CO882-(6-8) — Page 294

f. - -

PUBLIC RECORD OFFICE

Reference :-

PLLC.O. 882

8 PUBLIC RECORD OFFICE, LONDON

ALLY WITHOUT PERMISSION OF THE BE REPRODUCED PHOTOGRAPHIC-

COPYRIGHT PHOTOGRAPH—NOT TO

200

3. Mr. Piggott's description of the financial position of the Colony may, I think, be fairly held to be comprised in the word "desperate" and for a desperate position he proposes what he describes as a desperate remedy.

4. I do not dispute the accuracy of his description, neither do I confirm it. The information in my possession does not permit me to do either. It is possible, and indeed probable, that the description may apply to some estates and to some bailleurs de Fonds, but without a more intimate knowledge of the private affairs of the persons or estates affected than I can claim to possess, I cannot assign the proportion accurately.

5. It seems to me that the first thing is to ascertain the facts, and I will presently suggest how I think this should be done, but I think it well to preface my proposals by a brief resumé of the position.

6. I have every reason to believe that the Colony is threatened with a finan- cial crisis, the extent of which I cannot at present predicate. The consequences of such a crisis, if it should be as extensive as is feared, have been described by Mr. Piggott, and I have no reason to doubt the accuracy of his description. It is, I think, a truism to state that it is desirable to exhaust every effort to avert such a crisis, provided the measures taken. do not further prejudice the financial position in a manner that would provoke a worse crisis later on.

7. Mr. Piggott in effect proposes two fresh loans which shall be amalgamated in one.

The first a conversion loan, which would redeem the existing advances-in- aid loan and convert it into a loan with a 10 years currency. The present state of the money market is such that the conversion could only be carried out at a loss. That is to say, it would be necessary to borrow money below par to pay off a loan at par.

This is certainly a desperate remedy.

8. The second loan would be a loan to improve the machinery of the sugar mills. This has already been proposed in the Council of Government, and, in the debate that took place, I expressed myself as follows:

"No one denies, certainly I will not deny, that the existing factories greatly need amelioration; nor do I deny that the Colony would greatly benefit if the existing factories were improved and brought up to date; nor do I deny that the small planters would benefit by the amelioration of the existing factories. They would get a better return for their canes and a larger crushing. But there are difficulties. In the first place, this proposal has already been submitted to the Secretary of State some years ago. It was then rejected for reasons given. It is not for me to discuss whether those reasons were good or bad, at all events, from my point of view, I accept the fact that it was re- jected. In the second place, I must tell the Council quite frankly that I would not feel myself justified in approaching the Secretary of State and asking for a new loan for the large factories until, at all events, some considerable portion of the existing loans had been paid off. We may, perhaps, in a month or two have a new Governor here; I do not speak for him, I can only speak for myself, but I may say that looking to the financial position generally, I could not, and would not, as an honest man, approach the Secretary of State, with a new proposal for a fresh loan for the existing factories until a considerable portion of the existing loans has been paid off.

"The third objection is more serious. It is that this proposal might possibly, I do not say that it will, but it might possibly, constitute an infringe- ment of the Brussels Convention. Now, the interpretation of that Convention does not rest with me, it does not rest with the law officers of this Colony, it does not rest even with His Majesty's Government, but it rests with an International Committee which sits at Brussels and which contains representatives of many nations, all interested in the sugar industry, and who are naturally jealous to see that no one nation gets an advantage over the other and that no one Colony gets an advantage over the Colonies of another Power."

9. I have nothing to add to these remarks. However desirable, and it is desir- able, that the extraction of the mills should be improved, I consider that as at present circumstanced, the estates cannot give sufficient security to justify a fresh lan to them.

201

10. The question then arises whether the Colony is or is not to go into liquidation. For if Mr. Piggott's information is correct this is what it comes to.

11. As I have already stated it seems to me that the first thing is to ascertain the facts. I have, as you are aware, received information from various sources all pointing to a financial crisis in the near future. But this information is general and necessarily to a certain extent conjectural. It is not precise, and, unless I am informed precisely as to the extent and nature of the disease, I find it difficult to propose a remedy.

12. I suggest, therefore, the appointment of a Committee to ascertain the facts. This Committee would of necessity be of a confidential character. That is to say, there should be the same honourable obligation of secrecy that covers the commu- nication between a bank manager and the clients of his bank. The members of the Committee would be under an honourable obligation not to disclose to any person, except the Governor, the nature of the applications made to them or the evidence brought forward in support of them. They would receive applications for delay as from debtor to creditor and they would be at liberty to demand such information from the applicants as a bank manager would require under similar circumstances. Their advice to the Governor would be governed by the same considerations that govern a bank manager in deciding upon similar applications. I think such a Committee might be composed of the financial officers, i.e., the Auditor-General, the Receiver-General and the Collector of Customs. They should be assisted by two gentlemen of commercial experience selected from the Directors of the two banks, ie., the Commercial Bank and the Bank of Mauritius. They should also have legal assistance and I suggest either a member of the Parquet or the Govern- ment Notary.

13. When the report of this Committee has been received it will be possible to determine:

1st. The amount of the deficit likely to be realised on the payments due by

the planters on the 30th June.

2nd. The measures which may be necessary to meet the payments which must

be made by the Colony in London on the 1st August.

14. I will be glad if you can telegraph your decision on this despatch so soon as may be convenient to you. For it is desirable that the Governor or Officer Administering the Government should have some indication of your views not later than the middle of May.

I have, &c.,

GRAHAM BOWER, Administering the Government.

Enclosure in No. 155.

MY DEAR BOWER,

Chambers, March 25, 1904. I HAD SO much to do with the settlement of the financial crisis in 1898 and again in 1902, that I view the approach of a third crisis with the utmost dismay. The exhaustion of the Treasury balances is fraught with danger: the foreclosure of many mortgages on estates will entail general disaster. To borrow to repay is out of the question. Another remedy for the present evil condition of things have occurred to me. I send it to you quantum valeat, but, for many reasons, in the form of a memorandum and not as an official document.

MEMORANDUM.

Faithfully yours,

F. T. PIGGOTT.

The financial prospect of the Colony in the immediate future is alarming: it

may be briefly summarized as follows:

(1) A large number of estates will not be able to meet the first instalment of

the Advances-in-Aid Ordinance, due 30th June.

(2) The Bailleurs de Fonds will probably be able to pay, but if they do pay, they will not have enough money for the entrecoupe advances to the estates which are dependent on them.

19234

20