CO885(3-4) — Page 360

TELEGRAPHIC COMMUNICATION

BETWEEN

THE SOUTH AFRICAN COLONIES, MAURITIUS, AND ENGLAND,

SIR,

No. 1.

CROWN AGENTS to COLONIAL OFFICE.

Spring Gardens, London, December 14, 1875. REFERRING to past correspondence respecting the failure of Hooper's Telegraph Works Company to carry out the contracts entered into by them, with the Governments of the Cape of Good Hope, Natal, and Mauritius, to place those Colonies in telegraphic communication with the rest of the world, and more especially to your request that the Crown Agents for the Colonies should inform the Earl of Carnarvon whether they would advise the carrying out of the scheme by other means, I have the honour to submit, for bis Lordship's consideration, the following observations and proposals.

1. It would be difficult, perhaps, to exaggerate the importance, under certain possible contingencies, of placing this country in telegraphic communication with South Africa, Mauritius, and Seychelles, and the value of such communication to the distant posses. sions embraced in the scheme would only be second to that of the United Kingdom itself.

2. As an unaided joint stock enterprise it is useless to expect that it will be carried out until, from the growth of the communities at the eastern termini of the line, commercial intercourse shall have so increased as to afford reasonable hopes that such an undertaking would yield a good dividend to shareholders. At present no such results can be looked for, nor do I believe that a thoroughly reliable company, capable of raising the required capital, could be formed upon anything short of a guarantee or subsidy, so extensive as to render it much better for the Governments concerned to find the capital and get the work executed under arrangements conducted by themselves.

3. A subsidising or guaranteeing system is often advocated, in preference to the direct action of Governments, from an idea that the guarantors know at once the extent of their liabilities; whereas if the undertaking is to be carried out by a Government they may find themselves committed to an expenditure far beyond their expectations and probably beyond their means.

4. Experience has abundantly proved, however, especially in the case of Colonial Governments, that the supposed limit of the guarantors' liability is often delusive. It has frequently happened that companies have exhausted their capital long before they have accomplished their object, and it is then commonly found that the guarantors, who have by far the greatest interest at stake, find it less costly to move forward than to withdraw. The consequence is that either the guarantee is extended, to enable the company to raise more capital for the completion of the work, or the guarantors are obliged to buy out the interests of the company and then do the work themselves. By the time matters have arrived at this stage, years of valuable time have usually been sacrificed and much unnecessary cost incurred.

5. It will perhaps be alleged that if security were taken against such contingencies by requiring a sufficient amount of caution money to be lodged with the guarantors, that their pecuniary interests would be amply protected. To this, iny reply is, that caution money, like promotion money, is a costly and unnecessary item, for which shareholders and guarantors have to pay, and that it will be to the advantage of both never to sanction such unproductive outlay.

6. On the other hand, there need be no uncertainty as to the cost of constructing and submerging the cables, simply because the Governments concerned undertake to deal direct with contractors, instead of making a board of directors the medium of entering into contracts.

7. The process would be much the same, whether carried out by one agency or the other, but unless there were some gross mismanagement, the advantages would be all in

A 2

PUBLIC RECORD OFFICE

Reference :-

C.O. 885

4

PUBLIC RECORD OFFICE, LONDON

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