:
PUBLIC RECORD
OFFICE
Reference
TLC.O.882/12
COPYRIGHT PHOTOGRAPH-NOT TO
AS
PUBLIC RECORD OFFICE, LONDON
ÄELY WITHOUT PERMISSION OF THE REPRODUCED PHOTOGRAPHIC-
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"The position and functions of the bailleur de fonds are set out in paragraphs 56-59 of the Report of the Mauritius Royal Commission, 1909,
as follows:-
"56. But besides paying high interest on the mortgage debt. which is of the nature of a fixed charge, the great majority of the owners have practically no working capital and run their estates on borrowed money. By the end of the hurricane season, i.e., April, they have exhausted the funds derived from the last crop and have to apply to a financial agent for assistance. This agent is called in Mauritius a bailleur de fonds. He is often a local merchant or produce-broker, he has generally a substantial amount of liquid capital of his own as well as good credit at one or other of the two local banks, and when, as usually happens, the total amount of the money required for the estates which he is financing exceeds his own available resources, he borrows the balance from the bank, giving his own name and that of the estate owner as security. The planter submits to the bailleur de fonds a kind of budget for the coming year, showing what he expects to have to pay for interest and other fixed charges, wages of employees and labourers, manure, rice, and other stores, and in many cases for household and personal expenditure-in fact, for all his anticipated out goings during the year. He gives the bailleur de fonds the selling of the sugar produced on the estate and the right to demand, if necessary, a mortgage on the estate for any balance which may remain owing at the close of the year's transactions. The baillew de fonds then becomnos practically the business manager of the estate. He supplies the owner monthly with the funds required for fixed charges, wages, etc., he buys and pays for the manure, rice, and stores required for the estate, and, as the sugar is pro- duced, he sells it and credits the owner with the amount realized. On all his outgoings in respect of the estate he debits the owner with interest at the agreed rate, and, on the other side of the account, credits him with interest at the same rate on the sums received for the sale of produce. At the end of the year, the account is made up and the owner receives whatever balance there may be owing to him, or, if the balance is a debit one, gives the bailleur de fonds security for the amount.
"'57. The charges which the estate owner has to pay for this combination of financial accommodation and business management naturally vary with individual cases. From the evidence which we have received the usual arrangement appears to be as follows:- The bailleur de fonda charges interest in account current at bank rate, which is usually about 10 per cent.; he also charges a com- mission, which is generally 2 per cent. on the amount realized by the sale of the sugar. If he is also a produce-broker be conducts the actual sale of the sugar and charges the usual per cent, on the sale price to the seller and per cent. to the buyer. If he is not, he employs a broker to sell the sugar and allows him the per cent. brokerage, charging it to the estate owner.
"'58. If the estate is not in good condition and the owner's affairs are involved in short, if the risks run by the bailleur de fonds and the needs of the borrower are greater than usual-the bailleur de fonds may charge for the loan or 1 per cent. above the bank rate; if, on the other hand, the estate-owner has money, and goes to a bailleur de fonds more for convenience than of necessity, the latter may conduct the business of the estate for 1}, 1 or even per cent. commission instead of 23 per cent.
229.
**59. This system of financing estates is firmly established in Mauritius, though during the last year or two a few owners who formerly employed it appear to have made successful endeavours to carry on their estates without having recourse to a bailleur de jonds.'
"that the "It will, therefore, be seen," said Sir Francis Watts, continuance of the present low prices for sugar, unless alleviated by some outside assistance, will tend to increase the cost of production and make the present position worse even to the extent of compelling the bailleurs de fonds to withdraw their assistance owing to accumulated arrears of interest on sums loaned.
"In some cases, already, the bailleur de fonds has cut his losses and taken over the property in settlement of the money due to him, such a course being the only way open for him to recover some of the money advanced,'
8. This system is not of universal application throughout the Colony. Some estates, including a number owned and managed by English companies, do not make use of the bailleur de fonds' services at all. In certain other cases, also of estates working their own capital, he is employed merely as a town agent for the purchase of material for the estate fields and factory, and per- haps as a broker for the sale of the sugar. In his capacity of town agent the bailleur de fonds may render both useful and economical service. His specialized acquaintance with the conditions of the import market, and the fact that he is usually in a position to place large orders covering the requirements of several estates, enable him to buy on the most advantageous terms, and his own charges as agent are not unreasonably high. If his services were not available it would be necessary for the estate to incur the expense of maintaining a separate town agency of its own, as, in fact, is done by certain of the larger companies controlling several estates. It is not practicable for these functions to be discharged by the estate manager himself, who, in most cases, neither possesses the requisite experience nor could spare the time for the purpose. The work of estate management requires his unremitting personal attention throughout every month of the year and cannot he combined with commercial duties of an entirely different character.
The defects of the system appear when, as is more usually the case, the bailleur de fonds is called upon to finance the estate as well as to act as its town agent. In such cases he does not act merely as an intermediary between the planter and the banks. but is either himself the principal creditor, or, if he is unable to provide the money from his own resources, is required to pledge his own personal credit as security for the loan. The estates are mainly owned by limited liability companies and for this reason, besides the fact that when seeking financial assistance they are usually already heavily burdened with prior debt charges. the banks are unwilling to make advances for the purpose of current culti- vation without the bailleur de fonds' own personal guarantee. It
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