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PUBLIC RECORD OFFICE

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ALLY WITHOUT PERMISSION OF THE

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I have quite lately written to Sir Robert Herbert on this same subject, and he may in conversation with you have alluded to my letter to him, but I thought I might ver ture to submit to you in a separate form my views as at present laid before the Australian Colonies and Cape Colony, in the hope that you may have leisure to peruse them, and if satisfied with the scheme support it at the Conference.

If these low rates which I suggest are established it would probably rank amongst the most important events of Her Majesty's Jubilee.

The Right Hon. Sir Henry Holland,

&c.

&c.

&c.

Enclosure.

I am, &c.,

JOHN PENDER.

The Eastern and South African Telegraph Company, Limited,

Winchester House, 50, Old Broad Street, SIR,

London, E.C., 20th January 1887. FOR some time past the question of reducing the Submarine Cable Tariffs has been under the serious consideration of the Companies over which I have the honour to preside, and only by this mail I have been enabled to transmit to the Australasian Colonies our views on the subject, and as these were intended to apply to the South African Colonies also, the arguments used in the enclosed letter and memorandum are equally applicable to the latter.

As a preliminary step, however, I send herewith a statement showing what guaran- tees will be required so as to give a 5s., 48., or 2s. 6d. rate to the Cape and Natal, and should these views be approved in principle by your Government we shall be pleased to go thoroughly into the question with your representatives during the time the Colonial Conference is being held in London, when, as I understand, the subject of cheaper postal and telegraphic communication with our Colonial possessions will be discussed.

Since these documents were prepared our attention has been drawn to a report of a deputation which waited upon you in regard to an opposing line. I observe you stated in your reply that on the general question you agreed with the deputation as to the desirability of some competition with the Eastern Company, enormous," &c.

"whose charges were

It is true that on several occasions references have been made to the high tariff, and we have given our reasons why, for a time, it should be maintained.

When your predecessor was in London, I mentioned to him the subject of reductions under guarantee, but his opinion at that time was against the risk of entailing any additional charges upon the Colony.

I may say that last year this Company was only able to pay 6 per cent. upon its small share capital of 400,0001., and had the whole of the capital been in shares, instead of the larger portion in dobentures, the return would have been considerably less. The 600,0001. debentures were issued at 4 per cent., under the guarantee of the Eastern Telegraph Company, being 2 per cent. under the rate at which telegraph debentures have been generally taken by the public; but this low interest was due entirely to the good credit of the Eastern Telegraph Company.

The dividend this Company is now paying is small, taking into consideration the nature of the investment; and, apart from the subsidies, the average revenue for the last three years would yield little more than 3 per cent. upon the capital, without providing any reserve whatever,

It is true that since last September there has been an increase in the Cape traffic, due to the formation of gold and diamond mining companies, and I hope that this increase will become permanent through the successful working of the Companies now established, and to be established.

I am, however, perfectly aware that to make any large permanent increase in the traffic, a very considerable reduction of rate, such as cannot possibly be made at the risk of the Companies, would be required. Any small reduction would, so far as my experience goes, be simply a present loss to the Companies.

The scheme which I now propose is based upon the guarantee system; it would give the Colonies the entire control of the tariff-while the burden of maintaining the lines would fall upon the Companies-and the low rates they could establish would, I believe, assist in largely developing the material wealth of the Colonies, and thereby benefit the whole of the population. Should the increase of traffic not be such as would render the guarantee comparatively small, still the country would be benefited, whereas if the

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Companies were to make the reduction without guarantee they would be disastrously affected; the risk, therefore, I hold, ought to be with the Colonies, and not with the Companies.

I hope your Government will take this proposition, which I have now the honour to submit, into their serious consideration, believing as I do that it is the only practicable way of bringing about what we all so much desire, a thoroughly efficient system with the lowest possible tariff.

It has been urged by interested parties that an alternative line by the West Coast was desirable for security and for strategical purposes.

I hold that, either for security or strategical purposes, any line connected with the t'ape must be entirely in British hands.

The Eastern Telegraph Company has lately promoted the African Direct Company, which has laid 2,738 miles of cable connecting the British Settlements on the West Coast of Africa with their system, under a subsidy from Her Majesty's Government.

Another Company, the West African Telegraph Company, has a line on the West Coast, connecting the Settlements of Portugal, France, and Spain, subsidised by those Governments; but as messages sent by that Company's line are bound to pass through the territories of those nations, and must be transmitted by clerks of those nation- alities, it is certainly not an undertaking likely to command the support of the Imperial Government, nor, I should hope, that of the Cape Colonies.

So far as the traffic is concerned, neither of these lines at present pays half the working expenses of the stations, and to extend such cables to the Cape, so as to make them in every sense efficient, would require a large subsidy, which would be a great waste of money, as the line is not, for any practicable purpose, wanted at present.

Should the time, however, come when the Government or the Colonies, either for additional security or for [strategical purposes, require the cable to be continued to Port Nolloth or the Cape, the African Direct Company, supported by the Eastern Company, would be prepared to undertake the extension on the basis of a guarantee to be then agreed upon.

As the price of cables can be controlled by the Imperial Government, there is no foundation for the suggestion which I believe has been made, that in time of emergency higher prices would be required.

The Right Hon. Sir J. Gordon Sprigg, K.C.M.G.,

&c.

&c.

&c.

I have, &c., (Signed)

JOHN PENDER,

Chairman.

PROPOSED GUARANTEE for REDUCTION of TARIFF with SOUTH AFRICA.

Eastern Company to accept guarantee of present revenue And South African Company to accept a guarantee of 6%, on capital, after paying all expenses and providing for reserve and sinking funds

£ 16,642

41,900

Estimated total amount to be guaranteed

58,542

The result to the Government may be estimated as follows:-

Tariff to Europe and Indian frontier Net amount earned by Companies' lines after deducting proportion of Continental Administrations

58.

48.

2s. 6d.

48. 10d.

3s. 10d.

2s. 4d.

No. of words, 187,000.

£

£

£

Value

45.191

35,841

21,816

Loss to Government

13,351

22,701

36,726

15% increase would reduce loss to 6,572

17,325

33,453

25%

""

2,053

13,740

31,272

50

4,780

75%% 100%

79

25,818

""

""

20,364

""

14,910

20th January 1887.

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