this year that has saved the Colony. It cannot be hoped that next year's crop will reach the same figure. The financial position of the future depends absolutely on an increased output of sugar. Quantity of sugar will, in some measure, compensate for the poor quality of the price. This increased output can only be obtained by improved machinery, and improved machinery can only be obtained by means of a Government loan.
11. It has been hoped in the Colony that when the advances-in-aid had been paid off, the Secretary of State might possibly be induced to favourably consider the question of a loan for improvements in machinery. The postponement of the payment of this year's instalment postpones for another year the possibility of that hope being realized; a further postponement next year, if it were resorted to, would again postpone this question on which, not the prosperity, but the life of the Colony depends.
Postponement of payment of the instalments means only postponement of a crisis which is inevitable, and which when it comes will be so acute that the Colony could not stand it. The crisis can only be averted by increasing the production of sugar,
12. I believe, therefore, that the only way in which the present position of the Colony can be retrieved and its future assured, is by facing the two aspects of the trouble and by taking some step which will settle both. And this might be done by combining a conversion of the advance-in-aid instalments with a loan for improvement of machinery and allowing repayment in 10 years (as a minimum) but a longer term if possible. This at least is free from financial objection, because, although part of the loan is undoubtedly to repay unproductive charges on the
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