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Carnarvon to transmit to you, for the information for the Lords Commissioners of the Treasury, copies of the following papers :—

(1.) A memorandum put into Lord Carnarvon's hands by Mr. Pender, M.P., on behalf of the Eastern Telegraph Company, containing a proposal for the laying of a cable from Aden to the Cape, to be worked in connexion with that Com- pany's lines, the capital to be guaranteed by the Imperial Government, and annual subsidies paid by the Colonial Governments interested.

(2.) A despatch from the Governor of the Cape, requesting that the Imperial Government will co-operate with that Government in subsidising some telegraph company for this purpose.

(3.) A further letter from Mr. Pender, containing a proposal that the necessary moneys should be advanced by the Public Works Loan Commissioners. (4) A memorandum which was recently drawn up in this Department on the general

subject.

2. Lord Carnarvon understands that the Chancellor of the Exchequer has intimated to Mr. Pender that Her Majesty's Government are not prepared to invite Parliament lo guarantee a loan for the amount required to establish telegraphic communication with South Africa, and under these circumstances, beyond inviting the Lords Commissioners of the Treasury to consider the suggestion for an advance from the Public Works Loa Commissioners, his Lordship is unable at the present time to make any definite proposal on the subject.

3. I am to observe, however, with reference to the concluding paragraph of your letter now under reply, that Lord Carnarvon is quite unable to agree with the view taken by their Lordships, that there is any probability that "before very long" this great work, which is most urgently needed, is likely to be accomplished by private enterprise.

4. Though several proposals have been made for its accomplishment differing in material points, the necessity for Government assistance has been a common feature in all. The estimated cost of any line and the estimate of the probable receipts as given in every proposal show clearly, in his Lordship's opinion, that there is no hope whatever of the undertaking being a remunerative one for some years, and therefore of its being established for years to come, except with material aid in some shape from this Government.

5. The importance of effecting the object in some way is now universally admitted, and the Colonial Governments are prepared to assist to a certain extent, and probably to the utmost extent which their resources would justify, and Lord Carnarvon cannot therefore but observe that should Her Majesty's Government fail to co-operate in any way, whether by an advance or a guarantee or a subsidy, the postponement of the execution of a work which is really of the highest importance to the safety as well as the prosperity of the South African Colonies, will rest with that Government.

6. In the letter from this Department of the 26th of May 1876* Lord Carnarvon explained at length the grounds on which he considered that the Imperial Govern- ment would be justified in giving pecuniary support towards the establishment of such communication, and he does not therefore think it necessary again to enter on that point, but he trusts that their Lordships will once more consider whether some more satisfactory communication cannot be made to the Colonial Governments than that which his Lordship would have great reluctance in conveying, namely, that the Imperial Unless Her Majesty's Government Government will render no assistance whatever.

should be prepared to co-operate, Lord Carnarvon thinks it clear that they could have nothing to do with any mission to South Africa for the purpose of making fresh proposals.

7. I am to add that although Lord Carnarvon has pressed this question upon the Lords Commissioners of the Treasury only from a colonial point of view, the Imperial interests, especially in regard to military considerations, are, in his opinion, even of higher importance. In weighing this matter he cannot doubt that those considerations will be fully before the Lords Commissioners.

The Secretary to the Treasury.

I have, &c..

(Signed) ROBERT G. W. HERBERT.

• No. 2.

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No. 6.

EASTERN TELEGRAPH COMPANY to COLONIAL OFFICE.

February 22, 1878.

Tur importance and urgency of telegraphic communication with the Cape requires

no further proofs to-day.

The questions to decide are :—

1. Which is the best route?

2. Which is the cheapest route?

3. Which route is most capable of being maintained and repaired ?

4. Which is the best financial plan to carry out the undertaking

With regard to the first point, any examination of the two routes, viz., the eastern

and western, will show conclusively that the former is by far the better (see details in Sir James's last letter).

It would be the better, even if it were the more expensive, but it happens to be the cheapest, the most remunerative, the safer for Imperial purposes, the only one that can be repaired at all times.

This route is from Aden (station of the Eastern Telegraph Company) to Zanzibar, Mozambique, Delgoa Bay, and Natal thence by land-line to Cape Town.

The mileage is 4,000, against 4,500 and 6,000 respectively by the two proposed coast The branch line from

routes.

In those mileages, Mauritius is not comprised by either route. Zanzibar to Mauritius would be an additional 1,622 miles. This should be left till after the main line to the Cape is established.

This is the principle which we have followed in the Eastern Company, and which from a line between Marseilles and Egypt has developed into a system of upwards of 15,000 miles. Moreover, Mauritius is more likely to make an effort to subsidise the branch adequately if it is seen by the Colony that upon this depends its construction.

By arranging with the Eastern Company for the construction and working of the line, the Government will obtain the benefit of the large experience of the Eastern Company, a considerable reduction in working expenses, including the saving of the expense of a new station at Aden, the station of the Eastern Company being able to do the work; a good system of working by the efficient stuffs of the Eastern Company with several repairing ships and trained captains and electricians.

In addition to these general advantages, the Eastern Company would contribute towards the enterprise either in the shape of rebates or by providing a portion of the capital.

The printed memorandum shows our first proposition, based on the principle of the Government raising the necessary funds for establishing the line and being recouped for the greater portion of the accruing charges by the subsidies of the Colonies and the rebate from the Eastern Company.

The lowest price at which the line of 4,000 miles would be laid by the Telegraph Construction and Maintenance Company for cash would be 900,0007. In addition to this, a repairing ship would have to be stationed at Zanzibar.

The cost of a ship and equipment would be 50,000%.

The traffic, inclusive of four messages a day at 2s. a word, only for Mauritius, which would be transinitted by steamer to Zanzibar (being now transmitted to Aden), may be estimated at 937. a day or 33,0007. a year. The subsidy of 15,000l. per annum from the Cape and 5,000l. per annum from Natal would make up a revenue of 48,000, against a charge of 3 per cent. interest on 950,0001, of 33,0007, and working expenses 7,000, leaving about 8,000l. towards maintenance of ship and repairs. This sum would be further increased by the rebate of the Eastern Company of about 13,000, and in this manner the foundation could be laid for a reserve fund to be increased by the growth of the revenue.

The cables could be laid within nine months of the date of the order.

The life of a cable may be taken at 20 years. This would require a sinking fund of 2 per cent. or on 950,0007., 19,000/.

The material sacrifice of the Imperial Government would practically consist in trusting to an increase of traffic for providing fully this-sinking fund.

Should, however, the Government prefer a different plan to that of the entire capital being in the first place raised by them, we would beg to propose that a separate company be formed for this undertaking, with a board composed of directors of the Eastern and

G 584.

L

PUBLIC RECORD OFFICE

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