A HISTORY OF SOUTHERN RHODESIA’S FISCAL SYSTEM: THE POLITICAL ECONOMY OF REVENUE COLLECTION AND EXPENDITURE, 1890-1953 HONEST ELIAS KOKE THIS THESIS HAS BEEN SUBMITTED IN ACCORDANCE WITH THE REQUIREMENTS FOR THE DEGREE OF DOCTOR OF PHILOSOPHY IN THE FACULTY OF HUMANITIES, FOR THE CENTRE FOR AFRICA STUDIES AT THE UNIVERSITY OF THE FREE STATE, BLOEMFONTEIN PRIMARY SUPERVISOR: PROFESSOR IAN PHIMISTER CO-SUPERVISORS: PROFESSOR TINASHE NYAMUNDA DR. SIBANENGI NCUBE DR. VICTOR GWANDE JULY 2021 Declaration I declare that the thesis hereby submitted by me for the Doctor of Philosophy degree at the University of the Free State is my own independent work and has not previously been submitted by me or anyone at another University or institution for any degree, diploma or other qualification. I furthermore cede copyright of the dissertation in favour of the University of the Free State. SIGNED…………………………………………………..DATE……12/07/2021…………….. HONEST ELIAS KOKE All other particulars of good government profit a state little unless its system of public finance is well designed, well understood, well protected and maintained. The last two needs depend much upon the second. Unless the system is well understood by an instructed public, and the financial administration is constantly illuminated by the light of public opinion, there is danger both that its methods may lapse into mere routine and inefficiency, and that the administrators may be tempted to take liberties. It is the financial engine that drives the state along, and it is the public opinion and public criticism that keep the engine working smoothly and at full power. (Legislative Assembly Debates, Finance Minister J. H. Smit quoting Sir Edward Hilton Young,27 April 1936, Column 1051). Dedications To my wife for her unwavering support throughout my studies. TABLE OF CONTENTS Abstract ........................................................................................................................................... i Opsomming/abstrak ..................................................................................................................... ii Acknowledgements ...................................................................................................................... iii Acronyms ....................................................................................................................................... v List of Figures and Tables ........................................................................................................... vi Introduction ................................................................................................................................... 1 Why a History of Southern Rhodesia’s Fiscal System?: Historiographical Review ...................... 3 Justification of the Study .............................................................................................................. 13 Researching Southern Rhodesia’s Fiscal History: Sources and Methods .................................... 14 Thesis Outline ............................................................................................................................... 16 Chapter One ................................................................................................................................ 19 The Development of Southern Rhodesia’s Fiscal System: The Teething Years, 1890-1913 19 Introduction ................................................................................................................................... 19 The British South Africa Company (BSAC) and the Granting of the Charter: Preparation for Occupation .................................................................................................................................... 20 Early Occupation, Rudimentary Government and the Establishment of the Legislative Council and the Division of Treasury ......................................................................................................... 22 The Need for More Capital and Intense Fiscal Debates in the Legislative Council, 1903-1913 . 33 Conclusion .................................................................................................................................... 47 Chapter Two ................................................................................................................................ 49 Towards a New Fiscal Approach: The BSAC and the Consolidation of Settler Political Power, 1914-1922 ........................................................................................................................ 49 Introduction ................................................................................................................................... 49 ‘The Toad beneath the Harrow’: Negotiations for the 1915 Supplemental Charter and New Fiscal Promises by the BSAC.................................................................................................................. 50 The War Years and the Establishment of the Income Tax Department ....................................... 52 Imperial Demands for ‘Financial Fitness’: Southern Rhodesia’s Financial Status and Negotiations for Responsible Government ................................................................................... 68 Conclusion .................................................................................................................................... 79 Chapter Three ............................................................................................................................. 80 Fiscal Politics during the First Six Years of Responsible Government, 1923-1929: Imperial, Regional and Local Relations .................................................................................................... 80 Introduction ................................................................................................................................... 80 The Transition from Company Administration to Responsible Government ............................... 81 Revenue Sources and Debates over the Fiscal Reorganisation .................................................... 84 Southern Rhodesia’s Expenditure Patterns, 1924-1929.............................................................. 101 Conclusion .................................................................................................................................. 108 Chapter Four ............................................................................................................................. 110 Managing the Crisis: Southern Rhodesia’s Fiscal Policies during the Great Depression, 1930-1938 ................................................................................................................................... 110 Introduction ................................................................................................................................. 110 The Rhodesian Government’s Response to the Crisis: A Potpourri of Fiscal Measures, 1930- 1938............................................................................................................................................. 111 The Effort to Balance the Budget, 1930-33 ................................................................................ 114 Godfrey Huggins’ Administration and the Government’s Changed Attitude ............................ 125 Tax Reductions, 1935-1938 ........................................................................................................ 135 Conclusion .................................................................................................................................. 138 Chapter Five .............................................................................................................................. 140 ‘Britain’s Wars are our Wars’: Balancing Local Economic Development and War Commitment, 1939-1945........................................................................................................... 140 Introduction ................................................................................................................................. 140 Southern Rhodesia’s Commitments to the War Effort: A Brief Background ............................ 141 War and Economic Development ............................................................................................... 142 The Need for More Revenue: Political Debates over Fiscal Policies ......................................... 145 Southern Rhodesian Loan to the United Kingdom ..................................................................... 158 Calls for Taxation Policy Review ............................................................................................... 160 Conclusion .................................................................................................................................. 162 Chapter Six ................................................................................................................................ 164 Post-war Economics and the Southern Rhodesia’s Fiscal System, 1946-1953 .................... 164 Introduction ................................................................................................................................. 164 Southern Rhodesia’s Postwar Economy ..................................................................................... 165 Postwar Reconstruction and Expenditure Policies, 1946-1949 .................................................. 166 Measures to Mitigate the High Cost of Living ........................................................................... 173 Measures to Mitigate Extravagance: Expenditure Reductions in 1948/49 Fiscal Year and Efforts to Alleviate Shortfalls in Revenue .............................................................................................. 176 Towards the 1949 Tobacco Tax Crisis ....................................................................................... 184 Fiscal Policy and Regional Integration: The Fiscal Commission’s Recommendations on the Establishment of the Federal Fiscal Structure, 1950-1953 ......................................................... 186 Conclusion .................................................................................................................................. 193 Conclusion ................................................................................................................................. 195 Bibliography .............................................................................................................................. 206 Abstract This thesis is an examination of Southern Rhodesia’s development through the lens of its fiscal system from 1890 to 1953. It contributes to the existing historiography by examining two major themes, revenue collection and expenditure, covering six decades of the colony’s development. The study utilised a wide range of sources including government publications, correspondences, newspapers, parliamentary debates and secondary sources. Transcending two administrative epochs: the British South Africa Company (BSAC) Rule (1890-1922) and successive governments under self-Responsible Governmental system (1923-1953), the study makes two major contributions. First, whereas most studies placed emphasis on sectoral development of the economy of Southern Rhodesia, the thesis adds a fiscal dimension to the understanding of the development of the territory’s economy, which encompass all major economic activities. Secondly, the thesis examines inequalities in fiscal measures introduced by the government on the life and livelihoods of both races (Europeans and Africans) throughout the period under study. The measures resulted in serious contestations. During the Company rule, the contestations were over the settlers’ perception and belief that the BSAC neglected its core mandate of developing the colony as stipulated in the Charter as well as its skewed management of the public finance. Often, the Company government was accused of concealing its financial dealings and prioritising its commercial interests to the exclusion and detriment of the settlers’ demands and expectations. When the Responsible Government took over, it established the Consolidated Revenue Fund (CRF) in 1924, an accounting system to monitor revenue collection and government expenditure, to address the concerns that the settlers raised during the BSAC Administration. The CRF was meant to promote expenditure on the colony’s development unlike during the Company Rule. Despite the Responsible Government’s efforts to promote development of the colony, what is apparent in the evolution of the fiscal structure of Southern Rhodesia from 1890 to 1953 is that Africans were marginalised and at the fringes of the emerging political, economic and social policies despite their considerable contribution to the fiscus. The thesis concludes that the fiscal system that emerged in Southern Rhodesia was geared towards achieving the grand colonial project of creating a permanent white settlement in the colony. Key Words: BSAC, Responsible Government, Revenue, Expenditure, Budget, Southern Rhodesia, Settlers, Africans. i Opsomming/abstrak ii Acknowledgements At the high risk of overlooking many generous individuals and institutions that made my research possible, I would like to express my heartfelt gratitude to the following individuals and institutions: the International Studies Group (ISG), Professor Ian Phimister, my co-supervisors and the NationalArchives of Zimbabwe (NAZ). Professor Phimister and the ISG gave the opportunity to study at the University of the Free, a place I could only dream of during my undergraduate and Masters Studies at the University of Zimbabwe. His guidance was central during the writing process of my thesis. My co-supervisors: Professor Tinashe Nyamunda, Dr Victor Gwande and Dr Sibanenngi Ncube, played an important role too. Together with Professor Phimister, they read and corrected my work throughout my studies. They opened their academic doors for me. I could knock at their office doors at any moment and seek their insights on my work. They assumed brotherly roles as their help that went beyond academic spheres. They called and sometimes visited my place on several occasions to check if everything was under control and if I was in good health. Today I express my profound gratitude for their patience and commitment towards my work. The NAZ provided much of the primary data utilised in this thesis. I am grateful to the NAZ officials who helped me retrieve files that were otherwise difficult to access in time. I remain indebted to them for the help they rendered for more than the five months I spent at the archives. My special thanks goes to Trynos Nyoni, Tonderai Tonhodzai, Livingstone Muchefa, Pamela Mutume, Rumbidzai Muroi, Simbarashe Mutenha, Simbarashe Madhinha, and Emmanuel Takura. I am also grateful to people who took time to read and made very useful suggestions on my chapters: Dr Godfrey Hove, Dr Ivo Mhike and Dr Abel Gwaindepi. Part of this thesis was presented at Young Scholars Initiative (YSI) international conference at the University of Barcelona in October 2019 where I obtained valuable input. I am particularly grateful for the feedback and comments I received for my Chapter One. To my comrades in the trenches: Geraldine Sibanda, Priscilla Machinga, Michael Glover, Ruhan Fourie and Mbozi Santebe, I say the struggle was real and you are much appreciated for your collegiality and encouragement. The journey could have been difficult without you guys. I was also fortunate to have Mrs Le Roux and Mrs Gwena-Masakure as administrators at the ISG. Their support towards students was second to none and they were always committed to make sure that the PhD students’ academic and welfare needs were covered. iii Special thanks goes to the University of Zimbabwe’s Economic History Department Lecturers. They made me think of taking up Economic History as a subject of interest. At this department I was taught by Dr Ushehwedu Kufakurinani, Dr Joseph Mtisi, Dr Pius Nyambara, Dr Ivo Mhike (May his soul rest in peace), Dr Godfrey Hove, Dr Eric Makombe, Dr Mark Nyandoro, Dr Nathaniel Chimhete and Dr Bernard Kusena. Their support made my undergraduate and post- graduate studies at UZ memorable. They created an intellectually stimulating environment that made many students excel and I immensely benefited. I fell in love with Economic History because of them. More importantly, they financially helped me when I was applying for my PhD studies. I must thank my family for their lasting support. My wife had to contend sharing my time and attention with the meanest new ‘family member’, this thesis, especially during the days when she was not feeling well. Loneliness became her new ‘friend and husband’ as I was always busy with either drafting my chapters or working on the comments. To her I reserve the utmost gratitude and words fail me in thanking her properly. To my siblings I say all your support through WhatsApp video calls kept me going. Today the thesis is done! As the adage goes, all errors in this thesis, of course, remain my own! iv Acronyms BOA: British Online Archives BSAC: British South Africa Company CRF: Consolidated Revenue Fund EPT: Excess Profits Tax FDAA: Farmers Debt Adjustment Act FDAB: Farmers Debts Adjustment Act FYDP: Five Year Development Plan GPT: Gold Premium Tax I & EL: Import & Export License IDAC: Industrial Development Advisory Committee LABSR: Land and Agriculture Bank of Southern Rhodesia MP: Member of Parliament NAZ: National Archives of Zimbabwe NBHB: National Building and Housing Board RAU: Rhodesia Agricultural Union RCM: Rhodesia Chamber of Mines RGA: Responsible Government Association RMF: Rhodesian Mining Federation RUA: Rhodesia Union Association SCM: Salisbury Chamber of Mines SWT: Special War Taxes TNA: The National Archives at Kew TST: Tobacco Sales Tax v List of Figures and Tables Fig 1.1: Revenue and Expenditure of Southern Rhodesia from 1894 to 1913 ............................. 34 Fig 2.1: Revenue and Expenditure of Southern Rhodesia 1914-1922 .......................................... 59 Fig 2.2: Revenue Collected by the Income Tax Department from 1917-1918 to 1922-1923 Fiscal Years ............................................................................................................................................. 67 Fig 3.1: Tax and Non-Tax Revenue Yield from 1923-1924 to 1927-1928 .................................. 85 Fig 3.2: Main Sources of Tax Revenue versus Other Tax Sources, 1923-1924 to 1927-1928 .... 85 Fig 3.3: Taxation and Land Sales in Southern Rhodesia .............................................................. 98 Fig 3.4: Customs and Excise Duties Percentage to Total Revenue, 1924-1928 ......................... 100 Fig 3.5: Average Revenue, Expenditure, Deficit and Surplus, 1897-1928 ................................. 103 Fig 3.6: Total Government Expenditure, 1924-1928 .................................................................. 104 Fig 4.1: Classification of Broad Categories of Expenditure, 1935-1936 .................................... 128 Fig 4.2: Government Expenditure on Roads from Revenue and Loan Funds, 1935-1939 ......... 134 Fig 5.1: Southern Rhodesia National Savings Campaigns ......................................................... 152 Fig 6.1: Comparison of Expenditure from Revenue and Loan Account, 1946-1951 ................. 181 Fig 6.2: Expenditure on Various Departments from Revenue Funds, 1946-51.......................... 183 Fig 6.3: Fiscal Commission Recommendations on Total Revenue Allocation for 1952-1953 Fiscal Year .................................................................................................................................. 190 Table 1.1: Hut Tax Collected in Mashonaland, November 1897 ................................................. 29 Table 1.2: The Rhodesian League’s Calculations of the 7.5 million pounds ............................... 43 Table 1.3: Rhodesian League’s Calculations of the Company’s Profits and Revenue, 1912 ....... 44 Table 1.4: Rhodesian League Calculations of Administrative Revenue Surplus ......................... 45 Table 2.1: Receipts of the Beira, Mashonaland and Rhodesia Railway Companies .................... 55 Table 2.2: Capital Accounts Increase from 1908 to 1919 ............................................................ 71 Table 2.3: Comparison of Taxes at Rhodesia and Union Rate in 1921 ........................................ 76 Table 3.1: Summary of Average Taxable Incomes, 1926 Fiscal Year ......................................... 88 Table 4.1: Revenue and Expenditure, 1930 to 1934 ................................................................... 113 Table 4.2: Total Expenditure for the Ministry of Agriculture and Lands, 1929-1934 ............... 117 Table 4.3: Expenditure on the Mines Department, 1930-1934 ................................................... 118 Table 4.4: Final Revenue Statements showing Major Heads of Tax Revenue as Audited, 1930 to 1938............................................................................................................................................. 120 Table 4.5: Southern Rhodesia Primary Exports, 1930-1938 ...................................................... 124 vi Table 4.6: Statement Showing the Borrowing Powers of the Government of Southern Rhodesia ..................................................................................................................................................... 133 Table 4.7: Revenue, Expenditure and Surplus, 1935-1938 ........................................................ 135 Table 5.1: Secondary Industry Expansion, 1939-1946 ............................................................... 147 Table 5.2: Taxable Income of Farmers, 1937-1938 to 1944-1945 ............................................. 149 Table 5.3: Income Tax, EPT and Tobacco Sales Tax, 1939-1945 ............................................. 154 Table 5.4: Southern Rhodesia’s War Expenditure from Revenue and Loan Account, 1939-1945 ..................................................................................................................................................... 156 Table 6.1: Expenditure on Road Construction and Maintenance 1946-1951 ............................. 168 Table 6.2: Geographical Distribution of Settler Housing Shortage in 1946 ............................... 169 Table 6.3: Revenue and Expenditure for Years 1946 to 1951 .................................................... 177 Table 6.4: Southern Rhodesia Public Debt as of 1949 ............................................................... 180 vii Introduction This study examines Southern Rhodesia’s fiscal system from 1890 to 1953. It focuses on the interplay between politics, revenue collection and expenditure. In unpacking the evolution of the processes of revenue collection and expenditure by the British South Africa Company (BSAC) administration and successive administrations under the Responsible Government, it also entails discussing colonial state-making. Informing this approach is the analysis of often conflicting, but sometimes collaborative, economic and fiscal interests in Southern Rhodesia during the period under review.1 From the onset, fiscal administration in Southern Rhodesia depended on the political structure. The colony’s political system itself also relied on the establishment of administrative apparatus used by the state in decision making.2 The administrative set up included constitutional, legal and institutional frameworks that guided the state’s operations, thereby influencing fiscal decision making of the government. The system successive governments during the period under review were distinctive. The first form of government was the Company Administration. It established an administrative structure aimed at fulfilling its commercial interests. The second form of government, established in 1923, was a Responsible-Government, enjoying some modicum of autonomy different from neighbouring colonies like Northern Rhodesia and Nyasaland that eventually came under the Colonial Office administration. After inheriting an administrative structure from the BSAC, successive Responsible Governments worked to establish institutions designed to create a permanent white settlement in the colony. The colony’s fiscal system after 1923 conformed to the vision of establishing a settler colony in Southern Rhodesia. Intricately embedded in the governance structure was the fiscal system. As Bonney put it, studying the fiscal system depends on understanding the country’s established administrative state apparatus and the administrative set up.3 It is within this context that the thesis examines the changing aspects 1 Government of Southern Rhodesia, Official Year Book of the Colony of Southern Rhodesia: Statistics and General Information, 1, (Salisbury: 1930); Government of Southern Rhodesia, Official Year Book of the Colony of Southern Rhodesia: Statistics mainly for the Period 1924-1928, 2, (Salisbury: 1930); Government of Southern Rhodesia, Official Year Book of Southern Rhodesia with Statistics mainly up to 1950, 4, (Salisbury: 1952). 2 S.S. Erikisen, ‘State Formation and Politics of Regime Survival: Zimbabwe in Theoretical Perspective’, Journal of Historical Sociology, 23:2 (2010), 319-321; S. I. Lindberg, ‘Forms of States, Governance, and Regimes: Re- conceptualizing the Prospects for Democratic Consolidation in Africa’, International Political Science Review, 22:2 (2001), 175. 3 R. Bonney (Ed) The Rise of the Fiscal State in Europe, c. 1200-1815 (Oxford: Oxford University Press, 1999), 2. See also D. A. Brautigam (et al), Taxation and State-Building in Developing Countries: Capacity and Consent (Cambridge: 1 of the colony’s fiscal policy in relation to the state’s financial needs to maintain and operate its apparatus. The capacity to raise and allocate revenue in Southern Rhodesia changed over time and space. The nature of the economy influenced these changes. As Patrick Bond explained, ‘during the [colonial] years, [Southern Rhodesia] experienced several dramatic shifts in the political- economic character, best reflected in the fits and starts through which the mines, farms and industry suffered and prospered.’4 The changes included growth or decline of various industries or economic sectors such as mining, agriculture, manufacturing and commerce. The growth or decline of these industries or economic sectors changed the nature of the country’s revenue base. For instance, from the early years of the colony up to the late 1930s, mining remained the foundation of Southern Rhodesia’s economy. However, from the late 1930s with the outbreak of the Second World War, Southern Rhodesia’s reliance on the mining industry as the base of the economy and primary source revenue gradually decreased. The Colony’s economy expanded, agriculture and manufacturing contributing to the national purse. This changed the outlook of fiscal policy implementation. For the colony’s fiscal system to operate optimally, it relied not only on the economy but also on the state-society relations. The state’s ability to formulate and deploy fiscal policies depended precisely on the nature of its relations with economic interest groups and governmental institutions.5 The economic interest groups in Southern Rhodesia, excluding the Africans, were drawn from the country’s main economic sectors: agriculture, mining, commerce, civil service (labour) and secondary industries. They constituted part of the base from which the government could extract revenue through taxes and other non-taxation methods. Sources of revenue had a significant impact on the colony’s patterns of state financing. In most cases, interest groups influenced the state’s expenditure decisions, arguing that they financed the government through taxes. Cambridge University Press, 2008), 2; B. Yun-Casalilla and P. K. O’brien, The Rise of Fiscal States: A Global History, 1500-1914 (Cambridge: Cambridge University Press, 2012). 4 P. Bond, Uneven Zimbabwe: A Study of Finance, Development and Underdevelopment (Trenton: Africa World Press, 1998), 39. 5 D. J. Murray, The Governmental System in Southern Rhodesia (Oxford: Clarendon Press, 1970). 2 Why a History of Southern Rhodesia’s Fiscal System?: Historiographical Review The study seeks to unpack Southern Rhodesia’s development through the lens of its fiscal system. It offers a continuous assessment of fiscal evolution covering two administrative governments and over a period of 63 years. Studies of the development of the colonial state in general and Southern Rhodesia’s economy in particular have tended to be sectoral.6 Historical accounts that specifically address Southern Rhodesia’s fiscal development are lacking. Except for Phimister’s path-breaking 1988 book,7 most studies have either looked at Southern Rhodesia’s economic, social and political development using sectors such as agriculture, mining, industrial development and trade as well as the legal and governmental system. Those who have attempted to study the fiscal system of Southern Rhodesia, for example, Garmany, Curtin, McDowell and Harris have only focused on the Federation of Rhodesia and Nyasaland.8 Nicholls, the only to have attempted the examination of the fiscal development of the colony, only documents the constitutional provisions on managing its financial system during the first ten years of the Responsible Government.9 The existing historiography examined the state’s income and expenditure policies without an appreciation of how the state, as an agent of colonial economic development, was funded. Thus, studies on the economic history of Southern Rhodesia remain incomplete. Understanding where the state obtained its revenue tells us about the history of its development, evolving state-society relations and the economic opportunities and challenges it faced through its developmental path.10 In this regard, scholars have lately deepened their analyses of the historical dynamics between revenue and colonial state formation by providing theoretical frameworks that capture the 6 See, but not limited to, L. Gann, A History of Southern Rhodesia: Early Days to 1934 (London: Chatto and Windus, 1965); I. R. Phimister, An Economic of Zimbabwe 1890-1948: Capital Accumulation and Class Struggle (London: Longman, 1988); Murray, The Governmental System in Southern Rhodesia; C. Leys, European Politics in Southern Rhodesia (London: Oxford University Press, 1959); P. Mosley, The Settler Economies: Studies in the Economic History of Kenya and Southern Rhodesia, 1900-1963 (Cambridge: Cambridge University Press, 1983) and G. Arrighi, The Political Economy of Rhodesia (The Hague: Mouton, 1967). 7 See Phimister, An Economic and Social History of Zimbabwe to 1948. 8 J. W. Garmany, ‘Revenue Allocation in a Federal State: The Experiences of Rhodesia and Nyasaland’, South Africa Journal of Economics, 30 (1962), 50-60; T. R. C. Curtin, ‘Federal Finance in Central Africa’, (Msc Thesis: London University, 1964); H. McDowell, ‘The Fiscal Structure of the Federation’, Proceedings of the Rhodesian Economic Society, (1962); P. S. Harris, ‘Regression and Inertia in the Rhodesian Fiscal Structure: A Comment on the 1972 Budget’, Rhodesia Journal of Economics, 6:2 (1972), 9-20. 9 K. W. V. Nicholls, ‘The Public Finances of Southern Rhodesia during the First Ten Years of Responsible Government’, (MA Dissertation: University of South Africa, 1936). 10 T. Mkandawire, ‘On Tax Efforts and Colonial Heritage in Africa’, Journal of Development Studies, 46:10 (2011), 1647-1669. 3 fundamental relationship between colonial state-building efforts, fiscal capacity/system and long- term economic development.11 However, this recent focus on Africa’s past has remained unexplored in Southern Rhodesia’s historical context. While studies have examined the colony’s monetary development,12 little attention has been paid to its fiscal development in connection with economic growth and political dynamics. Much has been written on the economic, political and social history of Southern Rhodesia.13 In understanding the establishment of the colonial fiscal system, this study benefits immensely from 11 Given the importance of the fiscal system in the development of colonial Africa, the subject has recently received greater scholarly attention. Since 2010, there has been a surge on the study of Africa’s fiscal past and studies have either focused on the whole continent or particular country studies. Such works include E. Frankema, ‘Raising Revenue in the British Empire: How Extractive were Colonial Taxes?’, Journal of Global History, 5:2 (2010), 447-477; ‘Colonial Taxation and Government Spending in British Africa, 1880-1940: Maximising or Minimising Effort?’, Explorations in Economic History, 48:1 (2011), 136-149; E. Frankema and W. van Waijenburg, ‘Metropolitan Blueprints of the Colonial Taxation? Lessons from the Fiscal Capacity Building in British and French Africa, c. 1880- 1940’, Journal of African History, 5:3 (2014), 371-400; M. van Waijenburg, ‘Financing the African Colonial State: The Revenue Imperative and Forced Labour’, Journal of Economic History, 78:1 (2018), 40-80; L. Gardner, Taxing Colonial Africa: The Political Economy of British Imperialism (Oxford: Oxford University Press, 2012); A. Keese and M. Santos, Administration and Taxation in former Portuguese Africa (Cambridge: Cambridge Publishing Scholars, 2015); T. Ndlovu, ‘Fiscal Histories of Sub-Saharan Africa: the Case of Botswana’, University of the Witwatersrand Working Paper Series: No.1, August 2016; ‘Fiscal Histories of Sub-Saharan Africa: The Case of South Africa’, University of the Witwatersrand Working Paper Series, 2, 2017; A. Gwaindepi, ‘State Building in the Colonial Era: Public Revenue, Expenditure and Borrowing Patterns in the Cape Colony, 1820-1910’, (PhD Thesis: Stellenbosch University, 2018). 12 For example, see T. Nyamunda, ‘Financing Rebellion: The Rhodesian State, Financial Policy and Exchange Control, 1962-1979’, (PhD Dissertation: University of the Free State, 2015); A. Mseba, ‘Money and Autonomy in a Settler Colony: The Politics of Money Regulation in Colonial Zimbabwe, 1932-1945’, in C. Y. Hsu and E. Vause, (Eds) The Cultural History of Money and Credit: A Global Perspective (Lanham: Lexington Books, 2016). For early accounts of monetary and banking history of Southern Rhodesia, see J. A. Henry, Sixty Years north of Limpopo: The Story of the coming of the Standard Bank to Rhodesia and Nyasaland: With some Account of the Early Days (Salisbury: The Standard Bank of South Africa, 1953); The Standard Bank, The First Hundred Years of the Standard Bank (Oxford: Oxford University Press, 1963); A. P. A. Graffety-Smith, ‘Central Bank for the Federation’, Optima, 6:3 (1956); R. A. Sowelem, Towards Financial Independence in a Developing Economy: An Analysis of the Monetary Experience of the Federation of Rhodesia and Nyasaland, 1952-1963 (London: Allen & Unwin, 1967); W. T. Newlyn and D. C. Rowan, Money and Banking in British Colonial Africa: A Study in the Monetary and Banking Systems of Eight British African Territories (Oxford: Clarendon Press, 1954). 13 See ,for example, G. Arrighi, ‘Labour Supplies in Historical Perspective: A Study of the Proletarianisation of the African Peasantry in Rhodesia’, Journal of Development Studies, 6:3 (1970), 197-234; The Political Economy of Rhodesia; C. H. Thompson and H. W. Woodruff, Economic Development in Rhodesia and Nyasaland (London: Dennis Dobson, 1953); W. J. Barber, The Economy of British Central Africa (London: Oxford University Press, 1961); the second chapter of Nyamunda, ‘Financing Rebellion’; P. Mosley, Settler Economies: Studies in the Economic History of Kenya and Southern Rhodesia, 1900 to 1963 (Cambridge: Cambridge University Press, 1983); Leys:, European Politics in Southern Rhodesia; Palley, A Constitutional and Law History of Southern Rhodesia, 1888-1965; L. H. Gann and M. Gelfand, Huggins of Rhodesia: Man and His Country (London: Allen & Unwin 1964); Lee, ‘Politics and Pressure Groups in Southern Rhodesia, 1890 to 1923’; P. F. Hone, Southern Rhodesia (London: G. Bell and Sons, 1914), 99-112; R. Gray, The Two Nations: Aspects of the Development of Race Relations in the Rhodesias and Nyasaland (London: Oxford University Press, 1960); Murray, The Governmental System in Southern Rhodesia; D. G. Clarke, 'The Political Economy of Discrimination and Underdevelopment in Rhodesia with Special Reference to African workers 1940- 4 scholarship on Southern Rhodesia’s occupation and early development. For instance, Henri Rolin traces the occupation and development of Southern Rhodesia, and the government set up by the BSAC.14 The British Empire historian John Galbraith in his book, Crown and the Charter, chronicles Rhodes’s centrality in the establishment of the BSAC.15 The book argues that Rhodes was a central figure in the colonisation of Southern Rhodesia. He situates his argument within the broader empire project. He demonstrated, as John Gleanson observed, how Rhodes was able to manipulate those who ‘thwarted or abetted his triumphs.’16 Samir Amin, making a broader analysis of colonial occupation and African governments, argued that the inquiry into Africa’s past should be based on governance structure and existing resources that the colonial administrators could utilise.17 There were, Amin argued, various forms of African economies at the beginning of colonialism. Amin divided colonial Africa’s economies into three distinct groups: Africa of cash crops, of the chartered companies, and of labour reserves.18 These colonies had different fiscal demands. This thesis employs Amin’s approach to understand the foundations of Africa as labour reserves and under chartered companies, as these two aspects best describe Southern Rhodesia. There are other scholars who have looked at colonial Africa’s fiscal development, for example, Leigh Gardner.19 Specifically looking at Kenya and Northern Rhodesia she identified three aspects of Africa’s fiscal past. First, she argued that it is difficult to understand colonial policy without considering the nature of colonial state and resource constraints. Secondly, fiscal policies reflected and shaped the economies of individual colonies. Thirdly, putting fiscal issues at the centre of the British Empire’s history helps to answer questions such as the purpose and impact of British imperialism in Africa.20 Worth to note is that her study is focused on the 1973', (PhD Thesis: University of St Andrews, 1975); C. van Onselen, Chibaro: African Mine Labour in Southern Rhodesia 1900-1933 (London: Pluto Press, 1976); R. L. Cole, ‘The Tariff Policy of Southern Rhodesia, 1899-1963’, Journal of Rhodesian Economics, 2:2 (1968), 28-47; T. O. Ranger, Revolt in Southern Rhodesia 1896-97: A Study in African Resistance (London; Heinemann Educational Books, 1967); H. Rolin, Rolin’s Rhodesia (Bulawayo: Books of Rhodesia, 1978); Nicholls, ‘The Public Finances of Southern Rhodesia’. 14 Rolin, Rolin’s Rhodesia. See also H. M. Hole, The Making of Rhodesia (London: Macmillan & Co. Ltd, 1926); Old Rhodesian Days (London: Macmillan & Co. Ltd, 1928). 15 Galbraith, Crown and the Charter. 16 J. H. Gleanson, Review Article, ‘Crown and Charter: The Early Years of the British South Africa Company’, History Reviews of New Books, 3:8 (1975), 212-213. 17 S. Amin, ‘Underdevelopment and Dependence in Black Africa-Origins and Contemporary Forms’, Journal of Modern African Studies, 10:4 (1972), 503-524. 18 Ibid. 19 Gardner, Taxing Colonial Africa: The Political Economy of British Imperialism. 20 Ibid, 1-2. 5 British Empire forms of taxation and how the metropole influenced the development of fiscal systems in the empire. This thesis differs from Gardner’s work as it looks at a colony whose fiscal development received no intervention from the metropole. Despite the convergence of colonial occupation and state formation, there are fundamental differences between this thesis and scholarship that focus on Southern Rhodesia’s occupation. For instance, H. M. Hole focused on the influence of individuals, particularly Rhodes. As an official of the BSAC, his account casts a favourable light of the Company’s activities during the occupation process.21 Rolin, on the other hand, grappled with several important issues. His book tackled topics that ranged from the structure of the Rhodesian society, Native Administration, financial regimes and labour problems in Southern Rhodesia. Valuable for this thesis is his chapter four on financial regimes. In this chapter, he wrestled with the question of land ownership, the important asset that provided the company administration’s financial base.22 The land question became a topical issue covered in the first two chapters of this thesis. Land was an important asset for the BSAC. The Company used land to persuade shareholders to finance its occupation endeavour. However, unlike Rolin’s account, this thesis will examine how the Company government’s failure to separate revenue collected from land through mining, agriculture and land sales frustrated the shareholders and the settlers. The frustrations influenced settlers to police the Company’s fiscal policy, starting in 1903. When the Company finally lost its land rights through the 1918 Privy Council judgement, Phimister observed, it stopped financing the development of the colony, intensifying calls for the end of the BSAC administration.23 The thesis examines the history of fiscal development of the colony through sustained investigation of the country’s political dynamics on revenue collection and changing expenditure patterns. Scholars writing on early political development in Southern Rhodesia have focused on the 21 Hole, The Making of Rhodesia; Old Rhodesian Days. 22 Rolin’s view and opinion over Southern Rhodesia were castigated by R. C. Hawkins as reactive to criticisms passed by the Englishman on King Leopold’s Belgian Congo. Hawkins argues that Rolin insinuated that the British should mind their own business on colonial administration of Africa. For more on this see R. C. Hawkins, ‘The Laws and Administration of Rhodesia’, Journal of the Royal African Society, 13:49 (1913), 45-50. 23 Phimister, An Economic and Social History of Zimbabwe, 99. The Privy Council was a formal body of Advisers to the Imperial Government and it acted as the Court of Appeal for the entire British Empire. 6 expansion of settler politics in the colony, giving different interpretations.24 For example, Gann and Gelfand’s book is a sympathetic biography of Godfrey Huggins who was active in Southern Rhodesia’s political arena from around 1914, became the colony’s Prime Minister in 1933 and the first Federal Prime Minister in 1953.25 Written in 1964, and covering a period of over 60 years, the book shows the socio-political and economic development in the colony, emphasising the centrality of Huggins in the process. However, other scholars such as Nhamo Samasuwo have dismissed the book arguing that it ‘fell victim of celebratory trap’ focusing on Huggins as the giant of political and economic policies during the Responsible Government.26 Despite its celebratory tone, the book helps to understand Southern Rhodesia’s economic trajectory. The thesis contributes to this understanding by demonstrating how Huggins financed his economic policies. Additionally, the thesis goes beyond Huggins by examining how other political players and economic interest groups influenced the fiscal trajectory of the colony. This is particularly tackled in chapter four, five and six. Leys also wrote on the European politics in Southern Rhodesia. However, his entry point to Southern Rhodesia’s political, economic and social development is different from Gann and Gelfand. While Gann and Gelfand used Huggins as the central figure to investigate the development of Southern Rhodesia, Leys uses the notion of interest groups. He concluded that interest groups in the colony were organised around a common objective of maintaining white racial superiority over Africans. While this thesis acknowledges Leys’s preposition by arguing that fiscal policies were basically formulated to promote white settler development, it refutes the notion that interest groups were friendly and converged around a common goal. Interest groups sometimes clashed with each other over taxation, such as the imposition of the land tax in 1924, the Gold Premium Tax (GPT) in 1932 and 1940, and the introduction of Tobacco Sales Tax (TST) in 1942.27 24 See, among others, Lee, ‘Politics and Pressure Groups in Southern Rhodesia, 1890 to 1923’; ‘The Origins of the Responsible Government Movement’, Rhodesia History, 6 (1975), 33-53; Leys, European Politics in Southern Rhodesia; Murray, The Governmental System in Southern Rhodesia; Hone, Southern Rhodesia. 25 Gann and Gelfand, Huggins of Rhodesia. 26 N. Samasuwo, ‘Food Production and War Supplies: Rhodesia’s Beef Industry during the Second World War, 1939- 1945’, Journal of Southern Africa Studies, 29:2 (2003), 487-502. 27 See Chapters 3, 4 and 5. 7 Also contributing to the idea of interest group politics in Southern Rhodesia were Murray and Lee. Murray used the governmental systems that determined the decision making process. He argued that the administrative structure comprised of six sectors in Southern Rhodesia: agriculture, mining, commerce and industry, civil service, European labour and African Affairs. Analysing economic developments, Murray emphasised that the successive governments depended on the representative economic groups connected to the six sectors of the country. Challenging Leys’ characterisation of the interest groups as harmonious, Murray shows that inter-group conflict was rampant as they sought to influence the decision making process in the governmental system of the country. In addition to areas of conflict highlighted by Murray, this thesis demonstrates that another aspect in which interest groups contested each other was over revenue collection and expenditure by the state. The thesis, thus, unpacks these inter-group as well as interest-group-state contestations over the country’s fiscal policy. Lee lends support to Murray’s depiction of interest group conflicts.28 In her analysis of the Company Rule, Lee shows how various interests competed to influence the government’s decisions. These intergroup contestations had serious political ramifications. According to Lee, apart from growing demands for change in the country’s administrative system, the settlers, as taxpayers especially after the imposition of the income tax in 1918, did not agree on which path to follow: to gain total control of the colony or join the Union of South Africa.29 Taxation became topical during the Responsible Government Referendum campaigns. Two opposing political parties emerged: the Responsible Government Association (RGA) in 1917 and the Rhodesia Union Association (RUA) in the same year.30 These two parties, as demonstrated in chapter two, used the fiscal system as part of their main reasons in support or oppose joining the Union of South Africa and establish Responsible Government. After the transfer of power in 1923, conflicts between agriculture and mining industries over taxation and government expenditure, became even more pronounced than before. The conflicts notwithstanding, the change of administration strengthened the revenue collection capacity of the colony, unlike other colonies that were directly ruled by the Imperial Government through the Colonial Office. Building on Jeffrey Herbst’s argument that the new government 28 Lee, ‘Politics and Pressure Groups in Southern Rhodesia, 1890 to 1923.’ 29 Ibid. 30 L. H. Gann, A History of Southern Rhodesia: Early Days to 1934 (London: Chatto and Windus, 1965). 8 comprised an interventionist state,31 the thesis shows that the post 1923 government implemented fiscal policies to promote commercial agriculture to compliment mining as the base of economic development. This became clearer during the Great Depression because the colony’s economic base was small and highly vulnerable to changes in the world economy. The state acted as the buffer to vagaries of international changes and international capital. As Ian Phimister, Colin Stoneman and Lionel Cliffe have argued, the state acted as the regulator between local and international capital, by ‘accommodating imperialism.’32 Additionally, when the settlers took up farming, they were undercapitalised and threatened by African production, thus, the state had to finance white commercial farming. Overall, the aim of the government was to create a settler state with a system of white domination and all ‘state institutions created to ensure that.’33 While acknowledging the overall argument made by the preceding scholars, this study shows how the colony’s fiscal policy underscored the overall objective of creating a permanent white settlement in the colony despite the challenges faced by the government. The fiscal terrain experienced during the 1920s changed in the following decade. The onset of the Depression in 1929 posed the threat of an economic meltdown for the colonial state. Inquiry into the role of the state in protecting and promoting economic growth during this period has received considerable scholarly attention. Ian Phimister, Victor Machingaidze, James Edwards, Richard Gray and Patrick Bond examined the effects of the Depression on agriculture, mining, administration and politics.34 There is a consensus among these scholars that the Depression resulted in economic debility that greatly influenced the politics of the day. In essence, Southern Rhodesia’s economy was a primary products export oriented one. The decline in demand for primary products had serious consequences for trade and a low revenue income for the colonial government. External debt that was £350 000 in 1923 was well over £2 000 000 in 1932.35 31 J. Herbst, State Politics in Zimbabwe (Harare: University of Zimbabwe Press, 1990), 18-25. See also C. Sylvester, Zimbabwe: The Terrain of Contradictory Development (Boulder: Westview, 1991). 32 I. R. Phimister, ‘Accommodating Imperialism: The Compromise of the Settler State in Southern Rhodesia’, Journal of African History, 25:3 (1984), 279-294; C. Stoneman and L. Cliffe, Zimbabwe: Politics, Economics and Society (London: Pinter Publishers, 1989). 33 Eriksen, ‘State Formation and the Politics of Regime Survival’, 319. 34 Phimister, An Economic and Social History of Zimbabwe; V. E. M. Machingaidze, ‘The Development of Settler Agriculture in Southern Rhodesia with Special Reference to the Role of the State’, (PhD Thesis: University of London, 1980); J. A. Edwards, ‘Southern Rhodesia: The Response to Adversity, 1935-1939’, (PhD Thesis: University of London, 1978); Gray, The Two Nations; Bond, Uneven Zimbabwe. 35 Bond, Uneven Zimbabwe, 51. 9 Phimister argued that to mitigate the effects of the Depression the colonial state subjected Africans to several direct and indirect forms of taxation to salvage the economy from chilling blasts of the Depression.36 Phimister’s argument is particularly valuable for this thesis as it challenges Lord Hailey’s argument that Southern Rhodesia avoided an increase in African direct taxation.37 Hailey contented that Southern Rhodesia was able to raise the bulk of its revenue from other sources like income tax on individuals and corporations levied from 1918.38 This study show a plethora of weighty taxes that burdened and undermined Africans to the benefit of the settlers. For, as James observed, the £1 per annum paid by Africans in Southern Rhodesia was the highest in the region and put unbearable burden on them vis-a-vis low wages they received.39 The thesis also examines a motley of other policies introduced by the government, which include balancing the budget through cutting unnecessary expenditure, utilisation of surplus revenue accumulated in the twenties and imposition of new taxes to cover for revenue shortfall, as it dealt with the effects of the Depression.40 The state also established several controls and regulations ranging from price controls, subsidies (especially to help white farmers and small miners) and public works to solve the problem of unemployment. This was a mini-new deal of some sort. While Phimister’s analysis shows that the Depression lasted until the outbreak of the Second World War in 1939,41 this study shows that from as early as 1934, the policies implemented by the state started showing positive results, mitigating some of the devastating effects of the Depression. In 1934, for the first time since the outbreak of the Depression, the Treasury experienced budget surplus. As a result, the government was able to increase expenditure on agriculture, roads, European education, hospitals and public works.42 Additionally, during the Depression and recovery period, the state established a somewhat corporatist system in which interest groups like Chambers of Mines and agricultural associations worked in collaboration with the government in its effort to rebuild the economy.43 The improved financial status of the country intensified the demands for tax reforms in 1937. 36 Phimister, An Economic and Social History of Zimbabwe, 183-88. 37 NAZ, SRG4, Auditor General’s Report, 1932; African Observer, 21 Feb 1934. 38 W. M. H. Hailey, An African Survey: A Study of Problems Arising in Africa South of the Sahara, 3rd Edition (London: Oxford University Press, 1957), 646. 39 Edwards, ‘Southern Rhodesia: The Response to Adversity, 1935-1939’, 136-137. 40 See the second section of Chapter 4. 41 See Phimister, An Economic and Social History of Zimbabwe, Chapter 4. 42 The Rhodesia Herald, 17 March 1935. 43 For more details, see L. Cliffe, ‘Zimbabwe’s Political Inheritance’, in C. Stoneman (Ed) Zimbabwe’s Inheritance (London: MacMillan, 1981). 10 The outbreak in 1939 of the Second World War brought with it new dynamics. A voluminous literature has explored the effects of the war on the Rhodesian economy.44 Broadly, the consensus is that the war acted as a powerful stimulus to the economy. For instance, Godfrey Hove, Constantine Munhande and Nhamo Samasuwo share the view that the war increased internal and external demand for agricultural produce induced by wartime import restrictions and the expansion of the domestic market.45 Phimister, on the other hand, argued that the external demand for minerals provided ‘a fresh impetus’ in the mining industry and production of strategic base minerals, notably chrome.46 Others, including Victor Gwande, Thompson and Woodruff looked at the state’s position towards financing the development of secondary industries.47 While most of the works on the impact of the Second World War on Southern Rhodesia have, to varying degrees, made reference to the colony’s fiscal system, this is usually in passing. It must be noted that the focus of such works is not to understand the wartime fiscal reconfigurations to any depth, but rather to use fiscal developments as a point of reference to advance their arguments on the positive economic development brought by the war.48 Contrary to the approach that used fiscal policies as point of reference to economic development, this thesis focuses on the financial burden the Second World War placed on Southern Rhodesia’s fiscal system. Overall, this thesis shows how the settler government realigned its fiscal policy in response to the economic realities of the war and the political constraints it had to navigate. It examines the efficacy of revenue mobilisation 44 C. Munhande, ‘Global War and local economy: A Study of the Impact of the Second World War on Southern Rhodesian Tobacco Industry with Special Reference to Marketing, 1939-1965’, The Dyke, 2:2 (2005), 76-89; N. W. Samasuwo, ‘There is Something About Cattle’: Towards and Economic History of the Beef Industry in Colonial Zimbabwe, with Special Reference to the Role of the State, 1939-1980’, (PhD Thesis: University of Cape Town, 2000); ‘Food Production and War Supplies’; G. Hove, ‘The State, Farmers and Dairy Farming in Colonial Zimbabwe (Southern Rhodesia), c.1890-1951’, (PhD Thesis: Stellenbosch University, 2015); Gann and Gelfand, Huggins of Rhodesia: Man and his Country; L. Tow, ‘The Manufacturing Economy of Southern Rhodesia: Problems and Prospects’, (PhD Thesis: Columbia University, 1960); E. S. Pangeti, ‘The State and Manufacturing Industry: A Study of the State as Regulator and Entrepreneur in Zimbabwe’, (PhD Thesis: University of Zimbabwe, 1996); Arrighi, The Political Economy of Rhodesia; Phimister, An Economic and Social History of Zimbabwe; V. M. Gwande, ‘Organised Secondary Industry and the State in Zimbabwe, 1939-1979’, (PhD Thesis: University of the Free State, 2018). 45 Hove, ‘The State, Farmers and Dairy Farming in Colonial Zimbabwe’, Chapter 6; Munhande, ‘Global War and local economy’; Samasuwo, ‘Food Production and War Supplies.’ 46 Phimister, An Economic and Social History of Zimbabwe 1890-1948, 219-239. 47 Thompson and Woodruff, Economic Development in Rhodesia and Nyasaland; Gwande, ‘Organised Secondary Industry and State in Zimbabwe’, 35. 48 On the country’s taxation and expenditure policies see sections in D. Johnson, ‘The Impact of the Second World War on Southern Rhodesia: With Special Reference to African Labour, 1939-1948’, (PhD Thesis: University of London); N. Mlambo, ‘Arms Production and War Supply in Southern Rhodesia, 1939-1945: Limitations of the Industrial War Effort of South Africa and Zimbabwe’, (PhD Thesis: University of Cape Town, 2000). 11 mechanisms the country implemented during the war to finance the war effort and economic development. Scholars have also analysed Southern Rhodesia’s economy during the postwar period. They are generally agreed that following the end of the war, the economic development of Southern Rhodesia further accelerated. For example, Irvine, Stoneman, and Thompson and Woodruff share the same view that the postwar Rhodesian economy maintained its war time momentum and further expanded.49 The consensus among these scholars is that finance was available during postwar period. For instance, Irvine argued that until 1951 finance was not a limiting factor in Southern Rhodesia’s postwar development.50 Stoneman emphasised that postwar availability of finance in Southern Rhodesia was a result of a number of issues, particularly continued demand for raw materials and flight of capital from Britain and South Africa.51 The continued boom attracted foreign capital between 1945 and 1953, which amounted to £139 million and also increased revenue for the government.52 Thompson and Woodruff noted due to increased availability of finance, Southern Rhodesia sustained high levels of investment in postwar period.53 They argued that after the war, national income devoted to investment doubled between 1946 and 1949, from 13 per cent to 30 per cent and by 1952 it was 50 per cent of total investment. Despite the positive outlook of postwar developments in Southern Rhodesia, the thesis examines how the government was still financially constrained. In this regard, it examines how the end of the war brought new and several fiscal challenges for the state. Two major developments are worthy to note. First, high levels of white immigration resulted in increased demand for social services. This put pressure on Southern Rhodesia’s fiscus resulting in budget deficit in 1946 and 1947. Secondly, due to importation of capital goods, value of imports outstripped the value of exports, leading to adverse balance of payment.54 The situation was worsened by the fact that Southern Rhodesia, as a self-governing colony, did not qualify for Colonial Development and 49 Thompson and Woodruff, Economic Development in Rhodesia and Nyasaland, 175; Gray, Two Nations, 204; Stoneman, 31-38; ‘Foreign Capital and Reconstruction of Zimbabwe’, Review of African Political Economy, 11 (1978), 64. See also Arrighi, The Political Economy of Rhodesia, 57-58. 50 Irvine, Balance of Payments of Rhodesia and Nyasaland, 313. 51 Stoneman, ‘Foreign Capital and Prospects for Zimbabwe’, 31. 52 Stoneman, ‘Foreign Capital and Reconstruction of Zimbabwe’, 64. 53 Thompson and Woodruff, Economic Development in Rhodesia and Nyasaland, 175. 54 See The African Central Statistical Office, ‘The Balance of Payment of Southern Rhodesia, 1939-1947’, Economic and Statistical Bulletin of Southern Rhodesia, 16:13 (1948), 388-404. 12 Welfare Assistance that Britain offered to its colonies for postwar reconstruction. The government made efforts to find new and local sources of finance to fund its postwar development. To this end, the colonial government resorted to its pre-war fiscal policies of eliminating non-essential expenditure. It also controlled the importation of goods to maintain a positive balance of payments. These arguments are scrutinised in chapter six. The preceding literature review has shown the silences and the overlooked dimensions of the economic development of Southern Rhodesia. More apparent is how the financing of the state and its activities looms large in the existing scholarship. This is the focus of this study. Justification of the Study The study analyses the dynamics of government finance, expenditure, and political development in Southern Rhodesia from 1890 to 1953. It begins in 1890 when the BSAC occupied Mashonaland and imposed colonial rule. The study ends in 1953, when the Federation of Rhodesia and Nyasaland ushered a new administrative dispensation under the Federal State’s supranational government. Transcending the different administrative epochs (Company Administration and succeeding settler Responsible Governments) makes it possible for the study to account for the changes in fiscal management practices, as well as the socio-economic and political considerations that influenced the changes. The study is guided by the following question: How did trends in the national, regional, and global political economy impact on Southern Rhodesia’s fiscal system from 1890 to 1953? To answer this question, the thesis partly examines the financial aspects of the BSAC’s Charter as well as this Company’s sources of revenue and its expenditure during the occupation of Mashonaland and Matebeleland, and the subsequent imposition of colonial rule in Southern Rhodesia, from 1890 to 1913. The study also calls attention to fiscal policies during the period of the consolidation of settler politics from the First World War to granting of Responsible Government in 1923. The vote for a Responsible Government in 1923 was a demonstration of displeasure by settlers of how the BSAC had administered and managed the colony’s finances. With changes in political administration, so were the changes in the fiscal approaches and strategies of the country. The new government established the Legislative Assembly that took over from the Legislative Council established in 1898. The Legislative Assembly was more involved in making fiscal decisions as compared to the Legislative Council. The Legislative Assembly, in 1924, created the Consolidated 13 Revenue Fund (CRF) as a system to manage revenue collection and government expenditure. The thesis, therefore, examines the policies implemented by the Responsible Government to promote development of the colony during the period from 1923 to 1929. In its existence, the Responsible Government bumped up against some major occurrences, such as the Great Depression and recovery (1929- 1938), the Second World War (1939-1945), the postwar reconstruction and negotiations for the Federation of Rhodesia and Nyasaland, all of which impacted on the colony’s public finances. It is these occurrences that the thesis aims to tackle. Researching Southern Rhodesia’s Fiscal History: Sources and Methods In seeking to answer the above-stated questions, this thesis relied on material gathered from a wide range of sources. These were obtained from the National Archives of Zimbabwe (NAZ), the British Online Archives (BOA) and The National Archives at Kew (TNA). The NAZ holds much of the primary sources utilised in this study. They include files on the BSAC-the BR Series, Colonial Command Papers-CMD/CD Series, Colonial Office correspondences and Native Commissioner’s Reports. These show the evolution of the Company Administration, how it raised and expended revenue. The CMD/CD Series provided information on the transition from Company Rule to Responsible Government. These sources are augmented by historical manuscripts of political figures in Southern Rhodesian history such as Charles Coghlan, P.D. L. Fynn, Sir Alfred Milner, Sir Leander Starr Jameson, Sir Chaplin Drummond, among others. These individuals occupied various official positions during the Company Administration and post-1923. Jameson and Drummond occupied the administrator’s position. Fynn was the country’s Treasurer. Milner was the High Commissioner in South Africa and his position influenced political developments in Southern Rhodesia. Coghlan played important role during campaigns for Responsible Government and the formation of Responsible Government Association (RGA). He became the first Premier of Southern Rhodesia in 1923. Their collections revealed political and economic aspects of the Colony. The thesis also made use of CO-Series and DO-Series from the Colonial Office and Dominion Office housed at the TNA. These were crucial in casting the light on the financial relationship between Southern Rhodesia and Britain, especially during the Great Depression, Second World War and the postwar periods, covered by chapters four, five and six. After I failed to secure a visa to go to the United Kingdom, I was fortunate that Professor Ian Phimister was generous enough to share with me some of his collections. Dr. Victor Gwande also helped me with files I needed from TNA. 14 The NAZ also provided published primary material by the Government Departments. These included the Commissioner of Taxes Reports, the Controller of Customs Duties Reports, Statute of Laws, the Auditor General’s Reports and the Official Year Books. These provided statistics on various aspects of Rhodesia. More useful were statistics on tax collection, customs duties, expenditure breakdown and other aspects such as infrastructural development. Commissions of Enquiry set up by the government published their evidence and reports that influenced many government decisions that informed this research. For instance, the 1921 Cave and Buxton Commissions revealed the total amount the colony owed the Company. The 1924 Cost of administration Commission indicated the financial responsibility that the post-1923 government had to assume. Additionally, the 1929 Customs and Tariff Committee reported that the Customs Agreement with South Africa disadvantaged Southern Rhodesia and the country had to review its tariff system. The 1952 Fiscal Commission provided important information on the advantages of joining the Federation of Rhodesia and Nyasaland. Legislative Council and Legislative Assembly Debates also provided useful information on expenditure and revenue matters. They augmented information obtained from official documents. Although they do not provide official political party policies, especially after 1914 when the Rhodesian League and the Common Platform became the two initial political parties during the elections to end the Charter, the debates were important in providing a detailed analysis of different political interests towards various issues discussed in the thesis. The debates were complimented by material from other interest groups and political parties’ documents, all of which were crucial in giving alternative political views. For instance, the Rhodesian League Manifesto and the Responsible Government Association Manifesto provided valuable information on fiscal considerations to join the Union. This information covered the period from 1910 to 1922, discussed in chapters one and two. The thesis also benefited from both local and international newspapers and magazines. The study took cognisance of contrasting views expressed in these newspapers by different commentators on Southern Rhodesia’s development. Key actors on Rhodesia’s policymaking such as the Treasurer, Finance Minister and other senior government officials contributed opinion pieces in these newspapers. The newspapers were crucial in providing alternative information and bridged the gaps were primary sources were not available or silent, especially the ‘Letters to the Editor’ column 15 where Rhodesians would send their views concerning the country’s fiscal issues. The newspapers and magazines included the Morning Post, the Rand Daily Mail, The Rhodesia Herald, The Bulawayo Chronicle, the Truth, the Rialto, Commerce of Rhodesia, The Financier, The Economist and The Country. The Financier, the Truth, the Rialto and the Morning Post suggested evidence backing the settlers and shareholders’ views in chapter one and two, that the Company concealed its profits and declared losses. The Rhodesian Herald and the Bulawayo Chronicle covered the entire period of the study. Commerce of Rhodesia and The Country were particularly useful for chapters four and five. The thesis also utilised statistical figures and tables to analyse the two major aspects of government finance: trends of revenue collection and government expenditure. Due to the unavailability of Annual Financial Statements from 1890 to 1940, the first four chapters relied on Legislative Council and Legislative Assembly budget debates. The debates provided important statistics for revenue collection and expenditure trends and the politics around decisions on revenue mobilisation and allocation. However, keeping track of revenue collected and expenditure patterns from Legislative Council and Legislative Assembly Debates was an audacious task, especially tracking down the final decision reached by the Rhodesian legislators. The situation was compounded by some challenges encountered during the research period. Chief among them were difficulties to access some of the archival material from the NAZ. I could not get the run-down of departmental reports on expenditure. The only available financial statements covering the period from 1930 to 1939 are eight pages of revenue collection statistics without any detail. Additionally, at NAZ I could not get Southern Rhodesia’s financial statements for the period from 1934 to 1953, as they are missing. Fortunately, the BOA has financial statements starting from 1940, a period covered by chapters five and six. Thesis Outline In accounting for Southern Rhodesia’s fiscal development, this thesis is chronologically structured over an introduction, six substantive chapters and a conclusion. The first substantive chapter traces the development of Southern Rhodesia’s fiscal system between 1890 and 1913. It investigates how the early administration of the colony was established and financed. It also looks at the political development that influenced the British South Africa Company’s fiscal decisions. The second chapter, covering the period from 1914 to 1923, examines the settlers’ growing demands for the 16 Company administration to either change its expenditure policies to finance the development of the Colony or relinquish the country’s administration. The settlers were particularly concerned about public finance management, especially revenue from mining, land and income tax. However, in 1914 it was financially unfeasible for the settlers to take over the administration of the colony. The colony was not yet developed to sufficiently rely on its own financial resources, and the Charter was extended for another ten years. Additionally, the chapter examines how the First World War had financial implications on the Rhodesian economy. When the War broke out, the BSAC committed to help. This put the Company Administration under financial difficulties and it proposed to introduce war taxation that culminated in the imposition of income tax, leading to the establishment of the Income Tax Department. The chapter, thus, explores how income taxation became a rallying point of the settlers to end Company rule. Chapter Three, covering the period from 1923 to 1929, focuses on the change of administration from Company rule to Responsible Government. The shift in administration provided the settlers with the opportunity to establish the colony they envisioned. By contrast with the limited expenditure during Company rule, the settler government expanded expenditure to build infrastructure in support of greater white settlement. Expenditure growth reflected on the country’s fiscal base. While the Responsible Government expanded its expenditure, the country’s economy was already in poor shape. Before the 1929 Great Depression, its budget showed a different picture with budget surpluses. It experienced two recessions, first in 1926 and the other one on the eve of the Great Depression in 1928. The situation put the Colony under financial difficulties, challenging the settlers’ position that the country was ‘financially fit’ to govern itself. Chapter Four, covering the period from 1930 to 1938, explores the effects of the Depression on Southern Rhodesia’s economy, focusing on the fiscal measures the colonial state implemented to mitigate the Depression’s challenges. Chapter Five covers the Second World War years, 1939-1945. It examines the Second World War’s impact on Southern Rhodesia’s fiscal system. Much as it provided a conducive environment for economic development, the war crowded the colony’s fiscal space. The settler government was committed to helping the ‘Mother Country’, yet, by contrast to Dominions like Australia, Canada, South Africa and New Zealand, Southern Rhodesia’s financial resources were small. In the end, it imposed new wartime taxes, namely; the Gold Premium Tax (GPT), Excess Profits Tax (EPT) and 17 the Tobacco Sales Tax (TST) to raise more revenue. Through the taxes and a positive balance of trade, Southern Rhodesia experienced a budget surplus of £3 000 000 in 1943, which it offered to Britain as an interest-free loan payable after the war. The taxes also served other purposes. The EPT was imposed to curb profiteering. At the same time, the TST was a measure to ensure that farmers, who had been the favoured child of the government during the Depression, contributed to the country’s financial needs. The introduction of new taxes triggered political debates in the Legislative Assembly and opposition in settler community. By 1945, the government decided to scrap the war taxes. Chapter Six, covering the period from 1946 to 1952, explores the transition from war to peace. It examines how the colony continued to experience economic expansion while facing financial problems. After the war, the colony’s financial position deteriorated as it experienced a budget deficit. This was worsened by other several factors, including increased immigration of white settlers, the 1946/7 drought and a shortage of accommodation that increased the cost of living. The situation remained serious as a self-governing Southern Rhodesia was not eligible for the Colonial Development and Welfare Assistance that Britain offered to its colonies for post war development. The thesis’s conclusion brings together the arguments and major findings of the study through reconciling aims and objectives. It argues that the intersection of revenue and expenditure in Southern Rhodesia influenced and determined the government’s fiscal decisions in different historical contexts. This, in the end, resulted in political contestations and changing outlook of the government’s fiscal policies. 18 Chapter One The Development of Southern Rhodesia’s Fiscal System: The Teething Years, 1890-1913 Introduction This chapter explores how the British South Africa Company (BSAC) set up administrative structures and raised revenue to run Southern Rhodesia in the founding years of the colony. To this end, the chapter traces the emergence and establishment of the fiscal system of Southern Rhodesia between 1890 and 1913 in the context of the colony’s political development during this period. The chapter casts light on the early efforts of the colonial state-making process under the BSAC. After the occupation of Mashonaland in 1890 and the annexation of Matebeleland in 1893, the Company’s ability to finance the cost of governance was the most critical factor in the administration of the territory. This became its first challenge and informed the early stages of fiscal system development in Southern Rhodesia. In this period, the fiscal and budgetary administration approach was gradual, experimental and sometimes ad hoc. The discussion is divided into three sections. The first section outlines the establishment of the BSAC and attainment of the Charter, which granted the Company rights to perform dual duties: first, as the administrator of the colony of Southern Rhodesia and, secondly, to conduct its private commercial business. The second section examines the early establishment of the Company’s administrative duties and how it financed its state-making processes.1 The section analyses the establishment of Southern Rhodesia’s Legislative Council and the Division of Treasury to act as the regulators of the country’s nascent fiscal system. The third section explores the Company’s need for more finance and its efforts to convince shareholders to increase their investment in the BSAC. Focusing on the Company’s dual mandate and the conflicts it spawned, this section also examines the intensification of budgetary debates in the Legislative Council on the Company’s administrative and commercial accounts. 1 From 1890 to 1903, the Company Administration established institutional structures that included the Board of Public Health established in 1892, Mashonaland Native Department in 1894, Administrator’s Division in 1897, Division of the Commissioner of Mines and Public Works in 1897, Department of Education in 1898, Native Department in 1898, Audit Department in 1900, Division of Attorney General in 1900 and Division of Treasury in 1903. 19 The British South Africa Company (BSAC) and the Granting of the Charter: Preparation for Occupation To occupy territories between the Limpopo and Zambezi rivers, Cecil John Rhodes established the BSAC in 1889.2 Armed with the dubious Rudd Concession, signed in 1888 between Charles Rudd, on behalf of Rhodes, and Lobengula King of Matebeleland, the BSAC approached the British government to obtain the Royal Charter to occupy territories between the Limpopo and Zambezi.3 The Charter served as the British government’s legal mandate to occupy territories up north and was in line with the British government’s new imperial policy, ‘imperialism on the cheap.’4 The Rudd Concession, as explained by Robert Blake, gave the BSAC exclusive rights over minerals in territories under Lobengula’s jurisdiction.5 However, besides having the mineral rights granted by the Rudd Concession, the BSAC had to demonstrate to the British government that it could finance colonial occupation without burdening the Treasury at Whitehall. Rhodes’s ability to prove that the BSAC was capable of financing the colonial occupation of Southern Rhodesia allowed the Colonial Office to grant him the Charter in 2 Colonial occupation of Southern Rhodesia by the British South Africa Company has been subject to scholarly investigation. For more, see, among others, S. Samkange, Origins of Rhodesia (London: Heinemann, 1968); I. R. Phimister, An Economic and Social History of Zimbabwe 1890-1948: Capital Accumulation and Class Struggle (London: Longman, 1988); J. S. Galbraith, Crown and the Charter: The Early Years of the British South Africa Company (London: University of California Press, 1974); L. H. Gann, A History of Southern Rhodesia: Early Days to 1934 (Oxford: Clarendon Press, 1970); A. Keppel-Jones, Rhodes and Rhodesia: The White Conquest of Zimbabwe 1884-1902 (Pietermaritzburg: University of Natal Press, 1983); Chapter 2 of P. Bond, Uneven Zimbabwe: A Study of Finance, Development and Underdevelopment (Trenton: Africa World Press, 1998); D. Chanaiwa, The Occupation of Southern Rhodesia: A Study of Economic Imperialism (New York: St Martin’s Press, 1974); P. Mason, Birth of a Dilemma: The Conquest and Settlement of Rhodesia (London: Oxford University Press, 1958). Many scholars have investigated the formation of the BSAC and its imperial motives. While the formation of the BSAC is important to this study, detailed examination of its establishment falls outside the scope of the study. This study is limited to the administrative provisions of the Royal Charter and how the BSAC, after occupation, carried out its fiscal policy to achieve the provisions of the Charter. For detailed discussion and debates on the formation of the BSAC, see L. Blake, The Pioneer Column: Its Origins and Implications (Grahamstown: The 1820 Settler National Monument Foundation, 1973); I. R. Phimister, ‘Rhodes, Rhodesia and the Rand’, Journal of Southern Africa Studies, 1:1 (1974), 74-90; L. Thompson, ‘Great Britain and the Afrikaner Republics, 1870-1899’, in M. Wilson and L. Thompson (Eds.), The Oxford History of South Africa, Volume II: South Africa 1870-1966 (Oxford: Oxford University Press, 1971); J. Lockhart and C. M. Woodhouse, Cecil Rhodes (London & New York: Macmillan, 1963); R. Blake, A History of Rhodesia (London: Eyre Methuen, 1977); N. Parsons, A New History of Southern Africa (London: Macmillan Press, 1993). 3 Blake, A History of Rhodesia, 53. 4 See Galbraith, Crown and the Charter. ‘Imperialism on the cheap’ was the British imperial policy in the 19th century. The policy was dominated by emphasis on austerity measures to lessen the burden on the British taxpayer. It entailed the revival of chartered companies to act as agents of imperial expansion. 5 Blake, A History of Rhodesia, 53. 20 1889.6 The BSAC, through its initial capitalisation of one million £1 shares, contended that it was in a position to finance development in the territory. The Company’s directors intended to obtain the share capital from London Stock Market. The De Beers Consolidated Mines, Rhodes’s diamond mining company in South Africa, subscribed £200 000 and the directors £90 000.7 The remaining amount of the share capital would be obtained from ordinary shareholders who invested their money in the Chartered Company. Frankel commenting on this phenomenon, argued that colonial occupation and overseas investment of capital in Africa were influenced by: [T]he considerable possibilities of profit to particular individuals arising from the discovery of valuable resources; by the speculative opportunities arising from the creation of numerous enterprises [like BSAC]; by the significant gains hoped could be accrued through appreciation of values in land or natural resources.8 Thus, Rhodes and his associates managed to convince the British government that BSAC could finance colonial occupation and infrastructure development. As Jon Lunn put it, ‘to get the Charter, Rhodes [promised] to spend £500 000 on constructing the railway line.’9 As a result, as part of the Royal Charter’s provisions, the BSAC assumed responsibility for governing the colony on behalf of the Imperial Government. Of importance were the provisions of the Charter. The provisions of the Charter mandated the BSAC: To establish or authorise banking companies and other companies or associations undertaking banking business. To carry lawful commerce, trade pursuit, business operations, or dealings connected with the Company's interests, impose and levy taxes, raise revenue, and administer the colony. The Company had to furnish the Colonial Secretary with accounts and an annual report of its administrative, though not its commercial, activities. It could make roads, railways, telegraphs and harbours.10 However, the Charter was subject to supervision by the British government. It contained some permissive and restrictive points. For example, the Company government had to respect African customs and religious values and could not enact any law affecting the indigenous people without 6 See Keppel-Jones, Rhodes and Rhodesia, 317. 7 Blake, A History of Rhodesia, 55. 8 S. Herbert Frankel, Capital Investment in Africa: Its Course and Effects (London: Oxford University Press, 1938), 232. 9 J. Lunn, Capital and Labour on the Rhodesian Railway System 1888-1947 (Oxford: MacMillan, 1997), 18. 10 P. F. Hone, Southern Rhodesia, (London: G. Bell and Sons, 1914), 99. See also Blake, A History of Rhodesia, 54-55; C. Palley, The Constitutional History and Law of Southern Rhodesia 1888-1965: With Special Reference to Imperial Control (Oxford: Clarendon Press, 1966). 21 the British government’s approval.11 Thus, the Charter acted as a constitution that controlled the Company government during the early years of colonial occupation. Early Occupation, Rudimentary Government and the Establishment of the Legislative Council and the Division of Treasury A private commercial company…undertakes the development and administration of a new colony, has a limited capital behind it; it has not only the interests of the settlers to consider directly, but those also of the shareholders alike. Such a course is both a difficult and delicate one to pursue. Many direct benefits conferred on shareholders may be of material and permanent disadvantage to the settlers. Advantages conferred on the settlers, though of lasting benefit to the community, and to the economic development of the country, may involve the expenditure of considerable capital, and the consequent holding over, perhaps for many years, of profits due to the shareholders.12 As captured by Hone above, the Chartered Company’s position in its endeavour to develop Southern Rhodesia faced conflicting goals: appeasing the demands of both shareholders and the settlers. The disparity between the two goals posed a great challenge for the Company government in the management of its finances. On the one hand, the settlers demanded that the Company establish a prosperous colony that would attract more immigrants. This included the establishment of schools, hospitals, and transport networks to promote social and economic development for the settler state. As a result, for the entire period of the Company’s tenure as the colony administrator, the settlers wanted access to the Company’s audited balance sheet to scrutunise revenue raised by the Company and its expenditure on the colony. On the other hand, the shareholders were commercial men who had subscribed their money to the Company, hoping to gain profits through dividends. In their view, the development of the colony to meet the demands of the settlers was a secondary issue. They argued that the Company’s primary objective was to make money for its investors.13 This situation created a conflicting position for the Company directors who needed to strike a delicate balance between the shareholders and settlers whose interests often clashed. This delicate endeavour manifested through the Company’s management of its commercial and administrative accounts. While the Company purported that it 11 Blake, A History of Rhodesia, 54. 12 Hone, Southern Rhodesia, 123. 13 The BSAC continued to get money from shareholders in spite the fact that payment of dividends had been delayed for a generation. This influenced the politics and fiscal developments of the colony for years until the conferment of Responsible Government in 1923. 22 was struggling with its administrative and developments deficiencies, both the settlers and the shareholders felt that the Company had failed to fulfil their interests. After the occupation of Mashonaland in 1890, progress in the territory was determined by the finance the Company could obtain from share capital and developing the resources at its disposal. However, the development of the territory’s resources during the early years of occupation depended on the structure and nature of the administrative setup. The colonial state’s developmental path was gradual and experimental and relied on a small white population for administration and a large African population from whom manual labour and tax were drawn. In its administration of the territory, the Company faced many administrative tasks in functioning as both the administrator and a commercial entity. For example: Applications for licenses and mining rights had to be dealt with; disputes had to be settled; mining commissioners appointed; regulations for the proper control of the settlers prepared; roads constructed to the different parts of the country where [there were] mining operations; a postal system inaugurated; townships laid out; sanitary and municipal regulations framed. The Company had to take measures for the settlement of white people in the country and for raising revenue requisite to meet the expenses of the government.14 These were the preliminary administrative obligations which the Company had to finance. Between 1890 and 1894, the initial tasks or functions of the government were determined by the finances available to the Company. Thus, the Company during the early years of occupation established a small administrative set up with limited finances available. This administrative structure was subject to the Imperial Government’s approval through the Secretary of the State in London. Because he was ‘neither good at nor interested in administration’, Rhodes appointed Archibald R. Colquhoun as the administrator in 1890.15 Colquhoun having served as an assistant engineer in Yunnan and Deputy Commissioner for Upper Burma, was seen by Rhodes as an archetypical civil servant with the ability to establish a sound administrative basis.16 In his endeavour to create an early form government or a semblance of it, Colquhoun put in very rudimentary administrative system.17 The administration was established following the Foreign Jurisdiction Act of 1890, 14 Keppel-Jones, Rhodes and Rhodesia, 317. 15 Blake, The Pioneer Column: Its Origins and Implications, 23. 16 Ibid, 8-10. 17 NAZ, BR503, British South Africa Company reports, 1890-1893, 115. Blake, A History of Rhodesia, 98. 23 which stipulated that the Company did not possess any judicial or administrative powers over the Africans or whites unless there was approval from the Colonial Office.18 However, Colquhoun did not last long. Lord Blake revealed that he had previously been dismissed as Deputy Commissioner for committing the unforgivable sin of a civil servant: criticising his superiors.19 In Southern Rhodesia, Colquhoun’s history quickly caught up with him as he became a source of discord between Rhodes and the two Commanders of the Pioneer Columns, Frank Johnson and Colonel Pennefather.20 As a result, Rhodes got rid of him at the end of 1890 and appointed Leander Starr Jameson as his replacement. However, as Lord Blake observed, Rhodes dismissed the only man among his lieutenants who could have established a sound administrative basis for the new colony.21 According to Blake, Jameson was ‘slapdash and his policy, or lack of it, contributed to rebellion,’ especially after 1893 when he annexed Matebeleland.22 Jameson’s administrative approach from 1891 to 1894 was characterised by dynamics that lacked a proper outline on issues such as land sales, settlement policies and mining laws. Britain tried to rectify the situation through the 1894 Matebeleland Order in Council, which created the Mashonaland and Matebeleland Native Departments and mark the early establishment of colonial government departments adding to the administrator’s position. Nonetheless, the administration remained ad hoc. Lewis H. Gann and Peter Duignan observed that ‘throughout the 1890s Rhodesia was a land of reckless speculation,’23 lacking proper administration. In this hodge-podge of affairs, the Company hoped to obtain its revenue from the 50 per cent vendor’s scrip share clause, which the Company compulsorily demanded from companies operating in the colony, especially in the mining sector.24 Prospects for immediate returns on the 50 per cent share clause were gloomy since production was limited and mining returns were minimal. Even more, the supposed ‘Second Rand’ had not materialised and the administrative 18 For the administration arrangement between the Imperial Power and the Company see Palley, A Constitutional and Law History of Southern Rhodesia; T. O. Ranger, Revolt in Southern Rhodesia 1896-97: A Study in African Resistance (London: Heinemann Educational Books Limited, 1967). 19 Blake, The Pioneer Column-Its Origins and Implications, 9. 20 Ibid, 8-9. 21 Ibid, 23. 22 Ibid. 23 L. H. Gann and P. Duignan, White Settlers in Tropical Africa (Harmondsworth: Penguin, 1962), 54. 24 NAZ, LO1/1/1/1-50 London Office, British South Africa Company: Subsidiary Company Files, 1890-1900. 24 costs of the colony had outstripped available financial resources.25 Before the occupation, the share capital raised to form the BSAC was one million pounds.26 However, after the occupation, only less than half of the money was available because the money had been used to finance various government expenses. For instance, £70 000 went to concessions, £90 000 to the Pioneer Column, £50 000 to telegraph line and £200,000 to the BSA Police.27 In addition to these initial costs, the Chartered Company needed about £150 000 per annum to maintain the police force. With a limited budget, it was practically impossible for the Company to finance all its administrative duties. The BSAC report of 1893 noted that estimates for expenditure from 1890 to 1892 were far less than the actual money expended.28 The Company government found itself operating on budget deficit. Commenting on the Company’s finances, the Secretary of State in London wrote to the Rhodesian Administrator expressing his displeasure with the Company. He wrote, ‘The board [of directors] cannot understand without explanation how the Company’s [financial] affairs could have been allowed to drift into their present conditions.’29 The Company’s financial situation in 1892 marked the start of its struggles with expenditure and balancing its budget. Worsening the situation were reports in 1893 that only two companies were floated for work on the mining claims, and the BSAC received £116 270 from these companies.30 The Company administration was sinking into debt and survived on monthly subsidy from De Beers.31 To solve this, Rhodes ordered the colony’s administrators to cut the country’s administrative expenditure, who responded by implementing austerity measures.32 Phimister observed that ‘the BSAC was compelled to reduce expenditure considerably, primarily by reducing the expensive police establishment.’33 In addition, to minimise the administration financial burden 25 For a discussion on the failure of the Company to find the Second Rand and the challenges mining companies faced, see Phimister, An Economic and Social History of Zimbabwe, 8-15. 26 NAZ, BR503, The British South Africa Company Report: The Company’s Proceedings and the Condition of the Territories within the Sphere of its Operations, 1889-1892. 27 Ibid. See also NAZ, P2/14/1-2, Telegraph Construction and Maintenance, 1890-1895. 28 NAZ, BR503, The British South Africa Company: Report of the Proceedings at the Annual General Meeting of the Company, 19 December, 1893. 29 NAZ, CD7645, Command Papers: British South Africa Correspondences relating to the Administration of the Territory, 1896-1900. 30 Phimister, ‘Rhodes, Rhodesia and the Rand’, 88. 31 E. A. Walker, A History of Southern Africa (London: Longman, 1964), 426. 32 NAZ, BR503, The British South Africa Company: Report of the Proceedings at the Annual General Meeting of the Company, 19 December, 1893. 33 Phimister, ‘Rhodes, Rhodesia and the Rand’, 78. 25 the BSAC recruited volunteers from local settlers to act as a standby force to meet potential emergencies.34 This was done inspired by the system that was employed by the Boers in the Transvaal and Orange Free State, where the local settlers were incorporated into the commando defence when the need arose.35 In addition to cutting down expenditure, the BSAC had to look for other revenue sources apart from the 50 per cent share clause. It had to develop fiscal foundations that would help the colony be financially self-sufficient without burdening the shareholders who were waiting for payment of their dividends. The immediate source of revenue the Company could secure was taxation, both direct and indirect.36 Indirect taxation included custom and excise duties, but using these proved to be a long process towards easing the Company government’s financial struggles. Ultimately, they could not provide enough revenue because the colony’s industrial sector was not yet developed. The colony imposed its first customs tariff only in 1899.37 On the other hand, the Company could not directly tax the small white population.38 The Non- taxation of early settlers was a way to lure white people with the ability to establish businesses and industries in the territory and thus promote the development of its economy. However, white settlers in Southern Rhodesia during the formative years were not men and women of sound financial standing. Most of them possessed neither capital nor expertise to venture into business.39 Hodder-Williams described this group as settlers who were ‘mere storekeepers and small-time prospectors’ who lacked the ability to develop their land for commercial agriculture or any other business.40 34 Blake, A History of Rhodesia, 98. 35 Ranger, Revolt in Southern Rhodesia, 1896-1897, 60-61. 36 Direct taxation comprised taxes that the Company administration could levy on the income of individuals and companies. Indirect taxes included customs duties and fees the Company charged for administration. 37 NAZ, T2/20/27 the Rhodes Clause, 1899. Also see R. L. Cole, ‘The Tariff Policy of Southern Rhodesia, 1899-1963’, The Rhodesian Journal of Economics, 2:2 (1968), 28. 38 Before 1923, the Company’s interests had frequently been at odds with those of the settlers, and throughout the period under study, it was Africans who paid the price, regardless of squabbles between Company and settlers. 39 R. Hodder-Williams, White Farmers in Rhodesia, 1890-1965: A History of the Marandellas District (London: Macmillan, 1983), 13. 40 Ibid, 24-25. 26 The alternative was to tax Africans and discussions in this regard got underway. Rhodes first suggested the idea of direct taxation on Africans in the form of hut tax in 1892/3.41 However, Jameson, the colony’s administrator, initially did not support African taxation. He felt that the country did not have adequate revenue collection officers since the system of administration relied on field cornets, voluntary officers and settlers to collect the tax.42 In addition, the Company faced resistance from the Colonial Office because, according to the Charter, it was not allowed to enact any laws or policies that would affect Africans without Imperial consent.43 Despite Jameson’s position and the Imperial Government’s resistance, the Company proceeded to impose direct taxation on Africans. African taxation later received Imperial consent through the 1894 Order in Council.44 The collection of African tax marked the beginning of colonial oppression of Africans.45 The Company administration designed African taxation to serve two purposes. Apart from providing the much-needed revenue, it also worked as a tool to force Africans into wage labour first for the mining enterprise and later for agriculture.46 To this end, the Company employed methods that undermined African economic activities by demanding taxation in kind or labour.47 This method was open to abuse by white farmers acting as tax collection officers in outlying districts. They ended up abusing their positions. For instance, in Mashonaland, the Company appointed tax-collection officers who employed arbitrary methods and sometimes pocketed the tax.48 For example, Stella Jera documented some of the methods employed in the Umtali and Makoni Districts where officers went around villages appropriating cattle and grains.49 African tax 41 For more on the introduction of African taxes see R. Palmer, Land and Racial Domination in Rhodesia (London: Heinemann, 1977), 24, 27 & 42; H. V. Moyana, ‘Underdevelopment in Kenya and Southern Rhodesia’, Journal of East African Studies and Development, 6:2 (1976), 269-293. 42Ranger, Revolt in Southern Rhodesia, 1896-1897, 60. 43 On issues to do with the constitutional and legal affairs of Southern Rhodesia see Palley, A Constitutional and Law History of Southern Rhodesia. 44 Ranger, Revolt in Southern Rhodesia 1896-1897, 74-77. 45 H. V. Moyana, ‘Underdevelopment in Kenya and southern Rhodesia 1890-1923: a comparative study’, Africa Review of Business and Technology, 7:1 (1977), 41-2; S. Jera, ‘African Taxation during Company Rule 1891-1923’, (BA Hons Dissertation: University of Zimbabwe), 7. Tax collection from Africans improved with the appointment of Native Commissioners. However, for outlying districts, the Administrator had to arrange with white farmers to act as tax collection officers. 46 There is a great deal of literature that analyse the link between African taxation and the need for labour in settlers’ mining and agriculture industries. See, for instance, Phimister, An Economic and Social History of Colonial Zimbabwe; Ranger, Revolt in Rhodesia; Gann, A History of Southern Rhodesia; van Onsleen, Chibaro: African Mine Labour, 1900- 1933. 47 See Phimister, An Economic and Social History of Colonial Zimbabwe. 48 Jera, ‘African Taxation during Company Rule 1891-1923’, 7. 49 Ibid, 7. 27 collection had severe effects on both Shona and Ndebele economies. In Matebeleland, between October 1893 and March 1896, the settlers and the Company looted around 100 000 to 200 000 cattle.50 In his analysis of how the officers collected hut tax, Phimister states that it was ‘arbitrary and irregular, appearing more like the levy of a tribute than the collection of a civil tax.’51 Looting of African resources, along with forced labour to meet tax obligations, resulted in various and serious forms of resistance. These included desertions, finding other forms of economic activities to raise income for taxes, especially during the period from 1893 to 1895, and the uprisings of 1896-1897.52 The Company brutally reacted to the African uprisings, known as the First Chimurenga in Mashonaland and Umvukela in Matebeleland, exerting total control and complete annexation of Southern Rhodesia by 1897. In his 1897 report, the Chief Native Commissioner, H. M. Taberer reported that he was pleased with the excellent work done by the BSAC Police in subduing the African uprisings against the Company government and imposition of colonial taxes.53 He added: It is only the remote parts of Lomagundi and Mazoe districts that I cannot report on with confidence, but the Native Commissioners in these districts, as they extend their circle of operations, find the natives ready to surrender. Had the rebels been dealt with in the same thorough manner in which the British South Africa Company’s Police have attacked various chiefs and strongholds, their subjugation would have been far easier; for, in the earlier stages of the rebellion, they would not have massed together nor fortified themselves to the extent to which they have done now.54 However, except for Charter and Makoni, where Africans had surrendered early, it was still difficult for the Company to collect revenue in the form of hut tax from any other Mashonaland Districts. The Chief Native Commissioner suggested that Africans who avoided and evaded taxation be called upon during 1898 to pay hut tax in arrears.55 According to Taberer, this served 50 Phimister, An Economic and Social History of Colonial Zimbabwe, 16. 51 Ibid. 52 NAZ, N9/1-4, Native Commissioner’s Annual Reports: Umtali and Makoni Reports, 1898. There is a great deal of literature on the forms and methods of African Resistance to taxation. These include the key texts of Colonial Zimbabwe’s history like Phimister’s An Economic and Social History of Zimbabwe; Gann, A History of Zimbabwe; Ranger, Revolt in Southern Rhodesia; Blake, A History of Rhodesia. 53 NAZ, N9/1-4, Chief Native Commissioner’s Annual Reports, 1898. The BSAC targeted districts of Shaungwe, Kunzwi, Salisbury, Mazoe, Marandellas, Makoni, Charter, Hartley and Lomagundi. Resistance against hut tax in these districts was serious. 54 NAZ, BR504, British South Africa Company: Report of the Chief Native Commissioner Mr. H. M. Taberer for the half-year ending 20 September, 1897, 87. 55 Ibid. 28 as a lesson to the ‘rebels’ and was meant to appease those who took ‘no’ part in the rising and were called to pay tax. In 1897, hut tax amounting to £9 771 was collected from the Melsetter, Umtali, Makoni, and Charter districts. In Victoria, Chibi, and Chilimanzi collection of tax was under process.56 Table 1.1 below shows returns of hut tax collection in Mashonaland by November 1897. Table 1.1: Hut Tax Collected in Mashonaland, November 1897 Name of No. of No of Huts Estimated Estimated Collected Labour District Paramount Population African Tax African Tax Supply Chiefs £ £ Salisbury 7 4 500 18 000 2 250 Nil Scarce at present but should be good Mazoe 16 5 000 10 080 2 500 Nil Nil Lomagundi 15 6 000 19 000 3 000 Nil Nil Hartley 3 1 770 3 000 750 Nil Fair Hills Charter 3 8 000 32 000 4 000 2 445.10s Fairly good Chilimanzi 1 2 220 6 000 1 000 Nil Good Victoria 5 15 000 43 200 9 046 3 000 Fair Chibi 2 6 000 15 107 3 000 Nil Poor Melsetter 10 5 700 18 350 2 899 1 600 Good Umtali 3 6 000 21 500 3 150 2 646 Nil Makoni 5 4 020 13 000 2 010 1 718 Fair Marandellas 6 9 000 27 000 4 500 Nil Poor and Mangwende Mutoko 3 6 500 10 000 1 750 Nil Fair Total 79 79 710 236 037 39 855 11 409.10s Source: British South Africa Company Report, 1896-1897. After the risings, the Colonial Office delegated Sir Alfred Milner, the British High Commissioner of South Africa, to tour Southern Rhodesia and report on the country’s economic and political situation. In his report, he assessed how the BSAC was faring economically and administratively.57 56 Ibid. 57 C. Headlam, The Milner Papers: South Africa 1897-1905 (London: Cassell, 1933), 140-142. 29 With regard to economics, Milner painted a fine picture, but in reality, the situation was dire. He reported that ‘economically I think the Company [and its offsprings] has a good record. They waste a lot certainly, but they also spend a lot well developing the [colony].’58 Milner’s conclusions overlooked the fact that the development of the colony by the BSAC and its offspring companies formed the foundation for future debates with the settlers. However, with regard to the administration, Milner had no kind words for the Company. He reported that: On the administrative side, the case of the Company is much weaker, on the one hand, the land was alienated in the most reckless manner to Companies and individuals, and on the other hand, a lot of unfit people were allowed to exercise power especially concerning natives, in a manner [that] cannot be defended.59 This would not have mattered, argued Milner, if the Company and the people appointed to occupy certain positions in the administrative system had not engaged in horrendous activities like looting African cattle, among other things.60 In addition, the Company’s chronic budget deficits invited scrutiny from both the Colonial Office and the settlers. In its bid to achieve ‘strict’ financial accounting and administrative processes of Southern Rhodesia, the Imperial power sanctioned the establishment of clear regulatory departments. Even more, the events and uprisings of 1896/97 resulted in closer control of administration by the British government.61 The Imperial Power sanctioned the Company to create 58 Ibid. 59 Ibid. 60 Ibid. 61 The Imperial Government reacted to the attacks from Henry Labouchere and the Aborigines Protection Society on the BSAC and its notorious African Policy, plus its failure to develop the colony in the formative years; see Labouchere’s Truth magazine. However, Labouchere’s criticism against the BSAC must be treated with caution since his position and hatred towards Rhodes and his associates had irredeemably compromised his view of the Company. Lord Blake described Labouchere as a Radical M. P, newspaper proprietor and a bitter enemy of Rhodes. Labouchere was particularly critical of the Pioneers, whom he called ‘border ruffians of Hebraic extraction.’ (Blake, The Pioneer Column: Its Origins and Implications, 7). See also E. M. O. Mabin, ‘Truth and the British South Africa Company: The Development of a Radical’s Opposition to the Development of Capitalist Imperialism in a Southern African context’, (BA Dissertation: University of Witwatersrand, 1972) for a detailed discussion of Truth and the BSAC. Mabin argued that in Truth, Labouchere tried to demonstrate to his readers that the BSAC made no serious attempts to develop an administration or infrastructure essential in developing the country for colonial settlement. The BSAC, in Labouchere’s view, was not a viable commercial company but a speculative venture and did not take the capacity to govern the colony seriously. He believed that Rhodes was a financier and power-monger and that the BSAC’s activities in the territory were directed at enriching Rhodes and his colleagues. His attacks were thus aimed at warning potential settlers and shareholders to avoid the BSAC. 30 a concrete and well-established administrative structure that would provide constitutional, legal, and institutional frameworks to monitor the country’s fiscal system. To this end, the BSAC, through the Order in Council, established the Southern Rhodesia Legislative Council in 1898 which ultimately gave birth to the Division of Treasury in 1903. The new Order in Council spelt out the legal and institutional processes to be followed by the Company government in carrying out its fiscal duties in the colony. The creation of the Division of Treasury in 1903 conferred some latitude to the Legislative Council to debate fiscal matters of the country. At the same time, white settlers were also allowed input in the country’s fiscal policy. The head of the Division of Treasury, the Treasurer, would submit the annual estimates for revenue and expenditure for every department to the Legislative Council for deliberations. The Council further served as a platform for negotiations and debates on who should bear the burden of taxation and expenditure patterns. The revenue and expenditure structure incited the most debates and became highly politicised, creating animosity between the Company and the shareholders on the one side, and the Company and the settlers on the other. First, the Order in Council demanded that the Company government must separate its commercial account from the administrative account. When the Company government started administering the colony, there was no clear distinction between its commercial and administrative finances. Now, the Order in Council stipulated ‘strict’ financial accounting procedures that the Company needed to observe.62 The Chief Accountant of the Division of Treasury, Thos Berry, circulated a memorandum outlining what the colony’s fiscal system ought to be and laying out the Code of Conduct and procedures in revenue collection and expenditure.63 However, the operation of the colony’s fiscal system was determined by the country’s political structure. Yet, the political structure had inherent limitations/flaws on the operations of the colony’s fiscal system.64 The latitude given to the Company via the structure of the Council was such that, with the support of its appointed members, the Company could reverse decisions made by the Administrator or the Council. Appointed or nominated members of the Legislative Council were individuals selected 62 Palley, The Constitutional History and Law of Southern Rhodesia, 135; Mabin, ‘Truth and the British South Africa Company’, 105; Baxter, Guide to the Public Archives of Rhodesia: Volume 1, 1890-1923 (Salisbury: National Archives of Zimbabwe, 1969), 1; T. Nyamunda, ‘Money Banking and Rhodesia’s Unilateral Declaration of Independence’, The Journal of Imperial and Commonwealth History, 45:5 (2017), 746-776. 63 NAZ, GEN/TRE British South Africa Company: Fiscal System Part 1, 1898. 64 Galbraith, Crown and the Charter, 147-148. 31 by the Company to represent different constituencies and whose interests were the same as those of the Company. In most cases, these officials, though they were answerable to the High Commissioner of South Africa who represented the Imperial Government, covered the Company government activities in the colony.65 The situation was further complicated for the settlers in 1904 because elected members in the Legislative Council were four against thirteen appointed members.66 This meant that the elected members of the Legislative Council had limited initiative on matters of the colony legislation or fiscal development since the appointed members would always outvote them. Thus, the elected members’ votes on revenue collection and expenditure were nothing more than an expression of their opinion, which in many cases the Company government ignored. The Council resembled its counterpart in the Cape Colony in the 1800s. Gwaindepi observed that the Cape Colony Legislative Council was ‘toothless’ because public revenues were not subject to discussion.67 As in the Cape, the Company designed the Council to prevent settler interference in the administrative machinery for political matters and fiscal interests. It held a firm grip on the country’s political and economic affairs. Sir Ernest Guest, a lawyer who had held several senior positions in the country, noted that the Company ‘dictated what the [settlers] were to have for breakfast,’ signifying the extent to which it had monopolised political and economic power in the colony.68 The Company’s directors also felt that as long as the Company continued administering the territory, it had to keep the majority of the votes over fiscal decisions because it was responsible for the expenditure, and the elected members ‘should not vote for a large budget’ beyond the Company means.69 However, the Legislative Council provided the basis for the increase in settler political power. The settlers were fighting to decrease the number of appointed members and increase elected members of the Legislative Council, a feat they achieved year after year.70 In addition, by setting up a 65Galbraith, Crown and the Charter, 147-148. 66 F. M. G. Willson and G. Passmore, Holders of Administrative and Ministerial Office 1894-1964 and Members of the Legislative Council 1899-1923 and the Legislative Assembly 1924-1964 (Salisbury: Department of Government Source Book No. 3, 1966), 65. See also Mabin, ‘Truth and the Company,’ 105. 67 A. Gwaindepi, ‘State Building in the Colonial Era: Public Revenue, Expenditure and Borrowing Patterns in the Cape Colony, 1820-1910’, (PhD Thesis: Stellenbosch University, 2018), 72. 68 NAZ, Oral/GU1 Ernest Lucas Guest Oral History File, (1882-1972). 69 NAZ, BR503, Proceedings at the Seventh Annual General Meeting of the BSAC and Extraordinary General Meeting, 21 April, 1898. 70 See Willson and Passmore, Holders of the Administrative and Ministerial Office. 32 Legislative Council with settler representation, who would provide internal power balances and checks, the Imperial Government put an internal brake upon the Company’s freedom of action. Even more, the Company’s seemingly unfettered power incensed the settlers so much that they began to use their positions in the Legislative Council to demand the Company government to publish its revenue and expenditure accounts, another issue that created political tensions as discussed in the final section. While the Company fought tooth and nail to maintain its grip on the Legislative Council, the financial difficulties persisted. The BSAC board of directors acknowledged the need for fresh capital not only to finance the administration of the colony but also to fund the development of its commercial enterprises. They decided to issue new shares on the London Stock Market, as discussed in the next section. The Need for More Capital and Intense Fiscal Debates in the Legislative Council, 1903- 1913 The Company directors realised that there was a need for another appeal to their shareholders for more capital.71 From 1903 to 1906, the Company made serious attempts to raise share capital of another £1 000 000, but failed to convince the shareholders.72 In 1907, the BSAC produced a voluminous report detailing its operations as a way to persuade the shareholders. The report set out the board of directors’ financial proposals, which had been awaited by the shareholders with considerable curiosity. The directors reported that Rhodesia’s progress during the years from the turn of the 20th century had been marked by the country’s general prosperity which compared favourably with that of the provinces in South Africa.73 This was an exaggeration and clearly an attempt by the directors to attract fresh capital from shareholders. The report further mentioned that the mining and farming industries had continued to expand and that the board anticipated accelerated progress because of new arrangements made under the advice of the visiting committee of the Company’s board of directors.74 With regard to new capital, the directors proposed new ordinary shares in an attempt to raise £900 000 to help the Company overcome its financial woes. In addition, they believed that their capital proposal was in the best interest of shareholders and, at the same time, the best way to prompt and intensify further 71 Ibid, 151. See also NAZ, BR 503, Proceedings of the General Annual Meeting of the British South Africa Company, 1904. 72 Morning Post, 31 December 1907. 73 Ibid. 74 Ibid. 33 development of the country. The report was, however, issued too late to influence the shareholders and the motion of issuing new shares to raise capital did not go down well with the shareholders. They felt that continued support towards the BSAC would be unwise, considering how the Company, at that time, was tussling with chronic financial problems coupled with political contestations with the settlers. Moreover, the Company was still not in a position to pay the shareholders dividends, claiming that it was still operating on budget deficits (as shown by Fig 1.1 below) and could not pay the dividend. Fig 1.1: Revenue and Expenditure of Southern Rhodesia from 1894 to 1913 £1000 000.00 £900 000.00 £800 000.00 £700 000.00 £600 000.00 £500 000.00 £400 000.00 £300 000.00 £200 000.00 £100 000.00 £ 0.00 1894 1895 1896 1897 1898 1899 1900 1901 1902 1903 1904 1905 1906 1907 1908 1909 1910 1911 1912 1913 Revenue Expenditure Deficit Surplus Source: Collated from statistics obtained in the Official Book of the Colony of Southern Rhodesia, No. 2, 1930. The shareholders were disappointed with the BSAC’s financial dealings.75 The shareholders blamed the Company for spending too much money on Southern Rhodesia’s development, especially the provision of social services like education and health facilities, without developing the commercial sector.76 They claimed that from 1902 the Company had spent inexcusable sums funding the provision of high-class education for white settler children.77 One shareholder blamed 75 The Economist, 10 November 1906. 76 Ibid. 77 Morning Post, 31 December 1907. See also NAZ, BR503, Report of the Proceeding of the 15th Ordinary General Meeting of the BSAC, 28 February 1910. 34 the Company for spending the shareholders’ money in Southern Rhodesia while they received nothing in return.78 The shareholders’ complaints influenced their response to the directors’ request to raise more money. Share prices during this period dropped significantly because the shareholders were no longer interested in supporting the Company financially. According to Phimister, the share markets were in no mood to take up additional speculative capital,79 yet the board of directors continued to issue new shares. The Chartered Company’s report completely failed to inspire enthusiasm among the shareholders. The shareholders, disillusioned by an accumulation of deficit and the endless delay of dividends, became resentful. They labelled the directors’ efforts as feeble attempts to solve the colony’s financial problems and accused the board of directors not being able to provide solutions to the many financial questions they raised. Recalling former glory, the shareholders referred to times when the board was dominated by magnetic personalities of Rhodes, Earl Grey and Alfred Beit.80 The shareholders regarded these board members as capable administrators, with enormous influence in the money markets of Europe.81 The new board of directors comprised Philip Lyttelton Gell, Henry Paulet the Marquis of Winchester, Rochfort Maguire, Henry Birchenough and Sir Lewis Mitchell. The shareholders argued, though it had ‘brilliant’ individuals like Birchenough and Maguire, the board lacked people with the ability to take up important responsibilities.82 Because of the Company’s cloudy financial position and chronic financial difficulties, the shareholders made it clear that they were dissatisfied with the composition of the new board. The Company was rapidly drifting into a financial situation that the existing directors could not handle, as they all lacked the powerful financial connections and alliances present in the days of Rhodes and Beit. According to a letter to the editor posted in The Financier, the Chartered shareholders trusted that, if the board were to be properly strengthened, the administration of the Company would be conducted along more enlightened lines than currently the case.83 ‘There is,’ feared one 78 NAZ, BR503, Report of Proceedings at the 21st Annual General Meeting of the BSAC, 5 July 1907. 79 Phimister, An Economic and Social History of Zimbabwe, 46. 80 The Financier, 3 July 1908. 81 Ibid. 82 Ibid. See also NAZ, BR503, Report of Proceedings at the 15th General Meeting of the British South Africa Company, 28 February 1910. 83 The Financier, 8 February 1903. 35 of the shareholders, ‘far too much red-tape, both in London Wall and Bulawayo and Salisbury.’84 Another shareholder wrote: The management, instead of aping the dignity and picturesqueness of a government department, would do well to remember that the undertaking is primarily a business enterprise. If they do that, they may be able to earn for the shareholders the rewards for which the latter have been long waiting [to get].’85 Thus, the shareholders contended that it would be logical to provide more money to the Company if its financial position had been clear. The Company could only turn to local sources for revenue and it proposed to increase African taxation from £1 to £2 per annum.86 The Treasurer, Francis Newton, justified this increase by arguing that ‘the native portion of the population should in good times be made to bear their fair share of the burden of administration of the country.’87 However, this proposition was highly unfair because Africans were paying direct taxes from 1893, significantly contributing to the colony’s revenue purse. The Colonial Office quickly rejected Newton’s proposal because the tax would have added an unbearable burden to the Africans who were already paying more than they could afford earning an average salary of 50s per month.88 While the Company could not tax the settlers, the settlers had serious concerns over the Company’s mixed approach in the management of its administrative and commercial accounts and the general development of the colony. The Legislative Council became a platform for the most heated debates concerning these issues. Elected members insisted that it was unfair for the Company to ask for more money while the country was not developing. For example, the farmers argued that, while the Company was collecting taxes and making money through mining royalties and other commercial sources like land sales, it failed to develop the country. Ernest Edward Homan, Legislative Council Member for Northern District, pointed out that while the Company invested heavily in its commercial interests, sectors such as agriculture received minimal revenue allocation.89 He emphasised that the Company was spending less on infrastructure suitable for economic development and provisions of social services. For example, the Company financed the construction of railways, 84 Ibid. 85 Ibid. 86 Legislative Council Debates, 26 June 1903, The Treasurer, Column 182. 87 Ibid. 88 Legislative Council Debates, 7 June 1904, The Treasurer, Column 45. 89 Legislative Council Debates, 1 May 1905, Column 55. 36 not to primarily promote industrial development in the colony and provide cheap transport services, but as an asset ‘to raise capital and produce dividends for the shareholders.’90 The farmers’ position instigated the elected members to investigate the Company’s commercial and administrative accounts to ascertain its revenue and expenditure patterns. The BSAC administration, in response to the settlers’ demands appointed Henry Wilson Fox, an important figure in the Company’s London offices, to investigate the Company’s administrative and commercial accounts.91 Wilson drafted a memorandum in 1904 on the separation of governmental and commercial revenue in the country. The memorandum attempted to address the conflict over financial resources that occurred between the Company and the settlers during the 1904 Salisbury conference where the settlers noted that ‘the administrative rights of the Chartered Company should cease as soon as they can be relieved of the responsibility for any deficiency between revenue and expenditure.’92 Paying particular attention to the Mining Department, where money was received through various methods like licenses, registrations, inspections and survey fees, Fox said: I understand the board’s view to be that; administrative revenue is confined to monies received from the people of Rhodesia either by way of taxation (for example Customs Duties or Hut Tax) or as payment for administrative facilities (for example postal revenue or transfer fees on land). Commercial Revenue includes all revenue derived by the form of dealing with the assets of the Company. Hence monies received on account of sales of land or stands (except in cases where the land has been appropriated from private owners for public purposes) or by way of quitrent, claim licenses (which are a rent), and royalties, are all commercial revenue.93 The Company argued that, where money had been received as commercial revenue and spent on the administration side, it was to be regarded as an advance by the Company. As such, to avoid misconception as to what money should appear on administrative or commercial accounts, Fox suggested that the money be used for administrative purposes, but from the commercial side of the Company. Therefore, the Company should enter it in the accounts as an advance.94 Another financial expert, Georgie Goldie, a representative of the BSAC London board, sent a memorandum 90 J. Lunn, Capital and Labour on Rhodesia Railway System 1888-1947 (Oxford: Macmillan, 1997), 25. 91 NAZ, A11/2/18/28 Henry Wilson Fox, Memorandum on Political, Financial, Constitutional and other questions concerning Rhodesia, 26 August 1904. 92 Hone, Southern Rhodesia, 163. 93 NAZ, A11/2/18/28 Henry Wilson Fox, Memorandum on Political, Financial, Constitutional questions, 26 August 1904. 94 Ibid. 37 to the Legislative Council stating that the Company had asked him to investigate its finances. Goldie indicated that Southern Rhodesia’s expenditure was £7.5 million in excess; therefore, he proposed that if the settlers were to take over the country’s administration, they would be liable to pay all past administrative debts.95 This sparked outrage among the settlers in the country. The settlers believed that the people of Rhodesia, Africans included, contributed a third of what was required for the administration’s total revenue.96 The revenue included direct and indirect taxes and other revenue sources like official receipts from Post and Telegraphs, Rents, Stamps and Licenses, and sundry income. Africans paid taxes characterised by coercive collection and the absence of any representation. This tax, as mentioned earlier, aimed to fulfil the overlapping interests of both the Company and settlers in financing the colony and ensuring a steady supply of labour.97 Southern Rhodesia’s African taxation contributed a substantial portion of government revenue.98 Out of total revenue of £435 000 collected in 1903/04, Africans contributed £130 000 through taxes.99 The settlers complained that while Company owned the country’s resources, for instance land, mining and railway rights, it did not want to ‘contribute’ towards the country’s administration. Considering that the Company had vast interests in the country, the settlers demanded that it had to contribute two-thirds of the taxation and revenue towards the country’s administration. William Grimmer, Legislative Council Member for Mashonaland, pointed out that the Company owned vast commercial interests in the country and controlled the government's most important account, the expenditure account.100 Therefore, the Company had to bear at least two- thirds of taxation of the country. 95 Hone, Southern Rhodesia, 160. 96 NAZ, A11/2/18/28 W. Wilson Fox: Memorandum on Political, Financial and Constitutional Questions, 26 August 1904. 97 See, among others, Phimister, An Economic and Social History of Zimbabwe; van Onselen, Chibaro; Gann, A History of Southern Rhodesia. 98 Jera, ‘Taxation During Company Rule’, 8-14 99 Gann, A History of Rhodesia, 210. On total revenue collected in 1903/04 fiscal year, see also the Official Year Book of Southern Rhodesia, 526. Despite their contributions, Africans still received no representation. It was only during the instances when the Company’s finances were questioned that the settlers acknowledged Africans’ contribution to the revenue of the colony. 100 See Percy R. Frames as quoted by T. Madimu, ‘Farmers, Miners and the State in Colonial Zimbabwe Southern Rhodesia, c. 1895-1961’, (PhD Thesis: Stellenbosch University, 2017), 68-69. 38 According to The Rialto in June 1905, correspondence between the Administrator and the board of directors indicated that Southern Rhodesia’s future was again being debated.101 From many quarters, there was a feeling that the existing state of affairs and financial conditions could not continue indefinitely. Financially, the Company administration had proved disappointing, from both a mining and agricultural point of view. The settlers had countless grievances for which the Company provided no reasonable solution at the time. Besides, the increasing and unremitting direct and indirect calls of the Chartered Company for more capital were becoming a matter of national importance.102 Another major concern of the settlers was railway rates during the economic reconstruction in Southern Rhodesia.103 The Chartered Company’s future depended on railways with enormous fixed rates, despites their effect on the settlers, especially miners and agriculturalists. The fixed rates were over half a million per annum and were a burden on the country. In 1907, the Company’s directors visited the country. Both the settlers and the directors were anxious to work together to resolve problems. The directors agreed to the settlers’ demands to reduce the number of nominated members in the Legislative Council and give a majority to the elected representatives.104 With regard to the allocation of revenue, the Company represented both the shareholders and the government. Yet the settlers maintained that much of the revenue was being credited to the Company’s commercial side.105 For example, the settlers pointed out that, for the years 1906 and 1907, gross revenue for the country was £539 912 and expenditure was £501 989 leaving a surplus of £37 923, while the Company claimed that it had experienced budget deficit.106 With regards to land, the Company directors believed that the BSAC had absolute authority over all revenue accruing from land sales.107 They asserted that the land was used to raise capital at the London Market between 1896 and 1906, where it had raised about £4 292 937.108 101 The Rialto, 7 June 1905. The Rialto was a weekly independent journal published in London every Wednesday. Its important themes generally covered mining markets. The Rialto was not subsidised by any business enterprise connected with South Africa or Southern Rhodesia and consequently had an open mind in its criticism of the Company. 102 Ibid. 103 Ibid. 104 Madimu, ‘Farmers, Miners and the State in Colonial Zimbabwe Southern Rhodesia, c. 1895-1961’, 68-69. 105 Ibid. 106 Hone, Southern Rhodesia, 176. 107 Ibid. 108 Madimu, ‘Farmers, Miners and the State in Colonial Zimbabwe Southern Rhodesia, c. 1895-1961’, 68-69. 39 They strongly believed that land was a commercial asset to the Company and all mining activities carried on land were under the Company’s commercial side. The visiting Company directors, thus, refused to consider the proposal to allocate royalty money to the administrative account. In the settlers’ view, money collected from land, especially in the form of mining licenses, certificates, and government stamps, constituted administrative revenues and belonged to the country, not to the Company. For example, in 1907 the Company failed to credit the country’s revenue funds that were realised from the inspection of mining claims.109 The settlers contended that these funds were purely administrative and had to cover the expense of maintaining good governance. The elected members in the Legislative Council pushed this argument and elaborated that the funds were supposed to be credited to the administrative account and used in financing the country’s development. Among those who criticised the Company was Gordon Forbes, Legislative Council Member for Western District. The Company, he insisted, should not have used the funds that were supposed to finance the country’s fledgling industries, mainly farming, for its private gain.110 He further claimed that the administrative structure of the Colony was: Controlled by a board [with a] business to look after the commercial side of the Chartered Company. They must endeavour to make a success of the business; therefore, when the interests of this country clashed in any shape or form with the interests of the company they could expect nothing else but that the interests of this country should go to the wall.111 Contributing to the debate on land rights, Herbert Longden, Legislative Council Member for the Midlands, said that the Company was reluctant to implement the agreed proposals from the 1904 Salisbury conference.112 For example, the Company was unwilling to relinquish its control over land, one of its primary sources of income. Earlier, Percy Ross Frames, Legislative Council Member for Matebeleland, had argued that ‘the time has arrived when the British South Africa Company should contribute a definite sum to this territory’s revenue, in proportion to the property and interests which the said Company has in this territory, for the good government thereof.’113 109 NAZ, BR501, BSAC Annual Reports, 1907. 110 Legislative Council Debates, 6 May, 1907, Column 27. 111 Ibid. 112 Ibid, Column 23. 113 Legislative Council Debates, 31 March 1901, Column 145. 40 Frames believed that, for a proper appreciation of the situation, it was crucial to understand that the BSAC was a dual entity in its functions, an administrative and commercial undertaking.114 However, Frames noted that: Admitting the Company was a business and commercial undertaking and that it was the owner of the land, minerals, railways and other properties that generated revenues, it could have been liable to taxation under any form of government administration like Crown Colony, or self-government, as subjects of that administration.115 In 1907 the Mashonaland Progressive Association, an interest group representing farmers, declared that Southern Rhodesia ‘belongs to us, and we have every intention of developing our country after our own way.’116 In addition, the settlers felt that since the Company had boasted about owning the country as a commercial asset, exploiting all resources for its shareholders’ direct benefit, it had to pay all the government expenses required.117 However, it was common cause among all the parties that certain assets were the property of the Company’s commercial side and others belonged to the administrative side. The Company had to be allowed to profit commercially through its operations or renting out land, receiving royalties on the mining of minerals, levying customs duties and collecting other fees, but also contribute to the administration. This posed a severe challenge to the Treasurer, who complained about the gruesome experience of making up the budget. He was perplexed and did not know what belonged to administration and what did not. The Treasurer’s confusion intensified the settlers’ calls for the end of Company government. In response to the settlers’ efforts to terminate its administration, the Company consolidated its powers over the Legislative Council in 1911. The Council was precluded from passing any vote on public revenue issues or taxes recommended by the Administrator.118 The Company also prevented the discussion of matters concerning its land and other rights without the Administrator’s agreement. With regard to financing development, the Company contended that it had improved infrastructure, for instance roads, telephones, telegraphs and railways. It had also promoted education, with statistical reports showing that, by 1911, 35 schools were established for 114 Ibid. 115 Ibid. 116 Hodder-Williams, White Farmers in Rhodesia 1890-1965, 86. 117 Legislative Council Debates, 24 June 1908, Coghlan, Column 13. 118 NAZ-LA/1/2/1-7, The Council Matters: The Voting power of the Settlers in the Council, 1899-1923. See also NAZ, JA1/1/1 Jameson Papers: Historical Manuscripts, Proceedings of the 18th Ordinary General Meeting of the BSAC, 1913, 9. 41 white settlers’ children.119 Furthermore, the Company argued that it established the mining department and a scientific agricultural department.120 Despite the Company’s effort to dominate the Legislative Council, the Council played an essential role in the rise of settler politics in Southern Rhodesia as evidenced by the increase in the representation of elected members against nominated members. The number of elected members increased steadily over the years from 1903. There were twelve elected members as compared to eight nominated members of the Council in 1910.121 The Council provided the Rhodesian League with a platform to challenge the Company’s position. This League was a settler interest group established in 1912 (initially the Rhodesian Political Association, formed by non-farmers, but later became a farmers’ organisation). In its 1912 Manifesto, the League commented that: The people of Southern Rhodesia are now capable of providing all the revenue required for the government’s cost and the country’s administration, and it is no longer necessary for the financial control and responsibility to remain vested in the British South Africa Company. What was then true is also true today.122 The League’s meeting held in Bulawayo on 15 October 1912, stipulated that the Company government had to be a representative of the people, allowing people to have control of the legislation, taxation and finance of the country and the full power to manage their own economic, political and social affairs.123 The League’s campaign was against the Company’s continued administration, citing the confusion between the administrative and commercial accounts. On the other hand, the Chartered Company, through Rochfort Maguire announced the Company’s Statement of Policy in 1912 stating that: The Company regards the accumulated deficits upon Administration and Defence as part of the cost of the acquisition, maintenance, and development of the Territory’s land and minerals. Therefore, gentlemen, you will understand that the Board does not make any claim for the past deficiency between administrative revenue and administrative expenditure, a deficiency amounting to upwards seven 119 Ibid. 120 Ibid. 121 NAZ, JA1/1/1 Jameson Papers, Proceedings of the Eighteenth Ordinary General Meeting of the British South Africa Company, 1913, 9. See also Legislative Council Debates, 16 April 1913, Gordon Forbes, Column 174. 122 The Rhodesian League Manifesto, 14 November 1912. 123 NAZ, RH7/1/1 The Rhodesian League, 15 October 1912. 42 and a half million sterling. The Board regards that expenditure as incurred in establishing, developing, and protecting our position as the Territory owners.124 The Company claimed that the settlers were resentful of its commercial transactions which fulfilled the interests of the shareholders.125 In 1913 an extraordinary meeting was held between the Company, settlers and the shareholders. Jameson, who chaired the meeting, said that: We [the Company] pay our taxes, we are purely and simply a commercial company [operating] commercially in Rhodesia. Next year, 1914, we shall celebrate our silver wedding, the Chartered Company with the people Rhodesia, or the Charter shareholders.126 This position was aimed at persuading the settlers to support the renewal of the Charter. By contrast, the Rhodesian League provided financial evidence proving that it was no longer necessary for the Company to continue administering the country. Working on the audited Balance Sheet of the Company’s financial statements, the Rhodesian League challenged Maguire’s statement. The seven and a half million that the Company referred to were made up as follows: Table 1.2: The Rhodesian League’s Calculations of the 7.5 million pounds Matebele War Expenditure £119 954 Rhodesia Defence Expenditure £2 587 411 General Expenditure, London and S. Africa £4 835 104 Total £7 542 569 Source: Rhodesian League Pamphlet, March 1912.127 For the Rhodesian League, the deficiency comprised large sums that were not administrative expenditure, as Maguire mentioned. The League argued that an ordinary Rhodesian in the street would never understand that the seven and a half million pounds were the Company’s aggregate 124 NAZ, GEN/BR-British South Africa Company’s Policy Statement, not dated, 9. 125 NAZ, JA1/1/1, Jameson Papers: Historical Manuscripts, 1913, 7. 126 Ibid. 127 See also NAZ/T2/29/1-99, Audit Department’s Balance of Southern Rhodesia October 1914; British Online Archives (BOA) File 73150B, Southern Rhodesia Report of the Auditor General, 1915, 3-7 & 14-17; British South Africa Company’s Balance Sheet, 31 March 1912. 43 loss due to administrative expenditure. On the other side of the Company’s accounts, the commercial side, the Company had accrued the following profit and revenue. Table 1.3: Rhodesian League’s Calculations of the Company’s Profits and Revenue, 1912 Premium Shares (Proceeds of Shares and Debentures) £4 246 519 Stock received in connection with commuted rights in mining and other £659 998 properties Proceeds of Sales of Land and Stands (Cash £570 015 received only) Revenue and Expenditure Account £295 153 Total £5 771 685 Source: Rhodesian League Pamphlet, March 1912.128 The settlers then clamoured for the deduction of the £5 771 685 profit from the £7 542 569 deficiency to reduce the shortfall to £1 770 784. Even that could be further whittled down, if not wiped out entirely, by placing a valuation of the assets shown in the Balance Sheet. These assets included unrealised shares and debentures connected with the Company’s commuted rights in mining and £424 464 shares in the Rhodesia Railways Trust. These calculations were based on the Company’s overall income against the expenditure it incurred. As mentioned earlier, the Treasurer, in 1907, stated that he struggled to prepare his budget because he did not know which revenue heads fell under administration. This problem could be ascribed to the difficulty in identifying ownership of certain assets in the country.129 For example, the Company held indirect taxes such as customs duties, land sales and railway rates as its commercial revenue. It could not declare dividends out of these assets, yet it had to hold them for administrative purposes.130 From calculations of the budgets, receipts and expenditure accounts published by the Company in 1912, the settlers established that the Company received administrative surpluses from 1909 to 1912. The following table shows these administrative surpluses for the period 1909 to 1912. 128 See also BOA, File 73150B, Southern Rhodesia Report of the Auditor General, 1915, 3-7 & 14-17; British South Africa Company’s Balance Sheet, 31 March 1912. 129A. C. Raymer, Should Chartered Administration be Abolished? A Few Facts, Figures and Observations, (Bulawayo: Gifford House, 1914), 9. 130 Ibid. 44 Table 1.4: Rhodesian League Calculations of Administrative Revenue Surplus Year ended 31 March 1909 £27 319 Year ended 31 March 1910 £73 131 Year ended 31 March 1911 £136 244 Year ended 31 March 1912 £79 406 Total Administration Surplus for S. £316 080 Rhodesia Source: Rhodesian League Pamphlet, August 1913. A. C. Raymer, a well-known accountant of standing in Southern Rhodesia, was employed by the Division of Treasury to examine the accounts of the BSAC in Southern Rhodesia.131 He confirmed the League’s position asserting that the Company was making more profit than it declared.132 The bigger question that remained at this time was whether the Company should continue as the colony administrator or relinquish its position. During the 1914 election campaigns, the Rhodesian League was divided into two groups on this question. At one end were those supporting the continuation of the Charter, and at the other, those against the continuation of the Charter or joining the Union of South Africa that was established in 1910.133 Those who wanted the Charter to end formed the Common Platform, whose manifesto was heavily criticised by Coghlan and his colleagues.134 The Common Platform’s main argument was that ‘the longer the Chartered Company is allowed to retain the country's administrative functions, the more securely will they be entrenched, and the higher will be the price which the people will eventually have to pay for their emancipation.’135 Coghlan, once a staunch supporter of Responsible Government, was against the Common Platform’s position. He believed that the country was not ready for self-rule, especially after the Treasurer’s 1913 financial statement showed that revenue was £784 573 and expenditure £884 786, leaving a deficit of £100 213.136 131 Ibid. TNA, CO/879/120, File 57351, The Secretary of the State to the High Commissioner, 10 November 1921. 132 Raymer, Should Chartered Administration be Abolished?, 9. 133 NAZ, MA15/1/1 J. M. McChlery: Historical Manuscripts-Legislative Council Elections Manifesto 1914. 134 Ibid. 135 Ibid. See also Raymer, Should Chartered Administration be Abolished?, 9. 136 Legislative Council Debates, 21 April 1913, The Treasurer’s Budget Speech, Column 265; Legislative Council Debates, Charles Coghlan, 14 May 1913, Columns 311-316. 45 During negotiations and discussions for the end of the Chartered Government, three possibilities were raised apart from the Chartered Company government’s continuation: entry into the Union, Crown Colony government, or Responsible Government.137 Coghlan and his camp supported the renewal of the Charter and Company control of the colony’s administration for another ten years. In their proposals, they argued that many sympathisers of the movement to abolish Chartered Administration, as the first step towards Responsible Government, were somewhat uncertain about the territory’s fiscal position. They asserted that the country’s financial situation was not sufficiently strong to ensure any new government to take over the administrative costs.138 Even though it continued to be an issue until the 1922 referendum, the Union possibility proved to be relatively unpopular among the settlers during this time. According to Lee, ‘this was encouraged by the Company, which might have considered handing over the territory to the Union had they been offered the right price, as this was not forthcoming, the Company backed anti-Unionist feeling [to] prolong its administration.’139 Henry Wilson Fox, one of the Company directors in London, had commented in 1910 that ‘the present temper of Rhodesia’s inhabitants is decidedly against Union, and I think that it is entirely within the power of the Company to maintain and strengthen this sentiment.’140 The Company promised a new fiscal approach and played somewhat ‘divisive’ politics, especially against the Common Platform and its supporters, by labelling them as agents of the Union of South Africa.141 The failure of a formidable political movement against the Company rule at the 1914 elections is largely attributable to the labeling of the Common Platform and its supporters. Adding to that, Jameson commented that there were only two options for Southern Rhodesia, to either be absorbed into the Union or continue with the Company. He said: Of course, the Imperial Government might take away our administration tomorrow and leave us with our assets; but although they have the right to do that, I do not think they will do so. I do not think that in the interests of the Shareholders, the divorcing of the administration and the commercial assets would be advantageous, and still more in the interests of Southern Rhodesia’s people; I do not think it would 137 Raymer, Should Chartered Administration be Abolished?, 9. 138 British South Africa Company Directors’ Report to the Shareholders, 27 February 1913, 7. 139 Ibid. 140 NAZ, A11/2/18/27-29-Henry Wilson Fox, Memorandum on Problems of Development and Policy in Southern Rhodesia, 1910, 81. 141 NAZ, JA1/1/1, Jameson Papers, 1913. See also Lee, ‘An Analysis of the Rhodesian Referendum, 1922’; Lee, ‘The Origins of the Rhodesian Responsible Government Movement.’ 46 be advantageous. In the cause of good government, it would be a mistake to leave such an enormously powerful Company in such a very young and only moderately populated country. Therefore, I should hope that when times arrive, it would be, as I say, complete. The last alternative in front of the people of Rhodesia is absorption in the Union.142 The Company put considerable effort into suppressing political opposition from the Common Platform, which would have forced it to accept Responsible Government if the Platform had won the 1914 elections. Predicting the future outcome of the elections and the renewal of the Charter, Philip Lytelton Gell, who had held several positions in the BSAC (director from 1899-1917, chairman from 1917-1920 and president from 1920-1923), noted that ‘next year, 1914, we shall celebrate our silver wedding, that is, the Chartered Company with the people of Rhodesia, or the Charter Shareholders, who are the Company, with the people of Rhodesia.’143 He further said, ‘I venture to predict, and I hope to show you that there is no evidence that our silver wedding will end in divorce.’144 Subsequently, in 1915, the Company attained the Supplemental Charter, serving as a lifeline to continue its colony administration, as discussed in the following chapter. Conclusion The chapter focused on the creation of the colony’s administrative structure under the BSAC. Considering the significance of financing colonial occupation and expansion by the British government, the chapter examined how the BSAC as a commercial company was given a dual mandate. First it acted as a government and, secondly; undertook commercial activities. The chapter outlined the fiscal arrangement of the country. It looked at how the fiscal system shaped political decisions and the colony’s administrative structure. In the formative years the colony’s fiscal processes were experimental. In 1898, the establishment of Legislative Council laid the foundations for a more organised fiscal framework which culminated in the establishment of the Division of Treasury in 1903. A close analysis of the Legislative Council debates on important political, economic and fiscal matters such as land issues, taxation, government finance and expenditure shows that the Company struggled with balancing its budget. After 1900, there were severe debates on who should finance the country’s administration. The settlers argued that they were making significant contributions towards the country’s revenue; therefore, they had the right 142 NAZ, JA1/1/1, Jameson Papers, British South Africa Company Proceedings of the Eighteenth Ordinary Meeting and Extra Ordinary General Meeting, 27 February 1913. 143 Ibid. 144 Ibid. 47 to influence crucial administrative matters and demanded that the Company contribute towards government finance. 48 Chapter Two Towards a New Fiscal Approach: The BSAC and the Consolidation of Settler Political Power, 1914-1922 Introduction The year 1914 was significant in the political and fiscal history of Southern Rhodesia. In that year, the initial Charter given to the BSAC in 1889 was due to expire. While the Rhodesian League wanted an instant termination of BSAC administration, the country’s ‘financial fitness’ was not conducive to make such a decision due to persistent administrative deficits. As noted in the previous chapter, settler politics began to emerge as early as 1898, punctuated with several political and financial demands. The BSAC conceded to some of these demands and began implementing economic reforms, for example, increasing expenditure and land prices to bring more revenue for the administration. The decision to increase land prices, noble as it was, would create future problems for the Company regarding its settlement policy and the promotion of settler immigration in Southern Rhodesia. Meanwhile, the BSAC Charter, was renewed through the 1915 Supplemental Charter. The renewal of the Crown Charter empowered the Company to continue governing the colony on the one hand. On the other hand, it triggered new political strategies and financial demands by the settlers.1 This chapter explores the continuation of the Charter at a time when the fiscal demands from the settlers were intensifying. In doing so, it employs Marguerite E. Lee’s argument that the growing settler power in the colony intensified their movement in demand for total control of the country’s administration.2 As demonstrated in the chapter, apart from demanding a change of the administrative system the settlers, as taxpayers, wanted total control of the Legislative Council and the country’s fiscal system in order to manage revenue collection and expenditure decisions. The chapter, thus, begins by looking at how the BSAC managed to retain the Charter in 1915. The focus then shifts to the growth of financial burdens during the First World War, the introduction of income tax for white people, and the establishment of the Income Tax Department. The chapter ends with an analysis 1 The National Archives at Kew (hereafter TNA) CO/879/120, Colonial Office: South Africa Correspondence Relating to Political Affairs in Southern Rhodesia, 1919-1922, a letter from the High Commissioner Buxton to the Secretary of State, 1920, the letter does not have an actual date. 2 M. E. Lee, ‘Politics and Pressure Groups in Southern Rhodesia 1898-1923’, (PhD Thesis: University of London, 1974). 49 of the financial negotiations between the Company, the Imperial Government, and the settlers paving the way for the granting of Responsible Government. ‘The Toad beneath the Harrow’: Negotiations for the 1915 Supplemental Charter and New Fiscal Promises by the BSAC Marking the end of the first 25 years of the BSAC Charter, 1914, was the year when a significant section of the settlers expected Company rule in Southern Rhodesia to come to a complete end. However, the situation at hand could not permit. As discussed in the previous chapter, the envisaged end of the Charter in 1914 created tension in settler politics. The settlers who supported the continuation of the Charter demanded new provisions for fiscal administration that the Company administration would have to follow. These provisions had to be considered in the year 1915.3 The agreement on fiscal administration was important as it would inform any subsequent binding political decisions, for instance, the negotiations of the 1915 Supplemental Charter that were to follow. The Company decided to continue administrating the colony, according to Fox’s analysis, because it needed more time to develop the country as its asset and prevent premature relinquishing without profit in the end.4 However, fiscal grievances intensified when the first 25 years of the Charter lapsed, putting pressure on the Company. As noted in the previous chapter, this resulted in the formation of the Rhodesian League with the aim to support farmers’ demands. Nonetheless, the League, as mentioned in the previous chapter, failed to live up to its initial aim and split during the 1914 elections. The split was a wakeup call for the settlers to find common ground and outline their new demands at the Supplemental Charter negotiations. Thus, although it failed to achieve its initial aim of establishing a Responsible Government, the League laid the ground for talks and future success, acting as an incubator for the rise of one of the most important political figures on the settlers’ side to push forward their economic demands, that is, Charles Coghlan, the future Prime Minister of Southern Rhodesia. In the end, the Imperial Government and the settlers forced the Company to the negotiation table. It was at these negotiations that the Company and the settlers agreed on future fiscal policies. During the negotiations, the major fiscal grievances came from the farmers who complained over 3 Lee, ‘Politics of Pressure Groups in Southern Rhodesia’, 124. 4 Ibid, 136. 50 mining rights, the Land Settlement Scheme, and Labour Tax. According to Lee, the Company had to minimise its support to the mining industry and consider the agricultural sector’s grievances.5 The farmers complained and questioned the ownership of alienated land as the Company had claimed it as its private property. In their view, many financial and fiscal problems and unending yearly budget deficits of the country had principally emanated from the Company’s unclear Land Settlement Schemes, unclear tax systems, and the ever-present issue of mixed Administrative and Commercial Accounts.6 The settlers demanded provisions to be made under the new Charter which included: Acknowledgement of the obligation by the Company to provide the ordinary and necessary administrative services [and] that they should bear the same proportion of the cost of doing so because they were a purely commercial concern, that they should so re-arrange the burden of taxation and bear their fair proportion by giving a grant of what their tax should be.7 The Chartered Company’s directors agreed to meet some of the settlers’ demands. For example, they agreed to address and revise the Land Settlement Scheme, pay for services and other administrative expenses. They also agreed that the BSAC would take over deficits that were accumulated prior to 1914.8 These deficits, argued the settlers, were part of the price the Company should have paid for acquiring and developing the land and its mineral assets. Deficits after 1914, especially as a result of revenue shortfall, high cost of public works or other services, would be paid on mutual agreement.9 More importantly, the directors also agreed to separate the Company’s commercial and administrative accounts.10 According to Coghlan, it was the Company directors’ commitment ‘to pay for services and other administrative expenses, through their London Office, which influenced the people of the country to agree to the renewal of the Charter.’11 5 M. E. Lee, ‘An Analysis of the Rhodesian Referendum, 1922’, Rhodesian History, 8 (1977), 71. 6 The Rhodesia Herald, 8 August 1913. 7 Legislative Council Debates, 13 May 1918, Charles Coghlan, Column 168-169. 8 J. R. P. Wallis, One Man’s Hand: The Story of Sir Charles Coghlan and the Liberation of Southern Rhodesia (London: Longman, 1950), 125. 9 Ibid. 10 Ibid. 11 Legislative Council Debates, 13 May 1918, Column 170-171. 51 Coghlan’s view did not wholly capture the political situation of the time.12 If anything, a section of settlers felt that the Supplemental Charter was nothing but a botchery.13 In actual fact, it benefited the Company more than the settlers. The decision to renew the Charter, argued Gordon Forbes, was an embarrassment, ill-considered and drove people under Company domination.14 He warned that the Company was asking more than the settlers could offer, especially on land ownership.15 His doubts were proven right within a year after the renewal of the Charter when the Company doubled the price of the land. It also increased prices of land for the erection of stores, hostels and dwellings in towns or railway stations, making it more difficult for the settlers to acquire land along railway lines and commercial places.16 The situation worsened with the outbreak of the First World War. The War Years and the Establishment of the Income Tax Department After the Company secured the Supplemental Charter, it did not take long before domestic and international developments tested its administration. The outbreak of the First World War affected the world economy, including that of Southern Rhodesia and the commercial sector of the colony felt the immediate effect of the war.17 The four years of the war saw increases in shipping rates. Merchants were affected by the rise in the price of imports and shipping difficulties which, in turn, caused an increase in the cost of living.18 The increase in costs came from the fact that almost all ships were directed towards the war effort and a limited number towards commercial ventures. The rise in sea freights made it more expensive for farmers to transport their products. One farmer complained that: The development of agriculture in Rhodesia during the past year has, of necessity, been affected by the conditions [brought about] by the war. Those conditions have been entirely adverse to progress, for the high war prices, which have benefitted farmers in Britain, have in this country been more than counter-balanced by an excessive rise in sea freights.19 12 Lee, ‘Politics and Pressure Groups in Southern Rhodesia’, 132-136. 13 Wallis, One Man’s Hand, 121. 14 Ibid. 15 Ibid, 129-130. 16 Ibid, 148. The land price marked the beginning of land speculation that lasted until the twenties. 17 Legislative Council Debates, 7 May 1915, Columns 284-286. 18 Bulawayo Chronicle, 27 September 1914. 19 Report of the Director of Agriculture, 1914. 52 Secondly, because of naval battles, the seas and oceans were not safe. With regard to production, there was a decline in consumer goods and a rise in war industries. Because of shortages in consumer goods and the high demand for them in Southern Rhodesia, prices shot up.20 As Wallis put it: Falling revenue, growing unemployment and difficult credit made it hard for [a community] of some thirty five thousand [white people] to support the war out of current revenue. Receipts from import duties were dwindling while costs of living soared worsened by panic buying at inflated prices within and without the territory.21 In addition, the increase in the cost of living emanated from Imperial Proclamations published in October 1914.22 The proclamations had negative fiscal implications for Britain’s colonies and dominions as they were prohibited from ‘trading with the enemy.’23 The proclamation saw the closure of German trading firms in Southern Rhodesia, which intensified the shortage of goods in the country. Affected by the shortage of goods, the settlers levelled accusations of profiteering against the traders and merchants.24 The settlers argued that, while South African products were flooding the country at relatively cheap customs duties, they were sold at high prices by merchants. Information gathered across the country indicated that this was a matter of great political and administrative importance. The Company, therefore, could not increase the customs duties to earn more revenue because this could further increase cost of living. To make the situation even more difficult for the Company government, the 1914 Customs Agreements pitted Southern Rhodesia against the Union, which was in a stronger position, and only small concessions were granted.25 20 Ibid. 21 Wallis, One Man’s Hand, 133. 22 National Archives of Zimbabwe (hereafter NAZ), ZG1, Government of Southern Rhodesia Notice published on 16 October 1914. The Proclamation read: ‘Now, therefore, we have thought fit, by and with the advice of the Privy Council, to issue Our Royal Proclamation declaring and it is hereby declared as follows; (2) the Proclamation on Trading with the Enemy shall be deemed as from this date to prohibit with the Dual Monarchy of Austria-Hungary all commercial intercourse which under the said Proclamation is prohibited with German Empire. For the purposes, such Proclamation shall be read as if throughout the operative portion thereof the words “either the German Empire or the Dual Monarchy of Austria-Hungary” were substituted for the Words “the German Empire”.’ 23 Ibid. 24 Bulawayo Chronicle, 19 May 1916. 25 For a detailed discussion on the customs duties and Southern Rhodesia’s relationship with South Africa, see R. Cole, ‘The Tariff Policy of Rhodesia, 1899-1963’, Rhodesian Journal of Economics, 2:2 (1968), 28-47; A. Mlombo, ‘Southern Rhodesia’s Relationship with South Africa, 1923-1953’, (PhD Thesis, University of the Free State, 2017); ‘Settler Colonialism and Trade in the Periphery: Customs Relations between Southern Rhodesia and South Africa, 1924-1935’, African Economic History, 47:1 (2019), 92-115. For political debates on customs duties, see Legislative Council Debates, 7 May 1915, Columns 258-284. 53 The Company proposed to get a loan but was disallowed by the Imperial Government because this would put the burden of repayment beyond the settler community’s capacity.26 However, this decision was made without due consideration of whether borrowings repayable over time would indeed be more burdensome than the alternative of heavy taxation. The war also caused problems for the mining and farming industries. From 1914, the mining and farming industries’ problems were monetary.27 They were affected particularly by the increasing railway rates during the war. The mining community tried to lobby for the decrease of railway rates, but with limited success. In addition, the Rhodesia Chamber of Mines attempted to persuade the Company to reduce its royalties during the war years. However, other affiliate mining bodies did not support this, and the matter was dropped.28 The farmers were the most upset by the doubling of railway rates. While they expected their productivity to increase because of the war, the railway rates for transportation of inputs and their produce became the stumbling block. The railway rates sparked anger across the country, and all three sectors of Southern Rhodesia’s economy (mining, agriculture and trade) combined their efforts to secure an inquiry into railway affairs.29 However, the war had put a halt to political activities all around the world, including Southern Rhodesia. The Company, therefore, delayed the inquiry until 1916 when the BSAC published the railway position with a small deficit in 1915, as shown in Table 2.1 below. 26 Bulawayo Chronicle, 19 May 1916. 27 Ibid. 28 Lee, ‘Politics and Pressure Groups in Southern Rhodesia’, 150 29 See I. R. Phimister, An Economic and Social History of Zimbabwe 1890-1948: Capital Accumulation and Class Struggle (London: Longman, 1988), 99. 54 Table 2.1: Receipts of the Beira, Mashonaland and Rhodesia Railway Companies Year Total Gross Surplus Deficit Receipts Income Income £ £ £ 1910 1 353 234 --------- 35 303 1911 1 733 313 242 286 --------- 1912 1 681 032 156 428 --------- 1913 1 896 762 386 702 --------- 1914 1 754 230 220 386 --------- 1915 1 386 531 -------- 44 693 1916 1 672 249 199 580 -------- 1917 1 782 368 147 953 -------- 1918 1 890 734 185 302 -------- 1919 1 855 191 -------- 76 422 Subtotal 1 538 637 156 418 Surplus - 156 418 Grand Total 1 382 219 Surplus Report of the General Manager; Beira, Mashonaland and Rhodesia Company for the year ended 30 September 1919. The railway problems hindered not only the prospects of improved administrative and fiscal management but also political understanding between the settlers and the Company. To address the situation, the Company appointed W. M. Acworth to head the commission of inquiry into railway matters in 1918.30 His findings further infuriated the settlers when he noted that the rates were justified and that the country’s development depended on the development and maintenance of the railways. His comparisons with figures of the Union of South Africa were regarded by settlers as inaccurate, unfair and misleading, based on assumptions, not facts.31 As such, the settlers felt that the Company was prospering through the high railway rates to the benefit of its shareholders, while exploiting the industries that required assistance during wartime. Settlers urged 30 Acworth was an economist and a railway expert. He occupied many positions on many British Royal Railway commissions and committees, for instance the Royal Commission of Enquiry into the Canadian Railways in 1916 and Railway Commission of Enquiry in Southern Rhodesia in 1918 and Chairman of the Committee on Indian Railways in 1921. For more information on Rhodesian Railways see J. Lunn, Capital and Labour on the Rhodesian Railway System, 1888-1947 (London: Macmillan Press, 1997). 31 Lee, ‘Politics and Pressure Groups.’ 55 the immediate introduction of temporary low rates to promote the export of the base metals that Britain and the Allies urgently needed for ammunition industries.32 Apart from the financial difficulties brought by the war, the long-standing land question re- emerged at this time. The relations between the settlers and the Company regarding the colony’s financing increasingly hinged on the 1908 question of land and the 1913 proposed Land Settlement Scheme. The Company had initially tried to deal with the land question in 1908 by imposing rents on Africans and grazing fees for their stock and reducing African reserves to create more land as a commercial asset.33 Through the Land Settlement Scheme, the Company intended to use land as its commercial asset to reimburse the expenses incurred during the colony’s occupation. According to Phimister, when the BSAC announced a new Land Settlement Scheme in 1913, through their London manager, the unalienated land was valued at £22 786 312, a sum higher than the Company’s mining and railway interests combined.34 The Land Settlement Scheme was also used to promote white immigration into the country. For this purpose, the Company proposed to establish a £250 000 fund for the expansion of land sales and settlement. This was what the settlers wanted because an increased white population in the country would mean that mining and farming industries especially would expand. The Company also planned to tax all undeveloped land holdings including alienated areas, a position that would ignite conflicts later on. With all these fiscal promises and reorganisation, the settlers accused the Company of selling land to immigrants at high prices because it preferred to sell land to big Companies with money, inhibiting white settlers’ immigration to the country.35 Thus, struggle over land ownership ignited conflicts between the Company and settlers, specifically about who should control the income derived from it. The Company appropriated revenue from the land sales and quit-rent to its commercial account, against the expectations of the settlers who wanted the Company to use the revenue for administrative expenses.36 In addition, to protect the mining industry’s property, the Company had initially alienated land that was believed to be situated along 32 Ibid. 33 P. Bond and M. Manyanya, Zimbabwe’s Plunge: Exhausted Nationalism, Neoliberalism and the Search for Social Justice (Pietermaritzburg: University of Natal Press, 2002), 2. 34 Phimister, An Economic and Social History of Zimbabwe, 97-98. 35 NAZ, T1/11/2/3, In Letters and Correspondence: London Office, Mashonaland Land Settlement. For example the Willoughby Company was granted 600 000 acres of land in return for expenditure of about £30 000 within a period of three years. 36 Madimu, ‘Farmers, Miners and the State in Colonial Zimbabwe.’ 56 Gold Belts.37 The Company stopped issuing land in these areas to farmers and created the Gold Belt Title (GBT) which prohibited farmers from obtaining land along Gold Belts.38 By 1917, the outspoken settlers established the RGA to oppose the Company’s Land Settlement Scheme. Through the RGA, they requested the Imperial Government to investigate the issue of land ownership, which the Company lost through the Privy Council judgment in 1918. Phimister, analysing the intensity of the loss of the land asset by the Company, argued that: At a stroke, the Company forfeited its most valuable commercial asset, carefully nurtured through its tempestuous association with domestic capital. Having lost the asset around which it had constructed its entire economic and political strategy, the BSAC saw no further point in subsidising administrative deficits and told its shareholders that ‘since the land is not yours, capital for its further development must be sought elsewhere than from you.’39 The Company’s future financial policy changed drastically. It immediately stopped its contributions to Posts and Telegraph costs and attempted to reduce expenditure on Public Works.40 Drummond Chaplin, the Administrator of the country, addressing the Rhodesia Agriculture Union in 1919, stated that ‘under the situation that has been created by the judgment of the Privy Council regarding land, it is practically impossible for me to get money for capital expenditure unless it is provided out of the country’s ordinary revenue of the year.’41 The Company also decided to finance development in the country by ‘defraying the deficits.’ This further strained relations in the Legislative Council, where the elected members criticised the Administrator for allowing a budget deficit of £35 000 to occur a year later (1919) after the passing of the Privy Council judgment.42 John McChlery, Member for Marandellas, argued that this deficit was an artificial one. Percy D. L. Fynn, the Treasurer, replying to this claim, noted that: Approximate figures were accordingly given last year in the Administrator’s budget statement. The expenditure was then put at £887 800, and it was expected that the revenue would equalise the amount. According to the Auditor General’s report, the 37 Gold Belts were areas considered to have gold deposits. The Company refused to parcel out land in these areas desire to ensure uninterrupted mining development in the country. 38 See R. Hodder-Williams, White Farmers in Rhodesia, 1890-1905: A History of the Marandellas District (London: MacMillan Press, 1983), 28. 39 Phimister, An Economic and Social History of Zimbabwe, 99. The Privy Council was a formal body of Advisers to the Crown. It acted as the Court of Appeal for the entire British Empire. 40 Lee, ‘Politics and Pressure Groups’, 99. 41 Ibid. 42 Ibid. 57 actual figures were expenditure £888 913 and the revenue was £887 800 showing deficit of a little over £1 000. But for the interest of those who are interested in converting what the hon. Member of Marandellas (John McChlery) described as artificial deficits; I may state that against a cash deficit of £1 000 the London Office accounts, when they come to be made upon a commercial basis, will show a very substantial surplus of £35 000.43 The settlers rode on the implications of the Company’s decision to argue that, ‘if the country is to be administered on its own resources and credit…it might as well have the management of its affairs,’44 prompting the move for the termination of Company administration (a subject of discussion in the next section). Fiscal conflicts between the Company and the settlers were not confined to land only. During the wartime, specifically from around 1916, debates over introducing income tax and excess profit tax on European individuals and companies emerged. In 1918 serious consideration was given to adding income tax and excess profit tax to Southern Rhodesia’s taxation system after some financial proposals on covering the war expenses were put forward in the Legislative Council. The Company government argued that it had experienced budget deficit between 1914 and 1917 and was in dire need of new sources of revenue. Fig 2.1 below shows that the Company administration experienced budget surplus only in 1921 and 1922. 43 The Rhodesia Herald, Saturday 8 October, 1920. 44 M. E. Lee, ‘The Origins of Rhodesian Responsible Government Movement,’ Rhodesian History, 6 (1975), 49; Phimister, An Economic and Social History of Zimbabwe, 99; NAZ, BR503, The British South Africa Company, Report of the 22nd Ordinary General Meeting, 7 August 1918. 58 Fig 2.1: Revenue and Expenditure of Southern Rhodesia 1914-1922 1600000 1400000 1200000 1000000 800000 600000 400000 200000 0 1914 1915 1916 1917 1918 1919 1920 1921 1922 Revenue 777008 718127 744629 736128 737443 887801 1053396 1367828 1488606 Expenditure 836475 848611 768954 751086 790470 888913 1082372 1350005 1335041 Deficit 59467 130484 24325 14958 53027 1112 28976 0 0 Surplus 0 0 0 0 0 0 0 17823 153565 Source: Calculated by the author using statistics obtained from the Official Book of the Colony of Southern Rhodesia No. 2, 1930. The income tax, special war tax, and excess profits tax were introduced under the Provisions of the War Taxation and Excess Profits Duty for Southern Rhodesia in 1918, earmarked for covering the war expenditure.45 The Company government balance sheet revealed excesses in expenditure. For instance, the Public Works’ excess expenditure was £4 063 due to the increased cost of materials and necessary hand repairs of old buildings.46 The Veterinary Vote had an excess of £5 000 and received an extra £3 411 for the construction of a laboratory to research the effects of the East Coast Fever disease. Due 45 For example see NAZ, GEN/DAV E. J. Davies, ‘Rhodesian Taxation Guide: An Analysis of the Provisions of the War Taxation and Excess Profits Duty Ordinance for Southern Rhodesia’, 1918; J. F. Due, Taxation and Economic Development in Tropical Africa (Cambridge: The M.I.T Press, 1963); E. Skeet, Rhodesian Income Tax, (Salisbury: Chartered Accountants of Rhodesia, 1976); A. S. Silke, Income Tax in the Central Federation (Cape Town: Juta and Company, 1956); A. Katz, A Basic Guide to Rhodesian Income Tax (Salisbury: Pioneer Head, 1976); G. Eichelgun, ‘Income Tax in British Colonies’, The Economic Journal, 58:229 (1979). For general African taxation and the introduction of income taxation, see F. D. Lugard, The Dual Mandate in British Tropical Africa (London: William Blackwood & Sons Ltd, 1929). 46 Legislative Council Debates, 6 May 1918, Francis Newton, Budget Statement, Columns 37-48. 59 £ to the increased cost of uniforms, bedding, clothing, and utensils imported for the countryside district prisons, the Prisons Vote also increased.47 With regard to the Education Vote, excess expenditure included the following: Eveline School received £9 589, Bulawayo schools received £2 172, Milton School received £1 000; the Girls School in Salisbury received £1 750; while Umvuma, Sinoia, Selukwe, Que Que and Plumtree had a combined excess of £15 000.48 Other many small items added to the excess expenditure by the Company government, for example, the appointment of experts in the fields of diary, poultry, tobacco and cotton.49 The Administrator proposed that Southern Rhodesia provide funds for pension and gratuities for those recruited for the war in aid of the Imperial Government.50 The Commandant General also proposed to make Southern Rhodesia a depot for the Imperial forces. This was in line with his proposals that proper provisions be made for sending Rhodesian men overseas for the war.51 He further proposed to raise war pensions for ex-servicemen and civil servants equal to the amount in the Union of South Africa.52 All the above expenditures and costs of administration were, in Newton’s words: Sufficient grounds to justify the Government’s proposals to impose fresh taxation [through income tax]. There have been allegations that there is sufficient taxation in this country, but that position I challenge emphatically. I think we are possibly among the most lightly taxed populations. It is not a proposal to tax the poor and needy, but rather one, which will be met readily enough, I believe, and if there are not many rich men, at any rate, by those who are competent to bear such an imposition 53. The Treasurer proposed that the collected revenue from income tax would be used to cover the increase administrative because of the war, especially to provide for gratuities to married Civil Servants of the lower grade. The Treasurer also stated that there was going to be an additional amount of money spent on raising the war pensions to the amount of the Union rates. Apart from 47 Ibid. 48 Ibid. 49 Ibid, Column 51. Despite the cost, these were crucial appointments especially for a country that was still building its agricultural industry. 50 Legislative Council Debates, 15 May 1918, Column 247. Francis Newton quoting the Administrator Chaplin Drummond, in his Budget Statement to the Council. 51 Ibid. See also NAZ, A3/21/93/95-War Pensions Ordinance 1917 Amended by War Pensions Ordinance 1919. 52 Legislative Council Debates, 13 May 1918, Cited by Coghlan, Column 177. 53 Legislative Council Debates, 6 May 1918, Newton, Budget Estimates, Column 49. 60 these, the Treasurer indicated numerous small items of a miscellaneous nature that the settlers felt were unnecessarily straining the financial position of the country. The BSAC was restricted by the Imperial Government from accumulating internal debt through loan; in other words, the Company’s ability to borrow from the private sector was heavily controlled.54 The request for new taxes, thus, sailed through the Legislative Council. However, the Administrator’s biggest battle was deciding the kind of tax that the Company government would levy on the territory. According to Fynn, it was difficult to impose new taxes on the country’s African population since they were already bearing several taxes ranging from the 1892/3 hut tax, 1903 poll tax, 1912 dog tax, and grazing and dipping fees.55 The Administrator, Sir Chaplin in a letter to the High Commissioner, supported Fynn’s position noting that ‘as regards the proposals, I am quite clear that an increase of the native tax today would not be possible.’56 He added, ‘The natives have to pay more for everything they buy, and they also face very substantial expenditure of their income on other costs like dipping fees. I should not be prepared to recommend the Council to impose increased taxation on them.’57 As a result, the Company government needed to implement other forms of taxes. The Treasurer first proposed that a postage stamp tax be levied because collection of this tax was quite easy.58 He reiterated that this would allow the country to formulate its legislation concerning postage stamps since it was currently enforcing ‘foreign law’ through the Postal Act of the Cape Colony. The tax would have undoubtedly raised the cost of postage stamps in the country, which the Treasurer admitted. In the end, the Legislative Council members vehemently opposed the tax, arguing that such prohibitive costs of communication would inhibit Southern Rhodesia’s development, as communication formed an essential part of business networks.59 McChlery further stated that the tax was retrogressive to the development of Southern Rhodesia’s economy and downright oppressive to both settlers and Africans. Despite the Treasurer’s assurance that 54 Legislative Council Debates, 5th and 6th Session of the Sixth Council, 10 April to 5 May, 1918, Fynn, Column 202. 55 See, among others, Phimister, An Economic and Social History of Zimbabwe; Gann, A History of Southern Rhodesia, Mosley, Settler Economies: Studies in the Economic History of Kenya and Southern Rhodesia. 56 NAZ, CH8/2/2/12, Sir Francis Percy Drummond Chaplin Correspondences with Sir Lewis Michell, 1915-1923. 57 Ibid. 58 Legislative Council Debates, 14 May 1918, McChlery, Columns 202-219. 59 Ibid. 61 implementation of postage stamps tax would immediately cease after the war, the Legislative Council members stood their ground against the proposal. McChlery had previously proposed that the government levy a tax on income and excess profit, as many companies were making ‘thousands of pounds’ while no income tax was levied.60 His proposal received solid backing from the Council members. However, the country’s Administrator, Chaplin and the Secretary of Mines and Public Works, Ernest Montagu, called it unreasonable, citing that income tax on the mines would deter foreign capital, which the Chartered Company was desperately trying to attract.61 Chaplin and Montagu argued that the only way out of the colony’s financial predicament was to tax the white settlers, who, unlike Africans, had until 1918 never paid direct taxes.62 After much cogitation and debates, income tax was enacted in 1918, leading to the establishment of the Income Tax Department. Predictably, the income tax legislation was lenient towards private mining interests which, in turn, intensified the conflict between the mining and local farming capital. The debate quickly escalated as the farmers were skeptical as to who was liable to pay income tax. The Treasurer, in response to the settlers concerns, noted that: In the case of those who are liable or not to the Income and Excess Profits Tax (EPT), Income Tax would be payable on so much of the income as exceeds £1,500, except in the case of bachelors, who would pay on any income over and above £1,000 and all others, including companies up to £1,500. The effect of this would be to exclude almost all salaried persons. However, companies, including British South Africa Company on its commercial side and the railway companies, merchants, traders, professional men, and others, would pay on anything over £1,500. The rate proposed is 1s in every pound of such amount 63. These stipulations instigated further conflict between the settlers and the Company government about those exempted from paying income tax. According to the provisions, the following were exempted: all local social societies, authorities, farmers’ cooperatives, life assurance companies, ecclesiastical bodies, Imperial officials, and war pensions.64 Among other things, the farming 60 Legislative Council Debates, 3 May 1917. 61 Ibid. 62 Gann, A History of Southern Rhodesia: From Early Days to 1934, 234. The Income Tax Department was formed on 1 April 1918 but settlers were asked to file income tax returns for the previous 12 months ending 31 March 1918, meaning they paid income tax for the period before the Department was formed. 63 Legislative Council Debates, 6 May 1918, Fynn, Budget Statement, Column 50; Davies, ‘Rhodesian Tax Guide’, Chapter 1 & 2. 64 Legislative Council Debates, 6 May 1918, Fynn, Budget Statement, Column 50. 62 settler community felt that shareholders should also pay the income tax because the source of their income was in Southern Rhodesia. They argued that the struggle to find an appropriate means to tax corporate profits of shareholders would be terminated only by imposing the income and profit tax on corporations. This struggle had continued for years, just like in the Union, where income tax was imposed in 1914.65 Although some elected members had pushed for the establishment of the Income Tax Department, it was met with resentment.66 For instance, Coghlan felt that the Department was not pushing enough to make the Company’s officials pay income tax and EPT.67 The Salisbury Chamber of Commerce and the Bulawayo Chamber of Commerce affirmed readiness of their members to submit to these taxations for the war progress and purpose. However, both Chambers stated in their resolutions that they did ‘not think the taxation should have been introduced until the country has had the opportunity of considering the matter, and ascertain exactly how it would affect the country.’68 They were concerned with the Company’s timing of introducing the new taxes. In response, the Administrator on behalf of the BSAC replied, ‘we, as an Administration, followed the usual practice with all other governments; they do not state months in advance what taxation proposals they will bring in, they bring in their taxation proposals at the opening of the Parliamentary Session for deliberations.’69 Disputing the Company’s tax proposals, elected members weighed in arguing that ‘when income or a profit tax was proposed in England or the Union it was probably a month or two before the legislation became effective.’70 In other words, the people in those two countries had ample time to discuss, consider, and adapt to their respective governments’ new financial demands. Resistance to direct taxation also occurred in other settler colonies like Kenya in the early 1920s. As William McGregor Ross, a government official turned colonial critic, claimed that in Kenya, the settlers established the European Taxpayers’ Protection that advocated ‘for concerted action by all Europeans to refuse to fill tax returns files or pay the tax owed.’71 In Southern Rhodesia, elected 65 Ibid, Column 51. For comparisons with South Africa, see J. Hattingh et al (eds), Income Tax in South Africa: The First 100 Years, 1914-2014 (Cape Town: Juta and Company, 2016). 66 Legislative Council Debates, 13 May 1918, Coghlan, Columns 49-50. 67 Ibid. 68 Ibid. 69 Legislative Council Debates, 13 May 1918, Drummond Chaplin, Column 174. 70 Legislative Council Debates, 13 May 1918, Coghlan, Columns 49-50. 71 W. McGregor Ross, Kenya from Within: A Short Political History (London: Routledge, 1968), 157. 63 members objected to income tax on constitutional grounds. Income tax, settlers argued, was an offence against the people’s civil rights so long as white Rhodesians did not have full and independent financial responsibility of the country. They regarded the taxes as obiter dictum, which the Rhodesia people had to pay only under Responsible Government. 72 According to the settlers felt that the Company government’s decision to exempt excess profits tax on companies that were directly connected to its commercial interests was a way to avoid contributing towards the country’s expenses. Some of the Company’s many commercial interests included the railways and over 48 million acres of land, of which the mineral rights yielded over £100 000 of revenue per annum. Yet as Coghlan contended, ‘up to the present day from 1914, in four years, the Company paid only £800 in taxation and £789 in customs and excise duties.’73 Wallis concurred by observing that, ‘the Company, while bearing no part in of the territory’s taxes, had otherwise contributed less than £50 000 per annum during the four years [from 1914 to 1918], whereas the settlers had paid close to £3 000 000 [in duties, fees and stamps].’74 At the same time, the Company government complained that it was facing revenue deficits because of the country’s contributions towards war effort and needed extra income, hence the imposition of income tax. The farmers heavily disputed the Company’s argument. They claimed that while it was worthwhile for the Company government to help Britain fight the war, it was not obliged to contribute towards the war effort putting the burden on the people. Coghlan stated that the settlers had held many public meetings in Bulawayo to discuss the imposition of income and war profit taxes and the people’s position against income tax and EPT was clear.75 In addition, the settlers felt that they were forced to submit to the new form of taxation. To this end, elected members demanded that ‘the BSAC must make a fair contribution towards the country’s revenue. The Company should bear its full share in proportion to their assets in this country, and the income they derived from the country.’76 The elected members argued that the Company had broken its 1914 fiscal promises to the settlers that it (the Company) would contribute to the country’s revenue. 72 Legislative Council Debates, 15 May 1918, Coghlan, Column 247. 73 Legislative Council Debates, 13 May 1918, Coghlan, Column 170; 14 May 1918, Column 207. 74 Wallis, One Man’s Hand, 147. 75 Legislative Council Debates, 13 May 1918, Coghlan, Column 179. 76 Legislative Council Debates, 14 May 1918, Coghlan, Column 188. 64 A general feeling prevailed among the settlers and elected members that the imposition of the new tax was misplaced and they claimed that other possible forms of taxation could have been put forward to meet the country’s financial demands, for instance, land tax, customs and tariff duties, tax on luxuries like vehicle taxation, and entertainment tax.77 On vehicle taxation, Herman M. Heyman, a member of the Legislative Council, stated that ‘in this country people live in the lap of luxury, using petrol instead of doing the best to conserve it. Vehicles must be taxed.’78 By contrast, the Treasurer argued that since land tax, vehicle tax, and customs duties were long-term plans to stabilise the country’s financial problems; they were definitely not emergency taxes. Concerning land, he noted that, since many of the landowners were away at war, there was uncertainty as to who owned which pieces of land.79 At the same time, the Treasurer argued that the land was a contested asset between the Company and the settlers in this period which made it difficult to tax. With regard to vehicle tax, the Treasurer explained would involve extra taxation on the already overtaxed mines that were paying royalties to the BSAC. This position caused an uproar in the Legislative Council among the farmers who felt that the mining sector’s continued support was based on the BSAC’s commercial interests and who insisted that the mining industry pay vehicle tax. Meanwhile, the Treasurer took a cautious approach towards customs and tariff duties for fear of attracting reciprocal and retaliatory penalties from the Union of South Africa, with whom Southern Rhodesia had established strong trade links.80 While the Treasurer agreed that customs duties needed to be readjusted to compensate for the deficiency in revenue generated from this part of the economy, he was reluctant to alter existing relations with the Union, which were largely satisfactory in his view.81 Heyman, with the support of McChlery, did not agree with the Treasurer’s approach. For them, the existing customs and tariff duties regime was the major source of the country’s financial problems. If customs and tariff duties were reformed, they contended, 77 Legislative Council Debates 13 May to 15 May 1918, Coghlan, Columns 37-38, 49 and 53. 78 Legislative Council Debates 14 May 1918, Column 188. 79 Legislative Council Debates 13 May 1918, Column 53. 80 For a wider discussion on Customs Agreements, see Phimister, An Economic and Social History of Zimbabwe; Mlombo, ‘Southern Rhodesia’s Relationship with South Africa, 19231953’; Cole, ‘The Tariff Policy of Rhodesia, 1899- 1963’, 28-47. See also BOA, File No.73150J-01, Southern Rhodesia Report of the Controller of Customs for the year ended 1915. 81 Legislative Council Debates, 13 May 1918, Fynn, Budget Estimates, Column 54. 65 the country’s financial needs would be met without the necessity to impose income tax.82 Notwithstanding all the Treasurer’s remarks about the Union and revision of customs duty, Heyman suggested that an attempt be made to obtain more revenue from customs duties, especially on spirits and whiskey from the Union.83 He indicated that Cape brandy had an excise duty of 15s a gallon and averaged £78 000 to £80 000.84 In Heyman’s view, customs duties could be increased to cover the government’s financial needs instead of imposing income tax. He urged the Treasurer to prioritise the country’s financial position ahead of relations with the Union. He further argued that, ‘if the government was prepared to do that, it would have the people’s support. If it required money for war purposes, it should have tax things like brandy and whiskey, and if necessary, even tax them out of existence.’85 Regardless of continued resistance from the settlers, even after its imposition, income tax in Southern Rhodesia became one of the significant sources of government revenue from its inception until Responsible Government. By 1923 Southern Rhodesia was one of the few British territories in Africa to have established an income tax system that succeeded in collecting revenue from the white settlers, as shown by Fig 2.2 below. Leigh Gardner argues that Southern Rhodesia established one of the most successful income tax systems in British colonial Africa.86 Thandika Mkandawire shares this view. He acknowledges that the South African administration practices of income tax spread to neighbouring countries like Southern Rhodesia, a phenomenon he describes as the ‘institutional spillover.’87 By the 1920s, Southern Rhodesia’s Income Tax Department collected a large share of total revenue from companies operating in the country.88 Nevertheless, the subject of income taxation remained a constant source of conflicts between the Company government and the settlers. Given that the Income Tax Department was performing well with 82 Ibid, Column 186. For more information on the Legislative Council and Assembly Members and Cabinet appointments, see F. M. G. Willson (ed.), Source Book of Parliamentary Elections and Referenda in Southern Rhodesia 1898-1962 (Salisbury: University College of Rhodesia and Nyasaland, 1963); F.M.G. Wilson and G.C. Passmore, Holders of Administrative and Ministerial Office 1894-1964 (Salisbury: University College of Rhodesia and Nyasaland, 1966). 83 Legislative Council Debates, 13-18 May 1918, Column 186. 84 Ibid. 85 Ibid. 86 L. Gardener, Taxing Colonial Africa: The Political Economy of British Imperialism (Oxford: Oxford University Press, 2012), 50. 87 T. Mkandawire, ‘On Tax Effects and Colonial Heritage in Africa’, Journal of Development Studies, 46 (2010), 1647. See also J. F. Due, Taxation and Economic Development in Tropical Africa (Cambridge & Massachusetts: Massachusetts Institute of Technology Press, 1963), 31-35. 88 Davies, ‘Rhodesian Taxation Guide’, 17. 66 regard to revenue collection (see Fig 2.2 below), the settlers were keen to take over its administration for the country’s benefit, not for the BSAC’s. Fig 2.2: Revenue Collected by the Income Tax Department from 1917-1918 to 1922-1923 Fiscal Years 400000 347330 350000 300000 282128 273503 250000 236883 200000 150000 115856 98506 100000 50000 0 1917-18 1918-19 1919-20 1920-21 1921-22 1922-23 Income Tax 115856 98506 282128 347330 273503 236883 Source: NAZ SRG/TAX3, Reports of the Commissioner of Taxes from 1919 to 1923. Meanwhile, the end of the war witnessed the consolidation of settler politics. The settlers challenged the Company government’s justification for continuing to levy income tax. In addition, the Privy Council decisions that the land did not belong to the Company came as the final blow to the Company directors who became eager to relinquish the administration as quickly as possible. In response to the directors’ position, Coghlan changed his 1914 support of the Company to continue administering the colony claiming that ‘it was only after the Company’s election in 1914 that they wished to carry on as the country’s government; they might have surrendered the government back to the Colonial Office and have said, “We think we have had enough” of it.’89 He further said that the Company’s raison d’etre, as mentioned in the previous chapter, was to 89 Legislative Council Debates, 13 May 1918, Coghlan, Column 169. 67 establish an Imperial Flag, which it had managed to do.90 Coghlan became the most influential figure in Southern Rhodesia after assuming the Presidency of the RGA. Southern Rhodesia’s time as a globalised business project of the BSAC was approaching its end. As shall be underscored in the next chapter, the colony transitioned from a colonial corporate state under the BSAC to the Responsible Government, with an almost new fiscal system. Imperial Demands for ‘Financial Fitness’: Southern Rhodesia’s Financial Status and Negotiations for Responsible Government By the end of the War, it had become clear for both the BSAC and Imperial Government that the settlers wanted a change of administration from Company rule. Premised on a nationalist appeal to the people of Rhodesia to take control of their affairs, mainly financial matters, settler representatives in the Legislative Council presented arguments supporting the granting of Responsible Government. The development of settler ‘nationalist’ sentiment was not new in the colony. As early as 1907, the Mashonaland Progressive Association, an economic interest group comprised of farmers stated that, ‘we are Rhodesians, Rhodesia belongs to us, and we have every intention of developing our country after our own way and without interference [of the Company].’91 During the 1920 Legislative Council elections, the call for Responsible Government grew louder following the Company government’s failure to fulfil its promise of fiscal reorganisation in terms of the Supplemental Charter of 1915. This explained the increasing desire among the Imperial Government to facilitate the handover of administrative power from the BSAC to the settler population. This section investigates the financial negotiations between the settlers, the BSAC, the Imperial Government, and the Union of South Africa and how these negotiations influenced the fiscal decisions by the settlers. First, the Imperial Government insisted that for Southern Rhodesia to be granted Responsible Government, she had to satisfy two conditions: prove financial fitness, and demonstrate the capacity to reduce the disparity between the European and African populations.92 Failure to meet these expectations meant that the Colonial Office would regard the settlers in Southern Rhodesia not yet fit to govern the Colony. Prevailing sentiments in the British Parliament were that a 90 Ibid, Column 183. 91 Hodder-Williams, White Farmers in Rhodesia 1890-1965, 86. 92 NAZ, CO879/120, First Report of a Committee appointed by the Secretary of State for the Colonies to consider certain questions relating to Rhodesia, not dated. 68 Responsible Government in the hands of Rhodesian settlers would be an expensive government.93 Some Members of the British Parliament criticised Southern Rhodesian settlers for their desire to establish a government for ‘a community less than the size of an average single-member constituency’ in Britain.94 In addition, one of the Company’s directors argued that Britain could not afford a Responsible Government for Southern Rhodesia during that time because the Whitehall Treasury was facing post war financial difficulties.95 Lord Milner, the Secretary of the State from 1919 to 1921, suggested that the Responsible Government’s conferment be delayed until the 1924 elections in Southern Rhodesia when the Supplemental Charter was due to expire. His position was influenced by the fact that the Imperial Government had offered a developmental loan of £150 000 that would see the country get a source of income to cover its administration until 1924.96 Milner’s suggestion also provided the Company with an opportunity to prolong its administration of the country. The Company wanted to buy time to allow for a conversion of the public opinion to join the Union, which it considered was the better option for its financial settlement. This explains why the Company supported the Rhodesian Union Association (hereafter RUA) that campaigned to join the Union at the time.97 While castigating Responsible Government, the RUA drew parallels with one of the original colonies in the Union, Natal. ‘When Natal took Responsible Government,’ argued the RUA, ‘she had an overflowing treasury, a good part of which came from the profitable businesses of the Barberton and Rand mines.’98 The RUA further noted that Natal derived large sums of revenue from railways, harbours, minerals, and land, whereas the Rhodesia Responsible Government would not own any of these assets and derive no revenue from them. In the view of the Unionists in Rhodesia, it was a ‘laudable desire to wish for self-government, but no country could be governed by sentiment with financial resources necessary for administration lacking.’99 The 93 M. Chanock, Unconsummated Union: Britain, Rhodesia and South Africa (Manchester: Manchester University Press, 1977), 152. 94 Ibid. 95 https://www.parliament.uk/business/publications/hansard/commons/ Parliamentary Debates, House of Commons, 14 July 1921. 96 Lee, ‘Politics and Pressure Groups in Southern Rhodesia’, 216. The loans were regarded as Milner Loans. 97 TNA, CO879/120, Letter from Drummond Chaplin to the Secretary of State and the Rhodesia Union Association, 22 August 1921. Also see M. A. G. Davies, ‘Incorporation in the Union of South Africa or Self-Government: Southern Rhodesia’s Choice, 1922’, (MA Dissertation: University of South Africa, 1963). 98 Rhodesia Union Association Manifesto: The Case against Responsible Government, 1922. 99 Ibid. 69 financial question remained the deciding factor, upon which the Responsible Government could be founded. For this reason, the RUA and the Company joined hands to push forward the idea of at least delaying the conferment of Responsible Government in Rhodesia. Coghlan, who once supported the continuation of Chartered Administration in 1914, rejected the suggestion that Company administration be prolonged beyond 1924.100 He indicated that Natal was granted self-government with a European population of 43 000, an African population of 500 000 and a public debt of £7 000 000 (£163 per head).101 Rhodesia was facing these same conditions. Judging by the nature of debates in the Council, Coghlan concluded that change was both ‘desirable and inevitable.’102 Wallis amplifying Coghlan’s claim observed that ‘evidence of financial competency and fitness in other aspects was submitted, and readiness was affirmed [to tender] further testimony if called upon.’103 The country’s settler population had grown to 33 620 by 1921, and they felt that their contribution towards administrative revenue was essential in assisting the country’s fiscal stability. For instance, white people paid roughly a million and a quarter as revenue.104 He further contended that while the white people of a country were obliged to have the country’s affairs conducted at their own expense, they also had to control the country’s administration.105 Crawford Douglas-Jones, the Resident Commissioner from 1918 to 1923, commenting on the same subject said: Your Excellency may be of interest to know that Sir Charles Coghlan’s statement, which might perhaps be treated with suspicion, is entirely accurate. At my request, the Auditor General, through the Department of the Administrator, has supplied me with the following information; I find that the administrative deficits on a cash basis from 1st April 1908 to 31st March 1919 amounted to £383 183 15s. 0d.106 In the same period, argued Douglas-Jones, capital expenditure increased, as shown in the following Table 2.2. 100 Coghlan joined the RGA and quickly became its president. He fervently fought against the Company’s machinations for joining the Union supported by influential figures like F. Newton and P. D. L. Fynn. 101 L. Cripps, ‘Responsible Government: Facts and Figures’ Reprinted from the Bulawayo Chronicle, 31 January 1919. 102 NAZ RH9/1/1/19, Responsible Government Association Constitution. 103 Wallis, One Man’s Hand, 168. 104 Ibid. See also Davies, ‘Incorporation in the Union of South Africa or Self-Government’, 50. 105 Davies, ‘Incorporation in the Union of South Africa or Self-Government’, 50. 106 TNA, CO879/120-33095, No. 146 South Africa Correspondence: Political Affairs in Southern Rhodesia, Resident Commissioner (Douglas-Jones) to the High Commissioner for South Africa, 9 June 1920. 70 Table 2.2: Capital Accounts Increase from 1908 to 1919 Item Amount (£) (s) (d) Building and Construction 436 148 1 8 Works Telegraph Construction 64 903 15 6 Road Construction 80 186 12 7 Loans Paid from Votes 36 109 6 5 Movable Assets 118 741 18 4 Total 736 089 14 6 Source: NAZ, Cmd 1273, Buxton Report, Appendix II: Lord Milner’s Memorandum, 22 December 1920. Of the above amount, £32 000 was defrayed from the Loan Account, and the balance of £704 089 14s 6d from Voted Expenditure. Considering the settlers’ contribution towards the country’s revenue, the settlers argued that the increase in capital expenditure shown in the table above and the change of ownership of national assets would not put severe financial burden on the population. RGA members in the Legislative Council argued that white Rhodesians could take over the administration of the country. It was partly against this background that they refused to let Southern Rhodesia become the fifth province of the Union, emphasising that the country was able to provide for its administrative revenue.107 In the settlers’ view, the money that was being spent by the BSAC was enough for this purpose, and the Responsible Government could substitute the Company and execute administrative duties using that same revenue made available by the country’s population. Financial demands for the proposed Responsible Government were not confined to administration. The Company wanted to be reimbursed for past administrative expenditure since the occupation of the colony, claimed to be an amount of between £7 866 117 to £8 000 000.108 To settle the issue before granting the Responsible Government, the Imperial Government appointed Lord Cave to head the Cave Commission established in July 1919, which was later replaced by Lord Buxton’s 107 This was one of the economic reasons why the settlers refused to join the Union of South Africa. However, there were many other reasons. The settlers were against parliamentary representation of the colony and denounced the ‘Hertzogism, racialism and bilingualism’ of the South. For a detailed discussion on this see Davies, ‘Incorporation in the Union of South Africa or Self-Government: Southern Rhodesia’s Choice, 1922’; Phimister, An Economic and Social History of Zimbabwe, 96-98. 108 NAZ, S232, Southern Rhodesia Treasury Settlement between the Crown and the BSAC. See also NAZ, Cmd 1273, Buxton Report, Appendix II: Lord Milner’s Memorandum, 22 December 1920. 71 Committee in 1921.109 The Cave Commission investigated the Company’s finances and evaluated the possibility of a Responsible Government. However, as Lee argued, the outcome of the Commission was less satisfactory for the Company due to several issues.110 The Cave Commission reduced the reimbursement money to the Company to £4 435 225.111 The money would be reimbursed from the sale of unalienated land following the Privy Council’s decision. The Buxton Committee, tasked with investigating the financial liabilities of the Responsible Government, proposed that control of the unalienated land should be exercised through the High Commissioner representing the Colonial Office and the Land Board until such a time as the debt to the Company was extinguished, after which the remaining land would be transferred to the Responsible Government.112 The claim for interest on the money to be reimbursed was also disallowed. This ignited anger among the Company shareholders and directors, who felt that it was no longer feasible to administrate Southern Rhodesia and wanted immediate termination of the Charter. The political developments in Southern Rhodesia coincided with developments in Britain and South Africa, which greatly influenced political decisions in the colony. In Britain, Winston Churchill replaced Milner as the Colonial Secretary. Churchill called for a meeting in London with the Rhodesian delegates in 1920 to discuss the granting of the Responsible Government.113 Unfortunately, Churchill and the Rhodesian delegates could not reach an agreement on which decision to follow. The case remained open for Southern Rhodesia to either join the Union or establish the Responsible Government. In South Africa, Jan Smuts’ party, fused with the Unionists, had resoundingly won the election to take over power from Louis Botha. Smuts was inclined to taking Southern Rhodesia as the fifth province of the Union.114 In his view, the incorporation of Southern Rhodesia into the Union would entail the acquisition of Rhodesian land, mining and railways rights from the Chartered Company.115 He invited Rhodesian politicians to discuss terms and conditions for Southern Rhodesia to join the Union. A delegation from Southern Rhodesia headed by Coghlan travelled to. At this juncture, RUA started to campaign against Responsible 109 TNA, T161/65/7 Cave Commission of Enquiry. The Cave Commission under Lord Cave was a Commission of Enquiry into the claim of the British South Africa Company’s Accounts. 110 Lee, ‘Politics and Pressure Groups in Southern Rhodesia’, 216-222. 111 Ibid. 112 NAZ, Cmd 1273, Report of the Buxton Committee, 1921. 113 BSAC Directors’ Reports, 1920, 8. 114 See Chanock, Unconsummated Union: Britain, Rhodesia and South Africa. 115 BSAC Directors’ Reports, 1920, 8. 72 Government suggesting that the Buxton Report and the Cave Award would impose unbearable financial liabilities on the colony. Thus, the country needed to join the Union.116 By contrast, the RGA maintained its position that the country could bear the financial demands that Responsible Government would bring. This conflict between the two political parties continued during the negotiations of the terms of entry into the Union and the campaigns for the 1922 referendum. The referendum became the centre of the campaigns, with the terms that Smuts had proposed one of the main issues of contention.117 Critical to this study were Articles; (b), (d), (e), (f), (g) and (h) of Smuts’ terms. Article (b) stipulated that a provincial council headed by an administrator with the same jurisdiction as in other provinces was to be established in Southern Rhodesia.118 In addition to the usual subsidy to the province from Union revenues, there would be a special subsidy of £50 000 per annum for ten years. Article (d) specified that the Union’s Tax System would be applied to Rhodesia. However, for three years after incorporation, the existing limit of income tax exemption would remain in force in Southern Rhodesia. There would be a development grant of not less than £500 000 per annum for ten years, which would remain devoted to capital expenditure on development, such as railways, public works, irrigation, land settlement, telegraphs, roads and bridges.119 On railway rights, Article (e) mentioned that the Union would take over the BSAC’s rights over the Rhodesia and Mashonaland Railways.120 Union rates and fares, including special rates, would be charged throughout Rhodesia. Article (f) touched on land ownership. It indicated that the Crown lands would be taken over after the settlement of BSAC debt and a Land Settlement Board, consisting of Rhodesians, would be appointed for land settlement in the province.121 Article (g) specified that the BSAC’s mineral rights would be acquired by mutual agreement with the Company at a later date; in the meantime, the existing royalties would continue to be payable to the Company.122 116 NAZ, Cmd/1129, Report of the Cave Commission, 1921. 117 NAZ, BR503, British South Africa Company Government: Extraordinary Government Notice Gazette No. 341 of 31 August 1922. Also published in Dutch in the Union Government Extraordinary Gazette No. 1253 of 31 August 1922. 118 Ibid. 119 NAZ, BR503, British South Africa Company Government: Extraordinary Government Notice Gazette No. 341 of 31 August 1922. Also published in Dutch in the Union Government Extraordinary Gazette No. 1253 of 31 August 1922. 120 Ibid. 121 Ibid. 122 Ibid. 73 The publication of the Union government’s terms set the stage for the struggle between the pro- Union and anti-Union forces both in and outside Rhodesia. Smuts, with the support of the RUA, toured Southern Rhodesia to publicise the terms. Rhodesian newspapers widely covered his tour.123 After his return to South Africa, criticism of his terms mounted from both Rhodesia and South Africa.124 In Southern Rhodesia, the RGA criticised Smuts and his conditions on the taxation system, railway rates, and the Land Board, among other issues. With regard to taxation system, Smuts made it clear that finance and taxation would, in all respects, would be the same as in the rest of the Union, and no differential treatment could be accorded to Rhodesia. This, of course, meant, among other things that the Rhodes Clause would go.125 The RUA was the first to defend the Union taxation. In its campaigns across the colony, it commented that the provincial revenue and expenditure of Southern Rhodesia as a province of the Union would not compare with other territories. It argued that a subsidy equal to that given to Natal and the Orange Free State would be enough for the country without having to increase existing taxation; thus, there would be a substantial balance of revenue over expenditure for the country.126 In addition, the RUA submitted that, under the Union, the white population's indirect taxation would be far less than under Responsible Government. To test the accuracy of this assertion, and substantiate its claim, the RUA compared the customs taxation of the white population in Rhodesia with that of the Union. In addition, due to the decrease in the number of goods purchased by Africans because of high prices and a reduction in their buying power, it was estimated that Responsible Government would mean high customs for the tiny white population compared to those of the Union. For comparison, the 1920 revenue returns 123 Bulawayo Chronicle, 12 August 1922. 124 In South Africa, an Afrikaans newspaper, Die Burger criticised Smuts on a number of issues, for example, saddling South Africans into the Rhodesian debt, allowing land settlement in Rhodesia to fall under the Rhodesian board controlled by Rhodesians and the position of the Chartered Company. The paper wrote on 1 September 1922 that, ‘It is quite clear that there is on one side a sacrifice of the Union for Imperialistic and especially capitalistic ends, and on the other arbitrary exploitation of the Union taxpayer for the purpose of bolstering up Jan Smuts’ tottering position.’ In addition, the Federal Council of the Nationalist Party of South Africa issued a strong protest against the terms offered to Southern Rhodesia and the Chartered Company, arguing that the people of the Union had not been consulted and that the parliamentary representation to be given to Southern Rhodesia was out of proportion considering its white population. This alarmed the white settlers in Southern Rhodesia who felt that the Union government’s intention was to relegate Rhodesia to the status of a white territory upon entering the Union. 125 NAZ, C8/1/2/Vol Folios, Coghlan’s Correspondences with the Imperial Government 13 April 1922. See also A. Di Perna, ‘The Struggle for Self Government and the Roots of White Nationalism in Rhodesia’, (Ph.D. Thesis: St. John’s University, 1972). 126 The Rhodesia Herald, Saturday October 8, 1921. 74 were taken, and calculations showed that white people would pay£21 5s per head under Responsible Government as compared to £18 12s 3d under the Union. The RUA acknowledged that the amount that Africans would contribute would be somewhat higher, considering that the African population in Rhodesia constituted 96 per cent of the total population against 74 per cent in the Union. Therefore, the RUA’s argument was that a more favourable taxation should be imposed per head of the white population, which could be achieved only by joining the Union. ‘Whether we join the Union or elect to remain isolated,’ argued the RUA, ‘it is probable that there will be an increase in the present level of taxation. But under the present situation, the isolation means that the greater part of the increase in customs duties will have to fall on the small European population of this territory alone.’127 The RUA knew that the Imperial Government was unlikely would permit any further increase in African taxation. As far as customs duty was concerned, the RUA, did not seem to think that the Union would appreciably affect Rhodesia’s position at that time. Besides, the RUA indicated that the main form of direct taxation Rhodesians would have to pay to the Union Treasury would be income tax only. In the Union, taxable income started at £300, and Rhodesia would be exempted from £1 500 to £500 for three years.128 The following Table 2.3 shows the income tax (collected during the year ending 31 March 1921) produced in Rhodesia and what it would have produced at the Union rate. 127 Ibid. 128 Ibid. 75 Table 2.3: Comparison of Taxes at Rhodesia and Union Rate in 1921 Type of Tax Rhodesia Rate Union Rate Individual/Single Income Tax £17 441 £13 576 Individual/Single Super Tax £60 £1 020 Married Income Tax £60 906 £51 965 Married Super Tax £13 500 £1 016 Total £91 907 £97 577 Comparison of Income Tax and Dividend at Rhodesia and Union Rate in 1921 Companies Income Tax £175 581 £71 668 Dividend Tax £------------ £55 000 Total £267 488 £224 245 Source: The Rhodesia Herald, 8 October 1921. Supported by the figures as shown in the table above, the RUA argued that individuals in Rhodesia, both single and married, would pay less under the Union than under Responsible Government. The RUA also indicated that Rhodesian companies would pay considerably less. According to the RUA’s calculations, individuals would have paid £5 670 more-an increase of 6 per cent and companies £48 913 less, a decrease of 38 per cent in Southern Rhodesia under Responsible Government as compared to the Union. Even under the revised scale of exemption and reduction in the Union and Rhodesia, the position would not differ significantly. ‘There does not seem,’ argued the RUA, ‘to be any foundation for the extravagant statements that have been made from time to time about Union taxation being so much heavier than our own.’129 The RUA also asserted that if Rhodesian wanted their provincial tax system to remain, it could remain as it was, plus they could receive a subsidy from the Union government on the same basis as Natal and the Orange Free State. The country could then carry on delivering their different services to the people. In response to these claims by the RUA, the RGA got tasked with convincing the Rhodesian people that they were capable of financing their government. According to Davies, Coghlan fought hard to win over the country’s settler population to vote against the Union.130 Writing to his sister, Bella, during the referendum campaigns, Coghlan described this fight. He said he was: Fighting for his country and its freedom in the face of tremendous odds. The odds included the local people, South Africans and English Press, unlimited funds for propaganda, the unfriendly attitude of the Colonial Office, the magnetic personality 129 Ibid. 130 Davies, ‘Incorporation in the Union of South Africa or Self-Government’, 50. 76 of General Smuts, and a campaign of “organised lying” to a people uninstructed and uninformed as to the financial condition of the Union and the relations between its English-speaking and Afrikaans-speaking inhabitants.131 The RGA activated its defence campaign supporting the granting of Responsible Government. For Coghlan, the RGA leader, the people of Rhodesia would benefit more from self-government than from joining the Union.132 The RGA contended that if Rhodesia were to join the Union, Rhodesians would relatively pay more in taxes in the end, because the subsidy that the Union granted to its provinces was continually decreasing while the necessities of the provinces were steadily increasing. For instance, in 1921, the Cape Colony had to impose a property tax of £2 000 000, a corporation and a company tax of £35 000 to raise more revenue for the Provincial Council and Treasury.133 The Council also received £80 000 from various school boards in the Cape, and the people paid £250 000 to various Divisional Councils.134 In the same year, the Orange Free State Provincial Council had to impose a wheel tax of £45 000 and an education tax of £100 000.135 The RGA, therefore, claimed that, if Rhodesia were to join the Union, it would be forced to impose similar taxes to raise provincial revenue. According to the Rhodesian Treasurer’s figures, on the estimates of income tax and customs, Rhodesians would pay an extra of £200 000 a year.136 He also argued that, in ten years, when the subsidy from the Union government would come to an end, the total extra taxation, at a conservative estimate, would be £250 000.137 The RGA stated that if Responsible Government were granted, they would borrow £1 500 000 from the London Stock Exchange and spend this money on various developmental projects and pay loans and debts of the Chartered Company.138 An amount of £650 000 would be paid to the Chartered Company for public works and buildings they erected during their administration.139 A further £300 000 would be paid to the Imperial Government to make a total of £950 000.140 The RGA also promised that the remaining £550 000 could be used for development purposes. Of this 131 Ibid. 132 Ibid. 133 Bulawayo Chronicle, 23 February 1922. 134 Ibid. 135 Ibid. 136 NAZ, C8/1/2/Vol. Folios, Coghlan’s Correspondences with the Imperial Government. 137 Ibid. 138 Ibid. 139 Bulawayo Chronicle, 23 February 1922. 140 Ibid. 77 amount, £300 000 would be allocated to a Land Bank, which could establish its sinking fund, and the other £250 000 would be devoted to roads, public buildings, and other necessary development schemes. The rate of interest on this loan would be 6%, the London Market rate. To pay for the loan interest, the RGA proposed that the Land Bank provide 2%. The remaining 4% would be funded through extra tax as well as the land tax. The RGA maintained its position that, under the Union, after the initial three years of exemptions, Rhodesians would pay more in taxes than they would under Responsible Government.141 The possibility of introducing Union railway rates was also another financial concern for Rhodesians. The RUA created the impression that the railway rates would be lower under the Union than under Responsible Government. To the RUA’s advantage, South African press claimed that the Rhodesian Province would save between £650 000 to £750 000 a year under the Union’s railway rates system. Close examination of the official figures indicated that Union Railways was operating under a loss of upwards of £5 000 000. The ultimate liability for this loss would be borne by the Union taxpayers, putting a financial burden on Southern Rhodesia if it joined the Union. In the end, the RGA argued that the probability that the Union railway rates would save the Rhodesian community was ‘grossly exaggerated’ and intended to mislead the voters.142 Besides, during the conference for the terms of entry, General Smuts was afraid to face the possibility of Southern Rhodesia rejecting his terms. He instructed the Chartered Company directors, who were eager to gain more from dealing with Smuts than with the Imperial Government, remain silent on the railway, land and settlement matters.143 The fact that Smuts was not prepared to commit himself to the people of Rhodesia caused a mild sensation among the delegates who harnessed this in their campaigns. They claimed that the Company was doing business with the Union behind the backs of the Imperial Government and Rhodesia. The RGA won the 1922 Referendum setting the foundation for the establishment of Responsible Government in 1923. 141 Responsible Government Association: Manifesto to the People of Rhodesia Statement of Policy, 18. Also see S. Juris, ‘The Terms of Union: An Examination of their Provisions’, Rhodesian Railway Review, September 1922. 142 Responsible Government Association: Manifesto to the People of Rhodesia Statement of Policy, 7. 143 NAZ, C8/1/2/Vol Folios, Coghlan to Sir Francis Newton, 13 April 1922. 78 Conclusion This chapter examined the growing settler demands for a new approach to fiscal management which culminated in granting Responsible Government. The chapter argued that in as much as settler demands were political, they were mainly premised on fiscal and financial considerations. The chapter indicated that the settlers put forward their financial demands through the Supplemental Charter of 1915. The Supplemental Charter gave the BSAC a lifeline to continue administering the colony after the first 25 years had expired. In the Supplemental Charter, the Company promised to offer a sound fiscal system that would see the country overcome revenue deficits. However, the First World War presented a new set of financial challenges which forced the Company to introduce income and EPT. A close examination of the Legislative Council’s debates on crucial economic and financial matters such as taxation, administrative power, and land showed that the elected members wanted the colony’s administration to be transferred from the BSAC to the settlers. As argued in the chapter, the settlers’ justification for these demands rested on their belief that they had been significantly contributing towards the country’s revenue, especially income tax, which afforded them the right to make decisions on important administrative matters. The chapter also showed that, when the Company lost ownership of land through the Privy Council judgement in 1918, it immediately lost interest in administrating Southern Rhodesia. The chapter gave evidence that the Cave and Buxton Commissions delivered the final blow to the colony’s administration. The settlement between the Company assets and its administrative deficit was reduced to a figure that the Company had not expected. To obtain some kind of profit from the colony, the Company started negotiations for Rhodesia to join Union of South Africa as its fifth province. The Company thought it would win more from the Union than from the British government. Churchill decided to add the option of Rhodes’s joining the Union to referendum campaign for Responsible Government. In the end, this became the major rallying point in the 1922 referendum campaigns. In this way, the original issue of whether to continue Company administration was replaced by the conflict between Unionists and self-government proponents in their bid to gain control of the colony’s administration. The terms that the Union gave to Rhodesia, especially the fiscal terms, were financially disadvantageous to Southern Rhodesia. The proponents of Responsible Government ultimately won the October elections. Southern Rhodesia was granted its new status the following year, in October 1923. 79 Chapter Three Fiscal Politics during the First Six Years of Responsible Government, 1923-1929: Imperial, Regional and Local Relations Introduction The year 1923 ushered in a new political dispensation in Southern Rhodesia characterised by the transition from Company rule to Responsible Government. This, as shown in previous chapters, was a culmination of tensions between the company administration and the white settler community whose interests did not always coincide. The British South Africa Company (BSAC) legacy was that it had committed limited financial resources to the colony’s development. By voting for Responsible Government, the white settler community imagined a state that would represent local capital interests instead of international capital interests, which dominated the period of company rule. This was the challenge that the Charles Coghlan administration faced as it took charge of the colony’s affairs in 1923. The chapter analyses how the transition from Company rule to Responsible Government influenced the country’s fiscal policies. In doing so, the chapter casts light on the new settler government’s attempts to expand its revenue base by intensifying revenue collection and expanding its sources to meet white settler expectations. This entailed reorganising the colony’s fiscal system to create a fiscal framework that was fit for the kind of state that the settlers imagined. The extent to which the settler government succeeded in establishing effective administrative machinery to strengthen its revenue collection capacity, and the politics of revenue allocation, form the subject matter of this chapter. More broadly, the chapter elucidates the centrality of taxation and fiscal policies in underwriting the new state’s capacity to carry out its goals and shape state society relations in the process. In pursuing these matters, the chapter is divided into three sections. The first section outlines the transition from Company rule to Responsible Government. As shown in the previous two chapters, Company administration put in place several institutions to collect revenue and finance its various departments.1 However, under Company rule, the colony faced challenges in managing its 1 These institutions included the Division of the Treasury, which functioned as an early kind finance ministry; the Income Tax Department which collected income tax from white settlers and companies operating in the colony; the Department of Mines and Public Works; the Department of Agriculture; the Department of Posts and Telegraph; 80 finances, resulting in growing demands for Responsible Government by the settler public. The second section investigates the sources of revenue that were available for the new government. The third section focuses on expenditure patterns and analyses the factors that influenced the government’s financial priorities regarding different economic and social sectors. Also, hand in glove with this was the balance-of-payments factor. As demonstrated in the previous two chapters, the fiscal system under BSAC rule incurred huge deficits. The Transition from Company Administration to Responsible Government To fully appreciate post-1923 fiscal developments, it is crucial to understand the governance parameters set by the 1923 constitution. These constitutional parameters informed not only the fiscal system that was established, but also how the economy would develop in general. The negotiations between Britain and Southern Rhodesia about the new constitution allowed Southern Rhodesia to establish a Responsible Government.2 This type of government was unique in colonial Africa compared to other British colonies in Africa governed through the Colonial Office, save for South Africa that was a Dominion.3 This type of government had implications for fiscal policies. Colonies ruled through the Colonial Office had their revenue collected by colonial officials, and the expenditure determined by the Colonial Office.4 Because of this, welfare and development in the colonies were determined by the Colonial Office. But because Southern Rhodesia had opted for Responsible Government, it had to take the responsibility for collecting taxes as well as determining its financial needs, revenue sources, and how revenue would be spent. This was determined by two factors. The first was the nature of the government to be established and its revenue needs. The second factor was the taxes imposed on individuals and organisations and how the balance between taxes and expenditure would impact economic activities. Controller of Customs and Excise Duties as well as the office of the Native Commissioners that collected tax from Africans. 2 The National Archives at Kew (Hereafter TNA), DO35/4225/9, Southern Rhodesia’s Constitutional Letters Patent 1923. 3 See, for example, C. Palley, A Constitutional and Law History of Southern Rhodesia, 1888-1965: With Special Reference to Imperial Control (Oxford: Clarendon Press, 1966). 4 National Archives of Zimbabwe (hereafter NAZ), GEN/P, W. D. Gale, ‘The Years between 1923 and 1973: Half Century of Responsible Government in Rhodesia’. See also L. A. Gardner, Taxing Colonial Africa: The Political Economy of British Imperialism (Oxford: Oxford University Press, 2012). 81 Despite providing Southern Rhodesia with significant room for political and economic maneouvre, the 1923 constitution reserved Imperial authority in four specific areas.5 The Responsible Government was prohibited from interfering with the BSAC’s mineral and railway rights and from imposing bills or laws affecting the currency or African policy.6 Mineral and railway rights remained in the hands of the BSAC, which meant that the government could not control railway rates and impose direct taxes on mining companies.7 In addition, the colony could not benefit from revenue accruing to railway companies. On currency, it meant that the government could not control its own monetary policy.8 Thus, the government remained connected to the sterling area and sold its products at prices pegged on the sterling value. These limitations meant that the government had to accommodate Imperial interests, which, at least in theory, influenced how taxes could be imposed and revenue raised. Within the confines of the constitution, the new premier, Charles Coghlan, had to set up his new government. Coghlan established a new legislature comprising 30 elected members.9 From this Assembly a Cabinet of six ministerial heads was created. These encompassed the Premier's Office, the Colonial Secretary, the Treasurer, the Attorney General, the Minister for Mines and Public Works and the Minister for Agriculture and Lands.10 After the Cabinet’s formation, elected members in the Legislative Assembly demanded radical transformation from Company rule to Responsible Government. Their main argument was that the new government, unlike the Company administration, was supposed to play an important role in creating an environment in which the economy could function optimally. This marked a departure from how the BSAC had managed the colony’s finances. The new government created a Consolidated Revenue Fund (CRF), an accounting system where all the collected revenue would 5 NAZ, ZAG/1/2/3&5-Reports of the Cost of Administration Commission, 1924. Also, see Official Year Book of the Colony of Southern Rhodesia, No. 2, 1930, 50; Murray, Governmental System of Southern Rhodesia, 2; Palley, A Constitutional and Law History of Southern Rhodesia. 6 I. R. Phimister, An Economic and Social History of Zimbabwe, 1890 to 1948: Capital Accumulation and Class Struggle (London: Longman, 1988); R. Blake, A History of Rhodesia (London: Eyre Methuen, 1977), 192. See also TNA, DO35/4225/9, Southern Rhodesia Constitutional Letters Patent 1923. 7 See Phimister, ‘Accommodating Imperialism.’ 8 See T. Nyamunda, ‘Financing Rebellion: The Rhodesian State, Financial Policy and Exchange Control, 1962-1979’ (PhD Thesis: University of the Free State, 2015), Chapter 2. 9 NAZ, ZAG/1/2/3&5, Reports of the Cost of Administration Commission, 1924. See also Official Year Book of the Colony of Southern Rhodesia, No. 2, 1930, 50. 10 NAZ, ZAG/5, Reports of the Cost of Administration Commission-Memorandum on the new Civil Service and structure of Southern Rhodesia Government, 1924. 82 be deposited.11 Consequently, the fiscal system that was established involved depositing collected revenue into the CRF, which the fiscal authorities would then allocate to various arms of government. The settler government’s options were, however, narrowed due to the financial liabilities inherited from the BSAC. Before its new fiscal system could become effective, these liabilities had to be settled. At the lapse of the Charter, the colony’s debt had amounted to £2 352 000 and needed to be paid. The debt consisted of the following liabilities: £2 000 000 to pay for land to the BSAC, an Imperial Loan of £300 000, a Bacteriological Institute Loan of £20 000 and the BSAC Building Loan of £32 000.12 The government managed to pay off the BSAC with the help of the Imperial Government. Once the BSAC was settled, the government had to look for money to finance its various ministries and took stock of its available revenue. The total available revenue in 1923 was £1 326 000.13 The major revenue heads were Customs Duties £403 000; Income Tax £281 000, Native Tax £242 000, and Posts, Telegraphs and Stamps £218 000.14 These revenue heads determined the new government’s ability to expand its revenue base to meet financial demands. However, expansion of the revenue base relied on a number of considerations. First, it was critical to strike a balance between raising sufficient revenue without impeding economic activities. Secondly, the government had to determine who should be taxed and at what rate. Thirdly, the colonial government needed to develop taxation policies in a way that would not compromise relations with different interest groups. The third factor greatly influenced the political development in the colony because it was within the political context that the government’s fiscal 11 Official Year Book of Southern Rhodesia, No. 2, 1930, 524.The Audit and Exchequer Act passed in Parliament in 1924 gave birth to the CRF. 12 TNA CO/879/120, Colonial Office: South Africa Correspondence Relating to Political Affairs in Southern Rhodesia, 1919-1922. Memorandum by Lord Milner 22 December 1920 (Published as Appendix II to Buxton Report. Imperial Loans were borrowed from the Imperial Treasury in two instalments of £150, 000 bearing interest of 6½ per cent per annum. They were advanced by Lord Milner in pursuit of providing funds for the establishment of the Responsible Government. The Bacteriological Institute Loan was negotiated with a private individual in the Colony for the construction of the Bacteriological Laboratory in Salisbury. See also Official Year Book of the Colony of Southern Rhodesia, No. 2, 1930, 554; R. Palmer, Land and Racial Domination in Rhodesia (Los Angeles: University of California Press, 1977), 134. 13 British Online Archives (hereafter BOA) File No. 73150B, Southern Rhodesia Report of the Auditor General for the Financial Year ended 3 March 1923, presented to the Legislative Assembly in 1924, 4-6. 14 Ibid. See also NAZ, GEN/P, W. D. Gale, The Years between 1923 and 1973: Half Century of Responsible Government in Rhodesia. 83 system thrived. These considerations, as discussed in the following section, determined the government’s fiscal policies. Revenue Sources and Debates over the Fiscal Reorganisation Describing the situation in 1923, the Rhodesian Goldfields manager J. G. Macdonald said, ‘the taxable population is extremely limited, and the mine and land-owning companies will, I have no doubt, become the chief source of revenue.’15 However, revenue sources included customs and excise duties, income tax payments, African taxes, mining fees, land sales and rents, stamps, licenses and other duties.16 These could be grouped into two, namely tax revenue and non-tax revenue.17 Tax revenue included direct and indirect taxation. Direct taxation was levied on income of individuals and companies. Indirect taxation included charges on commodities and imports. Non-tax revenue included receipts from various commercial services conducted by the government such as postal and telegraphic services, boarding school fees, hospital fees, mining fees and land sales. Non-tax revenue showed a substantial increase during the 1923-24 fiscal year, soon after the administration change from Company rule to Responsible Government. For the first time, the increase was a result of the inclusion of receipts from land sales, income which formerly accrued to the BSAC.18 This revenue increased considerably in subsequent years. By the 1927-28 fiscal year, non-tax revenue amounted to £569 217.19 This high figure was mainly due to a tobacco boom that saw extensive land sales to companies and individuals for tobacco farming.20 Land sales increased as a result of the British Empire Exhibition at Wembley in 1924 as the number of people who wanted to settle in Southern was increasing.21 Between 1923 and 1928, non-tax revenue contributed a third of the Colony’s total revenue.22 Fig 3.1 below indicates tax and non-tax revenue sources for the country from 1923 to 1928. 15 NAZ, H.MSS FY4/1/1, Re: The New Political Situation in Southern Rhodesia’, by J. G. Macdonald, Memorandum, 20 July 1923 and Rhodesian Herald, 29 February 1924. See also Phimister, ‘Accommodating Imperialism’, 280. 16 Official Year Book of Southern Rhodesia, No. 2, 1930, 527. 17 Ibid. 18 Ibid, 530. 19 Ibid. 20 See A. Mlambo, White Immigration into Rhodesia: From Occupation to Federation (Harare: University of Zimbabwe Press, 2002). 21 NAZ, S1193/14, Acting Secretary, Department of Agriculture to the Office of the High Commissioner, 21 November 1927. 22 The dynamics between tax and non-tax revenue differed greatly. Debates over non-tax revenue were not as heated as that over tax revenue. The only aspect that attracted significant political debate was land sales, which contributed almost half of the total non-tax revenue each year. 84 Fig 3.1: Tax and Non-Tax Revenue Yield from 1923-1924 to 1927-1928 1800000 1595992 1600000 1419380 1340213 1400000 1165194 1200000 1086653 1026775 1000000 838143 829249 800000 730933651425 590249 569217 600000 502070435228 434261 400000 200000 0 1923-24 1924-25 1925-26 1926-27 1927-28 Tax Revenue Non Tax Revenue Difference Source: Calculated from statistics obtained in the Official Year Book of Southern Rhodesia, No 2. 1930. As Fig 3.1 above indicates, tax revenue contributed to the major proportion of all revenue collected. The tax revenue’s major heads were, in order of magnitude, Customs Duties, Income Tax and African Tax. Compared to other tax revenue forms, these contributed the most towards government revenue, as shown by Fig 3.2 below. Fig 3.2: Main Sources of Tax Revenue versus Other Tax Sources, 1923-1924 to 1927-1928 1600000 1400000 1200000 1000000 800000 600000 400000 200000 0 1923- 1924- 1925- 1926- 1927- 24 25 26 27 28 Main Sources of Tax 1034353 1109780 1271375 1332544 1503333 Revenue Other Sources of Tax 52300 55414 68838 86836 92669 Revenue Main Sources of Tax Revenue Other Sources of Tax Revenue Source: Calculated from figures obtained in the Official Year Book of Southern Rhodesia, No. 2, 1930. 85 £ £ Within the spectrum of these three main taxes, Southern Rhodesia had to formulate its fiscal management policies. Customs duties, which had the highest revenue yield from the identified main sources of revenue for the colony, generated serious debates between the government and the settlers, particularly farmers. Southern Rhodesia enjoyed a mixed trade relationship with the Union of South Africa, starting in 1903 when it joined the South African Customs Union.23 The 1903 agreement was terminated in 1910 and replaced by a Customs Agreement including Northern Rhodesia, Bechuanaland, Basutoland and Swaziland.24 The 1910 agreement was revised in 1914 and remained in force until 1924. In 1924, Southern Rhodesia reopened negotiations with South Africa. This was due to South Africa’s plans to ban up to 75 per cent of the Colony’s tobacco and impose a weight embargo on its cattle (slaughtered and live), affecting Southern Rhodesia’s customs revenue.25 Pretoria's administration had won elections largely based on its promise to implement protective tariff and protect its tobacco farmers from Rhodesian competition.26 After extended negotiations, the two countries agreed that Southern Rhodesia would sell £300 000 worth of cattle and £400 000 worth of tobacco to South Africa, in exchange for manufactured goods valued at about £1 000 000.27 Justifying the agreement, the Colony’s Treasurer noted that: Friendly relations with the Union Government is of no little importance, as we are associated with the Union in many ways. We get a great deal of assistance from them, from their research institutions; we get the products of their laboratories at special rates, and in many other ways we obtain facilities from the Union, and it is of great importance that we should maintain the most friendly relations and that we should continue to enjoy the benefits of these advantages. Now those are the main consideration, which influenced the Government in coming to this decision.28 23 NAZ, T2/20/27 the Rhodes Clause. For a more detailed study on the trade relations between Southern Rhodesia and the Union of South Africa, see A. Mlombo, ‘Southern Rhodesia’s Relationship with South Africa, 1923-1953’, (PhD Thesis, University of the Free State, 2017); ‘Settler Colonialism and Trade in the Periphery: Customs Relations between Southern Rhodesia and South Africa, 1924-1935’, African Economic History, 47:1 (2019), 92-115; R. L. Cole, ‘The Tariff Policy of Rhodesia, 1899-1963’, The Rhodesian Journal of Economics, 2:2 (1968) 28-47. 24 See W. G. Martin, ‘Region Formation under Crisis Conditions: South vs. Southern Africa in the Interwar Period’, Journal of Southern African Studies, 16:1 (1990), 112-138; Mlombo, ‘Southern Rhodesia’s Relationship with South Africa, 1923-1953’; ‘Settler Colonialism and Trade in the Periphery.’ 25 Mlombo, ‘Settler colonialism and trade in the periphery’, 96-98. 26 Ibid. 27 Ibid. 28 Legislative Assembly Debates, 25 November 1924, P. D. L. Fynn, Column 12. 86 However, agriculture was gaining momentum as one of the country’s key economic sectors. Thus, restrictions on Rhodesian tobacco were a cause for concern for both the Rhodesian government and farmers and attracted heavy criticism in the Legislative Assembly. Robert Gilchrist, MP for Midlands, accused the government and the Treasurer of ‘making a bad bargain.’29 In 1929, the Customs and Tariff Committee explained that Southern Rhodesia was the junior partner in the Customs Union Agreement, and this status affected her revenue collection.30 In support of the Committee’s report, Harry Bertin, MP for Salisbury South, noted that, even though the government was obtaining most of its revenue from customs tariffs in proportion to other sources, the need to renegotiate the terms of the agreement remained.31 ‘We have only two products that we send to the Union, tobacco and cattle,’ noted Bertin, ‘they do not want our citrus and maize except in odd times when they run short.’32 Bertin argued for the raising of tariffs against the Union of South Africa.33 Debates over customs duties occurred concurrently with demands for income tax reforms. After it was imposed in 1918, income tax quickly became one of the country’s important revenue sources. However, its collection was a source of conflicts between the government and various interest groups in the colony, especially the mining sector. Proportionally, the mining sector provided the highest figure of taxable income. The Commissioner of Taxes Report for 1926 shows mining income tax above all other taxable incomes, as indicated by the following Table 3.1. 29 Legislative Assembly Debates, 25 November 1924, Column 7. 30 NAZ, ZAM/2, Evidence of the Customs Tariff Committee, Chaired by E. C. Baxter, the Controller of Customs and Excise Duties, 1929. 31 Legislative Assembly Debates, 2 May 1929, Column 440. 32 Ibid. 33 Ibid. 87 Table 3.1: Summary of Average Taxable Incomes, 1926 Fiscal Year Source of Individuals Companies Total Taxable £ £ £ Income Mining 67 050 380 990 448 040 Farming 38 837 14 650 53 487 Professions 32 223 ------------------ 32 223 Employment, Public Service 18 822 ------------------ 18 822 Employment, 105 387 ------------------ 105 387 Other Rents 16 580 6 823 23 403 Miscellaneous: Railways, Banks, Finance ------------------- 501698 501 698 and Trusts, Fire Insurance Gross taxable 299 3336 904 165 1 203 501 amount Source: NAZ, SRG/TAX3, Commissioner of Taxes Reports, 1926. Several factors needed considerable attention with regard to tax burden, especially the difference in tax burden between companies and individuals. The government amended tax abatements. The 1918 Southern Rhodesia Income Tax Act made provisions for generous abatements at a flat rate of 1s for every £1.34 At the time, the abatements included any profit above £1 500 for companies, any income above £1 500 for married people, and income over £500 for individuals.35 By 1922/23 financial year, the company abatements had been withdrawn, while those for married people and singles had been reduced to £1 000 and £600 respectively.36 In 1925, the government readjusted the tax collection system from the proportional to the progressive principle of taxation, which stated that the rate of payable income tax increases as the income increased. The readjustment of abatements angered the Rhodesian business community. People in the business sector felt that the removal of abatements on business placed extra taxation burden on the industries. The government established an Appeals Court to engage with companies and the settlers on their tax easement pleas. Here, disputes were settled between Commissioner of Taxes and individual taxpayers and companies on issues to do with equality on income tax burden. The Court provided a platform where taxpayers could contest decisions of the Commissioner of Taxes concerning 34 NAZ, ZG1, Southern Rhodesia Statute Laws, Income Tax Ordinance No. 20 of the year 1918. 35 Ibid. 36 Ibid, No. 28 of the year 1925. 88 payment of income tax.37 The Court consisted of an Advocate from the High Court and an accountant with at least ten years’ experience.38 Although the main idea for establishing the Appeals Court was to represent every taxpayer in society, its main target was the mining industry. In appeals relating to mining income taxation, the industry urged the government to add an engineer as a representative of the sector to the Court.39 This dominance of the mining industry on income tax appeals compromised the position of the Appeals Court.40 For instance, following the mining law, the Court would only convene mining income tax disputes at a station nearest to the mining company. Or it would allow mining companies to submit their arguments on paper of their representatives having to appear in court.41 In addition, tracing the income tax complications in Southern Rhodesia, it is evident that several income tax amendments from 1922 to 1924 entrenched the mining companies’ position against the government. The Court allowed separate calculations of income tax for the mining claims operating under the same company.42 This arrangement benefited the mining companies because such separation meant that mines operating at a loss and those operating at small margin profits were not taxed. The Appeals Court was finally repealed in 1924.43 Two factors led to its repeal. First, individual taxpayers and various small companies blamed the government for upholding institutions that protected capital at the settlers’ expense. In addition, during the Appeals Courts’ brief existence, individual taxpayers, in particular, did not resort to them because they disliked placing details of their business affairs before people with whom they sometimes came in contact in daily life.44 Secondly, from the Commissioner of Taxes and the Income Tax Department’s point of view, the system of cost of appeals made it difficult for individual taxpayers to obtain suitably qualified legal officials to represent them in the court.45 Individual taxpayers could not afford the representation of a qualified legal official in the court of law. As a result, many of the legal officials who came 37 NAZ, S/CH13, Report of the Chamber of Mines, 1923. 38 NAZ, S679/41, Income Tax Department-Costs of Appeals against the decision of the Commissioner of Taxes on Income Tax, Salisbury, Southern Rhodesia, 1922-1933. 39 NAZ, S679, Cost of Appeals against the decision of the Commissioner of Taxes on Income Tax, Not dated. 40 NAZ, A3/28/36-38, Government Notices on Mining Income Tax, March 1922 to March 1925. 41 NAZ, SRG3/TAX3, Report of The Commissioner of Taxes for the year ended 21 March 1923. 42 NAZ, S/CH13, Report of the Chamber of Mines, 1923. 43 NAZ, S679/41, Minute No. G. 37398/1731/33, Income Tax Department: Costs of Appeals against the decision of the Commissioner of Taxes, 1923-1930. 44 Ibid. 45 Ibid. 89 to represent individuals were still under training, and the income tax law was comparatively an unknown subject to the trainee legal officials during those days.46 Commenting on this situation, the Commissioner of Taxes said: In objection of income tax decision by the Department, the Department will be at an advantage compared to the individual taxpayer through being represented by an advocate whereas the [taxpayer] may only appear in person or by a [legal trainee]. It is pointed out that the legal representative in such cases would not regard himself as entirely a counsel for the taxpayer.47 The cost of appeals made taxpayers feel that they were debarred from appealing against the Commissioner’s decision on income tax payment. Amplifying the need to repeal the Court of Appeals, the Commissioner of Taxes remarked that: My proposal respecting the hearing of appeals by magistrates had for its objects the avoidance of certain serious defects that became apparent in the Income Tax Special Courts during the brief period with them, or we drop them altogether. As a result of the Treasurer’s Minute and my discussion with him, I am convinced that the Courts would not be likely to function successfully and provide long-lasting solutions to income tax matters for various reasons.48 Repealing the Appeals Court did not help matters. New taxation problems emerged such as the double taxation of companies operating in the colony and outside its borders,49 African taxation, and the introduction of tax on unalienated and unoccupied land, all of which generated debates in both the Legislative Assembly and the Cabinet. Double taxation was a problem throughout the British Empire.50 The British government promulgated the Imperial Finance Act of 1916 which provided that individuals or companies who experienced double taxing were entitled to a refund.51 In 1923, the double taxation agreement between Southern Rhodesia and Britain became a source of complaints concerning taxing of shareholders’ dividends. Settlers had long wanted the big companies, especially the BSAC, to pay 46 NAZ, S679/41, Letter by the Commissioner of Taxes to the Secretary of Treasury, 17 June 1924. 47 Ibid. 48 Ibid. 49 Double taxation occurred when companies operating in Southern Rhodesia would pay income tax in both the colony and Britain. 50 NAZ, SRG/TAX3, Report of The Commissioner of Taxes for the year ended 21 March 1921. See also https://catalog.hathitrust.org/Record/102185749/Cite Great Britain. Board of Inland Revenue, (1924-1926). Income Taxes in the British Dominions: A Digest of the Laws Imposing Income Taxes and Cognate Taxes in the British Dominions, Colonies, Protectorates etc.: Supplement. London: H.M. Stationery Office (Accessed on 6 February 2020) 51 NAZ, SRG/TAX3, Report of The Commissioner of Taxes for the year ended 21 March 1921. 90 more taxes and contribute towards the national coffers. However, mining representatives argued that the industry was already paying high-income taxes and should be allowed relief and reimbursement. The mining industry held the view that mining companies registered in Britain and South Africa were assessed for income tax by their respective governments.52 In addition, the mining industry also claimed that the government was taxing the dividends of the shareholders who resided outside the country and, therefore, could not benefit from this taxation.53 The industry, therefore, saw it as a fair position to lobby for tax relief. In response to the mining industry’s criticism, the government explained that the industry enjoyed many allowances provided for in the constitution, which included income tax exemption on shareholders’ dividends.54 The mining industry also enjoyed tax relief on capital expenditure, fees and licenses.55 Contributing in a parliamentary session, the Premier, Charles Coghlan, wondered why there was anything wrong in ‘getting a little something out of the country’s wealth.’56 In a letter to the Treasury in 1925, the Commissioner of Taxes noted that refunds and relief based on the assessment of double taxation agreements between the colony and Britain would adversely affect the government by starving it of its ‘well-deserved revenues.’57 In the Legislative Assembly, members argued that the Imperial Government should not have extended double taxation relief to companies operating in Southern Rhodesia because the income taxed was derived from the colony in the first place.58 Commenting on the subject four years later in 1929, Jonathan Malcolm, MP for Umtali South said: I believe we should face the position of changing our whole fiscal policy and not let the burden of taxation be on those who cannot afford, namely the bottom dog, the worker and the producer, and putting a greater degree of taxation on those who extract resources from this country.59 52 NAZ, S/CH13, the Salisbury Chamber of Mines, Report and Balance Sheet, 31 March 1928. 53 NAZ, S1895, C. Dryden Pritchard to the Treasurer Percy. D. L. Fynn, 19 October 1927. 54 NAZ, S1895, Minute 9451/26 by the Commissioner of Taxes, 26 December 1926. 55 Ibid. 56 Legislative Assembly Debates, 27 April to 13 June 1925, Charles Coghlan, Column 1798; NAZ, S1895, A letter from the mining representative, C. Dryden Pritchard to the Treasurer P. D. L. Fynn, 19 0ctober 1927. See also, G. Mhene, ‘A Paradox of Profit and Revenue: The State and Corporate Taxation in Southern Rhodesia with reference to Gold Mining from 1907 to 1945’, (MA Dissertation: University of Zimbabwe, 2016). 57 NAZ, S1895, Letter dated 21 June 1925, Commissioner of Taxes to the Secretary of Treasury. 58 Legislative Assembly Debates, Third Session, 27 April to 13 June 1925, Coghlan, Column 1798. 59 Legislative Assembly Debates, 2 May 1929, Columns 409-412. 91 An example of the tussles between the government and companies over double taxation was Turner and Newall Ltd.’s application for income tax relief in 1926 through its subsidiary, African Asbestos Company Ltd. The company applied for reciprocal relief from taxation, arguing that it was also being taxed in the United Kingdom.60 Turner and Newall along with its fierce rival in asbestos mining the Rhodesian and General Asbestos Corporation dominated the production and mining of asbestos for a greater part of the 1920s. These two companies had distinct voices on fiscal matters that affected their production. The Southern Rhodesian government responded through the Acting Commissioner, A. H. Strachan, citing Section 27 of the United Kingdom Finance Act of 1920. The government noted that it was justified in collecting income revenue from mining companies operating within the colony.61 However the Act also noted that ‘where income tax has been paid or is payable in a Dominion on the income out of which income is also subject to United Kingdom Income Tax arises or received after deduction of Dominion Income Tax, a company is eligible for tax relief.’62 In this case, Turner and Newall felt that they were eligible to claim relief in the United Kingdom regarding the dividends generated by its subsidiary, African Asbestos. However, African Asbestos was registered and operated entirely in Southern Rhodesia.63 The result was a major dispute between Turner and Newall and the Commissioner of Taxes that lasted until the 1930s. Encounters over relief on double taxation between the mining industries and the Rhodesian government emanated from the differing interpretations of the United Kingdom’s 1920 Finance Act and its relationship to the Rhodesian tax laws. In Southern Rhodesia, unlike Britain, the source of income, rather than the residence of the taxpayer determined the principle of its 1918 Income Tax Law, as amended by Ordinance 6 Section 2 of 1920. Comparing the income tax laws of Southern Rhodesia and the United Kingdom in 1925, the Rhodesia government believed that there 60 NAZ, S679/41, Income Tax Department Correspondences, Memorandum on Reciprocal relief from taxation application by Messrs. Turner and Newall Ltd, 1926. See also Phimister, An Economic and Social History of Zimbabwe, 122-123; I. R. Phimister, ‘The Structure and Development of the Southern Rhodesian Base Mineral Industry: from 1907 to the Great Depression’, Rhodesia Journal of Economics, 9:2 (1976), 79-89. 61 NAZ, S679/41, Income Tax Department Correspondences, Memorandum on Reciprocal relief from taxation application by Messrs. Turner and Newall Ltd, 1926. 62 Ibid. 63 Ibid. 92 were important differences of principle. Replying to Turner and Newall’s letter, Acting Commissioner of Taxes wrote: You will see certain important differences of principle between our law and that of the United Kingdom. For example, we do not tax dividends in the hands of the shareholders; we tax the Company before the declaration of dividends, and although the shareholders may claim relief from the United Kingdom in terms of the Finance Act of 1920, they have no such claim on us under the Dominions Income Tax Act. We tax only income derived from sources within the Colony, whereas the United Kingdom’s net is much wider and comes from various sources.64 In light of the Commissioner’s reply, granting relief meant surrendering a considerable amount of revenue.65 In addition, the Commissioner noted that granting relief would complicate the country’s income tax law, and extra labour would be needed to deal with the claims of the numerous United Kingdom shareholders of companies operating in Southern Rhodesia. The Rhodesian government in 1929 argued that there was no binding legal authority in Southern Rhodesia to grant the relief requested by Turner and Newall and thus decided that there was no legal basis to grant Turner and Newall tax relief.66 Whether the company deducted tax from its dividends or carried it all by itself, the tax incidence remained the same. If the company paid the tax itself, the net profit would diminish accordingly, but if the tax were deductible from the dividends the net profit would be unaffected. However, the shareholders, unlike the company, received less pro tanto. Therefore, it was important for the companies to know the links, shortcomings, and inconsistences between Southern Rhodesia’s and the United Kingdom’s income tax laws not only for their interests but also for their shareholders’ interests. Another revenue matter that drew the government’s attention was African taxation. These taxes were too high relative to the low wages Africans earned.67 Furthermore, the collection and administration of African taxation were inherited from the Chartered Company and constituted harsh and arbitrary methods. It was against this background that the Attorney General and Minister 64 NAZ, S679/41Income Tax Department Correspondences, Commissioner of Taxes to Turner and Newall, dated 23 February 1926. 65 Ibid. 66 Ibid, Copy No. 4777/ST/K, Letter to the Secretary of the Treasury from Commissioner of Taxes, 18 February 1930. 67 Gann, A History of Southern Rhodesia, 257-8. 93 of Defense, Robert James Hudson proposed a Native Tax Amendment Bill to address shortcomings concerning the colony’s African tax system and legislation.68 He said: [L]et us do away with [the] system under which every year we send to prison comparatively large numbers of natives for what is not an ordinary criminal offence, the only crime being that the native has not provided himself with the means of paying his tax when it falls due; alternative methods must be applied.69 Fynn shared the Attorney General’s view. He stated that the Bill’s main objective should be to practically lessen the number of Africans' convictions and imprisonment and promote an effective and better method for African tax collection. This could make it easy for the Native Commissioners to make Africans pay the tax. Scrutiny of the Rhodesian African tax system through the Native Department shows that it was arbitrary and oppressive as well as self-defeating for the government. Usually, once an African non-payer was arrested, the colonial authorities would allow the ‘law’ to take its course through the courts. If he was found guilty of defaulting tax payment, jail punishment was imposed, which even lessened the chances of him paying the defaulted tax. As a result, jail punishment, meant to scare Africans from defaulting their tax payments and force them to abide by the law, starved the government of revenue and workforce. Osmond Charteris Du Port, MP for Hartley District and later Minister of Agriculture and Lands in 1927, commented that ‘after the sentence or probably after paying a fine, the native will be acquitted from the whole liability of payment of arrears.’70 Some parliamentarians urged the Native Commissioners to introduce a system of Yellow Certificates to identify defaulters. For instance, Lieut-Colonel Munro, Member for Gwelo District, justified the issuance of certificates explaining that an African: Dislike intensely having to be put in a position different from his fellows, and, by carrying such a certificate would place him in the eyes of other natives as someone who has done wrong. This will incite him to procure the money and to pay his tax as soon as possible.71 68 Legislative Assembly Debates, 2 November 1926, Column 26. For a record of time, the main shortcomings of Southern Rhodesia’s African taxation related to default tax payment caused by resentment towards colonial rule. 69 Legislative Assembly Debates, 2 November 1926, Hudson, Column 26. 70 Legislative Assembly Debates, 2 November 1926, Column 28. 71 Ibid, Column 27. 94 Other members of the Legislative Assembly quickly shot down the certificate system suggestion. The Treasurer argued that introducing new certificates with new colours would complicate the situation since Africans already carried two coloured certificates to indicate their employment and place of residence (the pass system).72 Others suggested another system by which Native Commissioners would make frequent raids on various farms, mining industries and any other business that employed Africans to collect the tax. This again was rejected because others felt raids could take a great number of labourers from workstations and disturb production and progress. Ultimately, the legislators settled on the last option where the Native Department would instruct employers to deduct tax from the wages of their African employees.73 The Native Department would send the names of Africans employees in tax arrears to employers, who would then deduct the amount owed from wages. This, in turn, would lessen the work of Native Commissioners tracking down Africans to send them to jail. The Tax Amendment Bill was passed in 1930.74 At the same time, another aspect of taxation emerged, imposition of land tax on unoccupied and alienated land. The Alienated Land (Information) Act of 1925 revealed that within the colony, approximately 4¼ million acres of land was held by large companies, more than 2 million held by private individuals.75 The Act also revealed that large tracts of land held by private individuals and several companies were unoccupied and undeveloped and within a fifty miles distance from the railway lines. The Minister of Agriculture and Lands proposed a Land Tax Bill empowering the government to introduce a 1% tax on the value of all unoccupied and undeveloped land.76 The government’s rationale for introducing the land tax was twofold: to force people who were not developing their land to develop, or to sell the land to individuals who were able to develop it.77 The government argued that undeveloped and unoccupied land constituted a part of the 72 Ibid, The Treasurer’s Budgets Speech, Column 31. 73 Ibid, Column 27. 74 NAZ, ZG1 Statute Law of Southern Rhodesia, Land Tax Act No. 13 of 1930. 75 Legislative Assembly Debates, 5 May 1925, Fynn, Column 159. The Act was the basis for the setup of the Morris Carter Commission on 8 January 1925 to conduct land audit in the Colony and was a precursor to the ‘possessory segregation’ of land policy. For more information on the Morris Carter Commission see B. N. Floyd, ‘Land Apportionment Act in Southern Rhodesia’, Geographical Review, 52:4 (1962), 566-582; A. C. Jennings and G. Huggins, ‘Land Apportionment in Southern Rhodesia’, Journal of the Royal African Society, 34:136 (1935), 296-312. 76 Legislative Council Debates, 27 April to 13 June 1925, Fynn, Budget Debates, Column 159. The BSAC once proposed to introduce land tax in 1913 and in 1919 but the settlers rejected it arguing that the Company was not the owner of land and it was not eligible to enact land tax. 77 Legislative Assembly Debates, 27 April to 13 June 1925, Fynn, Budget Debates, Column 159. 95 country’s wealth, which was practically untaxed. Senior government officials felt that unoccupied land was capital being held up unproductively. According to Captain Harry Bertin the aim of the tax would be to bring under production and make available of all land which was held out of occupation for speculative purposes.78 Supporting Bertin, Robert Alexander Fletcher, the Minister of Agriculture and Lands in 1928, pointed out that: The Government, you know, regards a tax on undeveloped land as compensation paid by the owner to the Government as the original owner of the land for postponement of Customs Duty’s payment arising through his failure to proceed with the prescribed development of the land.79 However, some Rhodesians felt that the tax was unjustified, especially the farmers who pointed out many inadequacies in the proposed Bill and claimed that it was the first of its kind in Africa. They lamented that the biggest owners of unoccupied and undeveloped land in the colony were the big companies who could hold on to the land despite the imposition of the tax. More so, companies would be able to put their land on the market and yield profit. The farmers added that the tax would defeat the purpose of raising funds through loans on mortgage based on the value of their land. A tax on companies that held large tracts of land would force them to put the land on the market in large quantities, flooding the land market. This, in the end, would depreciate the market value of land, leaving farmers without the wealth they thought they possessed through land value. For the farmers, the tax rate, calculated at 1% on all undeveloped land was not effective enough to bring about the desired result without proper development. According to Francis Leslie Hadfield, Bulawayo Central MP, the tax could only raise £30 000, an amount not to ‘gladden the heart of the Treasurer.’80 Nonetheless, Hadfield admitted that ‘of course it is a recognised practice of the modern democratic government to impose land taxes to bring the land into the market.’81 However, his concern was on the overall contribution of the land tax to revenue yield. In his view, it was illogical to promulgate land tax in an unimproved country as a source of government revenue or to force people to sell their unimproved land. 78 Legislative Assembly Debates, 21 May 1928, Column 1084. 79 Legislative Assembly Debates, 23 June 1924, Column 801. 80 Legislative Assembly Debates, 21 May 1928, Column 1068. 81 Ibid. 96 Resistance towards the Land Tax Bill also came in the form of demands for developing infrastructure and attracting more capital. Colonel Arthur James, MP for Que Que, stated, ‘develop the roads and improve the land and the [farmers] will begin to pay you handsome return from taxes.’82 The general feeling among farmers was that the tax would take the majority of small profits made by settlers and scare off investment. Rhodesians believed that low taxation would attract immigrants and investors into the country, as illustrated by Fig 3.3 below. 82 Legislative Assembly Debates, 2 May 1929, Column 405. 97 Fig 3.3: Taxation and Land Sales in Southern Rhodesia Source: Accessed on Facebook Page named Rhodesia and Zimbabwe History: 50 or more years back and Rhodesia Worldwide on 20 August 2018. 98 Despite serious opposition from the farmers, the government stood its ground by referring to other countries to justify the imposition of the tax. While the settlers saw the proposed tax as the first of its kind in Africa, the government cited the 1908 Land Taxation Ordinance of Natal. The Natal Ordinance was implemented to promote development and property rights. It was repealed only when Natal entered the Union in 1910.83 The government also referred to the Nyasaland government who levied land tax with the aim to collect revenue and not to force people to develop their unoccupied land.84 The Rhodesian government emphatically defended its position, stating that the state was developing general facilities across the country which were increasing the value of the land. There was no consensus among the settler community on the Land Tax Bill. While a section of the population vehemently opposed the Bill, other influential individuals supported it. Sir Ernest Montagu, the former Secretary of the Company’s Mines and Works represented the group of people who supported the Land Tax Bill. He argued that, because the state had ‘made roads and improved general facilities…those who hold land should help towards the state’s finances.’85 Reiterating this line of thinking, Fletcher had earlier urged the settler community to ‘recognise that the state’s rights should on occasion over-ride private rights.’86 This was nothing new, he asserted, explaining that the practice was ‘accepted in every civilised country, for example, America and the Cape Colony, capital must not be held up unproductively through holding up the land. Capital must be used productively in developing the assets of the country.’87 After these debates, the Legislative Assembly eventually passed the Land Tax Bill into law on 1 July 1928.88 Despite the debates regarding the introduction of the Land Tax, Southern Rhodesia collected high figures of revenue that resulted in budget surpluses during the 1928/29 fiscal year. Revenue was estimated at £2 156 000, while the actual figure reached £2 208 000.89 The Treasury’s report to the Legislative Assembly showed that the principal contributors to the revenue surplus were income tax, customs duties, native tax, and posts and telegraphs.90 Income tax was the most 83 Legislative Assembly Debates, 21 May 1928, Fynn, Column 1029. 84 Ibid. 85 Ibid, Column 1068. 86 Legislative Assembly Debates, May 1924, Column 798. 87 Ibid. 88 NAZ, ZG1, Statute Law of Southern Rhodesia, Act 22 of 1928. 89 Ibid. 90 Legislative Assembly Debates, 2 May 1929, Fynn, Budget Speech, Column 251. 99 significant, with a surplus revenue of £105 000.91 Underlying the explanations was the fact that there was a corresponding increase in taxable income according to taxpayer classes. For example, taxable income from trade profits increased from £1 307 000 in 1927 to £1 691 000 in 1928, an upsurge of 29 per cent.92 Another taxable income was from mining profits which increased from £871 000 in 1927 to £1 151 000 in 1928, a growth of 32 per cent.93 Railway taxable income also increased in profits from £1 106 000 in 1927 to £1 532 000 in 1928.94 Increases in earnings provided the colony with large amounts of taxable income. Customs duties, which in most cases averaged almost a third of the colony’s revenue from 1924 to 1928 (see Fig 3.4 below), also contributed to revenue surpluses. Fig 3.4: Customs and Excise Duties Percentage to Total Revenue, 1924-1928 35 30 25 20 15 28.9 31.7 26.4 28.4 29.2 10 5 0 462 000 487 000 570 000 686 000 681 000 1 599 000 1 842 000 2 010 000 2 165 000 2 333 000 1924 1925 1926 1927 1928 Year Source: Collated from statistics obtained in S. Herbert Frankel, Capital Investment in Africa: Its Course and Effects (London: Oxford University Press), 233. 91 Ibid. 92 NAZ, SRG3/TAX3, the Reports of Commissioner of Taxes, 1929. 93 Ibid. 94 Ibid. 100 £% In 1928 estimates for customs duties were £650 000, while £681 000 was yielded.95 The Southern Rhodesia figures for the year in question showed the percentage of important exports mainly came from mining and of non-mineral exports from tobacco.96 African tax was the most reliable of all the revenue streams of the colony. In Fynn’s words, it was the only tax ‘possible to estimate with some degree of accuracy.’97 It was estimated at £320 000 and yielded £321 000. The expansion Posts and Telegraphs provided a surplus of £14 000.98 However, as debates on tax revenue continued in the colony, taking on various forms and directions, another vital aspect of Southern Rhodesia’s fiscal development received attention: government expenditure patterns, discussed in the following section. Southern Rhodesia’s Expenditure Patterns, 1924-1929 In addressing expenditure and financial allocation problems, being a Responsible Government seemed to have certain distinct advantages over being administered by the BSAC. Gann notes that the advantages were derived from the fact that ‘officials worked in close contact with their Ministers which meant that policy matters did not have to be referred to London several thousand miles away as in territories run by the Colonial Office.’99 As a result, there was a significant change from Company rule to Responsible Government regarding the colony’s expenditure patterns.100 Gale refers to the increase in prosperity reflected in the annual surpluses. This enabled the government to spend more money on certain aspects of development, which the Company government had neglected in the past.101 The Premier, Sir Charles Coghlan, said that the Responsible Government was determined to promote the colony’s economic and social sectors indiscriminately. ‘We do not represent any particular section,’ said Coghlan, ‘and we are here to see that the industries of the country are properly looked after, that our resources are properly coordinated between them, whether those industries are mining industries, farming industries, labour or commerce.’102 95 Legislative Assembly Debates, 2 May 1929, Fynn, Budget Speech, Column 251. 96 Frankel, Capital Investment in Africa, 232. 97 Legislative Assembly Debates, 2 May 1929, Fynn, Budget Speech, Column 251. 98 NAZ, S3293, Final statements of Revenue as Audited, 1929. 99 L. H. Gann and M. Gelfand, Huggins of Rhodesia: Man and His Country (London: Allen & Unwin, 1964), 68. 100 Ibid. 101 Gale, The Years between 1923 and 1973: A Half Century of Responsible Government in Rhodesia. 102 Bulawayo Chronicle, 22 March 1924. 101 Coghlan’s government devoted its first year in power organising its departments. It appointed the Cost of Administration Commission to inquire into public service and government structure, detecting weak spots where money was spent unnecessarily.103 The Commission’s focus was to probe into subjects such as the costs of administration and living, transport of goods, the rates of wages concerning labour return, working expenses and methods of employment in industries, as well as recommend policies to the government for the economic development of the country’s resources.104 As mentioned in the first section of this chapter, by 1924, the CRF had control over the financial supply machinery for expenditure. The CRF, aided by the Commission’s reports, provided the government with an essential administrative tool to evaluate and recommend estimates of expenditure of different ministries for every fiscal year. Every department prepared its estimates for expenditure for the ensuing year and submit them to the Treasurer, who, upon amendment or approval by the Governor, presented them to the Legislative Assembly for consideration, either before or as early as possible after the commencement of each financial year. Having implemented the CRF accounting system, the government was able to establish a robust financial administration that saw expenditure increase by nearly 85%. During the 1923/24 financial year, expenditure was £1 356 000, and in 1928-29 it rose to £2 500 000.105 A certain measure of control of public finances was provided, while the method of informing the Parliament, through the annual reports, was laid down.106 The government, to some degree, became relatively development oriented in its fiscal policy. The CRF’s work entailed the examination of revenue at its source and the audit and inspection of all offices and all government accounts. Complete records of the establishment of every department and ministerial portfolios were maintained. This increase in expenditure was also a result of the reduction in the commercial activities of the government, which, in the past, had hindered the Company government from spending more on the colony’s development. Comparing the historical periods relevant to the study, namely 1890-1904, 1905-1912, 1913-1920 and 1921-1928, the last period which falls under 103 NAZ, ZAM/1/2/3/4/5, Cost of Administration Commission’s Reports, Evidence, Working Papers and Correspondences, 1924. See also The Rhodesia Herald, 29 February 1924. 104 NAZ, ZAG/5, Reports of the Cost of Administration Commission 1924. 105 K. W. V. Nicholls, ‘The Public Finances of Southern Rhodesia during the First Ten Years of Responsible Government’ (MA Dissertation: University of South Africa, 1936), 16. 106 Official Year Book of Southern Rhodesia, No. 2, 1930, 525. 102 the period of study of this chapter saw sustained growth in average government expenditure and average revenue surplus, as shown Fig 3.5 below. Fig 3.5: Average Revenue, Expenditure, Deficit and Surplus, 1897-1928 1800000 1600000 1400000 1200000 1000000 800000 600000 400000 200000 0 1897-1904 1905-1912 1913-1920 1921-1928 Average Annual Revenue Average Annual Expenditure Average Deficit Average Surplus Source: Collated from statistics obtained in the Official Year Book of Southern Rhodesia, No. 2, 1930, 527. However, the growth in expenditure between 1923 and 1929 did not occur in every government department and did not satisfy the interests of every sector in the colony. The financing of Southern Rhodesia’s development can be grouped into four broad categories: defence and security, administration, social services and economic sectors. The defence and security category constituted the offices of the Attorney General, High Court, District Courts, Prisons, Commandant, BSA Police and the Territorial Force. Administration constituted the offices of the Governor, Legislative Assembly, The Premier, Native Affairs and the High Commissioner. Social services constituted institutions and offices that dealt with Public Health, Hospitals, Dispensaries and Asylums, European Education and Native Education. Lastly, economic sectors constituted offices and department that controlled Mines and Public Works, Agriculture and Lands, the Treasury, Auditor Department, Customs and Excise, Loans and Interests, Taxes, Pensions and Gratuities, Posts and Telegraphs as well as Grants and Subsidies. 103 £ Between 1924 and 1928, total government finance allocation and expenditure for all these categories reached £8 180 248.107 The government’s total spending from 1924 to 1929 saw administration receive £822 761, defence and security £1 333 722, social services £1 820 008 and economic sectors £4 203 757 respectively. Fig 3.6 below shows the percentage of government finance allocation and expenditure over time. Fig 3.6: Total Government Expenditure, 1924-1928 Defense and Security: eg BSAP, prisons, courts 16% Administration 10% Economic Sectors: eg mining & agric 52% Social Services: eg health & education 22% Source: Calculated from Southern Rhodesia’s Expenditure as obtained in the Legislative Assembly Debates, 1924- 1930.108 The increase in government expenditure on the economic sectors underscores that the government, unlike its predecessor, was set on promoting economic growth to attract more white settlers. For instance, the government’s approach took steps towards developing settler agricultural production 107 The figure was calculated using the statistics from the Official Yearbook of Southern Rhodesia, No. 2, 1930, 534. 108 See also NAZ, S697, Southern Rhodesia Expenditure Statements, 1924-1930. 104 in the colony.109 Reports of the Auditor General on the CRF allocation of finance to the Division of the Minister of Agriculture and Lands and its associated sub-divisions shown an increased from £45 000 in 1923-1924 budget to £203 000 in 1929 budget.110 This could be partly explained by the government’s assistance to the tobacco sector after the 1928 debacle which bankrupted many growers.111 The government also supported and promoted investment of money in establishing the Land and Agricultural Bank of Southern Rhodesia (LABSR), European settlement and other agricultural activities.112 The LABSR was established with a capitalisation of £300 000. The Bank assisted European settlement and promoted rural credit facilities for infrastructural development.113 The amount was increased to £500 000 in 1925 to £750 000 in 1926 and to £970 000 in 1930.114 Loans were offered at 6% interest rate and were earmarked for clearance and land cultivation, construction of irrigation works, and purchase of stock and plants.115 The Bank’s liquidity did not come from the Treasury only, but it also had powers to borrow from the London Stock Market and issue Land Bank Bills.116 Social services sector was second in total government expenditure and financial allocation. Allocation of finance was done through the main components of this sector, namely Public Health £215 444, Hospitals, Dispensaries and Asylums £314914, European Education £1 240 932 and Native Education £48 718.117 Government expenditure on Public Health, Hospitals and Dispensaries, and European Education was much higher on proportion to its expenditure on Native 109 On the development of settler agriculture see V. E. M. Machingaidze, ‘The Development of Settler Capitalist Agriculture in Southern Rhodesia with particular reference to the Role of the State, 1908-1939’, (PhD Thesis: University of London, 1980). For agriculture and racial policy see Palmer, Land and Racial Domination in Rhodesia; Phimister, An Economic and Social History of Zimbabwe; R. Gray, The Two Nations: Aspects of the development of race relations in the Rhodesias and Nyasaland (London: Oxford University Press, 1960). 110 NAZ, S679, Consolidated Revenue Fund: Estimates and Revenue, not dated. 111 In 1928, Southern Rhodesia experienced a tobacco boom that saw the prices of tobacco fall significantly pushing farmers out of business. 112 NAZ, SB68, The Land Bank Act, 1924; NAZ, SB68, Board of the Land and Agricultural Bank. The Company first established the Land Bank in 1912 with similar intentions to promote settlement of undercapitalised Europeans in Southern Rhodesia. The Bank was also meant to promote and cater for the welfare of the settlers and achieve white hegemony over Africans, the ultimate aim of colonisation. The only Africans who could get loans from the Bank were those in the Native Purchase Areas. 113 Legislative Assembly Debates, 27 April to 13 June 1925, Fynn, Budget Debates, Column 154. 114 NAZ, F226/1085/F8/1, Financing Farmers (Credit Facilities), Not dated. 115 Ibid. 116 NAZ, SB68, The Land Bank Act, 1924. 117 Calculated from statistics obtained in The Official Year Book of Southern Rhodesia, No. 2, 1930, 534. 105 Education, which remained the case throughout the colonial period.118 Careful considerations on government expenditure on European social services shows that the government sought to guarantee white privilege. The same goes for Defense and Security. Large amounts of government allocation for the entire period went to the BSA Police, £1 084 479, to Districts Courts £242 218 and to Prisons £221 760, (see Fig 3.6 above).119 Expenditure on Defence and Security was meant to promote security for the white community. Responsible Government’s expenditure patterns in this aspect were notably for the colonial ambition and desire to suppress and control Africans to facilitate the complete pacification of the ‘natives’. Despite the growth in revenue and expenditure, the government’s attitude towards financing these four broad categories became a sensitive issue concerning overall expenditure patterns. The rosy financial and fiscal outlook was not spared denunciation. Even though the government claimed to be indiscriminate and fair in carrying out its fiscal goals, some Rhodesians felt that was not the case. As Tapiwa Madimu observes, the state that emerged after the 1922 referendum was confronted with fresh challenges, especially balancing the different societal and sectoral interests.120 The economic sectors demonstrated the underlying disgruntlement of Southern Rhodesian society towards the government’s expenditure patterns. Handicapped by the survival of the ‘corporate capitalists’ and constitutionally hamstrung, the government found itself in a quandary between financing economic development and protecting big capital interests. Settlers in the mining and farming industries kept complaining about railway rates until the government took over the railway rights in the colony.121 The settlers (especially farmers) accused the government of protecting international capital, especially the mining and railway companies, without exerting necessary effort to take over these companies. Financing development in the post-1923 period took on patterns that triggered debates all around the colony. For example, the mining industry’s funding post 1923 primarily depended on private enterprises, with the government playing a regulatory role. The only other significant government 118 Ibid. For more information on government expenditure on African and European Education see and article by K. Hungwe, ‘Educational Policy in African Colonial Contexts: The Case of Instructional Media in Southern Rhodesia (1930-1980)’, African Study Monographs, 15:1 (1994), 1-36. 119 Calculated from statistics in the Official Year Book of Southern Rhodesia, No. 2, 1930, 534. 120 Madimu, ‘Farmers, Miners and the State in Colonial Zimbabwe’, see Chapter 4. 121 For more information on protests over railway rates and the position of the government, see chapter 3 of Phimister, An Economic and Social History; J. Lunn, Capital and Labour on the Rhodesian Railway System, 1888-1947 (Oxford: Macmillan Press, 1977), Chapter 2. 106 contribution to mining operations was through the Geological Survey Department.122 By contrast, the Division of the Minister of Agriculture and Lands received more attention regarding administrative support. In 1923/24 financial year, there were 151 established senior officials in the Department of Agriculture to help the settlers with farming expertise, compared to 52 in the Departments of Mines and Works and Geological Survey combined.123 In the same year, 8 per cent of the budget was spent on Agricultural Departments compared to 0.2 per cent on Mines Departments.124 Besides, at an annual general meeting in 1926, the Salisbury Chamber of Mines complained that the government gave financial aid to the agriculture industry to the tune of £170 000 against £70 000 given to the mining industry.125 Yet, despite this minimal support from the government, the mining industry contributed the highest proportion of income tax.126 In 1929, George Mitchell echoed the sentiments of the Salisbury Chamber of Mines: We can talk as much as we like about agriculture being the country's backbone, and so on, but it is the plain, unvarnished truth that [Rhodesia] today exists on the mining industry. That is the actual position, but whereas a large amount of money is annually devoted to agriculture assistance, the amount provided for mining is comparatively insignificant.127 The mining industry continued its opposition towards government expenditure on agriculture. As a result, the farmers’ anger against the mining industry deepened. They strongly deprecated the mining industry’s rejection of government projects that promoted agricultural development. For instance, Du Port responding to the Salisbury Chamber of Mines’ position, argued that the country was creating monopolies that promoted the development of mining industries over agriculture.128 He insisted that, for Southern Rhodesia to develop, the government needed to take over the minerals and use them towards the country’s progress, rather than to continue nurturing monopolies that rejected government’s expenditure on other important sectors. Another government’s expenditure pattern that triggered anger among the settlers was its decision to cut expenditure on administration. The government reduced financial allocation to 122 Murray, Governmental System in Southern Rhodesia, 120. 123 Ibid, 64. 124 Director of Agriculture, Annual Reports, 1924. 125 Salisbury Chamber of Mines Annual General Meeting reported in the Rhodesia Mining Journal, April 1928. 126 NAZ, RH2/1/2/5, Salisbury Chamber of Mines, Annual General Meeting, 28 August 1926. 127 Legislative Assembly Debates, 2 May 1929, G. Mitchell, Column 440. 128 Legislative Assembly Debates, 2 May 1929, Column 533. 107 administration by reducing the size of the public sector and cutting salaries and allowances of civil servants. The Treasurer commented that: The economy does not necessarily mean holding up of everything. It does mean we may have to go without things we would like, which is only natural in a young country like this, and it also means that we shall have to get full value for every pound we get and spend.129 The Director of the Cost of Administration Commission, Woolley had warned the Treasurer in 1924 that, ‘scales of Pay and Allowances are a matter of concern’ and ‘should not be touched.’130 Regardless of the long standing recommendation by the Commission that the government should not cut salaries and allowances of the civil service personnel, it proceeded with its plan. In the end, criticism mounted for the government. The Civil Service Association, the stronghold of the government’s electoral base, drastically changed its loyalty.131 Conclusion The chapter looked at the change of administration from Company rule to Responsible Government, focusing on how this influenced the reorganisation and continuity of fiscal management. It discussed the government’s desire to implement fiscal policies that encouraged and promoted economic growth in the colony in favour of the settlers. The chapter showed that the post-1923 constitution gave some degree of autonomy to the Responsible Government. The government was able to put in place fiscal measures to facilitate and promote economic development. For instance, the CRF enactment prompted accountability and sound public finance management which improved revenue collection and allocation. As argued in the chapter, the increase in government expenditure was a result of annual surpluses which enabled the government to spend money on aspects that the Company government had neglected, for example, road construction and farming especially. The chapter further indicated that the financial growth in revenue and expenditure did not come without problems. Revenue collection, especially income tax from the mining industry, remained problematic for the new government. The Rhodesian tax system was hamstrung by constitutional dictates which, at times, favoured the international capital at the expense of local development. 129 Rhodesian Herald, 29 February 1924. 130 The letter was published in the Rhodesian Services Record, 8:5, 4 January 1924. 131 Ibid. 108 The chapter also showed that growth in government expenditure was skewed. This resulted in debates over why the government was financing some economic sectors at the expense of others. The debates pitted the farming and mining industries against each other, the later opposing government expenditure on, or aid, to the former. 109 Chapter Four Managing the Crisis: Southern Rhodesia’s Fiscal Policies during the Great Depression, 1930-1938 Introduction The previous chapter examined the transition from the British South Africa Company (BSAC) rule to Responsible Government. It highlighted the desire of the post-Company administration to turn the colony into a white man’s country. The Government established an economic structure aimed at meeting the demands and expectations of the settlers with a vision of encouraging white settler immigration. The government put concerted efforts into promoting economic sectors that were open for an ordinary settler like agriculture and small mining. However, when the Great Depression convulsed the 1930s, it threatened the envisioned colonial project. Southern Rhodesia’s economic structure was based on the exportation of primary products which left it susceptible to the devastating effects of the economic slump. The Depression resulted in a sharp fall in demand for primary products, and because she relied on the export of primary commodities, Southern Rhodesia suffered major financial difficulties. This chapter illuminates how the Depression affected Southern Rhodesia’s economy, focusing on the fiscal measures adopted by the colonial state to mitigate the resultant challenges. To get a clear picture of how the Depression impacted the local economy, it is imperative to briefly describe Southern Rhodesia’s pre-Depression economic status. As shown in the previous chapters, the colony’s economy before the thirties was based primarily on mining and, to a smaller extent, agriculture. The only form of secondary industries before the outbreak of the Second World War was agro-based processing industries, which contributed less than 10 per cent of the country’s Gross Domestic Product.1 The colony remained a primary producer of gold and other minerals, tobacco, maize and cattle.2 1 See V. M. Gwande, ‘Organised Secondary Industry and the State in Zimbabwe, 1939-1979’, (PhD Thesis: University of the Free State, 2018); L. Tow, ‘The Manufacturing Economy of Southern Rhodesia: Problems and Prospects’, (PhD Thesis: Columbia University, 1960); E. S. Pangeti, ‘The State and Manufacturing Industry: A Study of the State as Regulator and Entrepreneur in Zimbabwe’, (PhD Thesis: University of Zimbabwe, 1996). 2 For more on the structure of the Rhodesian economy see I. R. Phimister, An Economic and Social History of Zimbabwe, 1890-1948: Class Struggle and Capital Accumulation (London: Longman, 1988); V. E. M. Machingaidze, ‘The Development of Settler Agriculture in Southern Rhodesia with Special Reference to the Role of the State’, (PhD Thesis: University of London, 1980); J. A. Edwards, ‘Southern Rhodesia: The Response to Adversity, 1935-1939’, (PhD Thesis: University of London, 1978); D. J. Murray, Government System in Southern Rhodesia (Oxford: Oxford 110 Control of these sectors remained mostly in the hands of international capital and white settlers, with Africans at the fringe of the economic system. Foreign capital, represented by the British South Africa Company (BSAC) controlled railways and the bulk of gold production, asbestos and coal mining.3 Although Southern Rhodesia’s economy started diversifying in the late 1920s, this occurred at a very small scale. For example, the mining industry expanded to include small and medium scale miners involved in various base and precious metal mining.4 Commercial agriculture, which struggled for a long time before the 1920s, started taking shape with tobacco as its primary export crop. However, as discussed in the following section, it remained vulnerable to international market shocks. With regard to revenue collection, the colony relied on four major revenue streams, namely Customs Duties, Income Tax, African tax, Posts and Telegraphs, with other sources playing a complementary role.5 The country derived its Customs Duties from the export of mining and agricultural primary products which included chrome, asbestos, gold, tobacco and cattle. The country also levied income tax on the profits of the companies operating in Southern Rhodesia and on the salaries of employed white settlers and those doing business. Between 1924 and 1929, these major revenue streams produced surpluses that enabled the country to spend more, as shown in the previous chapter. The Rhodesian Government’s Response to the Crisis: A Potpourri of Fiscal Measures, 1930-1938 When the Depression broke out, Southern Rhodesia could not insulate itself from the economic adversity and suffered serious financial difficulties. It experienced a severe economic downturn as University Press, 1970); L. H. Gann, A History of Southern Rhodesia: From Early Days to 1934 (London: Chatto & Windus, 1965); R. Palmer, Land and Racial Domination in Rhodesia (Berkeley: University of California, 1977); G. Arrighi, The Political Economy of Southern Rhodesia (The Hague: Mouton, 1967); R. Gray, The Two Nations: Aspects of the Development of Race Relations in the Rhodesias and Nyasaland (London: Oxford University Press, 1960); W. J. Barber, The Economy of British Central Africa (London: Oxford University Press, 1961), 104; L. H. Gann and M. Gelfand, Huggins of Rhodesia: Man and His Country (London: Allen & Unwin, 1964); C. Leys, European Politics in Southern Rhodesia (Oxford: Clarendon Press, 1959); M. M. Burdette, ‘Industrial Development in Zambia, Zimbabwe and Malawi: The Primacy of Politics,’ in Z. A. Konozack, L. Jane and M. Timothy (eds.), Studies in the Economic History of Southern Africa: Volume 1, The Front-Line State (London & New York: Routledge, 1990); P. Bond ‘Finance and Uneven Development in Zimbabwe’, (PhD Thesis: John Hopkins University, 1992); R. Blake, A History of Rhodesia (London: Eyre Methuen, 1977). 3 Arrighi, The Political Economy of Rhodesia, 20. 4 See Burdette, ‘Industrial Development in Zambia, Zimbabwe and Malawi: The Primacy of Politics’, 75-126. 5 National Archives of Zimbabwe (hereafter NAZ) S3293, Final Statements of Revenue as Audited, 1929-1930 Fiscal Year. 111 a result of the decrease in the export of primary products. The mining industry also faced a myriad of challenges. Asbestos output dropped from 42 634 tons in 1929 to 15 766 tons in 1932. This decrease in asbestos production saw the industry plunge in value from £1 186 627 to £197 092.6 Chrome dropped in value from £674 937 in 1929 to £33 732 in 1932.7 Base mineral production almost stopped.8 The Rhodesia Herald reported that overall, the value of minerals produced in Southern Rhodesia between 1929 and 1932 dropped from £4, 518 918 to £1 300 176.9 The agricultural sector also experienced severe economic hardships. The slump in 1929 drove three-quarters of cotton and tobacco farmers out of production. This forced farmers into maize production, which also experienced the devastating effects of the Depression as the price fell from 10s to 8s per bag.10 Exports dropped from £7 497 000 in 1930 to £5 894 000 in 1931, a difference of £1 681 000. In particular, cattle exports declined in value from £340 000 in 1930 to £49 000 by 1931.11 The Depression left the farmers in a critical financial position. Overall, the country’s national income fell from £13.9 million in 1929 to £8.9 million in 1931 due to reduced agricultural and mining productivity.12 In general, there was a massive drop in exports, from £7 497 000 in 1930 to £5 894 000 in 193, a decrease of £1 603 000.13 Export overseas dropped by £735 000, to South Africa by £340 000 and to Northern Rhodesia by £606 000.14 Under such circumstances of low agriculture and mining productivity, many white settlers found themselves unemployed.15 The Select Committee appointed in 1932 to investigate unemployment, reported that the number exceeded 1 700.16 The situation was similar in railway companies and they experienced a financial crisis that threatened to be terminal. Railway revenue slumped by almost 50 per cent, from £5.1 million in 1929-1930 to £2.6 million in 1931-1932.17 Railway 6 Phimister, An Economic and Social History of Zimbabwe, 171. 7 NAZ, SRG/TAX3, Reports of Commissioner of Taxes, 1929-1932. 8 Phimister, An Economic and Social History of Zimbabwe, 171. 9 The Rhodesia Herald, 18 June 1932. 10 Phimister, An Economic and Social History of Zimbabwe, 172. 11 Murray, Governmental System in Southern Rhodesia, 83. Decline in cattle exports was also a result of the export quota following the 1930 Agreement with the Union. 12 Phimister, An Economic and Social History of Zimbabwe, 171. 13 NAZ, S3293, Final Statements of Revenue as Audited, 1930 and 1931 Fiscal Years. 14 Ibid. See Fynn, Budget Speech, Southern Rhodesia Legislative Assembly Debates, 12 April 1932, Column, 361. 15 Report of Select Committee to investigate the problem of unemployment in the Colony, 10 May 1932. 16 Ibid. 17 A. H. Croxton, Railways of Rhodesia: The Story of the Beira, Mashonaland and Rhodesia Railways (Newton Abbot: David & Charles 1973), 171; J. Lunn, Capital and Labour on the Rhodesian Railway System, 1888-1947 (Oxford: MacMillan, 1997), 58. 112 management introduced drastic measures for financial survival. ‘A third of railway workers were laid off between 1931 and 1935,’ observed historian Jon Lunn, which added to the already increasing unemployment numbers.18 In short, the overall impact of the Depression was economic debility that resulted in unemployment and a significant drop in revenue collection. After the accumulation of revenue surpluses in the twenties, the colony plunged into deficits in the early 1930s. As the Treasurer, Fynn, noted: Estimates of revenue and expenditure for the past two to three years [1930 to 1932] reached the low mark. In [1928-1929 fiscal year] revenue was £2 487 186 and expenditure was £2 411 375 giving a surplus of £75 811. In [1930/31 fiscal year] revenue was placed at £2 449 283 and actual expenditure was £2 453 286 giving a deficit of £4003. In [1931/32 fiscal year] revenue was £2 110 280 and expenditure £2 228 823 giving a deficit of £118 543.19 In the same vein, Murray observed that: Because of the economic Depression and reduced revenue arising from taxes, Fynn as the Treasurer found himself confronted by October 1931 with an anticipated financial deficit of [almost] a quarter of a million pounds, and, committed to ideas about the need to maintain the solvency of the government.20 In early 1930s the colony’s revenue sometimes fell short of the anticipated figure, as shown in the following Table 4.1. Table 4.1: Revenue and Expenditure, 1930 to 1934 Fiscal Year Ending 31 Expenditure from Revenue Surplus (+) or Deficit (-) March Revenue Funds £ £ £ 1929-1930 2 487 186 2 411 375 (+) 75 811 1930-1931 2 453 286 2 449 283 (-) 4 003 1931-1932 2 228 823 2 110 280 (-)118 543 1932-1933 2 176 565 2 268 910 (+) 92 345 1933-1934 2 500 246 2 465 380 (-) 34 866 Source: Compiled from statistics obtained in the Legislative Assembly Budget Speeches, 1930-1934. Evidently, the deficits significantly affected the country’s budgetary position. Revenue could not keep up with the financial demands of the government.21 It was against this background that the 18 Lunn, Capital and Labour on the Rhodesian Railway System, 100. 19 Legislative Assembly Debate, 12 April 1932, Fynn, Budget Speech, Column 358. For the audited financial statements and revenue figures, see NAZ, S3293, Final Statements and Revenue as Audited, from 1928 to 1939. See also S. Herbert Frankel, Capital Investment in Africa: Its Course and Effects, (London: Oxford University Press, 1938), 233, Table 55. 20 Murray, Governmental System in Southern Rhodesia, 36. 21 NAZ, S3293, Final Statements of Revenue as Audited, 1930. 113 state responded by implementing several fiscal policies to combat the devastating effects of the Depression. Murray argues that the Treasurer ‘sought a way of cutting government expenditure,’22 as discussed in the following subsections. The Effort to Balance the Budget, 1930-33 [Budget deficit] is the problem we are facing at present. [It is] the most formidable problem we [have] to address. It will put us to the test as to whether we will stand by the assurance that was given by the Members of the Legislative Council when praying for the grant of Responsible Government, that we were fit financially and in other respects to assume the responsibilities of self-government.23 Abel Gwaindepi asserts that budget balances, in most cases, determine the wide-ranging trends of a country’s fiscal policy and when there is constant deficit the government is forced to revisit its public expenditure and revenue policies.24 This aptly describes Southern Rhodesia’s situation during the Depression. From a fiscal point of view, the main challenge the Rhodesian government faced, as mentioned earlier, was to maintain solvency through balancing revenue and expenditure. The budgetary position of the country deteriorated significantly. The state responded by implementing the principle of a balanced budget through reducing ‘unnecessary’ expenditure and increased taxation. In a budget statement presented to the Legislative Assembly in 1932, the Treasurer said ‘in the face of falling revenue, steps have been taken to reduce expenditure by a considerable amount.’25 The Treasury observed rigorous fiscal accountability through building careful accounting and auditing procedures into the colonial administrative practice, and all efforts were made to prevent wastage.26 The Audit Department oversaw the budgetary principles of the government and set multi-annual expenditure ceilings the government was not allowed to exceed. Moreover, the Treasurer established Departmental Committees whose mandate was to examine and audit every branch of expenditure and make recommendations for reductions.27 He discouraged budget estimates that would increase spending, while he also encouraged all government departments to reduce their budget estimates and keep them at the best minimum, enabling the Treasury to cut 22 Murray, The Governmental System in Southern Rhodesia, 36. 23 Legislative Assembly Debates, Fynn, Budget Speech, Columns 361-62, 1932. 24 A. Gwaindepi, ‘State Building in the Colonial Era: Public Revenue, Expenditure and Borrowing Patterns in the Cape Colony, 1820-1910’ (PhD Thesis: Stellenbosch University, 2018). 25 Legislative Assembly Debates, 12 April 1932, Fynn, Budget Statement, Column 365. 26 Ibid. 27 Ibid. 114 financial allocation. Ultimately, the government managed to save an amount of £100 000.28 The Treasury implemented further estimated expenditure reductions targeting mainly Lands Department, native development, pensions and gratuities and defence. It saved £26 000 from Lands Department, £14 000 from native development, £27 000 from pensions and gratuities and £19 000 from the defence department.29 Another example of expenditure reduction was the decrease of the government’s wage bill. On numerous occasions in the Legislative Assembly, parliamentarians indicated that the government’s wage bill was too high due to the size of the civil service, which between 1930 and 1932 devoured up to 41.6% of the total revenue.30 The unit cost of administration and civil service was very high while revenue was inflexibly low to allow huge public service expenditure. This led to campaigns in the Legislative Assembly to introduce a Bill granting the Governor the power to reduce government expenditure on wages and abolish salary increments, allowances and bonuses in 1931.31 The Public Services Economic Act was passed in the parliament to allow the Governor to reduce the government’s wage bill by authorising, through proclamation, deductions on salaries of people employed by the government in all departments.32 The Treasury made deductions of 10 per cent on all government employees, with abatements allowed in both married and single employees supporting dependents.33 Apart from deductions in salaries, the government suspended all increments under Government Notice 373 of 1932, allowing it to save up to £130 000 in the 1932/33 fiscal year.34 From a political perspective, the settler government succumbed to pressure from economic interest groups. Mining and agriculture had grown more powerful in influencing the government’s fiscal decision to the civil servants’ disadvantage. But the pressure was not novel. Murray observes that, 28 Ibid, Column 359. 29 Ibid, Columns 365-366. 30 Ibid. 31 Gann and Gelfand, Huggins of Rhodesia, 65-6. The Act put pressure on Huggins whose political constituent was the civil service. He was the representative of the Public Service Association in the Assembly. Huggins criticised the Bill, but voted for it. He subsequently retired from the Rhodesian Party. For Huggins’ relations with the Public Service Association see the Rhodesian Services Record of May 1930; March 1931, April 1931 and November 1931. For his speech against the Public Services Economic Bill, see Legislative Assembly Debates, 14 November 1931, Columns 308-310. 32 NAZ, ZG1, Southern Rhodesia Statute Laws, Act No. 35 of 1931, Sections 2 & 3. 33 Ibid. 34 Government of Southern Rhodesia, Notice 373, 1932. 115 since 1928, agriculture and mining had wished for reduced taxation and believed this was achievable only if the government were to reduce its administration bill.35 The Chamber of Commerce wanted the government to economise in administration, especially by reducing the size of public service. The Chamber had earlier argued that this would lower the cost of civil service administration and, ultimately taxation.36 Similarly, for a long time since 1928, the farmers blamed their misfortune on the ‘big’ administrative structure of the government.37 They demanded a reduction of the public service to minimum numbers only necessary to carry out essential administrative duties. More telling was the position of the cabinet. Ministers believed that the country inherited an extended and costly administration from the Company rule.38 Since 1928, farmers believed that the structure of the government was meant to benefit the Company’s commercial operations at the expense of the Rhodesian taxpayer.39 In support of the Cabinet’s position, mining and agricultural industries lobbied the government to take an administrative decision which conflicted with civil servants’ interests. In the Treasurer’s view, scarcity of revenue required the government to spend sparingly and grudgingly. The government, therefore, could not finance the big administrative structure with limited financial resources. Hence, the colonial state between 1930 and c. 1934 oscillated between being parsimonious and generous, spending only when necessary to revive the economy. The limited government expenditure on civil service enabled the colonial state to save money, which significantly helped the Treasury to finance emergencies. For example, in 1931, the government managed to finance the additional expenditure to control an outbreak of foot-and-mouth disease in the country.40 A breakdown of financial allocation to the Ministry of Agriculture and Lands from 1930 to 1934 shows that veterinary services got £634 773 out of £1 108 853, as indicated on the following Table 4.2.41 35 Murray, The Governmental System in Southern Rhodesia, 31. 36 Ibid. 37 Ibid. 38 Ibid, 37-38. 39 Ibid. 40 Legislative Assembly Debate, 12 April 1932, Fynn, Budget Presentation, Column, 359. See also the Official Year Book of Southern Rhodesia, No. 2, 1932, 68. 41 The Veterinary Department’s Vote was merged with the Agriculture Vote in 1931. For the years between 1930 and 1934, this Vote topped all the expenditure allocation in the Agricultural Department. 116 Table 4.2: Total Expenditure for the Ministry of Agriculture and Lands, 1929-1934 Fiscal Agriculture Veterinary Lands Surveyor Veterinary Totals Year £ £ £ General Research £ £ £ 1929-1930 131 795 72 033 51 250 7 813 6 293 269 184 1930-1931 147 719 58 248 33 607 6 695 7 071 253 340 1931-1932 (a) (b) 147 165 19 527 6 369 5 892 178 953 1932-1933 (a) (b) 153 963 14 120 6 254 5 202 179 539 1933-1934 (a) (b) 203 364 11 180 6 910 6 383 227 837 Grand Total 279 514 634 773 129 684 34 041 30 841 1 108 853 (a) From 1931 the Agriculture Vote was merged with the Veterinary Department Vote. (b) Total Expenditure on Agriculture and Veterinary Vote. Source: Statistics obtained from the summary of expenditure from revenue funds by Ministerial Divisions as presented to the Legislative Assembly, 1930 to 1934. The government also introduced the utilisation of the surplus revenue it accumulated in the previous decade which stood at £300 000.42 Through the supplementary expenditure account, the government authorised an expenditure of accumulated surplus revenues and set aside £50 000 as a loan fund for maize farmers and £160 000 as relief to Tobacco farmers.43 Tobacco benefitted the most. The official history of the Rhodesia tobacco industry indicates that: Directly or indirectly, the tobacco industry cost the Rhodesian Government over half a million pounds sterling, a contribution all the more remarkable when it is remembered that the total annual revenue in those days was only around two and a half million pounds.44 According to Gann, financial experts in the country argued that ‘between 1928 and 1933 about £1 000 000 was spent on debt liquidation or reduction [for farmers], publicity, export bounties, rebates and research.’45 Phimister concurs stating that ‘an estimated £1.7 million was spent on agricultural services, subsidies, bounties and last-ditch rescue operations between 1928 and 1933.’46 In contrast, the government’s financial assistance to the mining industry was disappointingly low, as shown in the following Table 4.3.47 42 NAZ, S679, Estimates of Expenditure and Revenue Excesses, Minute No. 235/31, 1924-1928; The Auditor General’s Report, 1931. See also Legislative Assembly Debates, 12 April 1932, Fynn’s Budget Presentation, Column 357. 43 Legislative Assembly Debates, 12 April 1932, Fynn, Budget Presentation, Column 259. 44 F. Clements and E. Harben, Leaf of Gold: The Story of Rhodesia Tobacco (London: Methuen, 1962), 104. 45 Gann, A History of Southern Rhodesia, 285. 46 Phimister, An Economic and Social History of Zimbabwe, 174. 47 For more see, Nicholls, ‘The Public Finances of Southern Rhodesia during the first ten years of Responsible Government.’ 117 Table 4.3: Expenditure on the Mines Department, 1930-1934 Fiscal Year Establishment Travelling & Other Charges Total £ Transport £ £ £ 1929-1930 24 351 4 314 1 736 30 402 1930-1931 24 756 3 839 1 480 30 074 1931-1932 25 181 3 870 958 29 359 1932-1933 23 345 3 011 777 27 133 1933-1934 29 744 3 632 37 899 (a) 71 275 Grand Totals 127 377 18 666 42 850 188 243 (a) Including £33 784 in an adjustment of losses on Loan Funds Account, Mining Industry, written off on 31 March 1933. Source: Statistics obtained from the summary of expenditure from revenue funds by Ministerial Divisions as presented to the Legislative Assembly, 1930 to 1934. The Committee of Enquiry established in 1932 to evaluate the country’s economic position explained the disparity in government expenditure between mining and agriculture.48 The Committee argued that the state financed struggling farmers because the colony was moving towards making agriculture the mainstay of the country’s economic base. 49 It reported that: The issue that has to be faced is whether it is impossible to build a white colony on any other basis other than an agricultural population. [The] Committee has [considered] the possibilities of establishing a white colony on mining and Secondary industries, and has [concluded] that a white agricultural population must be the basis on which to build a white colony.50 Thus, the state took the leading role in financially shielding its white farmers from the chilly blasts of the international economy, placing an enormous burden on its revenue base. However, much as the government committed itself to reviving and supporting the economy by utilising surplus revenue and cutting unnecessary expenditure, its efforts were not enough to ensure that it achieved its goal of balancing the budget. To alleviate the budget deficit that was common in the early thirties, the Treasury introduced tax reforms.51 The most noticeable change was the Africans’ proportional contribution towards Southern Rhodesia’s revenue in per capita taxes. Historical literature has widely discussed how Africans carried the economic burden during the 48 Report of the Committee of Enquiry into the Economic Position of the Agricultural Industry of Southern Rhodesia , 1934, 1. 49 Ibid. 50 Ibid. 51 Legislative Assembly Debates, 12 April 1932, Fynn, Column 358. 118 Depression in different African colonial regions.52 The general argument in the literature is that, while Africans were already paying heavy taxes, for example, £1 poll tax imposed on all African adult males, bicycle tax of 2s 6d and dog tax of 5s, a myriad and other enduring taxes were imposed upon them from 1930. In 1931, the government imposed various levies and taxes on African farmers and cattle owners.53 Through the Cattle Levy Act of 1931, the government imposed a new charge of 2s 6d per head of slaughtered African cattle.54 The government added another 3d tax on all cattle in the country on top of the 2s 6d slaughter levy already in place.55 A close examination of the difference between direct taxes imposed on settlers and Africans reveals crucial details about the nature of the colony’s fiscal system. Proportionally, the tax structure of Southern Rhodesia left the tax burden on settlers very low compared to Africans. The state subjected Africans to several direct and indirect taxes, yet white Rhodesians paid only income tax, of which 75 per cent came from companies.56 Indeed, Africans carried the most significant per capita tax burden, which helped to salvage the colonial budget. This was confirmed by the Chief Native Commissioner who admitted that, when the Depression occurred: Taxation [on Africans] both direct and indirect, continued and the Natives took the ‘shock’ so effectively that our Colonial Treasurer could balance the colony’s revenue and expenditure. [The] African has always been the shock absorber in the State motor car.57 52 See Murray, Governmental System in Southern Rhodesia; Palmer, Land and Racial Domination in Rhodesia, chapter 8 ‘Fear of competition’; Phimister, An Economic History of Zimbabwe, Chapter 4; E. Punt, ‘The Development of African Agriculture in Southern Rhodesia with Particular Reference to the Interwar Years,’ (M. A. Dissertation: University of Natal, 1979). The literature points out that, during the 1930s, colonial governments implemented several laws and Acts to protect white farmers from African competition. In Southern Rhodesia these included the Land Apportionment Act, Dairy Industry Control Act, Public Service Act, Tobacco Marketing Act and the Industrial Conciliation Act, among others. For comparison, see B. Jewsiewicki, ‘The Great Depression and the Making of the Colonial Economic System in the Belgian Congo’, African Economic History, 4 (1977), 153-176; A. Minnaar, ‘The Effects of the Great Depression (1929-1934) on South African White Agriculture’, South Africa Journal of Economic History, 5:2 (1990), 1-25. 53 Official Year Book of Southern Rhodesia, 4, 1952, 115. 54 Ibid. See also NAZ, ZG1, Southern Rhodesia Statute of Laws, Cattle Levy Act No. 11 of 1931; N. W. Samusuwo, ‘There is Something About Cattle’: Towards an Economic History of the Beef Industry in Colonial Zimbabwe, with Special Reference to the Role of the State, 1939-1980’, (PhD Thesis: University of Cape Town, 2000). 55 Official Year Book of Southern Rhodesia, 4, 1952, 115. 56 NAZ, SRG4, Auditor General’s Report, 1932. 57 H. M. G. Jackson, ‘The Natives of Southern Rhodesia: Their Position after Ten Years under Responsible Government’, African Observer, 21 February 1934. For more on African contribution towards the colony’s finances during the Depression, see NAZ, GEN/EVE, R. H. Everest, ‘Southern Rhodesia: Influence of the Native Population upon Revenues, Direct and Indirect’, Not dated. 119 The Chief Native Commissioner’s Reports for 1931, 1932 and 1933 show that Africans, considering their economic condition, carried the tax burden which the settlers would not have managed to carry had they been paid such low wages.58 The average monthly African wage dropped significantly, making it more difficult for them to pay taxes.59 Between 1930 and 1934, wages fell by almost 30 per cent, from 28s 2d to 20s.60 As in William McGregor Ross’s words describing the Kenyan situation in 1927, the Rhodesian Africans carried the ‘Whiteman’s Burden manfully.’61 Table 4.4: Final Revenue Statements showing Major Heads of Tax Revenue as Audited, 1930 to 1938 Year Customs Income Tax Native Tax Stamps & Post & Gold Duties (Companies (£) Licences Telegraphs Premium (£) & (£) (£) Tax Individuals) (£) (£) 1930 704 693 499 050 343 688 140 092 233 676 1931 739 607 492 921 346 137 143 385 247 344 1932 548 160 407 545 344 365 136 575 281 377 1933 644 466 395 913 342 046 121 700 229 897 95 693 1934 720 478 366 809 334 016 123 203 236 909 105 093 1935 790 566 504 765 360 923 130 956 254 523 131 256 1936 791 725 530 185 377 000 135 889 272 557 122 421 1937 610 000 623 000 393 000 141 287 286 783 129 401 1938 997 630 793 785 397 500 170 047 337 660 285 Totals 6 547 325 4 613 973 3 238 975 1 243 134 2 380 726 584 149 Source: NAZ, S3293, Final Statements of Revenue as Audited by the Principal Revenue Examiner, 1930-1939. The massive direct tax burden on Africans came at a time when their economic position had significantly deteriorated. The state promulgated a panoply of laws that protected the white settler farmers from competition and kept Africans out of economic self-sufficiency through peasant farming. Many scholars have agreed that, between 1930 and 1935, a network of control boards and marketing Acts decimated the thriving African rural production system.62 The immediate 58 Chief Native Commissioner’s Reports, 1931, 7, 1932, 1 and 1933, 2. 59 African World Annual, 1934, 17. 60 Ibid. 61 McGregor Ross, Kenya from Within: A Short Political History (London: Routledge, 1968), 145. 62 See, for example, R. Palmer, Land and Racial Domination in Southern Rhodesia; Gann, A History of Southern Rhodesia: From Early Days to 1934; Phimister, An Economic and Social History of Zimbabwe; Machingaidze, ‘The Development of Settler Agriculture.’ 120 effect of this network was the incapacitation Africans who usually relied on the sale of their produce to pay taxes. The economic salvation of the settler state was thus achieved through the unrelenting assault on Africans. Africans’ production was ruined, even though the Chief Native Commissioner conceded that the ‘Native production, which is synonymous with [his] wealth, is in the best interests of the whole community, because [his] wealth adds to the revenues of the country’63 Apart from placing the burden of the tax demands on Africans, the government needed other revenue streams. Studies have established that throughout the Depression, customs duties in African colonies were the tax most easily influenced by international dynamics.64 As mentioned earlier, Southern Rhodesia remained a producer and exporter of raw materials with hardly any industrial sector.65 Her customs revenue depended on the export of primary products, especially to South Africa and Britain. Yet, the existing trade relations and agreements with South Africa were distinctly in favour of Pretoria.66 Scholars, for example, Abraham Mlombo, Victor Gwande and R. L. Cole, have emphasised the strained, and often antagonistic, relationship that existed between the two countries.67 They explore the changing position of interest groups supporting an upgraded Customs Agreement that would promote the development of secondary industries in Southern Rhodesia. The views of Cole, Gwande and Mlombo’s indicate that the politics behind customs duties, namely to protect local incipient secondary industries was one reason why Customs Agreements needed to be renegotiated. However, their core argument does not involve examining the fiscal implications of the Agreements on Southern Rhodesia’s economy. The colony’s Customs Agreements with South Africa before 1930 were for exchanging ‘each other’s domestic products free of duty and making fiscal payments (exports subsidies) between themselves, in lieu of customs 63 NAZ, S679/ No. 1069/33, Chief Native Commissioner’s Office to the Secretary of the Premier, 17 March 1933. 64 See, for example, L. Gardner, Taxing Colonial Africa: The Political Economy of British Imperialism (Oxford: Oxford University Press, 2012). 65 Gwande, ‘Organised Secondary Industry and the State’, 27. 66 The Customs Act adopted on 1925 after the November 1924 agreement with the Union impaired Rhodesia’s independence to formulate her own tariffs without the influence of South Africa. 67 See A. Mlombo, ‘Southern Rhodesia’s Relationship with South Africa, 1923-1953’, (PhD Thesis: University of the Free State, 2017); ‘Settler Colonialism and Trade in the Periphery: Customs Relations between Southern Rhodesia and South Africa, 1924-1935’, African Economic History, 47: 1 (2019); Cole, ‘The Tariff Policy of Rhodesia, 1899-1963’, The Rhodesian Journal of Economics, 2:2 (1968), 28-47. 121 revenue.’68 The Controller of Customs complained that this resulted in an unequal binding between the two countries, as South Africa was more industrialised than Southern Rhodesia, leading to revenue loss amounting to £200 000 from 1928 to 1929.69 Such revenue loss through unequal trade relations prompted the Rhodesian government to establish the Customs and Tariff Committee in 1929.70 The mandate of the Committee was to inquire into the possibility of amending the Customs Agreement, but in the end, it recommended that the colony denounce the Customs Agreements with South Africa.71 After the colony denounced the Agreement, the countries reached a new one in 1930 under which the colony was for the first time able ‘to frame its own customs tariff…as it may deem necessary.’72 However, following the intensification of the Great Depression, the Treasurer reported a shortfall in customs revenue of £106 000 for 1930/31 fiscal year.73 In December 1931, the Southern Rhodesia government further decided that it could not afford losing more revenue given the current situation of budget deficits.74 The country introduced amendment to customs duties in 1932 after the conclusion of the Ottawa Conference.75 The Treasurer reported to the Legislative Assembly that, at the Ottawa Conference, the Imperial Government granted the power, through the Imperial Tariff Act, to vary or increase its duties if it needed revenue.76 This enabled the colony to modify the Rhodes Clause, which established rigid maxima beyond which the Rhodesian duties on British 68 NAZ, SRG/CUS4, Report of the Controller of Customs and Excise Duties, 1929; The Report of the Ottawa Conference Committee, 1932, 35; The Countryside, Customs Agreement Statement by Fynn, October 1929. 69 NAZ, SRG/CUS4, Report of the Controller of Customs and Excise Duties, 1929; The Countryside, October 1929, 24; Edwards, ‘Southern Rhodesia: The Response to Adversity, 1935-1939’, 41. 70 NAZ, ZAM/2, Evidence of the Customs Tariff Committee, Chaired by E. C. Baxter, the Controller of Customs and Excise Duties, 1929; The Countryside, ‘The Customs Agreement: A Plea for Revision’, 4 & 6, ‘Customs Agreement’ Statement by Fynn, 24. 71 Legislative Assembly Debates, 24 March, Fynn, Budget Debates, Column 154. 72 Customs Agreement, 1930, Article 17; NAZ, H. Mss LE 3/1/1, Customs Agreement between Southern Rhodesia and the Union of South Africa, Report thereon by the Controller of Customs and Excise and the Government Statistician, 15 December 1931. See also A. S. Mlambo, E. S. Pangeti and I. Phimister, Zimbabwe: A History of Manufacturing, 1890-1995 (Harare: University of Zimbabwe Publications, 2000). 73 Legislative Assembly Debates, 10 April 1930, Column 773. 74 NAZ, H. Mss LE3/1/1, Customs Agreement between Southern Rhodesia and the Union of South Africa, Report by the Controller of Customs and Excise and the Government Statistician, 15 December 1931. 75 See The Report of the Ottawa Conference Committee, 1932. 76 Legislative Assembly Debates, 12 April 1932, Fynn, Budget Debates, Column 368; The Report of the Ottawa Conference Committee, 1932; The Bulawayo Chronicle, 25 February 1935. 122 goods could not be raised. The attainment of ‘tariff autonomy’ gave Southern Rhodesia the power to increase duties on beer, wines, spirits, tobacco manufactures and motor vehicles.77 The government’s efforts to gain fiscal control on its Customs Agreements for revenue purposes turned out to be a mistake, as it further tipped the balance of trade in favour of South Africa. This put the government under pressure from economic interest groups. Even the farmers who were against the imposition of customs duties, supported industrialists in their call for the government to terminate the 1930 Customs Agreement before 31 December.78 It became clear that Southern Rhodesia had to look external markets other than South Africa. Apart from Britain, the only other significant available market to the colony was Northern Rhodesia, especially because of its booming copper mines which made the northern territory a potential market for Southern Rhodesian products.79 However, the fiscal position of the country did not improve. The alternative trading partner did not provide the colony with export revenue enough to cover for the country’s deficits. Thus, balancing the budget and the colony’s dire financial situation prompted the government to impose new taxes to raise more revenue. The Gold Premium Tax (GPT) was one such tax.80 Unlike many primary products that suffered an overproduction crisis leading to a fall in prices, uniquely gold’s prices rose after Britain abandoned Gold Standard in 1930. Southern Rhodesia followed suit in 1931.81 There was always a market for gold and, according to Phimister, gold not only acted as the fiscal stabiliser of the colony’s economy but also ‘jerked the economy out of depression and inaugurated a period of expansion and prosperity.’82 As shown in Table 4.5 below, gold exports accounted for 50 per cent of the total export revenue between 1932 and 1938. 77 Government of Southern Rhodesia Notice No. 146 of 19 February 1932. 78 See The Bulawayo Chronicle, 25 February 1935; NAZ, S679/14/4, Salisbury Chamber of Industries: Memorandum on Customs Agreement between Southern Rhodesia and the Union of South Africa as concerns Secondary Industries in Southern Rhodesia, 9 November 1933; NAZ, S1246/5.30, Memorandum by the Manager of Neill’s Bacon Factory, 21 December 1933; A. M. Kanduza, ‘The Impact of Railway Rates and Customs Agreements on Settler Farming in Northern Rhodesia/Zambia, 1910-1939: The Case of Maize and Cattle Farming’, (MA Dissertation: University of Zambia, 1979), 121. 79 The Rhodesia Herald, 11 January 1935. 80 NAZ, ZG1, Southern Rhodesia Statute Laws, Act No. 17 of 1932. 81 Edwards, ‘Response to Adversity’, 177. 82 Ibid. 123 Table 4.5: Southern Rhodesia Primary Exports, 1930-1938 Gold Asbestos Chrome All Mining All Agric Value % Value % Value % Value % Value % (£1000) (£1000) (£1000) (£1000) (£1000) Year 1930 2 224 39.5 620 11.0 441 7.8 3 673 65.2 1 448 25.7 1931 2 165 48.8 455 10.3 218 4.9 3 025 68.2 957 21.6 1932 3 405 63.8 249 4.7 85 1.6 3 857 72.2 1 134 21.3 1933 3 016 66.3 512 8.7 82 1.4 4 634 78.4 984 16.7 1934 4 769 63.7 578 7.7 174 2.3 5 692 76.1 1 387 18.5 1935 5 107 63.4 793 9.8 289 3.6 6 391 79.3 1 182 14.7 1936 5 632 60.9 959 10.4 465 5.0 7 295 78.9 1 548 16.7 1937 5 629 52.6 1 230 11.5 673 6.3 7 894 73.8 2 262 21.1 1938 5 719 54.1 1 267 12.0 516 4.9 7 886 74.6 2 086 19.7 Source: Collated from statistics obtained in Phimister, An Economic and Social History of Zimbabwe, 176. Justifying the introduction of the GPT Bill in the House of Assembly, the Treasurer said ‘during this time when the government is struggling for revenue due to the state of the economy, a [15%] Gold Premium Tax is a stern necessity to keep the colony solvent under challenging fiscal conditions.’83 Although he was aware that the ‘gold mining industry is the mainstay of the country and nothing should be done to retard its development and discourage the prospector's activities and the small worker,’ the Treasurer still called for its taxation.84 He justified his decision because ‘the gold mining companies are taking a very substantial wealth from the country and producing the only product that is making a profit or realising a price higher than the normal.’85 Under the circumstances, it was only logical, argued the Treasurer, for the government to tax the gold mining industry for more revenue. The decision to tax gold did not sit well with the mining industry, which vehemently opposed the tax. Objection to the GPT came from various groups and individuals with mining interests in the country. In opposing the tax in Parliament, Alexander R. Thompson described the tax as both ‘a bad principle and a bad application.’86 The BSAC also opposed the tax because the miners got their income through exporting a commodity prone to fluctuations just like many other products in the world.87 The three major bodies representing the mining industry also weighed in against 83 Legislative Assembly Debates, 12 April 1932, Fynn, Taxation Debates, Column 395. 84 Ibid, Column 363. 85 Ibid, Column 395. 86 Ibid. 87 NAZ, S679/1/2/3, British South Africa Company to the Department of Mines and Public Works, 16 April 1932. 124 the tax. These included the Rhodesian Mining Federation (RMF) representing small workers, the Salisbury Chamber of Mines (SCM) representing local capital, and the Rhodesia Chamber of Mines (RCM) representing international capital.88 While the chambers differed in their attitude towards the government’s decision to introduce the tax, they shared an intense dislike for the GPT. In contrast, the tax received considerable support from high-ranking government officials in Parliament. For instance, George Mitchell, Minister of Mines and Public Works, argued that, although the tax ‘appeared to be very heavy,’ in reality, it did not ‘compare unfavourably with taxation in other parts of the Empire.’89 In any case, he added, ‘the principle [was] already recognised by [Southern Rhodesia] statute books, in particular the Mines Ordinance which empowered the state to collect royalties.’90 With this support, the GPT Bill scrapped through the Legislative Assembly to become law. By 1933, Southern Rhodesia had further managed to consolidate its authority on mining issues by purchasing mining rights. Unlike in Northern Rhodesia, where the mining rights and proceeds from copper revenue remained under the control of the BSAC, in Southern Rhodesian, the purchase of mining rights gave the colony more leverage in revenue collection on mining income. The tax contributed 2.4 per cent of the total revenue between 1933 and 1936 becoming one of the crucial sources of revenue to cover budget deficits.91 However, Moffat and Fynn’s efforts to combat the effects of the Depression did not inspire public confidence in the colony. The settlers regarded their leadership as tepid. This paved the way for Godfrey Huggins and his Reform Party to assume the colony’s leadership after the 1933 election. Godfrey Huggins’ Administration and the Government’s Changed Attitude Upon assuming office in 1933, Godfrey Huggins quickly moved towards expanding financial assistance and relief measures for the white community, despite the fact that his policies faced resistance from what he called ‘malcontents’ in the government structures. Soon after winning the 1934 elections, which saw the formation of the United Party, he quickly rearranged the government. This was a strategy, as Gann and Gelfand argue, to deal with the ‘malcontents’ who were always opposing his policies.92 He insisted that the country’s economic development should be in the hands of people committed to see the colony progress. Through the Ministerial Titles 88 See NAZ, S679/1 Rhodesia Chamber of Mines Memorandum, ‘Gold Premium Tax Act’ No. 17 of 1932. 89 Legislative Assembly Debates, 31 March to 12 April 1932, Column 395. 90 Ibid. 91 NAZ, S3293, Final Statements of Revenue as Audited by the Principal Revenue Examiner, 1933 to 1936. 92 Gann and Gelfand, Huggins of Rhodesia, 91-92. 125 Act, he reshuffled the Cabinet. He established the Ministry of Finance and Commerce to replace the Division of Treasury as its authority on financial matters in the country.93 The Ministry introduced significant changes in the colony’s financial management system. One of the main reasons behind the Ministry’s establishment was the need to clear the barriers between government departments, especially the Legislative Assembly and other departments as regards the authorisation of expenditure.94 As Murray put it, ‘up to 1934, the parliament had had no specialised machinery for investigating the government’s expenditure, and thus for exercising financial control.’95 As indicated in the previous chapter, the Legislative Assembly’s control over the country’s CRF on government expenditure was permissive rather than initiatory in nature. The Assembly could not authorise expenditure without the Treasury or the Governor’s approval. The arrangement granted more power to the Treasurer, who could override the Legislative Assembly’s decisions, thereby becoming a barrier to financial scrutiny. The Treasurer could go into full lengthy questioning and assessing before agreeing to an expense of any kind, whether authorised by the House or not.96 John Hendrick Smit, the new Minister of Finance, suggested the establishment of the Public Accounts Committee to strengthen the Assembly’s ability to examine government expenditure, a proposal supported by other members.97 The new system empowered Assembly members to keep a close eye on government expenditure. At times, this power enabled them to limit the Finance Minister’s ability to withhold finances on government programmes or even endorse some of his fiscal policies.98 An analysis of the parliamentary budget presentation debates from 1935 to 1938 reveals that increased government expenditure on public works and other projects divided the Legislative Assembly, elicited praise by some but abhorrence from others. However, after the institutionalisation of the new financial management system, some opposing voices in the Parliament had come to support government expenditure. For instance, Harry Herbert Davies, the Labour Party leader, supported increased government expenditure as opposed to the 93 NAZ, ZG1, Statute Law of Southern Rhodesia, Ministerial Titles Act of 1933. The sure casualty was the Treasurer, Fynn, who was replaced by John Hendrick Smit. However, he remained in the government as a minister without portfolio. 94 Legislative Assembly Debates, 13 March 1935, Smit, Budget Speech, Column 64. 95 Murray, Governmental System in Southern Rhodesia, 172. 96 Legislative Assembly Debates, 11 April 1935, John Hendrik Smit, Budget Speech, Column 852. 97 Legislative Assembly Debates, 12 April 1934, Column 154; 17 April 1934, Column 207. 98 NAZ, GEN/BER, Institution of Public Administration-Southern Rhodesia Regional Group: The System of National Finance in Southern Rhodesia, 1934. 126 previous administration’s balanced budget rule.99 He reasoned that it was economically wise to create an environment in which the people prosper and increase productivity, instead of the government concentrating on producing budget surpluses. This marked a shift in some parliamentarians’ attitude. They no longer resisted the idea of growth in public expenditure. The 1934 House set out to support government expenditure on intensive development of the colony and improvements in social services, just like in the twenties.100 Even in the face disagreements that sometimes occurred in Parliament, the new approach provided the Prime Minister with the political wherewithal to see the implementation of expansionary fiscal interventions. The support for greater spending prompted the Finance Minister to present to the Parliament the Appropriations Act authorising an expenditure of £2 702 131 in April 1935, an increase of £179 445 from the figure of the previous financial year which stood at £2 522 686.101 For the first time since the Depression, Votes for expenditure increased significantly.102 There were substantial increases on 24 out of 41 Votes for revenue allocation. The total share of supplementary expenditure for the 1934/35 fiscal year indicates the government’s priorities: European Education, Agriculture, Hospitals and Dispensaries, Posts and Telegraphs, Roads, Public Works, Debt/Loan service and Pensions and Gratuities (refer to Fig 4.1 below).103 99 Legislative Assembly Debates, 11 April 1935, Column 864. 100 Official Year Book of Southern Rhodesia, No. 4, 1952, 35. 101 The Rhodesia Herald, 17 April 1935. 102 Legislative Assembly Debates, 11 April 1945, Smit, Budget Speech, Column 855; The Bulawayo Chronicle, 30 March 1935; The Rhodesia Herald, 17 April 1935. 103 The Rhodesia Herald, 17 March 1935. 127 Fig 4.1: Classification of Broad Categories of Expenditure, 1935-1936 Source: Collated from statistics obtained from The Rhodesia Herald, ‘The Colony’s Departmental Expenditure: Votes that Shows Increase and Decrease’, 17 April 1935 and the Legislative Assembly Budget Debates. The increase in expenditure for various departments was a result of different developments. For instance, the Farmers’ Debts Adjustment Board (FDAB), established through Farmers Debt Adjustment Act (FDAA) in 1935aimed to relieve farmer debt.104 The institution that could provide farmers with capital, Land and Agricultural Bank of Southern Rhodesia, had been undercapitalised for years. On the other hand, expatriate commercial banks, the Standard Bank and Barclays, were, according to Huggins ‘more or less a kind of garage for money.’105 These banks invested their 104 Official Year Book of Southern Rhodesia, No. 4, 1952, 422. See also Phimister, An Economic and Social History, 175; Murray, The Governmental System of Southern Rhodesia; Bond, ‘Finance and Uneven Development in Zimbabwe.’ 105 Huggins as cited in T. Nyamunda, ‘Financing Rebellion: The Rhodesian State, Financial Policy and Exchange Control, 1962-1979’, (PhD Thesis: University of the Free State, 2015), 29. See also Legislative Assembly Debates, 1933, Columns 447-448. 128 146494 73931 13115 99281 431595 55587 19490 31175 11563 88669 96302 190200 16544 95458 204879 129103 28676 29435 318873 22008 46548 savings in their mother country instead of the colony.106 This led to calls for the State to establish a central bank to facilitate the movement of capital and the provision of loans.107 However, it was not until the establishment of the Federation of Rhodesia and Nyasaland that the formation of a central bank became a reality.108 In the meantime, the colony had to provide an alternative to help farmers, hence the establishment the FDAB. Thus, the board introduced export bounties, subsidies, and cheap loans to farmers to keep them in business. As was the case during Moffat’s tenure, the financial interventions were essential in bailing out the country’s agricultural sector.109 The Chairman of the Land Bank, Mr A. Redfern and other board members H. G. M. Huntley, E. C. Pulbrook and J. Richardson, argued in a report published by The Rhodesia Herald that: Few new settlers are entering the colony, youths leaving school are not attracted to farming and land [has] become practically unsaleable. Suppose white settlement on the land is an essential feature of an ideal White Rhodesia, in that case, every reasonably practicable measure is justified for retaining the present settlers and bringing about conditions to render settlement on the land attractive.110 The programme provided new facilities like the construction of water and soil works; the funding of afforestation schemes and the construction of a tobacco research station at Trelawney.111 Meanwhile, the post-1934 government increased its expenditure on the mining industry. Unlike the previous administration, Huggins’ administration ‘changed the state policy towards the mining industry after 1933.’112 This was partly because, during the 1934 elections, smallworkers in the mining industry placed their support behind the Reform Party, consolidating their political importance. Phimister contends that the contribution of smallworkers in the country’s gold output also increased owing to an upsurge in their numbers, from 1 500 in 1930 to 3 000 in 1936.113 This 106 G. Karekwaivenane, ‘A History of the Rhodesian Stock Exchange: The Formative Years, 1946-1952’, Zambezia, 30: 1 (2003), 33. 107 See A. Mseba, ‘Money and Autonomy in a Settler Colony: The Politics of Monetary Regulation in Colonial Zimbabwe’, in C. Yin Hsu et al (eds), The Cultural History of Money and Credit: A Global Perspective (London: Lexington Books, 2016), 133-48. 108 See R. A. Sowelem, Towards Financial Independence in a Developing Economy: An Analysis of the Monetary Experience of the Federation of Rhodesia and Nyasaland, 1952-63 (London: Allen & Unwin, 1967). 109 The Bulawayo Chronicle, 23 March 1934. 110 The Rhodesia Herald, 20 April 1935. 111 Ibid. 112 Phimister, An Economic and Social History, 179; Murray, Governmental System, 136. 113 Murray, Governmental System, 133. 129 further consolidated their economic significance. More importantly, when William S. Senior became the Minister of Mines, he aimed to build a system ‘similar [to that] developed for the farmers and [the agricultural industry].’114 The state introduced a wide range of services to assist smallworkers. As Phimister observes, these included the construction of a state-financed roasting plant in Que Que and the provision of cheap power through the Electricity Supply Commission.115 The state also established a government-revolving fund, similar to the FDAA, to provide financial assistance to struggling small miners and give cash rewards to individuals finding new mines.116 In contrast with the financial assistance afforded to the agricultural and mining sectors, secondary industries received limited support from the government. The development of secondary industries in the colony largely remained in the private sector’s hands for the entire period between 1930 and 1938. Before the Second World War, there were only 299 industrial units in Southern Rhodesia, contributing an inferior Gross National Product compared to agriculture and mining. For instance, between 1930 and 1937, mining was the major contributor to GNP, accounting for 21.4 per cent, followed by agriculture at 19 per cent while secondary industries contributed 4.6 per cent.117 As Gwande puts it, secondary industries were neglected because some dominant sectoral interests in country, i.e., commerce and agriculture, opposed any state interference in industrial development.118 Even in 1938, when the government established the Economic Development Committee, the secondary industries were still excluded from funding.119 The Committee communicated that the government should not have financed secondary industries.120 Apart from financing agriculture and smallworkers, Huggins’ administration spent a great deal on social utilities and amenities. Social spending was one of the government’s major priorities, especially against the backdrop of creating a white colonial state for British settlers. ‘The increased commitment to the country,’ Richard Gray observed, ‘produced…Europeans in Southern Rhodesia 114 New Rhodesia, 26 July 1933. 115 Phimister, An Economic and Social History, 179 116 Department of Mines and Public Works, Annual Reports, 1934-1937; Legislative Assembly Debates, 11 April 1935, Smit, Budget Statement, Column 862. 117 Gwande, ‘Organised secondary Industry and the State’, 27. 118 Ibid. 119 NAZ, S679/116/22, Southern Rhodesia: Report of the Economic Development Committee, 1939. 120 Ibid. See also S. S. Eriksen, ‘State Formation and the Politics of Regime Survival: Zimbabwe in Theoretical Perspective’, Journal of Historical Sociology, 23:2 (2010), 320. 130 [whose] desire was to establish on a firm basis [for] their present and future.’121 Therefore, social expenditure entailed programmes that promoted the position of the settler in the colony. The government introduced massive education and public health programmes. For example, on European education, the government spent more to provide several services like boarding grants for Prince Edward School and evening schools and technical classes.122 While expenditure on education for settlers had been part of public expenditure since 1890, the colonial state started devoting public finances towards African education in the thirties. When the Department of Native Education was established in 1928, the Director, H. Jowitt, reported that ‘until January 1928, native education was an appendage of the European Education Department; the stepchild inevitably receiving the crumbs from the table of the accredited educational family.’123 However, the establishment of the Department of Native Education did not significantly change the situation. There was a clear division between education for ‘native and non-native’ students, and funding of the former did not increase substantially even when expenditure on the latter increased in the 1930s. The settlers believed that missionary education focused on elementary skills was adequate for Africans.124 Thus, the financing of African education did not match the great strides made for white settlers. In the Legislative Assembly, there was ‘in the thirties a great reluctance to devote funds to African education.’125 The key issue behind this reluctance was the continued ‘native policy’ which guaranteed white privilege and promoted limited African development. On public health, due to the precipitous decline in national income, the colonial Treasury was looking for both overt and less obvious ways of balancing its books. The Treasury reduced expenditure on African healthcare and surreptitiously debited the Native Development account.126 121 R. Gray, The Two Nations: Aspects of the Development of Race Relations in the Rhodesias and Nyasaland (London: Oxford University Press, 1960); See also K. Hungwe, ‘Educational Policy in African Colonial Contexts: The Case of Instructional Media in Southern Rhodesia, 1930-1980’, African Study Monographs, 15:1 (1994), 1-36. 122 The Rhodesia Herald, 17 April 1935. 123 British Online Archives (hereafter BOA), File No. 73150G-04, 1928-1924, Report of the Director of Native Education for the Year 1928, 1. 124 Gray, Two Nations, 133. 125 Ibid, 143. 126 G. Ncube, ‘The Making of Rural Healthcare in Colonial Zimbabwe: A History of the Ndanga Medical Unit, Fort Victoria, 1930s-1960s’, (PhD Thesis: University of Cape Town, 2012), 67-69. For more on African health system, see M. Gelfand, A Service to the Sick: A History of the Health Services for Africans in Southern Rhodesia, 1890-1953 (Gwelo: Mambo Press, 1976). 131 Furthermore, the government limited the expansion of the African healthcare system to the construction of rural clinics with the aim to deal only with the ‘infectious diseases in the native’ communities.127 This was prompted more by the desire to protect whites by stopping the spread of infectious diseases. Thus, the African healthcare system remained inferior to that of white settlers as the government could not massively expand it without coming ‘up against the question of finance.’ In contrast, the government purchased ambulances for European hospitals and established infectious disease hospitals for Salisbury and Bulawayo to cater for white settlers. The government also took over maintenance of municipality clinics in white settler areas. It used loan funds to finance such developments.128 Loan funds were particularly important in government finance. Apart from funding municipality healthcare facilities, the Loan Account provided significant amounts towards the country’s public works at both municipal and national level. This was because the country’s Loan Account had improved over the years. ‘By adhering to the policy of balancing our budget and refraining from schemes of speculative nature,’ said the Minister of Finance ‘loans have grown in our favour in the money market’ as demonstrated by Table 4.6 below.129 127 Phimister, An Economic and Social History of Zimbabwe, 261. 128 The Rhodesia Herald, 17 April 1935. 129 Legislative Assembly Debates, 11 April 1935, Smit, Columns 860-862; NAZ, F15/A/130, Ref. No. 238, Statement showing the extent to which the government of Southern Rhodesia has power to borrow Funds during the Financial Year end 31 March 1936; NAZ, F15/A/130, Ref. No. 237/1935 Attorney General W. E. Thomas to the Treasury, 14 September 1935; NAZ, F15/A/130, Borrowing Powers: Secretary of Department of Justice to E. T. Fox, Secretary of the Treasury, 6 September 1935; Ref. No. 238, Statement Showing the extent to which the government of Southern Rhodesia has power to borrow Funds during the Financial Year end 31 March 1936. 132 Table 4.6: Statement Showing the Borrowing Powers of the Government of Southern Rhodesia The Loan Account on 31 March 1935: Representing unavailed powers to borrow under Section 1 of Financial Adjustment Act, 1927, and previous years’ £10 580. 11. 9 Appropriation Acts Under Section 1 of the Financial Adjustments Acts, £930 491. 0. 0 1927, and Loan Appropriations Act 1935 Under Section 8 of the Southern Rhodesia Loans £1 000 000 Amendment Act, 1924, as amended by the Southern Rhodesia Loans Amendment Act, 1931 Total £1 941 071. 11. 9 Source: F15/A/130, Ref. No. 238, Statement showing the extent to which the government of Southern Rhodesia has power to borrow funds during the Financial Year ended 31 March 1935. Southern Rhodesia’s eligibility to borrow from the London Stock Market provided the colony with another source of revenue/finance.130 Senior, the Minister of Public Works, stated that the Treasury deployed loan funds towards the construction and refurbishment of government buildings.131 For example, the Department of Public Works constructed hospitals in major centres of the colony like Bulawayo, Salisbury, Bindura, Gatooma and Que Que.132 Senior further indicated that the loan funds became particularly important in road construction.133 From 1935 to 1939 loan funds on road construction, as shown by Fig 4.2 below, also contributed the most significant amount towards government expenditure on road construction compared to Revenue Funds. 130 Legislative Assembly Debates, 11 April 1935, Smit, Budget Speech, Columns 860-862. 131 NAZ, S679, Revenue and Expenditure Reports in the Prime Minister’s Office, 1935/36 Financial Year. 132 BOA, File No. 7315G-08, 1897-1950 Office of the Director of Public Weeks, 16 March 1936, 1. 133 NAZ, S679, Revenue and Expenditure Reports in the Prime Minister’s Office, 1935/36 Financial Year. 133 Fig 4.2: Government Expenditure on Roads from Revenue and Loan Funds, 1935-1939 250,000 200,000 150,000 100,000 50,000 0 1935 1936 1937 1938 1939 Revenue Funds 109,000 63000 44000 51000 50000 Loan Funds 100000 198000 53000 98000 118000 Source: Collated from Budget Speeches as presented to the Legislative Assembly, 1935-39. The money financed the resurfacing of roads linking the major centres with asphalt strips and tarmac. Commenting on the development of road construction Smit said asphalt strips are: [S]pread all over, from Bulawayo to Beit bridge, Bulawayo to Gwelo, Bulawayo to Lonely Mine, Fort Victoria to Beit Bridge, the Gatooma area, Gwelo to Que Que, Gwelo to Selukwe, Gwelo to Umvuma, Salisbury to Banket, Salisbury to Bindura, Salisbury to Enkeldoorn, Salisbury to Marandellas, Umtali to Melsetter, Umvuma to Fort Victoria.134 In 1938, asphalt strip roads covered over 1 182km.135 In addition, the roads department constructed more than 266, both low and high level bridges across the country in conjunction with strip roads.136 Out of the total number of bridges constructed in the colony by 1939, the Beit Trust funded 92, while the remainder were financed through various loan funds of the country.137 The financing of road construction programmes benefited white agriculture significantly. As Machingaidze notes, improved road networks made remote areas of the country accessible and 134 Legislative Assembly Debates, 11 April 1935, Smit, Budget Speech, Column 861. 135 A. Mlambo, ‘From Dirt Tracks to Modern Highways: Towards a History of Roads and Road Transportation in Colonial Zimbabwe, 1890 to World War II’, Zambezia, 21:2 (1994), 162. See also B. J. Turton, ‘The Road Motor Services of Rhodesia, 1927-1938’, Journal of Transport History, 8:1 (1997), 13. 136 Ibid. 137 T. C. Salmon, ‘A Short History of Rhodesian Roads: From Veldt Track to Strip Road’, Rhodesia Engineer, 7:5 (1969) 849-851. 134 £,000 brought agricultural products to markets.138 Phimister attested to this, arguing that rural roads facilitated the Rhodesia Road Motor Services operations in over 1 600 miles of routes by 1938, of which the government subsidised several routes.139 Meanwhile, cheap road transport forced railway companies to reduce the rates of transportation, further benefitting the farmers. The fast development of the transport system improved the country’s economic growth during the six years preceding the war.140 The situation in the colony was improving and reports stated that the lowest levels of the Depression had passed in 1933 and improvements in the general conditions of the country were noticeable during the latter half of 1934.141 From 1935, as shown by Table 4.7 below, the country enjoyed a budget surplus. Table 4.7: Revenue, Expenditure and Surplus, 1935-1938 Year 1935 1936 1937 1938 Revenue 2 654 000 2 740 462 3 059 858 3 434 410 Expenditure 2 522 686 2 702 131 3 017 573 3 170 698 Surplus 131 314 38 331 42 285 263 712 Source: Budget Speech as presented to the Legislative Assembly, 1935-1938. The country’s improved financial position brought a new direction in Southern Rhodesia’s financial system. For the first time since the outbreak of the Depression, the country introduced tax reduction in 1935, as discussed below. Tax Reductions, 1935-1938 The improved financial position mentioned above prompted the government to review its taxation system, especially in the face of criticisms from the settlers who felt that the government expended way more than it provided. For example, the leader of the opposition, Harry Herbert Davies argued that: When we were granted the Responsible Government, in the previous year [during the Company Government] the budget was approximately 1¼ million pounds. Today under the administration of the Responsible Government, the most extravagant government, we have nothing to show for it…apart from extraordinary 138 Machingaidze, ‘Development of Settler Capitalist Agriculture’, 65. 139 Phimister, An Economic and Social History, 175. 140 Official Year Book of Southern Rhodesia, No. 4, 1952, 35. 141 Ibid. 135 national expenditure growth. There are also extra government departments, at least 15 control boards requiring large additional expenditure.142 In the face of this criticism, the government introduced a series of tax reductions from 1935 to 1938. In April 1935 the Minister of Finance and Commerce, John Hendrick Smit, announced considerable direct and indirect taxation reductions. The first target was Customs Duties. The effected reduction was 50 per cent on goods from Britain, which included woollen and cotton, bicycle parts and motor cars, sugar and syrup.143 On income tax, the government reduced the rate of taxable income. The rate applicable for the first £500 of taxable income was reduced from 1s to 6d in the £.144 The government also increased abatement on individual income taxation for a child from £50 to £75 and raised the age limit of a child eligible for tax abatement from 18 to 21.145 However, some Rhodesian legislators feared that tax reforms would result in revenue deficit, which would create financial problems for the colony. For example, Donald Macintyre, MP for Bulawayo Central, expressed his reservations about ‘the danger which exists in [shrinking] coffers in the Treasury’ through tax reductions.146 Relief, in his view, had to be given to those least able to bear taxation. In response to Macintyre’s fears, Smit, in what he termed the ‘best advertisement for the colony’ indicated that the drop in revenue collection due to tax reduction would not affect the country’s budgetary needs in any way.147 The estimated expenditure for 1935/36 financial year was £2 702 131 and revenue collected after the tax reduction was £2 740 462.148 Like many others in the Parliament, his position was that low taxation would promote immigration and settlement in Southern Rhodesia just like in the twenties when the government used to say: ‘settle in Rhodesia where taxation is light and land cheap.’149 As much as the tax reforms were important for promoting immigration, at least in the Finance Minister’s view, they were clearly discriminatory. While white settlers benefited from income tax rate reduction and abatements, Southern Rhodesia’s fiscal system in 1935 continued to exploit 142 Legislative Assembly Debates, 21 April 1938, Columns 107-112. 143 Legislative Assembly Debates, 11 April 1935, Smit, Budget Speech, Column 857; The Rhodesian Herald, 13 April 1935. 144 SRG/TAX3, Reports of the Commissioner of Taxes, 1935. 145 Ibid. 146 Legislative Assembly Debates, 16 April 1935, Smit, Budget Speech, Column 986. 147 The Bulawayo Chronicle, ‘Minister Defends his Budget Proposals: Reductions in Taxation are Best Advertisement for the Colony’, 27 April 1935. 148 Ibid. See also Legislative Assembly Debates, 11 April 1935, Smit, Budget Speech, Column 860. 149 The Bulawayo Chronicle, 27 April 1935. 136 Africans. In other words, Africans’ pre-1935 situation never changed because, in many ways, the white settler minority ‘arrogated to themselves the right to determine the pace and direction of the nation’s development at the expense of the African majority who struggled to ascertain their rights.’150 They did not receive or benefit from any tax reduction, relief or abatement. Instead, the state continued collecting exploitative taxes in several forms.151 Fiscal contribution in direct taxation between settlers and Africans in Southern Rhodesia shows that Africans contributed more than the whites did. By 1938, Africans contributed almost half a million pounds per year in taxes.152 By the end of 1935, whites in Southern Rhodesia, whatever income they received, with no business, paid income tax of not more than 3s in the £.153 Meanwhile, Africans had to work for about three months to save and pay a minimum amount of poll tax or work for twenty-days on road construction.154 At the same time, tax reductions further strained already acrid relations between the mining industry and the government. Letters to the editor of The Rhodesia Herald are revealing. One Mr G. H. Williams wrote concerning the effects of reduction, especially in income taxation, arguing that the system benefited agriculture at the expense of mining.155 He opined that remissions and abatements were more advantageous to agriculture, which paid less taxes than the mining industry.156 While agriculture enjoyed tax reductions, the mining industry paid four different taxes that included income tax, claim licenses, royalties and the GPT. The government’s decision to reduce taxes bolstered the mining industry’s demands for relief from GPT. In 1936, the RMF and SCM arranged a Joint Mining Conference to draft ways to dismantle the government’s vicious taxation grip.157 On the agenda was the mining industry’s discontent over discriminatory tax reductions and government policy to single out their industry, especially the gold mining sector as a source of revenue. In 1937, the government responded to the mining 150 A. S. Mlambo as cited in Nyamunda, ‘Financing Rebellion’, 28. 151 W. M. Hailey, An African Survey: A Study of Problems Arising from Africa South of the Sahara (London: Oxford University Press, 1938), 562. 152 Edwards, ‘Southern Rhodesia: Response to Adversity’, 136-137. 153 Ibid, 136. 154 NAZ, S14/A/3620, African policy established under a Cabinet Resolution on 18 September 1935. See also the previous chapter on African punishment for tax default. 155 The Rhodesia Herald, 13 April 1935. 156 Ibid. 157 NAZ, S482/349/39/1, Joint Conference of representatives of the Salisbury Chamber of Mines, Bulawayo Chamber of Mines and the Rhodesian Mining Federation held at Gwelo, 7 October 1936. 137 industry’s concerns through a Commission of Enquiry.158 The Committee recommended the abolition of GPT because there was no convincing economic case for its imposition.159 Subsequently, and in line with the Committee’s recommendations, the government abolished the tax. It is important to note that the government abolished the GPT based on two conclusions. More importantly, the Committee’s recommendations gave the mining industry a leveraged bargaining position against the government. The government was under pressure from mining interests, and in the end, it conceded to their demands.160 Secondly, the colony’s revenue had improved in 1936/37 fiscal year and rendered the tax replaceable, (see Table 4.7 above).161 However, the situation changed with the outbreak of the Second World War in 1939. The added burden of financing the war effort necessitated changes in the colony’s fiscal system, which will be discussed in the next chapter. Conclusion The chapter explored Southern Rhodesia’s fiscal response to the adverse effects of the Great Depression between 1930 and 1938. The first section, by way of background, briefly highlighted the structure of the colony’s economy prior the Depression focusing on the major drivers of the economy: mining and agriculture. Building on the first, the second section showed how the two major sectors of the economy plunged into operational difficulties and how the Depression affected the colony’s revenue base. The section demonstrated that the government was prompted to implement fiscal measures to mitigate the effects of the Depression. Several major conclusions can be drawn from the government’s response. First, the government’s major aim was to maintain solvency. Thus, the chapter looked at how the state implemented the balanced budget rule by reducing expenditure and utilising surplus revenue accumulated during the twenties. By doing so, the chapter indicated how interest groups influenced the government on expenditure decisions, strengthening Murray’s argument that interest groups, in many ways, dictated the government’s decisions. Secondly, by examining the government’s efforts to get more 158 NAZ, ZBN2/1/1 Report of the Committee of Enquiry into taxation of Low Grade Mines, 24 March 1937. 159 Ibid. 160 For a detailed discussion on the abolition of GPT, influence of mining interest groups and other political and administrative debates, see Murray, Governmental System, 139-143. 161 NAZ, SRG4, Auditor General’s Report, 1938, 128; Smit, Southern Rhodesia Legislative Debates, 22 April 1937, Column 15. 138 revenue, the chapter cast light on the layers of discrimination within the Southern Rhodesian fiscal system. At one level, there was intra-settler discriminatory interventions such as like the GPT, while at another, inter-racial interventions that pitted the settler community against Africans. The chapter put forth that, with regard to direct taxation, the state put the burden on Africans although their low wages could hardly carry it. Overall, the chapter has demonstrated how the government’s response to the effects of the Great Depression was premised on the desire to create a white Rhodesia. By 1935, the government successfully managed to cut down budget deficit necessitated by economic recovery that insured an increase in revenue collection, as demonstrated by Table 4.7. 139 Chapter Five ‘Britain’s Wars are our Wars’: Balancing Local Economic Development and War Commitment, 1939-1945 Introduction When the Second World War broke out in September 1939, Southern Rhodesia, as shown in the previous chapter, was already recovering from the effects of the Great Depression. Between 1935 and 1938, its financial position had significantly improved such that the Treasury was recording budget surpluses. However, this positive financial outlook changed with the outbreak of the war. As expected, the predominantly British-oriented white settler government immediately supported the ‘Mother country,’ a decision that had financial implications for the colony. Financing the war effort placed an extra financial burden on the country’s budget. The concern of this chapter is to examine the way in which the settler government sought to strike a balance between financing the war effort and supporting local economic development. The chapter particularly focuses on how the settler government raised its financial resources to cope with the war emergencies, local economic development, and balance between revenue and expenditure. Unsurprisingly, by implementing aggressive wartime fiscal policies to raise large amounts of revenue in a short period to continue financing the state, the government quickly undermined consensual tax payment, which resulted in serious confrontations with economic interest groups. The chapter is divided into five sections. The first two sections explore Southern Rhodesia’s Commitment to the war effort and the financial demands this placed on the country’s Treasury. The third section looks at the country’s need for more revenue to finance its economic and war expenses. The section argues that the government implemented a cocktail of tax collection measures and achieved budget surplus by 1943. It also examines the political decisions that influenced expenditure and revenue collection policies. The fourth section explores the government’s decision to grant an interest-free loan to Britain. The fifth and final section discusses the calls for taxation policy review as many people in Southern Rhodesia began to believe that the government had enough money to cover its expenses. 140 Southern Rhodesia’s Commitments to the War Effort: A Brief Background Although the colony’s contribution to the war effort falls outside this chapter’s scope, the following points, which have fiscal implications, need to be made. At the outbreak of the Second World War, Southern Rhodesia, as a self-governing colony, was not militarily developed and not economically advanced as Dominions like Australia, Canada, New Zealand and South Africa. This means that it had limited financial resources to provide support to the Imperial Government. But despite its financial position, the colony’s politicians saw this as an opportunity to offer support to Britain as a way of proving loyalty and pushing for Dominion status. Immediately at the outbreak of the war, the Legislative Assembly promulgated the Emergency Powers (Defence) Act of 1939 to empower the government to enact economic and fiscal measures to regulate and harness the colony’s resources to meet the increasing demand induced by the war. In addition, Prime Minister Godfrey Huggins created a Cabinet sub-committee consisting of Robert Clarkson Tredgold, the Minister of Justice and Defense, Ernest Lucas Guest, the Minister of Air, Mines and Public Works and himself.1 This subcommittee’s main objective was to see the administration of resources to meet the war demands. During a meeting in London in 1940 with the Dominion Office’s officials, Tredgold communicated the sub-committee’s intention to support the Imperial Government in fighting the war.2 The primary purpose of his visit to England was to discuss Southern Rhodesia’s contribution to the war effort and its implications on Southern Rhodesia’s Treasury.3 The two countries agreed that Southern Rhodesia should contribute towards the war an amount in the neighbourhood of £1.5 million per annum.4 In light of the agreement, the colony turned its focus to creating fiscal policies to collect revenue to finance the war and economic development, as discussed in the following section. 1 Legislative Assembly Debates, Vol. 19, 28 August 1939, Columns 1431-1434. 2 Legislative Assembly Debates, Vol. 19, 7 March 1940, Columns 1809-1810. 3 National Archives of Zimbabwe (hereafter NAZ), MFS/2/5/A 1595 Commitments and Financial Policy: Southern Rhodesia Financial Contribution to the War, Not dated. Also see The National Archives at Kew (hereafter TNA) Dominion Office (hereafter DO) TNA, DO35/1028/3, The Dominion Office to the War Office, 13 January 1940; NAZ, Box-MFS/2/5FI/1595 Commitments to Contribute towards the War, FileS2/5 Southern Rhodesia Defence Department to Imperial War Office, 14-29 February 1940. 4 NAZ, Box-MFS/2/5FI/1595 Commitments to Contribute towards the War, FileS2/5 Southern Rhodesia Defence Department to Imperial War Office, 14-29 February 1940. Also see British Online Archives (hereafter BOA) File No. 73150D-01, Southern Rhodesia Financial Statements, 1939-1945. 141 War and Economic Development During the Second World War, two significant factors influenced Southern Rhodesia’s expenditure and fiscal policies: the need to finance internal development and the colony’s commitment to contribute towards the war effort. Internally, the financial burden to finance economic development was massive for the Southern Rhodesia government, with current account expenditure rising from £3.5 million to £10 million between 1939 and 1944.5 This was chiefly due to the increase in average earnings and wages of government employees. Employees in public- owned establishments demanded higher salaries and more allowances to cover long hours of overtime. Working overtime was a result of the need to produce more to meet internal and war demands.6 In addition, continued capital expenditure on maintenance and improvement of the country’s infrastructure placed extra financial burdens on the country’s Treasury. In 1939, the Minister of Finance, Jacob Hendrik Smit, confirmed this by noting that ‘in addition to our defence commitments, we have to provide for repair works on roads and the bridges which were damaged during the abnormal rains’ and ‘many other public works necessary for the country’s economic development.’7 Funding for road construction became equally crucial during the war. Roads were essential to complement railways. Up to the war, railway transport had, despite its challenges, at least provided transportation for the country.8 However, since the war, the expansion of production in the agriculture and mining sectors coupled with constructional activities rendered railway transport insufficient to meet the colony’s transport demands. Road transport was also inadequate. The increased traffic during the wartime, arising from rapid development in the country, prompted 5 Official Year Book of Southern Rhodesia: With statistics mainly up to 1952, No. 4, 36. For a discussion on the reaction of the states during crisis period, see M. Moore, ‘Revenues, State Formation, and the Quality of Governance in Developing Countries’, International Political Science Review, 25:3 (2004), 297-319. Also see NAZ, SRG4, Report by the Auditor General and the Under-Secretary to the Treasury on the Machinery of the Public Finances of the Colony, 1940. 6 Official Year Book of Southern Rhodesia, No. 4, 208-209. Publicly owned establishments included Southern Rhodesia government departments such as the Municipalities and Local Authorities, Cotton Research and Industry Board, the Rhodesian Iron and Steel Commission, Sugar Industry Board, the Land Bank, the Grain Marketing Board, Native Labour Supply Commission, the Electricity Supply Commission and similar bodies. See also NAZ, Box S910/10, Emergency War Measures, File Item No. 671/T/1940-1945, Cost of Living Allowances, Treasury Circular No. 8, 1940. 7 Legislative Assembly Debates, 4 May 1939, Jacob Hendrik Smit, Budget Speech, Column 18. 8 C. H. Thompson and H. W. Woodruff, Economic Development in Rhodesia and Nyasaland (London: Dennis Dobson, 1954), 97. 142 the government to initiate major roads construction programmes and rebuild the main ones with full width single lane bitumen surface. The government also had to fulfill its 1939 electoral promises of considerable expenditure on social services. Compared to the previous financial year, the total appropriation for social services like education, public health and hospitals increased from £323 000 to £432 000 in 1940.9 And the trend continued with expenditure on European social services increasing yearly between 1940 and 1945. This was partly prompted by what was considered to be the need to protect the settlers from the outbreak of diseases following the massive migration of Africans to urban centres. However, the same protection was not afforded to Africans whose ‘urban locations’ were neglected.10 The war also expanded the settler government’s financial obligations in other ways. For instance, due to the need to curb war-induced commodity shortages, the colony increased its funding for agriculture, mining and secondary industries. Production of foodstuffs, as Phimister mentions, continued to trail behind total demand in the country.11 In the face of limited food production and rising internal demands, the state introduced bonus schemes covering almost every agricultural sector. These included dairy, maize, and beef products.12 The same support was extended to mining. The government provided funding for tantalite extraction after the United States urgently requested Southern Rhodesia to expand its output.13 The government extended its financing of mining production to other minerals like mica, which was essential for the production of motors for fighter tanks and a host of other electrical devices and chrome for munitions.14 The state, for the first time, decided to finance the establishment of secondary industries.15 The literature acknowledges that the World War Two accelerated the development of secondary 9 Legislative Assembly Debates, 4 May 1939, Smit, Budget Speech, Column 19. 10 For a detailed discussion on government neglect to finance African urban centres and the conditions of African locations, read I. R. Phimister, An Economic and Social History of Zimbabwe, 1890-1948: Class Struggle and Capital Accumulation (London: Longman, 1988), from page 258. 11 Phimister, An Economic and Social History, 232. 12 See Hove, ‘The State, Farmers and Dairy Farming in Colonial Zimbabwe’; Samasuwo, ‘Food Production and War Supplies: Rhodesia’s Beef Industry during the Second World War’; Johnson, ‘The Impact of the Second World War on Southern Rhodesia’ Chapter 3. See also NAZ, S482/173/39, Maize Control Board Circular Letter, 23 January 1942. 13 NAZ, S480/173, Secretary of Department of Mines R. L. Hardy to the Director of Geological Survey, 16 August 1942. Tantalite was important for the production of alloys. 14 Report of the Secretary of the Department of Mines and Public Works, 1945. See also Johnson, ‘The Impact of the Second World War on Southern Rhodesia’, Chapter 3. 15 V. M. Gwande, ‘Organised Secondary Industry and the State in Zimbabwe, 1939-1979’, (PhD Thesis: University of the Free State, 2018), 43-48. 143 industries in the colony. For instance, Gray argues that shortage of consumer goods during the World War Two stimulated the creation and expansion of secondary industries ranging from furniture manufacturing, food processing, metal manufacturing, and the manufacturing of boots, shoes and clothing.16 However, a subject that has not been adequately explored is how the development of the secondary industries affected the Southern Rhodesian government’s financial obligations, which is the aim of this chapter. In August 1940, the government established the Industrial Development Advisory Committee (IDAC), which later administered the Industrial Development Fund a year after the outbreak of the war.17 The Fund’s objective was to provide loans and grants to fledgling wartime industries.18 The IDAC also advised the government to nationalise basic industries upon which secondary industrialisation could take hold. These included the iron and steel works at Bulawayo, taken over by the state in 1942 and the setting up of a cotton spinning mill in Gatooma.19 The government later nationalised the sugar refinery in 1944.20 While the state’s takeover of basic industries had indeed laid the foundation for secondary industrialisation, this came at a cost. More than anything else, nationalisation of these industries meant extra financial obligation on the government’s part. The commitment towards the war effort increased current and capital expenditure. Southern Rhodesia pledged to contribute towards the establishment of Training Schemes and the actual training of forces. Estimates of current expenditure to train and maintain military forces amounted to more than £825 367 per year.21 The money was used to finance the training of 1 Air Force Squadron on service outside the colony, 1 200 men for the military forces and 430 men on active 16 R. Gray, The Two Nations: Aspects of the Development of Race Relations in the Rhodesias and Nyasaland (London: Oxford University Press, 1960), 202. 17 NAZ, S106, Report of the Industrial Development Advisory Committee for the period from 17 September 1940 to 31 December 1941. 18 D. Johnson, ‘The Impact of the Second World War on Southern Rhodesia, with Special Reference to African Labour, 1939-1948’, (PhD Thesis: University of London, 1989), 122; World War II and the Scramble for Labour in Colonial Zimbabwe, 1939-1948 (Harare: University of Zimbabwe Press, 2000). 19 NAZ, S482/101/42, Letter from Secretary of Treasury to the Secretary of the Prime Minister, 9 October 1943; S106, Second Report of the Industrial Development Advisory Committee. 20 For detailed discussion on the development of these industries, see various works by E. S. Pangeti, The State and Manufacturing Industry: A Study of the State as Regulator and Entrepreneur in Zimbabwe, 1930 to 1990 (Harare: University of Zimbabwe Publications, 1995); A. Mlambo and E. S. Pangeti, The Political Economy of Sugar Industry in Zimbabwe, 1920-1990 (Harare: University of Zimbabwe Publications, 1996). 21 NAZ S3292/56/9/1/1, War Expenditure (General): A press Statement on the Colony’s War Bill, 1939. See also TNA, DO35/1028/3, Dominion Office to the War Office, 13 January 1940. 144 service outside the colony.22 The colony also committed itself to contributing £900 000 to £1 000 000 towards flying schools.23 These war-oriented developments placed an enormous financial obligation on the country’s Treasury. Stephen Martin Lanigan-O’Keeffe, High Commissioner in London for Southern Rhodesia mentioned that ‘our commitment for war purposes amount to something like forty per cent of our normal revenue.’24 Thus, made the need for more revenue became pertinent, with serious political implications. In what follows, the discussion turns to these dynamics. The Need for More Revenue: Political Debates over Fiscal Policies Given the financial demands placed on the colony’s Treasury during the war, the country needed more money. For the first two years of the war, the colony experienced revenue deficit amounting to £191 553.25 The deficit sparked heated debates in the colony’s Legislative Assembly. Members of Parliament feared that the colony would plunge back into pre-1935 financial difficulties and the government would resort to heavy taxation. Smit, on the other hand, was not worried that the country experienced deficits. Instead, he was optimistic that, with the ‘rapid development [going on] and provided nothing occurs to severely shake our economic structure, we expect to meet [our] expenditure from revenue on the existing basis.’26 In fact, he was against the imposition of new forms of taxation to meet government expenditure. He advocated the limiting of annual spending, especially from loan funds for 1941/42 financial year, and the reduction of financial allocation to government departments. Surprisingly, the minister’s usual critic, the leader of the opposition Harry Herbert Davies, supported his position. Davies maintained his pre-war position that the government was running too many control boards which were unnecessary for implementing its economic policies. ‘We created outside parliamentary control, extra government departments’, charged Davies ‘that add to the country’s voluminous cost.’27 In his view, the country was confronted with a budget of 50 22 NAZ S3292/56/9/1/1, Treasurer’s Report: Press Statement. The colony’s war bill, 20 November 1939. 23 TNA, DO35/1028/3, The Dominion Office to the War Office, 13 January 1940; NAZ, S482/45/39: Financial implications of Southern Rhodesia defence commitments. A telegram from the Secretary of State, London, 25 April 1940; TNA, DO35/1028/3, War Finances-Southern Rhodesia Correspondences with the Dominion Office, 13 January 1940. 24 S. M. Lanigan-O’Keeffe, ‘Southern Rhodesia’s War Effort’, African Affairs, 39: 156 (1940), 213. 25 Legislative Assembly Debates, 6 May 1941, Smit, Budget Speech, Column 20. 26 Ibid, Column 19. 27 Legislative Assembly Debates, 4 May 1939, Column 27. 145 per cent higher than when Smit took office in 1934 due to the multiplicity of boards which assumed alarming proportions of expenditure. The country had allowed unnecessary and uncontrolled expenditure when revenue should have been sufficiently buoyant to meet ordinary spending. The real result was the inevitable over-taxation. Others in the Assembly had mixed feelings over the Minister of Finance’s position. For instance, Edgar Whitehead, a newcomer and destined to play critical roles in post-war Rhodesia, first as Finance Minister and later as the last Prime Minister of the United Party, supported limited expenditure but disagreed with the reduction in spending from the loan fund.28 Another prominent critic was Tredgold. Most frustrated because he ‘had the greatest difficulty in extracting money from the Treasury over which Smit presided’ Tredgold believed Smit supported low taxation as a way to limit government expenditure.29 In his corner were Max Danziger, the future Finance Minister, and Frank Delano Thompson, MP for Gwelo. Danziger believed that ‘the Cabinet generally decides what expenditure is necessary’ not the Minister.30 Thompson, on the other hand, was highly critical of the Minister’s position. He explained that while the Finance Minister was adamant to increase taxation, every taxpayer in the country, knowing Britain's situation, was entirely sure that the colony would increase taxation.31 Nevertheless, Smit did quite the opposite and declared that there should be no extra taxation. In support of Thompson’s statement, Edgar Pope Vernall remarked, ‘I found a large number of people were willing to have their tax increased.’32 The argument that the people were willing to see taxation increased also received support in the parliament. Some of the parliamentarians maintained that the general growth of the country’s economy provided enough taxable incomes across all sectors. Each branch of the economy established new records. Increased tobacco exports and minerals were responsible for putting into circulation £3 000 000 of additional purchasing power. Virginia tobacco production was 35 000 000 1b, record amount, and maize 1 625 000 bags, the highest since 1936-37.33 Butter 28 Legislative Assembly Debates, 8 May 1939, Column 58. 29 R. Blake, A History of Southern Rhodesia (London: Eyre Methuen: 1977), 232. 30 Legislative Assembly Debates, 11 May 1939, Column 181. 31 Legislative Assembly Debates, 15 May 1939, Column 272. 32 Legislative Assembly Debates, 8 May 1939, 71. 33 Legislative Assembly Debates, 6 May 1941, Smit, Budget Speech Column 14. 146 production amounted to 1 723 000 1b, the highest since 1932.34 The value of mineral output in 1941 was one million more than in 1939.35 The development of secondary industries also showed similar scales. Factories were exceptionally active and showed a substantial increase in their output. Materials used by factory trades increased in value from £2 600 000 in 1939 to £3 000 000 in 1940.36 Table 5.1 below shows the growth of secondary industries in the colony. Table 5.1: Secondary Industry Expansion, 1939-1946 Year Number of Labour Employed Gross Output (£’000) Establishments 1939 294 17 865 5 434 1940 295 20 659 6 297 1941 303 22 334 7 307 1942 296 24 341 8 371 1943 327 26 053 9 458 9144 331 28 668 11 230 1945 382 34 510 14 062 1946 435 39 958 17 264 Source: Gwande ‘Organised Secondary Industry and the State in Zimbabwe’, 63. Convinced by economic growth and increasing figures, the government implemented a cocktail of revenue collection policies through Special War Taxes (SWT) in 1939.37 These taxes included extra duties on petrol and portable spirits and additional income tax and other taxes like the Gold Premium Tax (GPT).38 The government reintroduced GPT after the devaluation of the sterling in September 1939 propped up the price of gold from 150s per oz. to 168s.39 On the other hand, additional income tax came from increased taxable income because individual and company incomes increased during the war. The country collected a total amount of £250 000 from single/married individuals, propriety companies and railway companies as additional income tax.40 34 Ibid. 35 Legislative Assembly Debates, 6 May 1941, Danziger, Budget Debate, Columns 12-14. 36 Ibid. 37 For a detailed discussion on various interest groups’ objection to extra taxes, see Gwande, ‘Organised Secondary Industry and the State in Zimbabwe’ 42-3; Johnson, ‘The Impact of the Second World War on Southern Rhodesia’, Chapter 3. 38 NAZ, SRG1 Southern Rhodesia Statute Laws, Act No. 28, 1939; NAZ S482/28/39 No. 28 of 1939: Special War Tax Bill, 1939; NAZ, SRG1, Southern Rhodesia Statute Laws, Act No. 23, 1940. 39 NAZ, 482/102/39, Treasury Memorandum of Gold Premium Tax, 5 October 1939; NAZ, ZBN2/1/1, Memorandum titled Outline of the History of the Gold Premium Tax: Southern Rhodesia, 5 November 1944. 40 NAZ, SRG3/TAX3, Commissioner of Taxes Report, 1940; S482/664/39, Income Tax Act, Memoranda of proposed scheme for increasing revenue from income tax, Not dated. 147 Duties on petrol and spirits collected £134 300 and additional income tax £116 500 while GPT raked in £300 000.41 In view of extra taxation, William Hives Eastwood, MP for Bulawayo Central, moved a motion in the House in November 1939 to introduce Excess Profits Tax (EPT) to complement SWT.42 He argued that merchants and industries were profiteering by making millions at the expense of the general populace. ‘The government must tax this money,’ he stated.43 His motion would later resonate with Huggins’ remarks in 1940 that ‘no one as far as was within reason and as far as it was humanly possible to do so (sic) would be allowed to make a higher income during the war than they had previously enjoyed.’44 Thus, the introduction of EPT was to serve two purposes. First, it was a control measure against profiteering, as alluded to by Gwande. Whitehead, speaking against profiteering, said, ‘immediately after the outbreak of the war, [although] there were substantial stocks in the country, prices of certain materials such as a khaki drill, which was going to be used for war purpose, rose very rapidly.’45 This warranted the government to tax any extra income. Secondly, the government regarded EPT as an immediate source of extra revenue to meet its financial demands. EPT contributed £300 000 in 1940 and increased to £400 000 in 1941.46 The state extended wartime fiscal policies to agriculture. Having had trouble during the Depression, farmers were recovering from the effects of the slump from 1935 to 1938. The war, however, changed the situation and the farmers’ misfortunes turned around overnight. The agricultural sector was expected to meet not only local food requirements but also external Imperial needs. Imperial demand for the colony’s agricultural produce increased prices, especially of Virginia tobacco. The price for Virginia flue-cured tobacco rose from 10s 11d per 1b in 1939 to 15s 63d in 1941.47 As a result, the farmers managed to accumulate taxable incomes (see table 5.2 41 Legislative Assembly Debates, Smit, Budget Debates, 29 April 1940, Column 71. 42 Legislative Assembly Debates, Vol. 19, 1 November 1939, Columns 1743-1745. 43 Ibid. 44 Legislative Assembly Debates, 30 April 1940, Column 110. See also NAZ), S482/731/39 Godfrey Huggins to the Minister of Finance, 29 August 1942. 45 Legislative Assembly Debates, Vol. 19, 1 November 1939, Column 1749. 46 Bulawayo Chronicle, 20 March 1942. 47 NAZ, S482/114/39/File No. 2, J. Shaul, Government Statistician to Parliamentary Secretary and the Prime Minister, 8 November 1941. 148 below). ‘Since tobacco had been commercially planted in Southern Rhodesia’, elaborated F. Clements and E. Harben ‘for the first time, every grower was making money.’48 Table 5.2: Taxable Income of Farmers, 1937-1938 to 1944-1945 Fiscal Year Taxable Income % Total national taxable income £ 1939-1940 388 531 3.3 1940-1941 850 217 6.6 1941-1942 1 135 051 7.2 1942-1943 1 416 230 8.3 1943-1944 1 270 711 7.9 1944-1945 1 518 082 8.3 Source: Southern Rhodesia Statistical Yearbook, 1947, 194. Given the growing fortunes of agriculture, it was logical for the government to tax farmers. However, agriculture was exempted from other forms of taxation like EPT, although many in Assembly felt it was unfair treatment of those who were contributing immensely to the country’s revenue. For example, Thompson, member for Gwelo, argued that the farmers were pampered during the Depression. It was time for them to contribute towards the national fiscus considering the sector’s production boom.49 Lawrence Keller, a Labour Party principal, shared this view. As a railway-man, he believed that railway workers were sacrificing more for the country through working extra unpaid hours, a sacrifice farmers should make.50 These sentiments influenced the Parliamentary Select Committee to recommend that the state should introduce a 5%Tobacco Sales Tax (TST) on tobacco farmers’ gross earnings.51 Although TST was imposed to appease and silence the critics of EPT, it served other purposes. As Johnson claims, the fiscal policy during the war was to appease the critics of the EPT and raise revenue.52 While Parliament supported the imposition of extra taxes, Smit changed his earlier position that the country should reduce expenditure on loan funds and suggested temporary borrowing from local money markets. This, he reasoned, would reduce the taxation burden on Rhodesians. He 48 F. Clements and E. Harben, Leaf of Gold: The Story of Rhodesian Tobacco (London: Methuen, 1962), 130. 49 Legislative Assembly Debates, 10 June 1940, Column 1218. 50 Legislative Assembly Debates, Vol. 20, 7 June 1940, Column 1197. 51 Legislative Assembly Debates, Vol. 21, Part II, 25 August 1941, Columns 2491-2493. 52 Johnson, ‘The Impact of the Second World War on Southern Rhodesia’, 114. 149 opposed the imposition of EPT and felt that ‘the war should [be] financed principally from war loans.’53 He appealed to people with funds lying idle to: [A]ssist the short-term borrowing of the government. Everyone in the country should be able to do something towards providing the loan capital necessary to continue the war. There is an opportunity for earning a very fair rate of interest for the small investor. This applies much more so, of course, in the case of Rhodesian Loan Certificates.54 In his view, money from local sources was an excellent alternative to collect revenue. The Prime Minister subscribed to his suggestion. Engaging with the Assembly in March 1940, the Prime Minister reasoned that ‘monetary contribution is going to be a very important factor, as you notice the enormous bill that is piled up in different parts of the Empire. We have not made any significant effort to direct the attention of the public towards loan contributions.’55 The Prime Minister’s position gave Smit the energy and latitude to deprecate extra taxation, favouring low interest rate borrowing from local people, which would encourage them (people) to save. Edward Noaks of Mazoe District shared the same view and reiterated the importance of savings positing.56 He posited that this would cultivate a culture of saving money in ‘people’s minds because they would be used to put aside a certain amount regularly.’57 Savings would thus act as life insurance of some sort, enabling the people to contribute not only through direct taxation but also by building up a reserve, while at the same time, lending to the government a sum that would become available at the end of the war. Borrowing locally was important for Southern Rhodesia because the country had never established local money markets. Except for £1 000 000 Southern Rhodesia 5% Local Registered Stock raised in 1925, the country’s borrowing system before the war showed external sources, mostly in London and South Africa.58 Besides, the loan was experimental to test the local market. However, 53 H. I. Wetherell, ‘Continuity and Change in Opposition Politics in Southern Rhodesia, 1923-1962’ (M. Phil Thesis: University of Rhodesia and Nyasaland, 1974), 133. 54 Legislative Assembly Debates, 7 March 1939, Smit, Budget Debates, Column 1819-1822; NAZ, S3302/19 National Savings Campaign. 55 Legislative Assembly Debates, 7 March 1940, Huggins, Budget Debates, Column 1806-1808. 56 Legislative Assembly Debates, 8 March 1940, Column 1878. 57 Ibid. 58 See BOA, File No. 73150D-01, Southern Rhodesia Financial Statements, Statement No. IV: Transactions on Loan Account, 1940-1941, 5; TNA, DO35/1168/17, Visit of Danziger to Britain-Treasury Memorandum: Statements of Loans raised by the Colony, Not dated. See also G. Karekwaivenani, ‘A History of the Rhodesian Stock Exchange: The Formative Years, 1946-1952’, Zambezia: Journal of Humanities of the University of Zimbabwe, 30:1 (2003), 33. 150 at the outbreak of the World War Two, the London Stock Market closed its doors to overseas borrowers. The colony could only raise its financial requirements locally, thus the reintroduction of local borrowing. Smit also believed that, if the government were to borrow locally, more Rhodesian money within the country’s borders would be available for investment in the colony. If the Treasury were able to raise loan funds locally at very low-interest rates, this would not place the financial burden on the future generations of Rhodesian taxpayers. With the help of Arthur Redfern, MP for the Salisbury Gardens constituent, Smit launched the National Savings Campaign.59 The campaigns convinced people to save for Loan Certificates and to buy Treasury Bills.60 ‘The more money that is saved voluntarily’, Smit claimed, ‘the longer can the government defer consideration of measures to tax heavily.’61 However, the public demanded that the Treasury pay high-interest rates. This was entirely against the interest of the taxpayer. Higher interest rates meant higher government expenditure servicing the loans in the future, putting greater burden on the Rhodesian taxpayer. 59 Legislative Assembly Debates, 6 May 1941, Smit, Budget Statement, Column 13. 60 NAZ, S3303/19, National Savings Campaigns; The Rhodesia Herald, 1 June 1942. 61 Legislative Assembly Debates, 6 May 1941, Smit, Budget Statement, Column 13; The Rhodesia Herald, 1 June 1942. 151 Fig 5.1: Southern Rhodesia National Savings Campaigns 152 As reported in The Rhodesia Herald above, the minister was geared towards convincing the public to invest in bonds and accept low-interest rates.62 The savings system appealed to several other organisations. For example, the Tobacco Producer’s Floor Ltd established an Investment Trust Fund to invest in government stocks and securities on behalf of the tobacco farmers.63 The Chairman and Secretary of the Floor, A. H. Phear and R. A. G. Seymour, writing to tobacco growers said: It is the duty of each of us to see every penny is usefully employed to bring nearer the day of peace and development in our country. We want to help the Colony’s war effort and at the same time ensure to the best of our ability that the country develops. To assist and stabilize our economy, we have inaugurated an Investment Trust Fund. Let us invest in Southern Rhodesia Government’s Treasury Bills and many other Government stocks or securities.64 After noticing the settlers’ enthusiastic acceptance of the savings campaign, Smit introduced National Thrift Campaigns. The aim of these campaigns was to widely advertise the country’s loans through inviting business people to purchase securities and stocks. The philosophy behind the National Thrift Campaigns was to give the individual the liberty of choice to save for the country. Meanwhile, the Minister of Finance persuaded Africans to help the state by investing their money in the Post Office Savings Bank.65 This coincided with the establishment of the National War Fund of Southern Rhodesia in 1939, which provided a ‘small source of funding for the war effort.’66 Between 1940 and 1944, the National War Fund received more than £32 000.67 Like in the previous period, financial contribution placed an unbearable burden on Africans whose wages were meagre. After reflecting on the Africans’ effort in donating despite their low wages, the 62 NAZ, S3302, National Savings Campaign, Government Notice, 29 May 1942. 63 NAZ, S3302, National Savings Campaign, A. H. Phear, Chairman of the Tobacco Producers’ Floor to Growers, 23 April 1942. 64 Ibid. 65 See The Bantu Mirror, 16 March 1940; The Rhodesia Herald, 13 October 1939. 66 Africans’ contribution towards the NWFSR has received adequate scholarly attention, for more on the NWFSR see S. Mutimbanyoka, ‘The Most Munificent Gift?: Southern Rhodesia’s Financial Contribution on the War Effort, 1939- 1952’, (MA Thesis: University of Zimbabwe, 2018); ‘; N. Mlambo, ‘Arms Production and War Supply in Southern Africa, 1939-1945: Limitations of the Industrial War Effort of South Africa and Zimbabwe during the Second World War’, (PhD Thesis: University of Cape Town, 2000). 67 National War Fund of Southern Rhodesia, Annual Reports, 1940-1944. 153 chroniclers of Empire Air Training Schemes found the donations as a ‘most munificent gift’ one could ever get.68 However, much as Smit fought against higher taxation in the colony through the various fiscal policies discussed above, he lost the battle. The political situation at the time did not allow his views to prevail. In 1942, he decided to retire, paving the way for Max Danziger. After Smit’s retirement, the government’s fiscal policy became even more ruthless than during the BSAC administration. Gann and Gelfand claim that the government’s fiscal policy proved far more brutal than anything experienced before in a British African colony.69 Danziger expanded government expenditure and disagreed with the Auditor General on numerous occasions. The Auditor preferred Smit and his Gladstonian policies of limited taxation. On the other hand, Danziger believed in budget surplus not from reduced expenditure, like his predecessor, but from taxing the people as much as possible. In September 1942, he wrote to the Prime Minister requesting to impose more taxes. ‘To be on the safe side,’ he wrote, ‘it seems that we should tax heavily probably by a supplementary taxation measure and [certainly] in the next budget, with a definite object of getting as big a surplus as possible.’70 He argued that this surplus could be used to cover for deficits in future years or ‘if there are no deficits for writing off rapidly wasting assets.’71 As shown in Table 5.3 below, he doubled the TST and imposed an additional income tax in 1943. Table 5.3: Income Tax, EPT and Tobacco Sales Tax, 1939-1945 Year Income Tax Excess Profits Tax £ Tobacco Sales Totals £ Tax £ £ 1939 947 031 ------------------ -------------- 947 031 1940 1 230 126 83 045 ------------- 1 313 171 1941 2 055 568 147 081 ------------- 2 202 649 1942 2 588 067 301 786 45 794 2 935 647 1943 3 806 683 770 031 124 988 4 701 702 1944 4 672 811 1 279 366 101 765 6 053 942 1945 4 774 681 1 100 540 124 377 5 999 598 1946 4 833 115 1 180 687 181 194 6 194 996 Grand Totals 24 908 082 4 862 536 578 118 30 348 736 Source: NAZ, ZBU2/2/2, Commission of Inquiry on the Income Tax Department, 1946. 68 Rhodesia and the RAF, Published under the authority of the Air Officer Commanding the Rhodesia Air Training Group, Johannesburg, 1945, 27. 69 L. H. Gann and M. Gelfand, Huggins of Rhodesia: Man and his Country (London: Chato and Windus, 1964), 162. 70 NAZ/S482/731/39/No. 2, Max Danziger, Minister of Finance to the Prime Minister, 24 August 1942. 71 Ibid. 154 Danziger also introduced surtax levied on taxable incomes of individuals and companies. He set surtax rates as follows: 1s 6d in every £500 for individuals; 2s 6d in every £1000 for individuals and companies; and 3s 6d for every £3000 for companies.72 He also expanded the country’s borrowing system because he reasoned that people’s investment in war bonds and many other government securities would provide surplus revenue for the government.73 Broadly, Danziger imposed several other revenue collection tools to the extent that the country's taxation system became unbearable and people demanded reforms, as shall be discussed in the final section of this chapter. There are several interpretations of how Danziger financed the state during the war. Gann and Gelfand argued that the administration aimed to pay for the war from revenue rather than from loan funds, refusing to put the financial burden on future generations and immigrants.74 They further content that Danziger, handled ‘[t]he country’s finances through the most challenging parts of the war,’ and by October 1945 he proudly reported to Huggins that since 1939 the colony disbursed some £16 569 000 from revenue and £4 775 000 from loans on the war effort.75 H. I. Wetherell supports this argument, noting that: From the outset, the government decided that the colony would make a maximum contribution to the war effort, that the burden would be spread as evenly as possible, that inflation would be avoided, and that as far as possible, the government would contrive to prevent anyone making a profit out of the sacrifice of others. This necessitated a policy of high taxation but at the same time avoided the raising of war loans, which future generations would have had to repay.76 This interpretation of the war effort, however, fails to capture Southern Rhodesia’s actual fiscal policies during the time. Computation of figures from the war period's Defence budget shows that more than £12 000 000 of the £30 841 030 spent during the war was still from loan funds (see the following Table 5.4). 72 BOA, File No. 73150D-01, Southern Rhodesia Financial Statements, ‘Proposed Changes in Taxation’, 10-11. 73 NAZ/S482/731/39/No. 2, Max Danziger, Minister of Finance to the Prime Minister, 24 August 1942. 74 Gann and Gelfand, Huggins of Rhodesia, 163. 75 Ibid. 76 Wetherell, ‘Continuity and Change in Opposition Politics in Southern Rhodesia’, 131. 155 Table 5.4: Southern Rhodesia’s War Expenditure from Revenue and Loan Account, 1939- 1945 Year Expenditure from Expenditure from Loan Revenues £ Funds £ 1939-1940 297 000 166 000 1940-1941 1 973 000 100 000 1941-1942 2 608 000 54 000 9142-1943 3 272 000 3 930 615 1943-1944 5 334 000 3 938 305 1944-1945 4 936 847 4 231 263 Grand Totals 18 420 847 12 420 183 Source: Extracts from Estimates of Revenue and Expenditure as presented to the Legislative Assembly for years 1939-1945.77 Even Edward William Spencer Cavendish, the 10th Duke of Devonshire, indicated that it was almost impossible, given her limited financial resources, for Southern Rhodesia to meet the war effort expenditure out of tax revenue, even after extra taxation, without the aid of loans from money markets.78 As shown by the table above, when Danziger took over as the Finance Minister in 1942, loan expenditure began to increase immensely, with the colony borrowing from the local money market. Running concurrently with the government’s policy of collecting more revenue were financial regulation policies. Financial control during this period was necessary for the country to maintain positive sterling balances. The government needed to control the flow of capital into and out of the country.79 To this end, it tightened export and import controls and introduced strict regulations prohibiting the exportation of money from the country. It thus introduced Import and Export Licences (I & EL).80 No commodity, except minimal items of no economic significance, was 77 BOA, File No. 73150B, The Auditor General’s Handbook, 1950, 26. See also Legislative Assembly Debates, 24 April 1950, John Young, MP for Avondale, Budget Debates, Columns 208-209. 78 TNA, DO 35/1028/3, ‘The Financing of Southern Rhodesia’s War Effort’ War Finances: Southern Rhodesia Correspondences with the Dominion Office, 13 January 1940. 79 Legislative Assembly Debates, Vol. 19, 7 March 1940, Smit, Budget Debates, Column 1820. 80 NAZ, Box S910/10, File Ref 18/40, Notice to Importers and Agents, Financial Adjustment Act, 1 January 1941; NAZ, Box S910/10, War Emergency Measures: Import Duties (Emergency Provisions) Act, 1939. See also section 2 of the 1941 Finance Act. 156 allowed to be exported from the country without a license issued by the Treasury. Added to this, exports passed through censorship stations where inspections were carried out to ensure that contents conformed to items declared on I & EL.81 Given that Southern Rhodesia did not have a central bank to control the flow of money in and out of its borders, the financial regulations were particularly crucial. Writing on the monetary history of Southern Rhodesia, Tinashe Nyamunda notes that the Southern Rhodesia Currency Board established in 1938 could not control currency movement, which made it difficult for the colony to ‘account for the monetary stocks’ in the country.82 To curb this problem, the Treasury instructed the banking institutions to not allow the export of large amounts of capital without authorisation by the Treasury Department or the Finance Minister himself.83 Huggins supported this position. He had earlier complained in the context of the Great Depression that the banks acted ‘more or less [like] a kind of garage for money than fulfilling their proper function which is to turn the wheels of industry.’84 At the same time, the government took advantage of these regulations to induce capital investment in the country. As a consequence of the war, the government limited its imports and controlled the capital flow out of the country, adding to the country’s favourable balance of payments, which increased sterling balances from £3 33 608 in 1939 to £16 568 937 in 1945, an increase of £13 237 329.85 Due to budget surplus and positive balance of payment, the Rhodesian government found itself with extra money in its coffers, a position Danziger had always envisaged to achieve. He offered an interest-free loan to Britain which triggered fierce political debates, as discussed in the following section. 81 NAZ, Box S910/10 War Emergency Measures, War Circular No. 141/15, (Confidential) Department of Customs and Excise, 11 December 1943; Ref: 156/40 Controller of Supplies and Censorship to the Secretary of Treasury, 21 June 1943. 82 T. Nyamunda, ‘Financing Rebellion: The Rhodesian State, Financial Policy and Exchange Control, 1962-1979’ (PhD Thesis: University of the Free State, 2015) 29. See also R. A. Sowelem, Towards Financial Independence in a Developing Economy: An Analysis of the Monetary Experience of the Federation of Rhodesia and Nyasaland 1952- 1963 (London: George Allen & Unwin Ltd, 1967), especially the first chapter on political and economic background. 83 Legislative Assembly Debates, 7 March 1940, Smit, Budget Debates, Column 1820. See also section 2 of the 1941 Financial Act. 84 Legislative Assembly Debates, 1933, Huggins, Column 447. 85 Ibid, 633. 157 Southern Rhodesian Loan to the United Kingdom In 1943, barely a year after Danziger took over the finance ministry, the Central Statistical Office reported that the colony realised a large amount of £3 000 000 from the budget surplus, a favourable balance and local borrowing.86 The money was utilised in the form of a loan to the Imperial Government payable after the war. The rationale for offering this loan to Britain was the colony’s preparation for post-war reconstruction. The conditions of the loan were well articulated in a telegram to the Secretary of State, summarised as follows: Would you please enquire whether His Majesty’s government in the United Kingdom would accept a loan of approximately three million pounds free of interest from the colony? [The] loan would be repayable on demand, but repayment would probably not be required until after the war. The loan would be in Southern Rhodesia Currency and would be payable in the same manner. [The] money could be used towards defraying United Kingdom expenditure on Rhodesian Air Training Scheme. Please explain that the colony’s financial position is peculiar due to the fortuitous accumulation of money in the hands of public, which government consider could be used to assist the war effort. [The] money would be required immediately after the war to reconstruct the colony’s economic life and probably cushioning effects of trade recession to which the colony is particularly vulnerable.87 The Secretary of the State received the request with great enthusiasm and, on behalf of the United Kingdom government, he accepted the loan on the 19th of April 1943.88 According to the Secretary, this was ‘quite acceptable to us on the understanding that we should be given as long notice as practicable of desire for repayment.’89 However, while the loan was a welcome gesture for the United Kingdom government, it generated debates in the Southern Rhodesian Legislative Assembly. Individuals like Leslie B. Fereday of Highlands District and Minister of Mines viewed the loan ‘as a gift, a widow’s mite and a token payment.’90 However, others regarded the loan as a gross financial mistake by the Minister. For instance, Donald Macintyre, MP for Bulawayo South, reasoned that the Minister departed from every known and accepted orthodox financial principles.91 Macintyre elaborated that the Finance Minister had raised money through extra taxation and borrowed from the local market at an interest 86 BOA, File No. 73150D-01, Southern Rhodesia Financial Statements, 1943. See also The African Central Statistical Office, ‘The Balance of Payment of Southern Rhodesia, 1939-1947’, The Economic and Statistical Bulletin of Southern Rhodesia, 16:13 (1948), 391. 87 NAZ, S3292/20/2, The Treasury File: Finance Minister of Southern Rhodesia, War Expenditure Vote X. 88 NAZ, S3292/20/2, Telegram No. 130 Secretary of State to the Governor of Southern Rhodesia. 89 Ibid. 90 Legislative Assembly Debates, 29 April 1943, Column 183. 91 Legislative Assembly Debates, 30 April 1943, Column 223. 158 rate, yet lent at no interest. Crucial to note from Macintyre’s position is that the Minister used the money unproductively. He could have used the money to clear debts the country owed at the London Stock Market. This, in turn, could have increased the ratio of internal loans to external loans, thereby improving the colony’s financial standing in other countries. Apart from paying up for the debt, it was only logical for Danziger to use surplus money to finance something productive during this period of high national expenditure, for example, to buy railway rights considering the government’s desire to provide industries with cheap transportation rates. Smit, the usual critic of Danziger, weighed in noting that, ‘Danziger has [always] given the House a budget that unfolds schemes of long-range financial planning, but did not hesitate to provide funds for the purpose, even by imposing extra taxation, even though there is available accumulated surplus.’92 Smit referred to his days as the minister, when he used to say, ‘give me sound schemes, and I will give you sound finance.’93 His slogan proclaimed that the government need not spend for the sake of spending. The debate continued until 1945. Smit maintained his position against the government arguing that taking £3 000 000 from the people in 1943 and giving it to Britain free of interest was a clear indication of the state’s fiscal aggressiveness.94 The money, he argued, could be put down as fruitless expenditure by the government.95 Danziger held a different view to that of his predecessor Smit. ‘When he left the office,’ Danziger stated, ‘he complained that the government’s taxation policy had done untold damage to our reputation, but this kind of mischievous statement does infinitely more damage than any taxation, however onerous.’96 It was also clear, according to Danziger, that capital was still earning profits in worthwhile enterprises, evidenced by the many expanding industries in the country (refer to Table 5.1 above). The Minister of Finance indicated that it was government’s policy to tax heavily in boom times so that taxation might be reduced in times of depression, in other words to have a reserve available for expenditure during depression and when borrowing is difficult.97 92 Legislative Assembly Debates, 29 April 1943, Smit as quoted by Colonel John Brady of Bulawayo East District, Column 183. 93 Ibid. 94 Legislative Assembly Debates, 15 May 1945, Column 673. 95 Ibid. 96 Legislative Assembly Debates, 14 May 1945, Column 611. 97 Ibid. 159 Meanwhile, the pressure to reduce taxation was mounting. People felt that the unabated national expenditure was getting worse, mainly because money was available. As shown in the discussion, Danziger differed from the policy followed by Smit and his predecessor Fynn. They taxed only when money was needed and to provide finance to essential sectors.98 However, Huggins and Danziger believed in significant national expenditure, particularly towards the war effort and following the Prime Minister’s slogan that ‘Britain’s Wars are our Wars.’ Ultimately, the fiscal position of the Prime Minister and Finance Minister offended many economic interest groups. They came under severe attack, rendering debatable Danziger and his colleagues’ initial position that people were willing to pay more taxes. Calls for Taxation Policy Review After a budget surplus in 1943, Rhodesian society, just like they did in 1935, demanded lower taxes. Surplus revenue brought forward at the beginning of 1943 amounted to £1 503 000 and rose to £1 973 000 by 1944.99 Significant contributors to additional taxation were Customs Duties at £409 000, Income Tax at £391 000 and EPT at £405 000.100 As had been the case in 1935, the government faced criticism regarding its taxation policy. Every sector complained that the government’s tax policy had inflicted harm on their respective industries. Gold mining, the usual protestors, and tobacco farmers were at the forefront in calling for the repeal of heavy taxes.101 Arguing that the GPT was justified when introduced, many miners asserted that it had outlived its purpose because the production of many mines had severely reduced.102 Even the Minister of Mines, Fereday, accepted that the taxation system of Southern Rhodesia was no longer compatible with the situation at hand.103 He elaborated that many of the remaining mines would inevitably close down if the taxation policy continued. Thompson added his voice in 1945 when it was clear that the war would end. He was particularly concerned with the gold mining industry and argued that the taxation of this industry was becoming iniquitous and unjustified and left the industry in a 98 As shown in the previous chapters, Fynn and Smit ‘carefully’ analysed the expenditure needs of the country before presenting their budget estimates or approve any expenditure. 99 Legislative Assembly, 26 April 1945, Danziger, Budget Speech, Column 156. 100 Ibid. 101 The Bulawayo Chronicle, ‘Government Urged to Review Taxation’, 7 April 1945; Legislative Assembly Debates, 21 April 1943, Danziger, Column 20. 102 The Bulawayo Chronicle, 4 May 1945. 103 NAZ, S916, Taxation 1944-1945. Letter from the Minister of Mines L. D. Fereday to the Prime Minister, 4 March 1944. See also NAZ, ZBN2/1/1 Memorandum: Outline of the History of the Gold Premium Tax, Southern Rhodesia, 6 November 1944; Bulawayo Chronicle, 12 May 1945. 160 parlous position.104 The 1945 Commission of Enquiry into the Mining Industry of Southern Rhodesia characterised GPT as an ‘unfortunate fiscal expedient.’105 Phimister explains that GPT was a tax on the product with no equitable relation to the miner's actual income from the mining operations he conducted.106 Industrialists demanded the repeal of the EPT, arguing that it cut the financial expansion and operations of the secondary industries and stifled reinvestment of the sector’s profits. Through the IDAC, secondary industries advocated for the repeal of the EPT.107 The government conceded to the demands of the secondary industries in 1944. It amended the EPT Act, but still, criticisms continued. The amendment, argued industrialist, took no consideration of the national importance of the sector. In the agricultural sector, tobacco farmers also tabled their grievances against the TST. Bulawayo Central MP, Eastwood moved a motion in the House that the government ‘should consider to repeal the [1942] TST.’108 Cabinet members supported the farmers’ call for repealing the TST.109 Following the pressure from economic interest groups, the government accepted to repeal the GPT, EPT and TST to and reform the income tax in 1945. It refunded GPT to the tune of £128 000.110 Concerning income taxation, the Treasury expanded allowances and removed the wartime taxation. The expansion of allowances would allow taxable income to conform more closely to the conception of taxation on profit.111 The Treasury also gave further assistance to secondary industries in the form of increased allowances. It would deduct expenditure incurred on experiments and research, buildings erected, plant and machinery acquired and industrial buildings liable to depreciate before the imposition of income tax.112 The Treasury made amendments to Customs and Excise Duties to allow industries to import capital goods at a lower rate, especially 104 Legislative Assembly Debates, 3 May 1945, Column 383. 105 Report of the Commission of Enquiry into the Mining Industry of Southern Rhodesia, 1945; The Report of the Commission of Enquiry into the Mining Industry of Southern Rhodesia, 1947. 106 I. R. Phimister, ‘Gold Mining in Southern Rhodesia, 1919-1953’, The Rhodesian Journal of Economics, 10:1 (1976), 37. 107 NAZ, S106, Report of the Industrial Development Advisory Committee, 1941; NAZ, S915/40, Excess Profits Tax, Letter by Minister of Commerce to Minister of Finance. 108 Legislative Assembly Debates, 21 April 1943, Column 20. 109 Bulawayo Chronicle, ‘Taxation Measures Discussed in the Parliament: Tobacco Bill given Third and Final Reading’, 27 June 1945. 110 Legislative Assembly Debates, 26 April 1945, Danziger, Budget Speech, Column 161. 111 Bulawayo Chronicle, 19 April 1945. 112 Legislative Assembly Debates, Danziger, 26 April 1945, Column 161. 161 agriculture and mining.113 In this instance, demands for tax reforms revealed the taxpayers’ convergence of interests, which had been at variance previously. More importantly, from 1944 to 1945 the colony could finance its budget from surplus revenue accumulated in 1943.114 Commenting in 1950, MP for Avondale, John Richard Young indicated that, by 1944 the country’s expenditure was close to 10 million. The colony was able to finance its expenditure without increased taxation on the Rhodesians.115 In 1944, total expenditure amounted to £10 083 044, while total revenue was £10 317 000 and revenue surplus was £1 100 241.116 By 1945 expenditure was £10 046 252 and revenue £10 515 950.117 Conclusion Revolving around the Rhodesian government’s fiscal policies during the war, this chapter set out to explore the colony’s revenue and expenditure dynamics. It brought together a diversity of issues for discussion. It acknowledged that the Second World War promoted industrial and economic growth in the colony at a broader level. War induced internal and external demands provided Southern Rhodesia’s economic sectors with insatiable markets which prompted increased production. Considering that the colony was recovering from the devastating effects of the Depression, the war provided an unimagined impetus for development. However, the government attempted to formulate fiscal policies for financing both the war and economic development at a local level. The war commitments, as shown in the first section, crowded Southern Rhodesia’s fiscal space. Many politicians supported the government’s financing of both the war and economic development, especially because the colony wanted to prove its loyalty to the Imperial Government. However, the war effort put extra financial demands on the colony’s limited resources. The chapter thus looked at the various fiscal tools that different government officials suggested to raise revenue for the country to achieve its goals. The government reversed its previous policy of tax reductions implemented in 1935 by reintroducing a cocktail of new SWT. This triggered political confrontations with economic interest groups, forcing the Finance Minister Smit to resign. 113 Ibid. 114 BOA, File No. 73150D-01, Southern Rhodesia Financial Statements, 1944 & 1945. 115 Legislative Assembly Debates, 24 April 1950, Columns 208-209. 116 BOA, File No. 73150D-01, Southern Rhodesia Financial Statements, 1944 & 1945. 117 Ibid, 1945, 1. 162 The chapter also illustrated that, when the new minister, Danziger, took over the situation for the taxpayers changed for the worse as the government continued to implement aggressive fiscal policies never experienced in the country’s history. Danziger believed that extra taxation would collect more revenue for the country. As a result, the country found itself with extra income amounting to £3 000 000, which it presented to Britain as an interest-free loan. This, again, triggered serious debates in Parliament. Many in Parliament felt that the interest-free loan was an unnecessary expenditure on the part of the government. Overall, the chapter demonstrated how government finance during the war greatly influenced the political development in the colony. Tracing the two successive finance ministers’ fiscal philosophy, the chapter showed how their political orientation determined fiscal decisions. 163 Chapter Six Post-war Economics and the Southern Rhodesia’s Fiscal System, 1946-1953 Introduction The end of the Second World War in 1945 and the peace dispensation that followed necessitated a reconfiguration of Southern Rhodesia’s fiscal management system. This entailed the scrapping of such wartime taxes as Excess Profits Tax (EPT), Tobacco Sales Tax (TST), and Gold Premium Tax (GPT).1 Although the colony experienced continued expansion in almost every sector of the economy, the financing of various economic sectors brought new fiscal challenges. Initially, in the 1946-47 fiscal year, the state-operated on budget deficit as government expenditure exceeded revenue. Even though Southern Rhodesia enjoyed a budget surplus during the latter years of the war, the postwar period saw an increase in demand for government finance to provide social services for the growing European population. The country thus resorted to the pre-war expenditure policies of eliminating non-essential spending to ensure effective allocation and utilisation of financial resources. This chapter offers a critical analysis of how the country budgeted its finances in the postwar period and how budgeting affected the government’s fiscal tools, especially after the colony abolished war taxes. It will be shown that the country’s financial situation deteriorated. Several other factors put pressure on Southern Rhodesia’s resources and compounded the fiscal problem, for example, population increase and shortage of accommodation and the 1946/47. Furthermore drought caused the cost of living to increase and pressure to mount on the country’s fiscal structure. 1 National Archives of Zimbabwe (hereafter NAZ), ZBU/2/2/2 Report of the Commission of Enquiry into the Operations of Income Tax Department, 1945. For a detailed discussion on Southern Rhodesia’s economic and financial position during the post-war period, see for example, A. G. Irvine, The Balance of Payments of Rhodesia and Nyasaland 1945-1954 (London: Oxford University Press, 1959). For financial entrenchment of Southern Rhodesia in the sterling area see R. A. Sowelem, Towards Financial Independence in a Developing Economy: An Analysis of the Monetary Experience of the Federation of Rhodesia and Nyasaland, 1952-1963 (London: Allen & Unwin, 1967); T. Nyamunda, ‘Financing Rebellion: The Rhodesian State, Financial Policy and Exchange Control, 1962-1979’ (PhD Thesis: University of the Free State, 2015); V. M. Gwande, ‘Organised Secondary Industry and the State in Zimbabwe, 1939-1979’, (PhD Thesis: University of the Free State, 2018); C. H. Thompson and H. W. Woodruff, Economic Development in Rhodesia and Nyasaland; A. S. Mlambo, Zimbabwe: A History of Manufacturing, 1890-1995 (Harare: University of Zimbabwe Publications, 2000); C. Stoneman, ‘Foreign Capital and Prospects for Zimbabwe’, World Development, 4:1 (1976), 25-58; Richard Gray, The Two Nations: Aspects of the Development of Race Relations in the Rhodesias and Nyasaland (London: Oxford University Press, 1960). 164 The chapter examines the importance of sound fiscal management after 1945, particularly looking at revenue collection, expenditure policies, and public debt management. The chapter is divided into six sections. The first section focuses on Southern Rhodesia’s economic position after the war. The second section explores the postwar reconstruction and government expenditure policies. It argues that, despite tremendous economic development and government expenditure on capital investment, the end of the war brought many financial and economic difficulties. The situation resulted in high cost of living and many other problems for the Rhodesian society. The third section examines the government's measures to mitigate the high cost of living in 1947/48 fiscal year. During this time, the government incurred a budget deficit for the second time in the postwar period, leading to calls for a reduction in government expenditure. The fourth, building on the third section, illustrates how the Treasury attempted to balance government expenditure and revenue to eliminate budget deficits. These attempts set the pace for the debate on the introduction of Tobacco Tax to raise revenue for the colony, which in turn, led to the Tobacco Tax Crisis discussed in subsection five. The final section examines the establishment of the Fiscal Commission and its recommendations for the Federal fiscal structure. Southern Rhodesia’s Postwar Economy Southern Rhodesia’s economy during the postwar period experienced tremendous growth. Notable expansion occurred in agriculture which replaced mining as the primary source of income for the settler government.2 Agriculture’s contribution as the primary source of government finance is reflected in the 1947 balance of payments which showed that agricultural exports, particularly tobacco, surpassed mineral exports.3 Nonetheless, mineral production expanded too. It experienced an upward surge compared to previous years with chrome, asbestos and coal making great strides.4 Asbestos and chrome had a huge market in the United States. The two minerals became primary dollar earners for the colony and generated revenue crucial for importing industrial machinery.5 Momentum in the secondary industries continued too. While some industries like furniture and chemical production had existed before 1945, new enterprises were 2 Irvine, The Balance of Payment of Rhodesia and Nyasaland 1945-1954, 312. 3 Ibid. See also British Online Archives (hereafter BOA) Southern Rhodesia Financial Statement, 1945-1950. 4 Official Year Book of Southern Rhodesia, No. 4, 37. 5 Gwande, ‘Organised Secondary Industry and the State in Zimbabwe, 1939-1979’, 63. 165 established, while others expanded. Many industries experienced phenomenal growth like iron and steel, engineering, clothing, enamelware, jute bags, paints, cutlery and cement production.6 This remarkable economic growth facilitated the expansion of wholesale and retail trade. Wholesale and retail sectors provided the third essential source of income in the country, contributing about 14 per cent of the total GDP.7 In addition, as Gray put it, the country’s economic pattern changed during the post-war period.8 The colony produced for its local market and built up a significant secondary industry sector, especially of manufactured textiles for exportation to its neighbours. Overall, the expansion of secondary industries in terms of value almost doubled between 1946 and 1948, from £14 062 000 to £25 858 000.9 Another noteworthy postwar economic feature was the state’s continued direct participation in the economy by controlling several key enterprises and bodies. For example, it controlled the Currency Board, Cotton Research and Industrial Board, Roasting Plant Board, Grain Marketing Board, Triangle Sugar Estates, the Land Bank, National Building and Housing Board (NBHB), Rhodesia Native Labour Supply Commission, Electricity Supply Commission and Cold Storage Commission.10 These enterprises were essential in providing services that the private sector could not deliver and in executing government policies. In doing this, the state considered its position as complementary to the private sector and as a provider of opportunities for establishing industries. Postwar Reconstruction and Expenditure Policies, 1946-1949 Despite the economic expansion, the end of the war brought many problems in various sectors of the colony. For example, the transport sector experienced severe difficulties. Gann and Gelfand posit that the ‘[road] transport was a major bottleneck and a constant worry to the government.’11 Though the road network system had seen some development during the 1930s and the war, still the condition could not facilitate optimum operation of road transport. Existing main roads were stripped once and could therefore be easily damaged during rainy seasons. The strip road system, hailed as the solution to Southern Rhodesia’s transport problems during the war, proved inadequate 6 Irvine, The Balance of Payment of Rhodesia and Nyasaland, 312. 7 Ibid. 8 Gray, The Two Nations, 204. 9 Gwande, ‘Organised Secondary Industry and the State in Zimbabwe, 1939-1979’, 63. 10 Official Year Book of Southern Rhodesia, No. 4, 1952, from page 537 to 576. 11 L. H. Gann and M. Gelfand, Huggins of Rhodesia: The Man and His Country (London: Allen and Unwin, 1964), 196. 166 and inefficient by 1946. Long-distance haulage road transport found it difficult to operate optimally with the existing roads making the transport system expensive in the colony. On the other hand, railways which provided the most important form of transport in the colony had not received funds for maintenance and infrastructure replacement since the outbreak of the war. A. H. Croxton argues that by 1945, Rhodesia Railways Ltd Company was no longer capable of maintaining the existing railway network without government support.12 However, because ownership of railways was in private hands, it was difficult for the government to provide financial assistance which would not bring them any revenue. Thus, the cost of maintenance remained in private hands until the government bought the Rhodesia Railway Company in 1947 To cope with its new postwar transport needs, Southern Rhodesia needed to revolutionize its road network system. In 1946 it financed road construction using bitumen. The government’s policy was to fund the construction of all trunk roads linking main centres like Salisbury and Bulawayo.13 The Roads Vote averaged a total increase of £100 000 per annum, as shown by the following Table 6.1. 12 A. H. Croxton, Railways of Rhodesia: Story of Beira, Mashonaland and Rhodesian Railways (Newton Abbot, David & Charles Publisher, 1973). For more on Rhodesia Railways, see J. Lunn, Capital and Labour on the Rhodesia Railway System, 1888-1947 (Oxford: Macmillan, 1997); I. R. Phimister, An Economic and Social History of Zimbabwe: Capital Accumulation and Class Struggle 1890-1948 (London: Longman, 1988); Irvine, Balance of Payments of Rhodesia and Nyasaland, 314-315. 13 A. S. Mlambo, ‘From Dirty Tracks to Modern Highways: Towards a History of Roads and Road Transportation in Colonial Zimbabwe, 1890 to World War II’, Zambezia, XXI:II (1994), 147-166. Increased expenditure on this added to the country’s capital expenditure. 167 Table 6.1: Expenditure on Road Construction and Maintenance 1946-1951 Fiscal Year Total Expenditure Total Increase £ £ 1946 297 467 ----------------------- 1947 369 959 72 492 1948 470 881 100 922 1949 545 451 74 570 1950 603 257 57 806 1951 746 593 143 336 Source: Compiled from Statistics obtained from the Financial Statements, 1946-1951. The yearly increase in road construction cost was due to the rise in the price of material and labour to cover for arrears in maintenance. At the same time, the influx of immigrants into Southern Rhodesia placed extra demands on social services. The Rhodesian government’s immediate strain was the provision of social services like housing, schools, and hospitals. Shortage of housing also needed immediate attention. A housing census conducted in 1946 revealed a total of 9 807 houses or flats against a white urban population of 10 558 in need of housing in all municipal areas of the country.14 Based on the number of families per home, the census reviewed a shortage of 751 houses.15 However, this number did not give a full picture of the situation. Based on the municipal records on housing distribution, the total number of houses needed to accommodate the settlers who resided in urban centres was 1 718, as demonstrated in the following Table 6.2. 14 Official Year Book of the Colony of Southern Rhodesia with Statistics up to 1952, No. 4, 550. 15 Ibid. 168 Table 6.2: Geographical Distribution of Settler Housing Shortage in 1946 Municipal Area Number of Houses Salisbury Municipality and Suburbs 682 Bulawayo Municipality and Suburbs 761 Umtali Municipality 118 Gwelo Municipality and Suburbs 90 Gatooma Municipality and Suburbs 30 Que Que Municipality and Suburbs 37 Total 1 718 Source: Official Year Book of Southern Rhodesia, No. 4, 1952, 550. The government realised that, to solve the housing crisis, emergency measures were necessary. In this regard, Whitehead proposed a National Housing Bill in the Legislative Assembly in August 1946.16 After deliberations, the Parliament passed the Building Act, leading to the formation of the National Building and Housing Board (NBHB) on 29 November 1946.17 The Board’s mandate was to: Alleviate the housing shortage in the colony by constructing or encouraging the construction of the largest practicable number of dwelling and other buildings within as short a time as possible and doing all things possible to assist [people] to obtain accommodation in the colony. To acquire adequate building materials for use in the colony and redistribute such materials to the best advantage. To advise the means of reducing building costs and organise the building industry so that the colony would meet the long-term accommodation needs.18 The Board started by converting military and air force camps into temporary living quarters. At the same time, the Board recommended a reduction in the financing of Air Training Schemes and channeled the money to the building of houses for immigrants.19 This marked a shift in government policy, from financing the construction of military facilities like air camps and other works connected with the colony’s war effort to financing national housing projects. In December 1946, C. W. Glass, the Director of Public Works Department, remarked that, ‘in accordance with the 16 Edgar Whitehead replaced Ernest Guest as the Finance Minister in August 1946. For a detailed discussion of the National Housing Bill, see Legislative Assembly Debates, 25 October 1946, from Columns 2122-2158, 2301-2326, and 2337-2458. 17 Official Year Book of the Colony of Southern Rhodesia with Statistics up to 1952, No. 4, 558. 18 Ibid, 558. 19 Ibid. 169 government policy to meet the present housing shortage, a high proportion of finance was allocated under Loan Vote A to provide new houses, schools and hospitals.’20 He further stated that the Department aimed to work with every government department in all preparations and building of houses without delay to improve the accommodation capacity in the country. In mid-1947, the NBHB, working with the Public Works Department, introduced low-cost houses and government buildings. There was an increase in the construction of all types of houses, which became a post-war phenomenon. The government availed money for constructing temporary pise- de-terre houses, and prefabricated flat-lets preoccupied the colony housing development.21 The NBHB also worked in conjunction with the Land and Agricultural Bank of Southern Rhodesia (LABSR). The government granted the Bank power to issue loans at low-interest rates to encourage individuals to build their own houses.22 The Bank offered loans on the security of mortgage over land for housing construction.23 Repayment for these loans was financially flexible for settlers. The arrangement was that the settlers repaid the loan and interest based on monthly instalments for thirty years.24 The NBHB did not confine itself to housing the European population. It established small housing schemes for Coloured communities in Salisbury, Bulawayo and Umtali municipalities.25 Following the Native Urban Areas Accommodation and Registration Act, the government also built houses for Africans living in urban areas, like Salisbury, Bulawayo, Umtali, Gwelo and Que Que. The NBHB’s support was based on the rational that, by constructing permanent African urban housing, the state would provide the industries with much-needed stable labour and, in the long term, address the problems of labour shortage. There were various accommodation types for Africans ranging from hostels for single persons to detached houses for families.26 Through the 20 BOA, File No. 7315G-08, Annual Report of the Public Works Department of Southern Rhodesia for the Year ended 31 December 1946, 2. 21 Official Year Book of the Colony of Southern Rhodesia with Statistics up to 1952, No. 4559. Temporary houses were later replaced by permanent ones in 1950. 22 See Legislative Assembly Debates, 31 January 1946, the Finance Minister’s Budget Speech, Columns 3660-3664. 23 NAZ, SB68/27, Board of the Land and Agriculture Bank, Board Minutes, September 1946 to January 1952. 24 NAZ, S2529/A39, Housing and Agricultural Loans, 29 November 1947 to 31 December 1948. 25 Official Year Book of the Colony of Southern Rhodesia with Statistics up to 1952, No. 4, 560. 26 For a detailed discussion of African accommodation in Southern Rhodesia, see E. Chipembere, ‘Colonial Policy and Africans in Urban Areas, with Special Focus on Housing, Salisbury, 1939-1964’, (MPhil: University of Zimbabwe, 2006). 170 Association of Chamber of Industries of Rhodesia, industrialists supported the government’s position because they favoured urbanisation.27 However, financing of housing construction was done segregatively, with African housing receiving little financing and state attention.28 This was mainly due to the Rhodesian laws that did not allow Africans to own homes in urban areas. This resulted in overcrowding within African suburbs, leading to the spread of diseases which even threatened the European community. A 1946 Health Services Enquiry Commission, noted Phimister, ‘showed evidence of [the] deteriorating health of the African’29 prompting calls for the expansion of urban health services if the country wanted to have a healthy white nation. The Committee advised the government to set aside the considerable amount of £1 140 000 for health issues.30 There were two main expenditure items on health facilities comprised of Public Health Vote number 29 and Hospitals and Dispensaries Vote number 30. The two Votes received £700 000 leaving the Treasury with £440 000 to finance other Health Department aspects.31 The Committee suggested it was wise for the Health Department to use the £440 000 to provide money to finance building programmes for clinics and hospitals in African communities.32 The suggestion was made against the backdrop of the Committee’s description of the hospitals in these communities as an eyesore without the ability provide health services to curb the spread of diseases. Due to disagreements between the urban councils and the central government on who should pay for the development of the African health system, the Rhodesian authorities ignore the Committee’s suggestion. According to Phimister, Bulawayo Hospital, one of the hospitals 27 Report of the Second Annual Congress of the Association of Chamber of Industries of Rhodesia: Presidential Address, 8 October 1946. See also Gwande, ‘Organised Secondary Industry and the State in Zimbabwe, 1939-1979’, 53. 28 From the early days of colonisation, successive Governments of Southern Rhodesia promulgated laws that prohibited Africans from being permanent residents of the urban areas. The laws included: the Sanitary Boards Ordinance of 1894, the Municipal law of 1897, the Native Locations Ordinance of 1906, the Land Apportionment Act of 1930, the Municipal Act of 1930, the Town Planning Acts of 1933 and 1945, the Natives (Urban Areas) Accommodation and Registration Act of 1946, the Native Land Husbandry Act of 1951, and the Vagrancy Act of 1960. For a detailed discussion on the segregative process of financing housing construction and ownership, see P. Bond, Uneven Zimbabwe: A Study of Finance, Development and Underdevelopment (Trenton: Africa World Press, 1998); ‘Finance and Uneven Development in Zimbabwe’, (PhD Thesis: John Hopkins University, 1992) Chapter 5. 29 Phimister, An Economic and Social History of Zimbabwe, 261. 30 Legislative Assembly Debates, 24 October 1946, reported by Minister of Internal Affairs, Thomas Hugh William Beadle, Column 2078. 31 Ibid. 32 Report of the Health Services Enquiry Commission, 27 June 1946. 171 providing medical services for Africans, did not receive funding to update its system.33 While the government paid no attention to African healthcare, ‘the Bulawayo City Council would do nothing for the native except what the native could pay for.’34 William Henry Elliot, MP for Gwanda, supported the Council’s position.35 For him, the best way to fund the health system was through a medical tax.36 Elliot’s suggestion ran counter to the Committee’s recommendations that funding of health services should not be limited to what Africans were able to pay.37 Also, his view did not consider that wages for urban Africans lagged behind their living cost and that they could hardly afford any medical bills added to monthly expenses; thus, it was impossible to impose a medical tax on them. Contrary to Thompson and Woodruff’s argument that the government found itself preoccupied in providing social services commensurate with the population,38 the African population remained outside of the colonial government’s expenditure commitments with regard health provision. Adding to the challenges that the Rhodesians faced was the high cost of living. In May 1946, the Consumer Price Index increased by 18 per cent.39 The Bulawayo Chronicle of 19 October 1946 reported that the ‘standard of living is falling [and people are] facing difficulties in the rising costs.’40 Necessities of life became more expensive and beyond the reach of many ordinary people. One primary concern was the cost of clothing. A pair of trousers that cost 32s in 1938 was costing £4 7s 6d in November 1946.41 Prices for children’s clothing and school fees doubled.42 To make matters worse, the situation coincided with the 1946/47 drought. The drought resulted in the shortage of consumer goods, especially foodstuffs, further aggravating the high living cost. Of course, the shadow of difficulties fell on all Rhodesian communities, although the lower-income groups, especially the Coloured and Africans, were heavily affected. For them, living conditions became desperate as admitted by MP for Bulawayo South, James Stuart McNeille, who contended 33 Phimister, An Economic and Social History of Zimbabwe, 261. 34 Ibid. 35 Legislative Assembly Debates, 24 October 1946, Column 2483. 36 Ibid. 37 Report of the Health Services Enquiry Commission, 27 June 1946. 38 Thompson and Woodruff, Economic Development in Rhodesia and Nyasaland, 177. 39 Official Year Book of the Colony of Southern Rhodesia with Statistics up to 1952, No. 4, 552. 40 The Bulawayo Chronicle, 19 October 1946. 41 Ibid. 42 Ibid. 172 that, ‘as far as the Coloured and native communities are concerned, many of them are finding things more than difficult.’43 The settlers saw the high cost of living as a direct outcome of increases in customs duties. This sentiment gained currency even in Parliament. ‘Between 1939 and 1945,’ argued McNeille, ‘there was an increase in customs duties from £920 583 to £1 370 000,’ an increase of £450 000.44 McNeille was particularly critical of the government on this matter. ‘We have frequently in the past accused people in the business of profiteering’, he charged, ‘but [at the moment the] government is profiteering at the expense of the public.’45 Another MP, Denzil Crichton Paul of Salisbury South, weighed in arguing that although the government needed to maintain customs duties on luxuries, it ‘should accept the motion to reduce them on necessities of life.’46 Garfield Todd, MP for Insiza, shared the same view. Acknowledging that customs duties should not be reduced on luxury goods, he indicated that: We know that customs duties form part of the price of the goods [that] we buy in the shops. [If] the government is not up against things financially, it is [evident] that one way to help the [low-income families] is to remit customs and bring down the price of goods as much as possible. We are concerned with keeping down the cost of particular articles, but we are concerned with [considering] the people in such matters as social security. If duties cannot be reduced on luxuries of life, the government should accept the motion to reduce them on life necessities.47 The situation forced the government to introduce fiscal intervention measures in its 1946 budget to cushion the people from the effects of the high cost of living. These measures are discussed in the subsequent section. Measures to Mitigate the High Cost of Living First, the government made some adjustments on customs tariffs levied on non-luxurious imports to allow the settlers to import life necessities. For instance, the government decided not to impose customs duties on goods of utility type, especially clothing, footwear, household stores but to charge customs duties on luxurious merchandise like cigarettes, spirits and sportswear. These adjustments were particularly desirable and necessary to reduce the prices of goods and services. 43 Legislative Assembly Debates, 6 November 1946, Column 2557. 44 Ibid. 45 Ibid, Column 2558. 46 Legislative Assembly Debates, Columns 2562-2564. 47 Ibid. 173 The government also expanded its financial support to the people. Contrary to Gann and Gelfand’s position that the ‘government put through a very conservative budget’ in 1946,48 the Finance Minister expanded the colony’s expenditure through re-introducing the cost of living allowances. The allowance scheme targeted mostly the civil servants who could not keep up with their monthly expenses. Presenting his budget in 1946, the Finance Minister indicated that the country would need supplementary estimates of expenditure defrayed from both Revenue and Loan Accounts from time to time.49 Supplementary estimates increased from £150 000 to £190 000.50 This amount included £65 000 appropriated for allowances to the teaching staff and £50 000 for the Native Department employees. The Finance Minister committed to pay civil servants an extra £40 per year, taking additional expenditure on civil servants to £90 000.51 The Plewman Commission’s report recommended that civil servants be entitled to income that would enable them to buy what they could have afforded in 1939.52 The Finance Minister claimed that the government’s expenditure on improving civil servants purchasing power was necessary. Before the allowance scheme, civil servants, unable to cover monthly expenses, were resigning in large numbers daily. Those holding critical positions in the government departments were leaving to take up employment in commerce. In addition, young white Rhodesians leaving school did not go into civil service. Thus, important work in government sectors was delayed by a staff shortage, especially in departments like Income Tax and Posts and Telegraphs, reaching crisis propositions.53 In 1948, 1 200 vacancies for European civil servants were advertised, of which about two-thirds were filled by temporary civil servants, pensioners and married women.54 Thus, the allowance scheme was to act as a way to attract people into civil service. Adding on to the scheme, the government introduced many other allowances including the £2 children allowance scheme, and £2 given to all pensioners irrespective of their pension scale.55 The government took these steps to avoid a total breakdown of the civil service department. 48 NAZ S2225/2, Memorandum on Customs Union (Interim) Agreement: The Union of South Africa and Southern Rhodesia. Southern Rhodesia was already producing and exporting some of these products. 49 Legislative Assembly Debates, 17 October 1946, Whitehead, Budget Speech, Columns 1885-1888. 50 Ibid, Column 3568. 51 Ibid. 52 Legislative Assembly Debates, 18 October 1946, cited by the Minister of Internal Affairs, Thomas William Beadle, Column 1919. 53 Legislative Assembly Debates, 27 April 1949, Whitehead, Budget Speech, Column 30. 54 Ibid. 55 Legislative Assembly Debates, 24 October 1946, Greenfield, Budget Debates, Columns 2073-2074. 174 Thus, the idea behind the provision of allowances was not to give civil servants social security per se. Instead, it was a policy to compensate civil servants who were working under difficult conditions. Other critical interventions that the government introduced were price controls and subsidies. These were introduced on farm produce, rates and rentals to enable people to cover their monthly budgets. For example, appropriation of Vote H was increased by £500 000 to provide funds to the Maize Control Board to purchase maize from Argentina and cover the country’s foodstuff shortage.56 However, importation of maize from Argentina triggered fierce debates in the Legislative Assembly. Donald Macintyre, MP for Bulawayo Central, who later became the Finance Minister in 1953, contended that ‘whilst it is important to purchase maize owing to the drought, the Minister [of Finance] continually brought supplementary estimates’ to the Legislative Assembly.57 Calculations showed that the country imported maize from Argentina at the cost of £2 10s per bag.58 Noteworthy is the fact that Southern Rhodesia, as an agricultural country, imported maize from Argentina, while the government had spent a considerable amount of money promoting the production of other crops like tobacco since the twenties. Macintyre further accused the government of using its allowance schemes as a political gimmick to win the 1946 general elections.59 He reasoned that, if the government had chosen to introduce these allowance schemes after the 1946 general elections, it might have seemed more sincere in its desire to improve people’s living conditions.60 To finance the allowance schemes, the government relied on supplementary budgeting. Supplementary budgets became a popular system of expenditure, complicating the system of financial management. The Auditor General, the Public Accounts Committee, and the Treasury struggled to establish a good relationship. Edgar Pope Vernall, an industrialist and a member of the Salisbury Chamber of Industries, revealed this struggle.61 He indicated that, in most cases, fiscal controllers failed to agree on their budget estimates and then always turned to the Legislative 56 The Bulawayo Chronicle, 19 October 1946; Legislative Assembly Debates, 24 October 1946, Whitehead, Budget Debates, Columns 2073-2074. 57 Legislative Assembly Debates, 20 February 1947, Column 2724. For more on Allowance Schemes see United Party Manifesto, Our Political Principles, Our Achievements and Intentions (Salisbury, 1948). 58 Legislative Assembly Debates, 20 February 1947, Column 2724. 59 Ibid. 60 Ibid. 61 Legislative Assembly Debates, 31 January 1946, Finance Minister Budget Presentation, Column 3572. 175 Assembly and the Cabinet to resolve disagreements. He further explained that submitting three supplementary budgets showed financial profligacy and failure of fiscal controllers to agree on sound budgets that were essential for the country’s development.62 ‘One cannot stop being upset,’ he charged, ‘[because] this is the third supplementary estimates this year, or rather the second which with the budget makes [it] the third.’63 The system of supplementary budgets resulted in severe extravagance which put the country in a financial predicament. In total, the government required an additional expenditure of £1 148 255 during the 1945/46 fiscal year, of which £297 155 came from Revenue Account and £851 100 from Loan Account.64 The figure exceeded the original estimates of expenditure, leading to the budget deficit in succeeding years, particularly 1946 and 1948, as demonstrated in Table 6.3 in the following section. The ensuing section examines the government’s effort to combat extravagance and highlights how this helped its financial position. Measures to Mitigate Extravagance: Expenditure Reductions in 1948/49 Fiscal Year and Efforts to Alleviate Shortfalls in Revenue The government needed to strike a balance between expenditure and revenue. While Irvine’s assertion that, ‘until 1951 finance was not a limiting factor in the post-war development of Southern Rhodesia,’ is compelling to some extent, the colony faced difficulties balancing its budget between 1946 and 1948.65 In 1948, the colony experienced a budget deficit of almost £200 000 from a surplus of £1 213 239 in the previous fiscal year, as shown by the Table 6.3 below. 62 Ibid. 63 Ibid. 64 Ibid. 65 Irvine, Balance of Payments of Rhodesia and Nyasaland, 313. 176 Table 6.3: Revenue and Expenditure for Years 1946 to 1951 Year Ended 31 Revenue Expenditure Deficit Surplus March £ £ £ £ 1946 11 096 123 12 392 815 1 296 692 ------------- 1947 11 214 278 10 001 039 -------------- 1 213 239 1948 12 700 414 12 899 754 199 340 ------------- 1949 13 602 085 13 530 621 -------------- 71 464 1950 16 910 773 14 828 537 -------------- 2 082 236 1951 17 997 385 16 736 780 -------------- 1 260 605 Source: Compiled from statistics obtained in the Official Year Book of Southern Rhodesia with Statistics mainly up to 1950, No. 4, 1952. With limited financial resources, the government made efforts to consolidate its fiscal policies by keeping expenditure at the lowest possible level starting in 1947/48 fiscal year. The government attempted to reduce its expenditure as a strategy to support the principle of revenue budgeting. Similar to the previous period, during the Depression (discussed in Chapter 4), departmental estimates were subject to significant trimming, and sometimes the government decreased the financing of existing services. Even the Prime Minister, Godfrey Huggins, shifted his position in May 1948.66 Uncharacteristically, he started supporting limited financial expenditure. First, the government cut expenditure on transport services for nearly all departments.67 As the Director of Transport, L. S. Maclean, indicated, this decision was primarily influenced by the need to reduce unnecessary travelling by government employees, which at times entailed payment of travelling allowances.68 Secondly, the government prohibited the use of state transport for private business. The Mechanical Transport Committee established to oversee the country’s vehicle properties strictly controlled vehicles issued to government employees for individuals use.69 Thirdly, the government suspended the purchase of passenger cars in preference to trucks and other machinery vehicles for departments.70 The Government Transport Department notified all departments to make do with what was available for transportation. 66 Legislative Assembly Debates, 26 May 1948, Columns 369 & 420. 67 Legislative Assembly Debates, 18 May 1948, Finance Minister Budget Speech, Column 114-119. 68 Annual Report of the Director of Transport for the Year ended 31st March 1948, 1-5. 69 Ibid. 70 Legislative Assembly Debates, 18 May 1948, Finance Minister Budget Speech, Column 114-119. 177 In addition, a Cabinet Committee was established to investigate the government’s annual expenditure and recommend reductions in appropriation from the Consolidated Revenue Fund (CRF).71 Subsidies Vote provided the state with the principal section of expenditure that could be cut. The Treasury saved a total amount of £1 075 000 through reduction of subsidies in 1948.72 Also, comparing the expenditure of the 1946/47 fiscal year with that of 1947/48, several other expenditure Votes contributed to financial savings.73 These included Mining Engineering, Roads and Irrigation which showed an aggregate saving of £313 000.74 Thus, eliminating non-essential expenditure was effective, allowing the government to increase its spending on essential development. The principal increase occurred on Gold Production Subsidy, with £695 000 to enhance its productivity.75 This was particularly important for boosting the colony’s exports to stabilise the balance of trade. The trade deficit was approximately £10 million in 1948 as the proportion of imports was worth £33 490 000 and exports £23 649 000.76 Meanwhile, overspending remained a fundamental problem despite concerted efforts to cut expenditure. While the Finance Minister maintained his position that it was essential for the country to keep supplementary estimates to an absolute minimum, actual expenditure on primary social services increased. For example, in 1948, Pensions and Gratuities increased by £303 000, European Education and Public Health and Hospitals by £294 000, and Native Education by £155 000.77 Agricultural expenditure increased by £103 000 to cover afforestation, soil conservation loans and irrigation schemes. Spending on agriculture was necessary to prevent further increases in local food production costs and importation of foodstuffs. The lesson was learnt in 1946/47 fiscal year when, as Nyamunda notes, ‘[a]bnormal imports of food’ contracted the fiscal space.78 After the colony purchased the bulk of its grain and other foodstuffs from Argentina and other countries, expensive transport rates inevitably increased the payment cost, 71 Ibid. After meticulous investigations, the Committee recommended that total expenditure had become unmanageable without reducing the government’s budget. 72 Legislative Assembly Debates, 18 May 1948, Finance Minister Budget Speech, Column 114-119. 73 BOA, File No. 73150D-01, Southern Rhodesia Financial Statements, 1948, 1-10. 74 Ibid. 75 Ibid. 76 Ibid. 77 Ibid. 78 Nyamunda, ‘Financing Rebellion’, 36. See also Finance Minister Budget Speech, Legislative Assembly Debates, 18 May 1948, Column 106. 178 further damaging the already precarious balance of payments. Ultimately, the total increase amounted to £2 206 000.79 The situation deteriorated further in 1948. For the second time during the postwar period, the colony’s revenue proved less buoyant and failed to reach the estimates, experiencing a budget deficit of £199 340.80 Surprisingly, when the government was fighting tooth and nail to reduce expenditure to balance its budget, it further reduced taxation.81 In May 1948, it reduced income taxes from 10s 6d to 7s 6d for people in the middle-income bracket. As a result, the colony lost £600 000 of revenue.82 To make matters worse, another significant shortfall in revenue collection occurred in customs duties. The shortfall amounted to a total sum of £205 000, mainly due to the extension of import controls against hard currency countries like Belgium, Portugal, Sweden and Switzerland.83 The only revenue heads that showed increases were Transfer Duties, which amounted to £60 000 due to increased activity on the property market, and Vehicle Tax amounting to £55 000 due to an unprecedented rise the in registration of new cars.84 Defending the government’s position of reducing the taxation burden, the Commissioner of Taxes argued that the state intended to increase taxation for people most able to bear the burden. To cover the budget deficit, the government intended to increase supertax on married and single people whose income exceeded £3000 and £2000 per annum.85 The Treasury expected to raise a total amount of £400 000 from supertax. The other option was to increase customs and excise duties. However, the import duties were to serve two purposes. First, customs and excise duties would provide the needed revenue. Secondly, the government wanted to deal with the negative balance of payment caused by the importation of capital goods to develop secondary industries.86 But, the 79 Official Year Book of Year Book of Southern Rhodesia, No. 4, 1952, 606. 80 Legislative Assembly Debates, 27 April 1949, Finance Minister Budget Speech, Column 31. See also NAZ, SRG/Tax 3, Reports of the Commissioner of Taxes, 1948; Table 5.3 in Chapter 5. While the abolition of war taxes (GPT, TST and EPT) in 1946 was essential to ease the tax burden on the country’s white population, the timing was terrible. These three taxes had contributed immensely towards the country’s revenue during the war. Before the abolition of EPT and TST for the 1946/47 fiscal year, they collected more than £1 362 881. 81 NAZ, SRG/TAX 3, Reports of the Commissioner of Taxes, 1948. 82 Ibid. 83 Legislative Assembly Debates, 18 May 1948, Finance Minister Budget Speech, Column 30; BOA, Southern Rhodesia Financial Statements, 1948, 1-10. 84 NAZ, SRG/TAX 3, Reports of the Commissioner of Taxes, 1948. 85 Ibid. 86 See Bond, Uneven Zimbabwe: A Study of Finance, Development and Underdevelopment; Phimister, An Economic and Social History of Zimbabwe; ‘Secondary Industrialisation in Southern Africa: The 1948 Customs Agreement between Southern Rhodesia and South Africa’, Journal of Southern African Studies, 17:3 (1991), 430-442; A. S. 179 reintroduction of the suspended customs duties was undesirable for other reasons, most notably the increase in the cost of living index. The situation became dire for the colony and was further compounded by growing public debt. The debt involved a loan of £32 000 000 raised through government debentures listed on the London Stock Market to purchase the Rhodesia Railways Company in 1947.87 In total, the colony’s public debt in March 1949 amounted to £75 367 000 of which about £47 000 000 had been raised in London and £28 000 000 locally, as shown on the following Table 6.4.88 Table 6.4: Southern Rhodesia Public Debt as of 1949 Rhodesia Railways Loan (1947) 32 000 000 Statutory Commissions and Boards 17 213 000 Loans Government Stores and Imports 3 330 000 Posts and Telegraphs (including 2 364 000 buildings) Miscellaneous Loans (including local 3 807 000 authorities) Expenditure represented by assets 16 663 000 (including roads, public works, mineral rights) Expenditure not represented by assets 1 990 000 Total 75 367 000 Source: Commerce of Rhodesia, December 1949, 18. Close examination of parliamentary debates from 1946 to 1953 reveals that the issue of public debt divided opinion in the Legislative Assembly. Those who supported the government in financing its development through loans argued that it was essential to fund capital investment and purchase vital assets like Rhodesia Railways if economic progress were to be achieved in the colony.89 The opposing view was that Southern Rhodesia’s economy had not developed to the extent of financing Mlambo et al, Zimbabwe: A History of Manufacturing, 1890-1995 (Harare: University of Zimbabwe Publications, 2000). 87 Commerce of Rhodesia, December 1949, 18. 88 Ibid. See also Official Year Book of the Colony of Southern Rhodesia with Statistics up to 1952, No. 4, 1952, 610. 89 Legislative Assembly Debates, 18 May 1948, Finance Minister Budget Speech, Column 121. 180 high levels of borrowing to finance capital investment. For example, the leader of the Opposition, Raymond Osborne Stockhil opposed remarking that: The public debt is assuming alarming proportions. In 1945 it was £24 499 463. [Currently], according to the latest figure, it is more than £75 000 000. A large amount of that is indeed the Railway loan, but even after deducting that, we find we have almost doubled the National Debt in three years. The original figure had been accumulated over a period of fifty years.90 His position was that the country should have financed its capital expenditure using tax revenue.91 However, other parliamentarians argued that it was difficult for the colony to do that. Unlike countries such as the United Kingdom and other developed countries with high national income, it was difficult for a country like Southern Rhodesia with a total national income of £60 000 000 and a home investment of £20 000 000 to finance big budgets, especially capital expenditure, from tax revenue without borrowing.92 Thus, Southern Rhodesia depended on both loan and revenue funds. Fig 6.1 below shows that Loan Account expenditure played a pivotal role in the colony’s finances, especially during the 1947/48 fiscal year as it surpassed Revenue Account expenditure. Fig 6.1: Comparison of Expenditure from Revenue and Loan Account, 1946-1951 40000000 35240107 35000000 30000000 25000000 20000000 15000000 10046472 8834233 9063030 10000000 3216690 5000000 2060211 0 1946 1947 1948 1949 1950 1951 Expenditure from Loan Account Expenditure from Revenue Account Source: Collated from statistics obtained in the Official Year Book of Southern Rhodesia, No. 4, 1952, 607. 90 Legislative Assembly Debates, 3 May 1949, Column 101; Legislative Assembly Debates, 27 April 1949, Finance Minister Budget Speech, Column 21. 91 Legislative Assembly Debates, 27 April 1949, Finance Minister Budget Speech, Column 21. 92 Ibid. 181 £ The danger of continued expenditure from Loan Account was the piling up of unmanageable national debt. The debt placed a serious financial burden on the country’s fiscus as the government serviced loans from Revenue Account.93 Total expenditure for loan service consisted of two major items: the redemption of debt and debt management. The former was the sum the Legislative Assembly agreed to pay out of public revenue to the sinking fund to purchase government stock and thus reduce the debt.94 Debt management included the cost of raising loans and interest rate payments on outstanding loans.95 From 1946 to 1951, debt servicing and management were, on average, among the highest expenditure items, as shown in Fig 6.2 below. 93 Official Year Book of Southern Rhodesia, No. 4, 1952, 610. The national debt further increased from £75 000 000 in 1949 to £90 200 000 in 1951. 94 Official Year Book of Southern Rhodesia, No. 4, 611. A sinking Fund is money accumulated or set aside by the government for the purpose of periodically redeeming bonds and debentures 95 Ibid. 182 Fig 6.2: Expenditure on Various Departments from Revenue Funds, 1946-51 2500000 2000000 1500000 1000000 500000 0 1945/46 1946/47 1947/48 1948/49 1949/50 1950/51 Source: Collated from statistics obtained in the Official Year Book of Southern Rhodesia, No.4, 1952, 605-606. Variations in the expenditure items from year to year at times reflected differences in accounting practice, or administrative organisation, rather than a real change in expenditure. For instance, one of the largest items in the fiscal year 1950/51 was £1.3 million expended by the Central Mechanical Equipment Department, yet it seems from Fig 6.2 above that no money was spent before 1949/50 fiscal year. There was, of course, significant expenditure on mechanical equipment before 1949. Before then, departments purchased and maintained their equipment. In 1949, the Central Mechanical Equipment Department took over the responsibility for the procurement and maintenance of machinery, motor transport and workshop machinery of every government department. 183 Towards the 1949 Tobacco Tax Crisis Government’s efforts to reduce expenditure and alleviate the shortfall of revenue did not save the day for the Rhodesian settler state. Though the country experienced budget surplus in 1949, it was a meagre sum of £71 464, not enough to cover the colony’s 1949/50 budget which was envisaged to reach £65 000 000. 96 Whitehead, diagnosing the country’s financial problem said the situation was beyond the general fiscal mechanics of balancing the budget. He came up with what he called ‘seven-point problems’ that included, among other things, the negative balance of payment, inflation, high cost of living, lag in food production, and housing.97 These problems, particularly inflation, could bring the country’s development to a standstill. At the same time Southern Rhodesia, as a self-governing colony, did not qualify for the Colonial Development and Welfare Assistance which Britain offered its territories for postwar reconstruction. Without Colonial Development and Welfare Assistance, the colony tried other means to get money from the Imperial power to finance its mega-budget. It ratified the European Cooperation Agreement that demanded the colony develop a Four Year Development Plan (FYDP).98 In coming up with the plan, the government was hopeful that it could obtain additional funds from overseas. Whitehead, accompanied by D. H. Cummings, the undersecretary of Finance in the Treasury Department went to Britain to ask for permission to access the London Stock Market.99 He presented the FYDP to the Imperial Treasury and the Commonwealth Office to convince the Imperial Government to lend money to the colony.100 The Plan was laudable and contained many impressive economic projects. Whitehead, presenting to the Imperial delegates, laid down that it was important for the colony to get the money to finance development projects like construction and the maintenance of railways to and from Walvis Bay port as well as increase coal and chrome mining.101 Other projects included the establishment of the Sabi Valley Irrigation Scheme and the 96 Legislative Assembly Debates, 27 April 1949, Whitehead, Column 23. See also TNA, DO35/1028/3, Bank of England: War Finances of Southern Rhodesia, Original Correspondences, Telegram No. 91, Government’s development plan, 1949-1953. 97 Legislative Assembly Debates, 27 April 1949, Whitehead, Column 23. 98 The FYDP was designed to entice the Imperial Treasury to provide low-interest-rate loans to the Colony. The government had recently decided to cut on financing capital expenditure from borrowing or Loan Account, yet it drafted the FYDP targeting to get loans from Britain. 99 TNA, DO35/1028/3, Bank of England: War Finances of Southern Rhodesia, Original Correspondences, Telegram No. 91, Government’s development plan, 1949-1953. 100 TNA, T236/3502, Southern Rhodesia Economic and Financial Policy: Financing of Southern Rhodesia Development Programme General File. Not dated. 101 Ibid. 184 Kariba Hydro-Electric Scheme.102 The main development scheme was the hydroelectric plant on the Zambezi River. The total installation cost was estimated at £10 million over five years and would produce 800 000 kilowatts.103 Apart from this, there would be greater expenditure on public utilities and iron and steel works.104 However, in a joint letter to Prime Minister Huggins, the Dominions Office and the Commonwealth Relations Office indicated that, despite the impressiveness of FYDP, the Imperial Treasury could not give Southern Rhodesia access to London Stock Market. The letter noted that: It is understood that Mr. Whitehead, the Southern Rhodesia Minister of Finance, wishes to [borrow] in London. Overseas territories should closely scrutinize [borrowing] from the United Kingdom. It is also unfortunately probable that the money is likely not to be fully realised during the first two or three years. If, in consequence, the Minister feels that his development plan will be unduly delayed [due to unavailability of funds], it will then be for consideration whether finance could be sought from other sources. We also understand it that the general position regarding Colonial Development and Welfare Assistance to Southern Rhodesia remains that it is only eligible for assistance only if the project concerned were intended to benefit some non-self-governing governments like Northern Rhodesia and Nyasaland.105 As long as Southern Rhodesia’s development projects did not directly benefit Britain or any other territories under the Colonial Office administration, the Imperial Government could not allow the colony to get access to the London Stock Market. After the fruitless trip to London, the colony was forced to turn to internal sources for finance.106 As mentioned earlier, the colony could not increase or impose new taxes. It was impossible to reintroduce suspended customs duties because this could further increase the undesired high cost of living. Moreover, the government could not increase taxes without driving capital out of the country. However, unlike other industries, the tobacco industry benefited immensely from the trade dynamics of the postwar dollar shortage, and Whitehead was of the view that this industry 102 Ibid. 103 Ibid. 104 Ibid. 105 TNA 236/3302 Joint Telegram from Commonwealth Office and Dominion Office to the Prime Minister Godfrey Huggins 2 April 1949. 106 See C. Leys, European Politics in Southern Rhodesia (Oxford: Clarendon Press, 1959), 101; F. Clements and E. Harben, Leaf of Gold: The Story of Rhodesia Tobacco (London: Methuen, 1962). 185 was better positioned to provide the funds required to finance the FYDP. To this end, he proposed the 20 per cent Tobacco Export Tax Bill in March 1949.107 The Bill received resistance from interested parties, which resulted in what many commentators termed the ‘tobacco tax crisis.’108 The crisis lasted for almost six months. The growers and Salisbury Chamber of Commerce argued that it was ‘discriminatory taxation…contrary to [the] democratic principles [of the country] and [would] undermine the confidence in the country’s financial stability.’109 The resistance lasted for three months, during which time the government changed the Bill from 20 per cent Export Tax to 15 per cent Sales Tax and finally changed the Bill to 15 per cent Compulsory Savings Scheme that was passed into law on 11 June 1949.110 The passing of the Compulsory Savings Scheme in June 1949 did not save the day or abate the colony’s financial woes. Even though the Savings Scheme helped Southern Rhodesia achieve a budget surplus of £2 082 236 in 1950, from £71 464 in 1949, the income problem to finance the country’s FYDP remained.111 With total revenue of £16 910 773, it was practically impossible for Southern Rhodesia to finance the FYDP’s budget of £65 000 000. The £3 000 000 loan that Rhodesia had given to Britain could not ease the colony’s financial state. However, Britain had initially promised that Southern Rhodesia would get financial support from the Imperial power if its development projects directly benefited non-self-governing colonies. This presented the colony with a chance to reconsider the Central Africa Federation talks of the late 1940s and early 1950s, as discussed in the following section. Fiscal Policy and Regional Integration: The Fiscal Commission’s Recommendations on the Establishment of the Federal Fiscal Structure, 1950-1953 In Britain, government officials posited that Southern Rhodesia, without political federation, could not attract outside financing for development. For instance, O. Lyttelton, the new Colonial Secretary in 1952, told the British government that he was ‘convinced of the urgent need for federation.’112 Several important issues had to be considered before a federation could be 107 The Rhodesia Herald, 18 March 1949. 108 Ibid. 109 NAZ, S482/171/6/49, Letter to the Prime Minister from the Salisbury Chamber of Commerce 23 March 1949. 110 Southern Rhodesia Statute Laws, Vol. 13, 1949. See also Legislative Assembly Debates, March 1949, Whitehead, Column 331. 111 Refer to Table 6.3. 112 J. J. B. Somerville, ‘The Central African Federation’, International Affairs, 39:3 (1963), 338. 186 established and chief among them included the African policy and Constitutional issues.113 These, however, falls outside the ambit of this section as it focuses on fiscal considerations. Willis is among scholars who have closely focused on the establishment of the Federation of Rhodesia and Nyasaland. He argues that ‘economic incentives…spurred the later campaign for Federation in the late 1940s and early 1950s.’114 This greatly influenced the proponents of economic benefits of the Federation in Southern Rhodesia. As Thompson and Woodruff note, these proponents called for the ‘integration of the three economies’ because their economies depended closely on each other’s resources and requirements of the three territories were complementary rather than competitive.115 Southern Rhodesia and Northern Rhodesia required Nyasaland labour; Northern Rhodesia required Southern Rhodesia’s coal, while Southern Rhodesia needed the other two territories as a market for its manufactured goods.116 Thus, amalgamation would lead to economic growth and reduce vulnerability of public finances of the Federal territories.117 The economic argument vividly resonated with Lord Hailey’s words in 1941 when he said that colonies needed to amalgamate to achieve greater economic development like the Dominions.118 However, Andrew Cohen observes that economic considerations should not be overplayed in analysing Southern Rhodesia’s decision to join the Federation because ‘it is unclear whether or not a detailed economic analysis in predicting the Federation’s effect was carried out before it was implemented.’119 Contrary to this argument, fiscal matters formed part of economic decisions and were of great importance for all territories. In January 1952, when there was growing acceptance 113 For a detailed examination of debates on the establishment and dissolution of the Federation of Rhodesia Nyasaland see but not limited to A. J. Willis, An Introduction to the History of Central Africa: Zambia, Malawi and Zimbabwe (Oxford: Oxford University Press, 1985); A. Hazelwood, ‘the Economies of Federation and Dissolution in Central Africa’, in A. Hazelwood (ed.), African Integration and Disintegration: Case Studies of in Economic and Political Union (London: Oxford University Press, 1967); D. S. Pearson and W. L. Taylor, Break up: Some Economic Consequences for the Rhodesias and Nyasaland (Salisbury: Phoenix, 1963); L. H. Gann, Central Africa: The Former British States (Englewood Cliffs: Prentice Hall, 1971); P. Gifford, ‘Misconceived Dominion’, in P. Gifford and W. R. Louis (eds), The Transfer of Power in Africa; Decolonisation, 1940-1960 (London: Yale University Press, 1982). 114 Willis, An Introduction to the history of Central Africa: Zambia, Malawi and Zimbabwe, 322. See also A. Cohen, The Politics and Economics of Decolonisation in Africa: The Failed Experiment of the Central African Federation (London: I. B. Tauris, 2017), Chapter 1. 115 Thompson and Woodruff, Economic Development in Rhodesia and Nyasaland, 183-4. 116 Ibid. 117 See Gann, Central Africa, 140; L. Gardner, Taxing Colonial Africa: The Political Economy of British Imperialism (Oxford: Oxford University Press, 2012), 209. 118 TNA, CO967/13/41, Lord Hailey, Minutes of the Colonial Office Third Meeting, 1 May 1941. 119 Cohen, The Politics and Economics of Decolonisation in Africa, 41. 187 in Whitehall that the Federation was likely to happen, discussions commenced between the three territories and the Imperial Government to establish a Fiscal Commission.120 The Commission was appointed in April 1952 under the chairmanship of Sir Jeremy Raisman, who had headed similar Commissions in East Africa and Nigeria, to investigate and report on the financial arrangements that could be made for the Federation of the three territories.121 The Commission was asked to make recommendations on five matters regarding the fiscal structure, namely: revenue and expenditure, income tax, assets and liabilities, government borrowing and customs union.122 The Fiscal Commission provided an important platform for Southern Rhodesia to present its case for joining the federation. Some political individuals in the country urged the colony’s representatives to consider the other two territories’ economic and fiscal position. Many in the Legislative Assembly expected Southern Rhodesia’s representatives to take a leading role in convincing the Fiscal Commission to recommend a federal fiscal structure that would benefit the colony. For example, MP for Bulawayo South, Cyril James Hatty, moved a motion in the Legislative Assembly that ‘the Fiscal Commission that has been set [must] study and report on the economic possibilities and advantages of the Federation for Southern Rhodesia.’123 He pointed out two important issues: the ability to raise finance/revenue, and the possibility of faster development under federation. For Hatty, it would become easier to obtain funds from Britain for future development under a federated government, but other territories had to show the ability to raise funds locally. Noel St. Quinton, MP for Harare Gardens, supported his argument. He reiterated that the Fiscal Commission should analyse the financial position of the other two territories before making any suggestions to join the Federation.124 He said: If, as proposed, we are going to take other territories as our Federal partners, we must be surely supplied with a clear picture as to the revenue, expenditure and probable lines of [economic] expansion and development. In short, so that we can see what they are going to contribute to the general pool. Northern Rhodesia’s 120 NAZ, GEN/WEST, John H. West, Joint Secretary of the Fiscal Commission, The Taxation Proposals of Fiscal Commission, not dated. The Commission recommended that the functions of the fiscal structure be divided among the four governments, that is, the three territorial governments and the Federal Government. 121 TNA CO52/193 Cabinet Office Copy 64, Proposed Federation of Southern Rhodesia, Northern Rhodesia and Nyasaland, 13 June 1952. 122 NAZ, GEN/WEST, John H. West, The Taxation Proposals of Fiscal Commission, Not dated. See also J. Due, ‘Financing Federation in Africa’, Revenue Sharing and its Alternatives: What is the Future for Fiscal Federations, Vol. 1, a paper prepared for the Subcommittee on Fiscal Policy of the Joint Economic Congress of the United States, 1967. 123 Legislative Assembly Debates, 24 June 1952, Column 2744. 124 Ibid, Column 2755. 188 financial position at present is most attractive, but conditions in the world may change [affecting copper prices]. [Unlike Southern Rhodesia] Northern Rhodesia has a 10-year plan of development, another aspect and a matter for the Fiscal Commission’s consideration.125 Hatty and Quinton’s points explain Southern Rhodesia’s dominant influence on the recommendations made by the Commission. Their main argument cemented the general idea among the Rhodesian politicians that Southern Rhodesia, because of her advanced state of development and fiscal structure, was able to raise more revenue than the other two territories and needed more finance to maintain its infrastructure. Thus, the colony should hold the controlling position of economic and fiscal affairs in the partnership. The Commission spent the first three weeks of its investigations analysing the expenditure patterns of the three territorial governments. The Commission needed to obtain an overall view of the territories’ fiscal pattern as the basis for provisional decisions concerning the allocation of finance between Federal and constituent governments. Its report prepared an expenditure structure using the 1952 budgets of the three territories as the basis for the allocation of finance to territorial governments. J. H. West, joint secretary of the Fiscal Commission, noted that ‘the [idea] was to pick out from the three Territories items of expenditure that represented the same functions.’ This would set out the division of fiscal responsibilities between Federal and territorial governments. The Federal government took over important functions from territorial governments, notably health, education, agriculture, commerce and industry, post offices and the financial sector.126 It also assumed responsibility of the African Affairs Board, External Affairs, the Supreme Court, and other expenses covered under each territory’s Governors’ Departments.127 On average, it appeared that the Federal government would require at least £26.9 million per annum. After transfer of federal services, the territories’ expenditure was expected to be £12 700 000 in Southern Rhodesia, £8 300 000 in Northern Rhodesia, and £2 800 000 in Nyasaland. The Commission’s recommendations set out to benefit Southern Rhodesia more than the other Federation partners. For example, in preparation of the 1952/53 fiscal year, as shown in Fig. 6.3 below, Southern Rhodesia received the biggest amount in revenue allocation after the Federal government.128 125 Ibid. 126 NAZ, F187-E771-05, Summary of the Fiscal Commission Report, 3. 127 Ibid. 128 NAZ, F187-E771-05, Fiscal Commission Paper No. 1. 189 Fig 6.3: Fiscal Commission Recommendations on Total Revenue Allocation for 1952-1953 Fiscal Year £8051528, 18% £2492462, 6% £10271600, 23% Federal Government S. Rhodesia Terrotirial Government N. Rhodesia Territorial Government Nyasaland £23508374, 53% Source: NAZ, F187-E771-05, Papers and Reports of the Fiscal Commission and Fiscal Review Commission, Federation of Rhodesia and Nyasaland 1952. Having completed the analysis of expenditure, the Fiscal Commission turned to the revenue side of the budget. It prepared a statement setting out all comparable forms of revenue for the three territories. Income tax collection tools were unified under the existing Southern Rhodesian Income Tax Consolidation Act of 1948 to ensure efficient operation of the Federal fiscal structure. The income tax burden would be divided between the Federation and the territories as follows: Federation 60 per cent, Southern Rhodesia 17 per cent, Northern Rhodesia 17 per cent and Nyasaland 6 per cent.129 The Commission also suggested territorial surcharges, mainly to cover for the reductions in income tax rates of Southern Rhodesia and Nyasaland.130 Surcharges on 129 NAZ, F187-E771-05, Federal Revenue and Expenditure as compiled by the Fiscal Commission, June 1952. 130 Ibid. 190 personal incomes would be collected along with basic tax and on companies; they were limited to a maximum of one-fifth of the Federal tax rate.131 Having decided that income tax should be assessed and collected at a uniform rate and that the proceeds be divided among the four governments, the Commission had little hesitancy in recommending that such a fundamental matter be included in the Federal constitution. All three territories agreed. However, as John Due argues, this was attained ‘at the price of substantial loss of fiscal autonomy on the part of territorial governments, particularly Northern Rhodesia and Nyasaland,’132 whose tax systems were not as developed as Southern Rhodesia. The decision was welcomed by Southern Rhodesia, who had worked for more than 30 years to establish its income tax system.133 Concerning customs and excise revenue, the Commission found it difficult to come up with uniform customs and excise duties throughout the Federation without violating customs agreement between Southern Rhodesia and South Africa, and between Northern Rhodesia and the Congo Basin.134 However, with the assistance of the controllers of customs and excise duties from the three territories, the Commission identified items to put under a uniform export tax system.135 It made suggestions for reductions in customs duties on all necessities of life such as clothing.136 This particularly benefited Southern Rhodesia, because, since 1946 the colony had tried, but failed, to reduce the cost of living. After the Commission had completed the provisional analysis of expenditure and revenue collection, it turned its focus to public debt management, which presented a major problem. In contrast to Southern Rhodesia, the other territories had manageable debts. The Commission suggested three main options to deal with the problem. First, the Federal government would take over all the public debts of the three countries. The second option was that public debts should remain with the three territories. The third option was that the debts be divided between the Federal and territorial governments according to whether the money was invested on assets and projects 131 Ibid. 132 Due, ‘Financing Federation in Africa’, 506-512. 133 Ibid. In 1918, Southern Rhodesia used income tax as one of the reasons not to join the Union, arguing that it was high in South Africa. Yet, the Commission imposed Southern Rhodesia’s high income tax on Northern Rhodesia and Nyasaland. 134 NAZ, F187-E771-05, Fiscal Commission Paper No. 13, Report of the Integration of the Tax Laws of Southern and Northern Rhodesia, 1952. 135 NAZ, CMD, 8573, The Proposal to establish a Customs Union in the Central African Federation. 136 NAZ, GEN/WEST, John H. West, The Taxation Proposals of Fiscal Commission, Not dated. 191 which directly benefited all three territories.137 Territorial governments disagreed on what option to follow. With its huge public debt, Southern Rhodesia preferred the first and, to some degree, the third option.138 Whitehead told the Fiscal Commission that Southern Rhodesia was under a depressing debt and did not receive Colonial Development and Welfare Assistance, so it would be financially helpful to the colony if the Federal government took over part of its national debt.139 His sentiments particularly referred to the £30 000 000 which Southern Rhodesia had incurred purchasing the Railways in 1947, a debt he felt fell under the Fiscal Commission’s third recommendation. The other two territories, Northern Rhodesia and Nyasaland, due to their manageable national debt compared to Southern Rhodesia’s, preferred the second option.140 According to Northern Rhodesian officials, the effect of sharing the debt was that the amount of tax revenue, especially income tax, needed to balance the budget after the servicing of debt was higher in Northern Rhodesia than in Southern Rhodesia.141 However, a consensus was reached, and the Federal government agreed to take over the public debt of the three territories amounting to £79 000 000: £56 000 000 from Southern Rhodesia, £16 000 000 from Northern Rhodesia, and £7 000 000 from Nyasaland.142 This would leave Southern Rhodesia with a national debt of £50 000 000 and, virtually, transfer the whole of Northern Rhodesia and Nyasaland’s debts to the Federal government.143 To coordinate external and internal borrowing and avoid future piling of national debt, the Commission recommended the establishment of a Loans Council on the model of the Loans Council of Australia.144 This model consisted of the Federal Finance Minister and the Finance Ministers from each of the three territories. ‘We envisage,’ reported the Commission, ‘that the Loans Council would be the sole authority for the raising of all external loans,’ under the auspices of the Federal government.145 Thus, the proposed draft for the Federation’s financial management 137 Ibid. 138 Ibid. 139 NAZ, F187-E771-05, Fiscal Commission Paper No. 3, 81. 140 Ibid. 141 NAZ, GEN/WEST, John H. West, The Taxation Proposals of Fiscal Commission, Not dated. 142 NAZ, F187-E771-05, Fiscal Commission Paper No. 14, 5. 143 Ibid. 144 Ibid. 145 Ibid. 192 put external borrowing under the Federal Government as part of the monetary policy. This was in line with the Commission’s recommendation that the Federal Government alone should be empowered to control the banking system and monetary policy. Internal borrowing, on the other hand, remained in the hands of Territorial governments. The Commission argued that it was important for the Loans Council to limit its control of borrowing from sources within the Federation because of the connection between internal borrowings and general control over monetary policy.146 After much cogitation over the territorial Governments’ expenditure and revenue systems, the representatives of the Commission finally agreed to set up a Federal fiscal structure based on suggested policies. In a report to the Rhodesian government, Whitehead indicated that ‘we agreed [with satisfaction] to apply the Fiscal Commission’s recommendations as guiding principles of the Federation fiscal structure.’147 Thus, the Commission’s report set the basis of the Federation’s fiscal structure and was approved in the final conference at Carlton House Terrace in January 1953. The Southern Rhodesia electorate supported the decision in a referendum leading to the Federation’s full effect on 23 October 1953. Conclusion The overarching observation made in this chapter was that an understanding of Southern Rhodesia’s post-war economic performance requires investigation beyond the existing narratives. These narratives hold that the country’s total postwar economic performance can be ascribed to tremendous development. Beyond the economic development that Southern Rhodesia experienced in this period, the chapter has shown that the colony faced fiscal and financial challenges.148 Though the colony’s economic sectors like manufacturing/secondary industries, mining, and agriculture indeed saw great development, the end of the war brought new fiscal difficulties. In 1946, the colony experienced a budget deficit, after which the situation improved in 1947, only for the colony to experience another budget deficit in 1948. The deficit was compounded by the ever- growing public debt that placed a financial strain on the colony’s income resources.149 To improve 146 NAZ, F187-E771-05, Fiscal Commission Paper No. 13, Report on the Integration of Tax Laws of Southern and Northern Rhodesia. See also Sowelem, Towards Financial Independence in a Developing Economy, Chapter 4. 147 NAZ, F187-E771-05, Fiscal Commission Paper No. 13, Report of the Integration of the Tax Laws of Southern and Northern Rhodesia, 1. 148 Irvine was of the view that finance was of limited importance in terms of Rhodesia’s development. This chapter has tried to show that Irvine’s assertion was not entirely true. 149 See Fig 6.2 193 the situation, the Minister of Finance turned to the pre-war fiscal policies of budget reductions by trimming departmental expenditure. Of course, this did not help the colony as it consequently experienced another deficit in 1948. The colony had to look for alternative sources of income. As the chapter attempted to show, Southern Rhodesia sought financial assistance from Britain through their Colonial Development and Welfare Assistance. For this purpose, the colony formulated the FYDP. However, as a self- governing colony, it did not qualify, and the Colonial Development and Welfare Assistance which was intended for dependencies or colonies whose projects directly benefited Britain. The colony tried another measure and introduced the Tobacco Export Tax. This created heated debates across the country, and the government ultimately imposed a Compulsory Savings Scheme. Even though the Scheme improved the country’s financial position, so much so that it experienced budget surplus in 1949/50 fiscal year, revenue remained inadequate to fund the FYDP. The chapter highlighted that one of the reasons for the colony’s decision to join the Federation was the need to get the Imperial power finance some of its projects for economic development. This led to the establishment of the Fiscal Commission in 1952. The Commission’s mandate was to investigate and report on financial arrangements for the Federation of the three territories. Its report, as shown in the chapter, benefited Southern Rhodesia. 194 Conclusion This thesis examined the history of fiscal development in Southern Rhodesia from 1890 to 1953. It particularly analysed the structure, processes and the management of the fiscal system: how revenue was raised and expended over time. The fiscal system shaped political decisions and the colony’s administrative structure and, conversely, these also shaped the fiscal system.1 The fiscal changes necessitated interactions that existed between political dynamics and economic institutions shaping the direction of the country’s development course. The thesis’s main argument is that the development of the colony depended on the ability and capacity of the state to finance the colonial project. The capacity to finance also turned on the administrative structures put in place to raise, allocate and manage the revenue. The ultimate sources of finance were direct and indirect taxation, loans and other forms of non-tax revenue. The state’s capacity to collect and generate revenue determined the scope for public expenditure and provision of public goods, which in turn had consequences for the economic development of the colony. In the introduction, the thesis posed a question on how national, regional and global dynamics impacted on sources of revenue, expenditure and the role of settler politics in influencing the government’s fiscal decisions. What comes out clear in the thesis in answering this question is the nexus between politics, revenue collection and expenditure. Analysing the fiscal system, the thesis built on Murray and Lee’s observations that the established systems in Southern Rhodesia were hotly contested and this triggered squabbles between the Company Administration or Responsible Government and the settlers, who were themselves divided. Usually the disputes were over tax imposition, especially who should carry the burden of taxation and who should enjoy the benefits of government expenditure. In pursuing the main argument that the administrative system, politics, revenue collection and expenditure were central to state-making in Southern Rhodesia, the 1 Prior to 1890 the administrative system established in Southern Rhodesia did not exist. There are studies that have examined African administration systems prior to colonisation. While these studies does mention that there were existing African forms of administration and the colonial state did not build from scratch, the focus of this thesis has been to show the development of a particular colonial state focused on establishing colonial structures that excluded Africans. For more on African systems of administration prior to the establishment of Southern Rhodesia, see D. N. Beach, The Shona and their Neighbours (Oxford: Wiley-Blackwell, 1994); G. Chikozho Mazarire, ‘Reflections on Pre- Colonial Zimbabwe, c. 850-1880s’, in A. S. Mlambo and B. Raftopoulos (eds) Becoming Zimbabwe: A History from the Pre-Colonial Period to 2008 (Harare: Weaver Press, 2009); H. K. Bhila, ‘The Manyika and the Portuguese, 1575-1863’, (PhD Thesis: University of London, 1971); S. I. G. Mudenge, A Political History of Munhumutapa, c. 1400-1902 (London: Currey, 1989); J. R. D. Cobbing, ‘The Ndebele Under Khumalos, 1820-1896’, (PhD Thesis: University of Lancaster, 1976); S. J. Ndlovu-Gatsheni, The Ndebele Nation: Reflections on Hegemony, Memory and Historiography (Pretoria: UNISA Press, 2009). 195 narrative is told in different historical epochs, because of different administrative systems, namely Company government and self-Responsible Government. The first epoch before 1923, covered in Chapters One and Two, was under the Chartered Company Rule, a commercial company entity acting as the government. Its interests were frequently at odds with those of the settlers. Noteworthy, regardless of the company and the settlers’ squabbles, it was Africans who paid the price. The second epoch, covered in Chapters Three, Four, Five and Six constitute fiscal policies implemented under Responsible Government. Regardless of the different periods, however, a common thread in the analysis is the government’s negotiation with the Rhodesian settler community in response to certain fiscal developments. During the first 33 years of British South Africa Company (BSAC) rule, the Company and the settlers were frequently at loggerheads over the administrative system. Between 1890 and 1894, as explored in Chapter One, the company government established a rudimentary administrative structure (pp. 24-25). As a result, during the early years, the colony’s fiscal processes were experimental and somewhat unstructured. Debates on important issues like land ownership, expenditure and revenue collection processes were among the many administrative duties that the Company faced. This created financial problems for the Company. In face of all the problems, the BSAC Administration defended itself arguing that it was operating on a budget deficit (refer to Fig 1.1 in Chapter One), while the settlers argued that it should disclose income from its commercial activities. The Imperial Government instructed the BSAC Administration to establish institutions that would facilitate the effective administration of the country’s finances. By 1898 the Company established the Legislative Council, which culminated in the establishment of the Division of Treasury in 1903. However, the Legislative Council and the Division of Treasury’s establishment did not improve the administration of the colony’s finances, at least in the settlers’ view. The Council’s structure did not allow the elected members to make decisions on the Company government’s expenditure policies, not least, because the Company’s appointed members outnumbered the elected members (pp. 32-34). The appointed members determined the Company government’s policies, nor was the Company government obliged to publish its commercial activities,2 yet the settlers argued that it mixed its administrative and commercial accounts. The settlers, thus, argued that the Company 2 See R. Blake, A History of Rhodesia (London: Eyre Methuen, 1977), 54. 196 was using administrative revenue for its commercial interests. The situation triggered fierce debates over who should finance the country’s administration, with settlers claiming that they contributed almost two thirds towards the country’s revenue. In contrast, the Company that owned all the country’s resources paid virtually nothing towards its administration. The debates laid the basis for campaigns against the continuation of the Company administration. From 1908 to 1912, settlers wanted the Company to change its fiscal approach. The ever growing settler demands for a new fiscal approach examined in Chapter Two intensified settler politics in the colony. During the Supplemental Charter negotiations that gave the BSAC a lifeline following the lapse of the initial one, the settlers had divided opinions. After the Charter lapsed in 1915, the existing Rhodesian League, an economic interest group that pushed for the farmers’ interests, was split into two groups with different demands. The Common Platform, the breakaway interest group, wanted the Company administration to end and the colony to get Responsible Government or join the Union of South Africa. Those who remained in the Rhodesian League under Charles Coghlan’s leadership argued that the country was not yet financially capable of administering itself. This group demanded binding agreements between the Company and the white Rhodesians that the BSAC administration would reform its fiscal approach. The Company conceded to the settlers’ demands in the Supplemental Charter; it promised to reorganise its fiscal system to avoid a mixture of the administrative and commercial accounts and to deal with revenue deficits. As these arrangements unfolded, the onset of the First World War presented a new set of financial challenges for the Company and it breached its promises. Events during this period put the Company government in a precarious position. The war hindered the development of the agricultural industry, railway rates became expensive and there was a shortage of consumer goods. The living cost shot up. While white Rhodesians were struggling to make ends meet, the Company proposed an income tax, special war tax and excess profits tax. The Company argued that up to 1917, white Rhodesians never paid direct taxes and it was the duty of every Rhodesian to contribute towards the country’s finances. This intensified settler politics in 1917 as they established the Responsible Government Association (RGA) dominated by the farmers. Among other many fiscal demands, they wanted to control the Income Tax Department that was collecting more revenue for the Company. The farmers felt that white Rhodesians, instead of the Company, 197 should administrate this revenue. The Income Tax Department collect £115 856 in 1918 and it increased to £236 883 in 1922. Driven by the desire to gain financial benefits for its shareholders, the Company was against granting of Responsible Government and preferred Southern Rhodesia to join the Union of South Africa. The Company supported the Rhodesia Union Association (RUA) established to campaign against the conferment of the Responsible Government. However, the RGA argued that the fiscal terms given to Southern Rhodesia were unfavourable towards the colony. In the end, as examined in Chapter Two, the Responsible Government’s proponents succeeded in influencing the political terrain in Southern Rhodesia, as exhibited by the 1922 referendum when they supported the end of the Company Rule. This ushered in the Responsible Government. The change in administration from Company Rule to Responsible Government examined in Chapter Three precipitated the reorganisation of the colony’s fiscal management. The Responsible Government, the longest government system in the history of Southern Rhodesia was meant to drive development designed to create a settler state. It thus implemented fiscal policies that encouraged and promoted economic growth for the white Rhodesians. While the post-1923 constitution had limitations on the Responsible Government’s functions, it gave some degree of autonomy in terms of fiscal policy. The government was able to put in place fiscal measures to facilitate and promote economic development. For instance, the CRF enactment prompted accountability and sound public finance management that improved revenue collection and allocation compared to the previous administration. As argued in Chapter Three, the government increased expenditure on aspects that the Company government neglected, for example, road construction and especially farming. Expenditure increased from £1 356 000 in 1923/24 fiscal year to £2 500 000 in 1928/29 fiscal year. However, the financial development during the twenties had its problems. Revenue collection, especially income tax from the mining industry, always created problems for the new government. As highlighted in the thesis, the post 1923 governments tussled with big mining companies on double taxation (pp. 92-94). The mining companies argued that they paid taxes in both Britain and Southern Rhodesia. In addition, the thesis argues that growth in government expenditure during the twenties was skewed. The government financed agriculture more than any other economic sector. As a result, debates over why the government prioritised agriculture at the expense of other sectors erupted, pitting the two major industries: farming and 198 mining industries. The big mining industries opposed government expenditure on or aid to agriculture. In addition to examining the politics of revenue collection and expenditure, this thesis has also connected local fiscal demands with the changing global context. Chapters Four and Five in particular showed how global dynamics influenced the Colony’s fiscal policy. In Chapter Four, the thesis examined the effects of the Great Depression on Southern Rhodesia’s economy and how the Rhodesian Treasury responded to the Depression. Before the Depression, the colony’s economy was dominated by agriculture and mining as its major drivers. However, because of the Depression, the operations of these two major sectors, with the exception of gold mining, declined significantly, affecting the colony’s revenue base. Whereas during the twenties, the Colony experienced revenue surpluses, during the Depression the country experienced budget deficits (see Table 4.1 in Chapter Four). These developments put the country’s fiscus under great pressure. The situation compelled the government to implement measures to mitigate the effects of the Depression. The government’s main objective was to keep up solvency. Consequently, it revisited its public expenditure. The state implemented the balanced budget rule by reducing ‘unnecessary’ expenditure and utilising surplus revenue accumulated during the twenties (pp.114-118). Even as the government implemented a balanced budget rule, it was not enough to mitigate the effects of the Depression. Tax reforms became imperative. The most noticeable change in the Rhodesian tax system was the proportional contribution between Africans and white settlers. As admitted by the Chief Native Commissioner in 1934, Africans, through direct and indirect taxes, took the shock of the Depression. Africans contributed £3 238 975 of £18 608 282 revenue collected from major heads between 1930 and 1938, (see Table 4.4 and pp. 119-126). Their contribution vis-à-vis their low wages, was significant for the colonial state. In addition, the government implemented a motley of laws that protected white settler farmers against African competition, making it more difficult for them to secure income to pay their taxes. Meanwhile, the tax reforms exposed more cracks within the Rhodesian settler community. For example, while gold acted as the Rhodesian economy’s stabiliser through its contribution on exports, the imposition of GPT triggered opposition from gold miners. They contended that the GPT was a tax premised on ‘bad principle and application’ because it was charged on the product/gold, and not on the profits realised, thereby, added to the cost of production. The three major mining bodies, 199 the Salisbury Chamber of Mines, the Rhodesian Mining Federation and the Rhodesian Chamber of Mines, all opposed the introduction of the GPT. Despite opposition, the Rhodesian state passed the GPT Act in 1932 to raise extra revenue for the Treasury. The thesis also demonstrated that because of the Depression, Southern Rhodesia renegotiated its relations with its neighbours. Given that the colony’s economy was based on exports of mining and agriculture products, a plunge in these sectors decreased the revenue collected from customs duties. At the same time, Southern Rhodesia had an unequal Customs Agreement with South Africa since 1903. Before 1930, the Customs Agreements were designed to exchange goods without collecting customs revenue. This had been a source of friction between the state and interest groups for a long time since 1910 up to 1928 (pp. 83-85). However, with the intensification of the Depression, there was an agreement across the Rhodesian society that the colony should renegotiate Customs Agreement with South Africa. Reduction in expenditure and tax reforms quickly put Southern Rhodesia on the recovery path fiscally. By 1935 the colony experienced budget surplus of £131 314 and increased to 263 712 in 1938, (pp. 127-130). For the first time since the outbreak of the Depression, the government abandoned its balanced budget rule and expanded its expenditure. In addition, by adhering to strict budget balancing, the country boosted its status on the money markets, (see Table 4.5 in Chapter Four). With surplus revenue, the government allocated additional funds to European education, agriculture, hospitals, posts and telegraphs, roads, public works, debt and loan service, and pensions and gratuities, (as demonstrated by Fig 4.1 in Chapter Four). However, while the government increased expenditure, secondary industries received negligible attention. Secondary industries were neglected because dominant sectoral interest in the country opposed state support for industrial development.3 Similarly, African development received little government financing. For example, while European education was part of public expenditure the Department of Native Education established in 1928 was primarily funded by missionaries (p. 130).4 With improved financial position the settlers demanded tax reductions by 1935, indicating that the country’s financial position was improving. The incumbent Finance Minister, John Hendrick Smit, 3 See V. M. Gwande, ‘Organised Secondary Industry and the State in Zimbabwe, 1939-1979’, (PhD Thesis: University of the Free State, 2018). 4 R. Gray, Two Nations: Aspects of the Development of Race Relations in the Rhodesias and Nyasaland (London: Oxford University Press, 1960), 133. 200 a fan of Gladistonian policies, subscribed to the idea of tax reductions. He announced considerable tax reductions starting from 1935, first targeting customs duties and income tax. In 1938, he completely scrapped the GPT. However, tax reductions, like any other Rhodesian policy, were segregative/discriminatory. Africans who carried the burden of the Depression benefited less from the policy (pp. 136-137). While settlers benefited from income tax reduction and abatement, Africans’ pre-1935 conditions never changed. At the same time, Smit did not implement his tax reductions without experiencing opposition. Many in the Legislative Assembly feared that tax reductions would create a deficit generating budgetary problems for the colony. Rhodesian legislators’ fears were soon confirmed. Following on the heels of the Great Depression was the outbreak of the Second World War. While the thesis acknowledge conventional wisdom that the Second World War promoted industrial and economic growth in the colony by providing insatiable markets for the colony’s products,5 it contends, however, that the war commitments crowded Southern Rhodesia’s fiscal space. Financing the war effort and local development put extra financial demands on the colony’s limited financial resources. Balancing the two outstripped the available revenue. Combined ordinary and war effort expenditure jumped from £3 591 000 in 1938/39 fiscal year to £5 331 820 in 1940/41.6 To raise fresh capital, Smit suggested low-interest local borrowing against the reintroduction of scrapped taxes (pp. 150-155). He launched National Savings Campaigns to convince people to save and buy the government’s Loan Certificates and Treasury Bills. While some Rhodesian legislators supported local borrowing because Britain had closed its money markets during the war, many in the Legislative Assembly believed that Rhodesians were more than eager to pay more taxes to help the government’s decisions to support the mother country. Therefore, against Smit’s position, the Rhodesian government reversed its tax reductions policy through the implementation of new Special War Taxes (SWT). The reintroduction of new taxes 5 See for example D. Johnson, World War II and the Scramble for Labour in Colonial Zimbabwe, 1939-1948 (Harare: University of Zimbabwe Press, 2000); ‘The Impact of the Second World War on Southern Rhodesia: with special reference to African Labour, 1939-1948’, (PhD Thesis: University of London, 1989); L. H. Gann and M. Gelfand, Huggins of Rhodesia (London: Allen & Unwin); N. Mlambo, ‘Arms Production and War Supply in Southern Africa, 1939-1945: Limitations of the Industrial War Effort of South Africa and Zimbabwe during the Second World War’, (PhD Thesis: University of Cape Town, 2000); G. Hove, ‘The State, Farmers and Dairy Farming in Colonial Zimbabwe, (Southern Rhodesia), c.1890-1951’, (PhD Thesis: Stellenbosch University, 2015); Madimu, T., ‘Farmers, Miners and the State in Colonial Zimbabwe Southern Rhodesia, c.1895-1961’, (PhD Thesis: Stellenbosch University, 2017). 6 British Online Archives (BOA) File 73150D-01, Southern Rhodesia Financial Statements, 1940-1941 Fiscal Year, 5. 201 generated political conflicts with economic interest groups. In the end, Smit, who supported reduced taxation, resigned with Max Danziger taking over. When Danziger took over, the taxpayers’ situation changed for the worse. The government continued to implement aggressive fiscal policies never experienced in the country’s history, not even seen during dark days of the British South Africa Company (BSAC) rule. He argued that extra taxation would collect more revenue for the country to utilise when the war ended. In the same vein of extra taxation, Danziger expanded Smit’s borrowing policies. Contrary to Lewis Gann and Michael Gelfand, and Wetherell that from the outset, the government wanted to contribute towards the effort from tax revenue,7 the thesis, demonstrated that more than £12 000 000 of the total £30 841 030 spent during the war was from loan funds, (see Table 5.4 in Chapter Five). Combined tax revenue and loan finances raised surplus income for Southern Rhodesia that amounted to £3 000 000. Danziger offered the money to Britain as an interest-free loan in 1943, payable after the war. The logic behind offering Britain an interest-free loan was to build future relations with the Imperial Treasury for Rhodesia to borrow from the British money markets. The end of the War did not turn out as Danziger expected. While conventional wisdom narrates that the colony’s economic sectors like secondary industries, mining, and agriculture massively developed during the post war period,8 the thesis argues that the end of the War brought new fiscal challenges. Many aspects needed financial attention. The transport system was in shambles. The strip road system that was developed in the thirties and hailed during the war was no longer adequate. The railway system, completely neglected during the war, was in disarray. At the same time, the increased immigration of white settlers put pressure on social services like education, housing and the health system. As a result of attending to the demand on social services, Southern Rhodesia operated a budget deficit in 1946. The situation briefly improved in 1947. However, in 1948 the colony experienced another budget deficit. The financial strain was compounded by the 7 Gann and Gelfand, Huggins of Rhodesia, 163; H. I. Wetherell, ‘Continuity and Change in Opposition Politics in Southern Rhodesia, 1923-1962’, (MPhil Dissertation: University of Rhodesia and Nyasaland, 1974), 131. 8 A great deal of literature argues that during the postwar period Southern Rhodesia developed immensely. While this argument is correct, it does not capture the fiscal situation of the colony. See for example Gray, Two Nations; Gann and Gelfand, Huggins of Rhodesia; A. G. Irvine, Balance of Payments of Rhodesia and Nyasaland 1945-1954 (London: Oxford University Press, 1959); Thompson and Woodruff, Economic Development in Rhodesia and Nyasaland; C. Stoneman, ‘Foreign Capital and Prospects for Zimbabwe’, World Development, 4:1 (1976), 25-58. 202 ever-growing debt, putting pressure on the colony’s income resources (refer to Fig. 6.2 in Chapter Six). The £3 000 000 loan given to Britain was insignificant to finance reconstruction while recurrent expenditure took up the bulk of the country’s budget. At the same time, Southern Rhodesia, regardless of the interest-free loan it offered Britain during the war, did not qualify for the Colonial Development and Welfare Assistance. The overall effect of financial problems in the post-war period was the high cost of living. In this regard, the thesis adds to historiographical dimension that argues that the War brought mixed fortunes. To improve the financial situation, the Minister of Finance, Whitehead encouraged government departments to reduce expenditure. Consequently, the fiscal status improved between 1949 and 1951, as illustrated in Table 6.3 in Chapter Six. Though they produced positive results through budget surplus, the government’s efforts to reduce expenditure did not help the colonial state. In 1949/50 fiscal year Southern Rhodesia put an estimated budget of £65 000 000, yet the colony’s total revenue in that year was £13 602 085. Because Southern Rhodesia did not qualify for Colonial Development and Welfare Assistance, it drafted a Four Year Development Plan (FYDP), hoping it could obtain funds from external sources. Whitehead, accompanied by D. H. Cummings, visited Britain to present their case, but the journey was fruitless. However, Britain promised Whitehead that Southern Rhodesia would be allowed to borrow from the London Stock Market or benefit from the Colonial Development and Welfare Assistance if its projects directly benefited non-self-governing colonies. Even officials in London argued that it was difficult for Southern Rhodesia to obtain Imperial support without joining a federation. After he failed to secure income in London, Whitehead had to look for alternative sources. Contrary to Irvine’s argument that finance was not a limiting factor in Rhodesia’s development,9 the study shed light on how it was difficult for the country to secure capital to fund its huge 1949/50 budget. It could not impose new taxes on both white and black Rhodesians already struggling with the high cost of living. Additionally, new taxes would affect the inflow of capital. The alternative was to tax the flourishing tobacco industry. The government proposed a Tobacco Export Tax. This created heated debates with many interest groups connected to the tobacco industry calling the tax discriminatory and contrary to ‘the country’s democratic principles’ (pp.185-187). Ultimately, the government imposed a Compulsory Savings Scheme. Despite the Savings Scheme’s significant 9 Irvine, Balance of Payments of Rhodesia and Nyasaland, 313. 203 contribution towards government finances, revenue needed to fund the FYDP remained inadequate. Driven by the desire to get funds from Britain to finance its projects, Southern Rhodesia approached the Colonial Office to enquire if the colony could take the Federation way. While studies that focussed on the Federation champion other causes for the establishment of the Federation of Rhodesia and Nyasaland, this thesis argues that fiscal matters, at least on the part of Rhodesia, were equally important. As a result, Britain invited Northern Rhodesia, Nyasaland, and Southern Rhodesia to Whitehall to discuss the Federation’s fiscal terms, leading to the establishment of the Fiscal Commission in 1952 (pp. 198-197). Broadly, this thesis contributes to Southern Rhodesia’s economic history through the prisms of its fiscal development. It expands Nicholls analysis.10 Whereas Nicholls’ study examined the colony’s public finance management between 1923 and 1933, this study updates his work by examining how Southern Rhodesia’s fiscal system evolved before 1923 and developed after the granting of Responsible Government until 1953. Tracing the fiscal dimension of the colony from 1890 to 1953 enabled the thesis to cast light on the changing dynamics in the country’s revenue collection, expenditure and political development. Overall, the thesis makes the case that understanding the colony’s fiscal development processes can only be achieved after analysing the changing nature of the country’s politics and the economy. It also adds a new historiographical dimension to the development of Southern Rhodesia. Where most studies have placed emphasis on sectoral developments of the colony’s economy, they have overlooked the aspect of fiscal development. More importantly, the main point that can be drawn from this thesis is an understanding of colonial Zimbabwe’s fiscal foundations. The thesis adds to already existing and other emerging works on the development of revenue collection, budgeting and the politics of the national purse in the history of Zimbabwe.11 It agrees with Douglas Rimmer that it is difficult to understand today’s African central government functions, mainly in terms of government spending, revenue collection 10 K. W. V. Nicholls, ‘The Public Finances of Southern Rhodesia during the First Ten Years of Responsible Government’, (MA Dissertation: University of South Africa, 1936); J. A. Edwards, ‘Southern Rhodesia: The Response to Adversity, 1935-1939’, (PhD Thesis: University of London, 1978). 11 There are studies that have looked at post-1953 and post-colonial Zimbabwe’s fiscal system and economic development. Such studies include J. Moyo, Politics of the National Purse: Public Budgeting as Public Policy in Zimbabwe (Harare: SAPES, 1992); G. Zhou, ‘Fiscal Management in Zimbabwe’, International Journal of Economic sand Business Modeling, 3:1 (2012), 152-161; T. Nyamunda, ‘Financing Rebellion: The Rhodesian State, Financial Policy and Exchange Control, 1962-1979’, (PhD Thesis: University of the Free State, 2015); G. Sibanda, ‘Finance, Economic Planning and Power in Zimbabwe, 1980-2013’, (PhD Thesis: University of the Free State, 2021). 204 and political development without looking at their colonial origins.12 The public sectors in Africa in general and Zimbabwe in particular, as we know them today, are a product of institutions established during the colonial period. 12 NAZ, GEN-AFRI/Douglas Rimmer, ‘The Public Sector in West Africa: a characterisation’, 23. 205 Bibliography Primary Archival Sources (a) British Online Archives (BOA) BOA, File 73150D-01, Southern Rhodesia Financial Statements, 1940-1952. 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NAZ, ZAM/1/2/3/4/5, Cost of Administration Commission’s Reports, Evidence, Working Papers and Correspondences, 1924. NAZ, ZBN2/1/1, Memorandum: Outline of the history of the Gold Premium Tax, Southern Rhodesia, 6 November 1944. 211 NAZ, ZBN2/1/1, Memorandum titled Outline of the history of the Gold Premium Tax: Southern Rhodesia, 5 November 1944. NAZ/S482/731/39/No. 2, Max Danziger, Minister of Finance to the Prime Minister, 24 August 1942. NAZ/T2/29/1-99, Audit Department’s Balance of Southern Rhodesia, October 1914. NAZ-LA/1/2/1-7, The Council Matters: The Voting power of the Settlers in the Council, 1899- 1923. (c) The National Archives at Kew (TNA) TNA, CO/879/120, File 57351, The Secretary of the State to the High Commissioner, 10 November 1921. TNA, CO/879/120, Colonial Office; South Africa Correspondence Relating to Political Affairs in Southern Rhodesia, 1919-1922, a letter from the High Commissioner Buxton to the Secretary of State, 1920. 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Lessons from the Fiscal Capacity Building in British and French Africa, c.1880-1940’, Journal of African History, 5:3 (2014), 371-400. ____________‘Colonial taxation and government spending in British Africa, 1880-1940: Maximising or minimizing effort?’, Explorations in Economic History, 48,1 (2011), 136-149. ____________‘Raising Revenue in the British Empire: How Extractive were Colonial Taxes?’, Journal of Global History, 5:2 (2010), 447-477. Gleanson, J. H., ‘Crown and Charter: The Early Years of the British South Africa Company’, History Reviews of New Books, 3:8 (1975), 212-213. Good, K., ‘Settler Colonialism in Rhodesia’, African Affairs, 73:290 (1974), 10-36. Hawkins, R. C., ‘The Laws and Administration of Rhodesia’, Journal of the Royal African Society, 13:49 (1913), 45-50. Hulec, O., ‘Some Aspects of the 1930s Depression in Rhodesia’, The Journal of Modern African Studies, 7:1 (1969), 95-105. Jennings, A. C. and Huggins, G., ‘Land Apportionment in Southern Rhodesia’, Journal of the Royal African Society, 34:136 (1935), 296-312. Jewsiewicki, B., ‘The Great Depression and the Making of the Colonial Economic System in the Belgian Congo’, African Economic History, 4 (1977), 153-176. Lanigan-O’keeffe, S. M., ‘Southern Rhodesia’s War Effort’, Journal of Royal African Society, 39:156 (1940), 211-215. Martin, W. G., ‘Region Formation under Crisis Conditions: South vs. Southern Africa in the Interwar Period’, Journal of Southern African Studies, 16:1 (1990), 112-138. 219 Minnaar, A., ‘The effects of the Great Depression (1929–1934) on South African White agriculture’, South Africa Journal of Economic History, 5:2 (1990), 1-25. Mkandawire, T., ‘On Tax Effects and Colonial Heritage in Africa’, Journal of Development Studies, 46 (2010), 1647-1669. Mlambo, A. S., ‘From Dirty Tracks to Modern Highways: Towards a history of Roads and Road Transportation in Colonial Zimbabwe, 1890 to World War II’, Zambezia, XXI:II (1994), 147-166. Mlombo, A., ‘Settler colonialism and trade in the periphery: Customs relations between Southern Rhodesia and South Africa, 1924-1935’, African Economic History, 47:1 (2019), 92-115. Moore, M., ‘Revenues, State Formation, and the Quality of Governance in Developing Countries’, International Political Science Review, 25:3 (2004), 297-319. Mseba, A., ‘Money and Autonomy in a Settler Colony: The Politics of Money Regulation in colonial Zimbabwe, 1932-1945’, in Hsu, C. Y., Luckett, T. M., and Vause, E., (eds), The Cultural History of Money and Credit: A Global Perspective (Lanham: Lexington Books, 2016), 133-148. Munhande, C., ‘Global War and local economy: A Study of the Impact of the Second World War on Southern Rhodesian Tobacco Industry with special reference to Marketing, 1939-1965’, The Dyke, 2:2 (2005), 76-89. Nyamunda, T., ‘Money Banking and Rhodesia’s Unilateral Declaration of Independence’, Journal of Imperial and Commonwealth History, 45:5 (2017), 746-776. Phimister, I. R., ‘Accommodating Imperialism: The Compromise of the Settler State in Southern Rhodesia’, Journal of African History, 25:3 (1984), 279-294. ____________‘Gold Mining in Southern Rhodesia, 1919-1953’, Rhodesian Journal of Economics, 10:1 (1976), 21-44. ____________‘Secondary Industrialisation in Southern Africa: The 1948 Customs Agreement between Southern Rhodesia and South Africa’, Journal of Southern African Studies, 17:3 (1991), 430-442. ____________‘The Structure and Development of the Southern Rhodesian Base Mineral Industry from 1907 to the Great Depression’, Rhodesia Journal of Economics, 9:2 (1976), 79-89. Salmon, T. C., ‘A short history of Rhodesian roads: From veldt track to strip road’, Rhodesia Engineer, 7:5 (1969) 849-851. 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O., ‘Truth and the British South Africa Company: The Development of a Radical’s Opposition to the Development of Capitalist Imperialism in a Southern African context’, (BA Dissertation: University of Witwatersrand, 1972). Machingaidze, V. E. M., ‘The Development of Settler Agriculture in Southern Rhodesia with Special Reference to the Role of the State’, (PhD Thesis: University of London, 1980). Madimu, T., ‘Farmers, Miners and the State in Colonial Zimbabwe Southern Rhodesia, c.1895- 1961’, (PhD Thesis: Stellenbosch University, 2017). Mlambo, N., ‘Arms Production and War Supply in Southern Africa, 1939-1945: Limitations of the Industrial War Effort of South Africa and Zimbabwe during the Second World War’, (PhD Thesis: University of Cape Town, 2000). Mlombo, A., ‘Southern Rhodesia’s Relationship with South Africa, 1923-1953’, (PhD Thesis, University of the Free State, 2017). 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S., ‘The State and Manufacturing Industry: A Study of the State as Regulator and Entrepreneur in Zimbabwe’, (PhD Thesis: University of Zimbabwe, 1996). Punt, E., ‘The Development of African Agriculture in Southern Rhodesia with particular reference to the interwar years’, (M. A. Dissertation: University of Natal, 1979). Samasuwo, N. W., ‘There is something about Cattle’: Towards and Economic History of the Beef Industry in Colonial Zimbabwe, with Special Reference to the Role of the State, 1939-1980’, (PhD Thesis: University of Cape Town, 2000). Tow, L., ‘The Manufacturing Economy of Southern Rhodesia: Problems and Prospects’, (PhD Thesis: Columbia University, 1960). Wetherell, H. I., ‘Continuity and Change in Opposition Politics in Southern Rhodesia, 1923-1962’, (M. Phil Thesis: University of Rhodesia and Nyasaland, 1974). (d) Internet Sources https://www.parliament.uk/business/publications/hansard/commons/ Parliamentary Debates, House of Commons, 14 July 1921. 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