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CHAPTER II.

MERCANTILISM.

Part 1. Before and during the Napoleonic Wars.

When the so-called first British Colonial Empire came to an end in 1783, the Cape was not yet under British control. Opinions are divergent as to the rigidity with which the mercantilistic colonial policy of the mother country, England, was enforced during the period prior to 1783. It may be stated in general, however, that there was a tendency for the colonial nations at this early period to look upon their colonies as upon their private possessions. It was a time when, in the words of the famous Pitt, the North American colonies had not even the right to manufacture the nail for a horseshoe. Certain manufactures, such as hats or woollen goods, were restricted or prohibited altogether, while other industries, thought to be especially beneficial to the mother country, such as pig and bar iron, were encouraged. Colonies were there to supply the mother country with raw materials and take in all their manufactured articles from the mother country. Everything was done to facilitate the exportation of manufactured articles from the mother country to the colonies; so, likewise, with the importation of raw materials from the colonies into the mother country, while the importation of manufactured articles from the colonies into the mother country or the exportation of raw materials from the mother country to the colonies was, if not entirely prohibited, positively discouraged. In other words, manufacturing industry was over-estimated in its importance to the mother country. Manufactures were regarded as supplying work to a more numerous population, which mercantilists desired for purposes of defence.

So far as trade with the rest of the world was concerned, the policy was that buying and selling should be through the mother country. In other words, in order to get an abundant supply of the precious metals in the mother country — in order to get the much-desired “favourable balance of trade”it was attempted by colonizing states,

: i. To make their colonies purchase European goods only in the mother country;

ii. To prevent the colonies from selling their produce directly to the foreigner, because that would deprive the “home” merchant of the advantage of re-selling colonial goods to the foreigner at a profit; : iii. To have the trade with the colonies carried by the ships belonging to the mother country. (1).

The general policy, then, was one of exclusion of the foreigner. It was against this policy that the Physiocrats objected, as they were convinced of the value of competition. They were followed in England by Adam Smith and his followers, for example, men like Huskisson and Peel.

On the whole it may be said that English colonial policy was much more liberal than that of the other colonizing states of the time. (2). Colonial ships, for instance, had all the rights of English ships. (3). Thus Adam Smith says: “In the disposal of their surplus produce, or what is over and above their own consumption, the English colonies have been more favoured, and have been allowed a more extensive market, than those of any other European nation. Every European nation has endeavoured more or less to monopolise to itself the commerce of its colonies, and upon that account, has prohibited the ships of foreign nations from trading to them, and has prohibited them from importing European goods from any foreign nation. But the manner in which this monopoly has been exercised in different nations has been very great." (4).

However, England's policy of protection was very active: up to the middle of the 19th century. It had its opposers, but they were usually in a minority. We thus find that England's trade with the Cape Colony was likewise protected, and more or less by the following measures :

1. For this policy in embryo see Mun: England's Treasure by Forraign Trade, Chapter 2.

2. See A. Girault: "The Colonial Tariff Policy of France,” Introduction.

3. The Navigation Act of 1660 prohibited the carriage of any goods to or from the colonies in other than English-built ships, "English" including the colonists.

4. Adam Smith: “Wealth of Nations,” Book IV, Chapter 7, Section 4. See also Marshall: “Industry and Trade,” Appendix D, pp. 732 -- 734; also Ashley's “The Commercial Legislation of England and the American Colonies,” Q. J. E., Nov., 1899.

: a. Higher duties on foreign goods than on British goods on their importation into the Colony;

b. Preferential treatment of some colonial products on importation into England;

C. Preferential treatment of British shipping.

Minute regulations of the trade to and from the Colony was supposed to bring about the desired result, and Ordersin-Council dealing with the trade of the Colony multiplied very rapidly. (1).

Prior to the conquest of the Cape of Good Hope by the English in 1795, it had been under the monopoly of the Dutch East India Company. The usual system which prevailed under these chartered companies was that the colonists could sell their produce to the Company only, at a fixed price, and had usually to buy the European products from the Company. There was no competition and prices were arbitrarily fixed by the Company. (2). At the Cape it usually happened that the officials of the Company - and sometimes the Governor himself — were keen traders. It thus often happened that the farmers were not allowed to sell their goods to the ships in the harbour before those of the Company's officials were sold. This led to much friction, and was perhaps a cause of the farmers moving further and further inland in quest of fertile land and pastures for their flocks, until they had ultimately lost all interest in trading pursuits, if they could only escape the petty and vexatious restrictions of the Company.

Moreover, the administration of the Dutch East India Company “had 5 per cent. upon everything brought into or sent out of the Colony." (3). The first regular tariff of customs duties levied at the Cape was that of the year 1678, (4), when servants of the Company and officers of ships were allowed to trade for themselves to a very limited extent. They

the adminictions of the could only

1. By an Act of the Imperial Parliament passed in April, 1806, and subsequently renewed for prolonged periods, the regulation of trade to and from the Cape Colony was entrusted to the King-inCouncil. Theal: History of South Africa, Volume III, p. 382.

2. cf. Adam Smith, Book IV, Chapter 7, Section 4, para. 2. None could buy and sell without a license, and a certain tax paid for this privilege. The farmers were obliged to sell to the Company at fixed prices wheat, barley, beans, peas, meat, oxen and wine. See Captain Robert Percival: "An Account of the Cape of Good Hope,” (1804).

3. Captain R. Percival: “An Account of the Cape of Good Hope,” 1804 Edition, pp. 321, 322.

4. Theal: “History of South Africa," Volume I, p. 255.

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brought articles to the Cape which they sold to individuals there; but the Company found that the sales of these articles interfered with its own sales, and thus a duty was levied on these articles equivalent to the loss which it sustained. The duties were levied as follows:- For a keg of brandy, 33s. 4d.; a keg of arrack, 16s. 8d.; a half-aum or 72 litres of Rhenish wine, 25s. ; a cask of rum, 25s.; a pound of tobacco, Is. 4d.; a gross of pipes, 2s. 6d. ; 1,000 pounds of rice, 20s. 8d.; a canister of sugar, 4s. 2d. These duties were bitterly resented by the colonists and they demanded the right to sell their produce to whomsoever they chose, and that “all commerce introduced into the country should be freely landed.” (1).

In October, 1789, the Directors of the Company ordered that a duty of 5 per cent. ad valorem on all articles imported or exported — except by themselves — should be levied at the Cape for the benefit of the Company. The Fiscal, an official appointed by the Directors to see that no bribery took place at the Cape among the Company's officials, had previously levied these duties for his own benefit, and he now continued to collect and keep the money under the plea that it was a legitimate perquisite of his office. (2). In other words, under the government of the Dutch East India Company, “the customs were principally considered as a matter of police and regulation and were put under the control and management of the Fiscal and his officers and assistants. This continued to be the case until 1793 and 1794 when an order of the Government was made to pay their amount to the Receiver General... Nor had the Dutch East India Company decided upon any system of collection when the capitulation took place.” (3).

The Commission of Messrs. Nederburgh and Frykenius, who were sent out to the Cape in 1792, to try to reduce the expenses of the Company at the Cape, after the Company's finances had been severely tested by Governor van der Graaff, resulted in their levying a duty of 2 pounds sterling upon every slave imported into the settlement, and a duty of 5 per cent. ad valorem upon all articles imported or exported — except in the case of the Company. (4). This was done solely for revenue purposes. The Company was a trading unit, not

1. J. Noble: "South Africa Past and Present,” p. 18.

2. Theal: "History and Ethnography of South Africa before 1795,” Vol. III, p. 190.

3. Letter of Governor Caledon of the Cape Colony to Castlereagh, Oct., 16th, 1809: Records of the Cape Colony, Volume 7, p. 193.

4. Theal: History and Ethnography of South Africa before 1795, Vol. III, p. 203.

ed ining the prish Rive with the onists soc

a colonizing unit, a fact which the colonists soon came to learn when they came in contact with the Ama-Xosa Kaffirs along the banks of the Fish River, towards the year 1780. There was nothing the Company loathed more than to become involved in Kaffir wars for the sake of the colonists.

When the Cape passed into the hands of Great Britain in 1795, England was still labouring under the pangs of the birth of a new colonial policy. The revolt of the North American colonists had thoroughly discredited the commercial policy of the mother country at that time. But as it takes a long time for an idea to die, so this policy of restrictions died very hard. “It had taken more than a century to grow to maturity, (1650 — 1775), and it took almost the same length of time to disappear, (1775 — 1897 [?].” (1). English commerce was still controlled by the Navigation Laws. She now started a new colonial policy. The trade of the colonies with each other and with foreign countries was no longer prohibited, but instead there arose a system of reciprocal differential duties in the mother country, and this was extended to the colonies. The products of the colonies paid lower duties than did those of foreign countries, and to compensate herself, the mother country enacted that her products should be allowed free importation into the colonies while foreign articles should be taxed. When British articles were taxed in the colonies for purposes of revenue, the articles coming from foreign countries into the colonies had to pay higher duties. This system of reciprocal differential duties lasted as a matter of principle until 1846. With the advent of Free Trade the duties in the colonies were reduced. At the Cape the differential duties were abolished in 1855 by the Customs Tariff Act of its first Parliament. From that time on until 1903 the customs duties at the Cape were equally levied on all articles imported into the Colony, irrespective of their origin. (2).

The most important colonial articles on which preferences were granted in the “home” tariff were grain and timber (Canada), sugar (West Indies), and wine (Cape Colony). (3). This preferential treatment of certain colonial articles alleviated somewhat the burden of the colonies under this system of minute regulation, but it is not unfair to say, that during the whole of this second period of British Trade Policy the

1. Prof. J. Davidson: Commercial Federation and Colonial Trade, p. 17.

2. O.Y.B., (3), p. 701, (Dutch Edition).

3. cf. C. J. Fuchs: The Trade Policy of Great Britain, pp. 216 — 217.

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