PUBLIC RECORD OFFICE
Reference :-
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C.O.885
14 PUBLIC RECORD OFFICE, LONDON
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It is not necessary, for the present purpose, to make more than passing reference to the circumstances of the monopoly granted in 1887 to Mr. Edward Lippert, which gave ground for strong representations on the part of Her Majesty's Government, and which was formally cancelled in 1892. The present circumstances are, nominally at all events, somewhat different, the Volksraad, in 1893, having declared the traffic in explosives to be a Government monopoly, the execution of which might, with the consent of the Executive, be transferred to other persons, subject to regulations laid down by the Volksraad.
Accordingly, in October 1893, the Government concluded a contract with Mr. L. G. Vorstman, by which he was appointed sole Agent for 15 years for carrying out the monopoly.. Under this contract, the Agent was given the right to establish a Company for the purpose; he was allowed to charge certain maximum prices for dynamite. amounting, in the case of Dynamite No. 1, to £4 15s. per case, and was to pay to the Government 58. per case of dynamite sold, as well as an amount not exceeding 20 per cent. of the "surplus," which was defined to be the balance remaining after deduction of all costs, wear and tear, the usual writings off, and interest of 8 per cent. on the capital. The Agent further engaged to erect manufactories during the two-and-a-half years allowed by the Volksrand Regulations, and, pending their erection, the Government were themselves to import all materials required and place them at the disposal of the Agent, who was to hand over to the Government the proceeds of the sale, from which the Government were to deduct 5s. per case and the sums paid for the materials imported, returning the balance to the Agent.
Her Majesty's Government are advised that the creation of a monopoly in favour of the State is not necessarily inconsistent with Article XIV. of the London Convention. ' even when exercised by a concessionnaire, provided that the concession is intended in good faith to benefit the State generally, and not simply to favour the concessionnaire.
The question, then, which presented itself to me was, whether the Dynamite monopoly as exercised under the contract with Mr. Vorstman was for the benefit of the Stafe generally, or mainly for the benefit of the concessionnaire.
To this question the reply is to be found in the Report of the Commission of the Volksraad appointed in February last to enquire into the working of the monopoly, a translation of which is included in the papers laid before Parliament in April last.
From this Report I gather the following facts :-
The Company which the Government Agent was empowered to form was constituted under the designation of the "Zuid Afrikaansche Fabrieken voor Ontplofbare Stoffen. Beperkt" (South African Explosives Company, Limited). They did not complete their factory within the period of two-and-a-half years allowed by their contract, but in October 1896 they claimed to be in a position to manufacture 80,000 cases annually--the total requirements of the country being estimated at 200,000 cases-and thereupon the Executive Council, contrary to a resolution of the Volksrand of September 1894, which expressly forbade any departure from the regulations, allowed the Company a further two-and-a-half years for erecting factories sufficient to supply the needs of the country. Under the most favourable conditions—and assuming that the expectations held out by the Company are fully realized-the Commission estimate that for the years, 1897-1900, it will be necessary to import at least 430,000 cases over and above what could be produced by the Company. The treatment in the factory of the imported dynamite and blasting gelatine is stated to consist of the simple process of making them up into cartridges; while, as regards the comparatively small proportion which the Company claim to manufacture, it appears that all the essential raw materials have to be imported, as they are not now produced within the State, nor is there any likelihood in the near future that they will be. In this cornexion the Committee observe: It is therefore clear that the Government Agent has not fulfilled the promise he made in the contract, viz., to produce dynamite and other explosive materials in such quantities as the needs and demands within the South African Republic require."
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Dealing with the profits made by the Company on the importation of explosives, as distinct from the profit on those manufactured by them, the Report contains the following - tatements: ** This importation brings the Company extremely great profits that have nothing to do with those arising from the explosive materials manufactured by the Company itself."
Your Commission finds, from the accounts which have been laid before it by the State Secretary, that the profits made by the Company on explosive gelatine and guhr-impregne imported and paid for by the State, amount to close upon £2 per case, of which only 58. per case comes to the Republic.
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Applying the above calculation to the 430,000 cases, the minimum that must be imported in the next four years, we obtain the result that, if the State imported, the Treasury would benefit to the amount of £860,000, whilst, if the Company does so, the profit to the State would only be £107,500, thus making a difference to the disadvantage of the State of £752,500.
The advantage accruing to the State by importing on its own account would probably by still greater after 1900, on account of the increased demand."
It is clear from this that it is impossible to contend that the monopoly, as at present exercised, is one for the benefit of the State generally. It appears that the establishment of the monopoly serves no purpose of State by making the Republic independent of outside sources in obtaining its supplies, for it is clear that these will continue to be imported for a period to which no limit can be assigned. Financially, the result to the Stite is a loss to be measured in hundreds of thousands of pounds.
Her Majesty's Government do not doubt that the Government of the South African Republic, in view of the facts recently brought before them, will take steps at an early date to annul the monopoly, or so to reform it that it may be exercised in good faith for the benefit of the State, and they will be glad to be thus spared the necessity of pressing their views of the monopoly as an infringement of the London Convention; but they think it desirable that the Government of the South African Republic should be made aquainted with those views, and desire accordingly that you will make a communication through the British Agent at Pretoria in the sense of this despatch.
R. E. W.
R. B. F.