Capital and Colonialism

In this chapter, we describe the historical context of the late nineteenth and early twentieth centuries for our study. We delineate how European imperialism developed during the period, with a particular focus on the colonization of the African continent, the so-called Scramble for Africa. We also describe the development of global financial markets and the key role played by the City of London. The chapter finally introduces a discussion on the interconnection between these two aspects—international, and in particular British, investments in the African colonies.

In this chapter, we describe the theoretical framework of the book. It is described how several classical economists saw colonies as a possible vent for surplus capital in Europe. Marxists later came to focus primarily upon what has been called ‘super-profits’, that supposedly could be earned from investing in colonies. More recent scholarship has primarily viewed imperialism and colonialism as driven by various special economic interests. According to yet another line of thought, colonialism could have reduced the risk of investing in colonies.

This chapter presents previous research that has attempted to study private gains from investing in colonies—measured either as the profitability of companies or the return on investment enjoyed by investors. The chapter describes how these studies have been delineated in time and space and also what methods and data have been employed. The chapter concludes by showing the gap in the previous literature that this book aims to fill.

In this chapter, we provide an aggregate overview of the return on investment in Africa, studying how it changed over time and by sector of operation. We compare our results to previous estimates for the same geographical region and time period in order to test the reliability of our estimates. The results from these comparisons show that our figures match such previous estimates well. We also compare our results to previous estimates for other parts of the world in order to draw conclusions about the rates of return on investing in Africa during the period that we study. The results indicate that the return on investment in Africa was slightly elevated on an aggregate level compared to the return on investment elsewhere in the world. There were also important differences in the return on investment over time and between different regions in Africa.

The aim of this chapter is to use the risk/return relationship to broaden the picture of the financial axis between the London financial market and Africa during our period of study. We use two central concepts in the analysis of financial risk—volatility and equity risk premium—to put our return estimates in context. We move on to analyse the relationship between the companies’ longevity in our sample and the return on investment. Our results show that investing in Africa was somewhat riskier than investing in the United Kingdom, which on an aggregate level corresponds with a somewhat elevated return on investment. Disaggregating the data by region in Africa at the same time shows that many investors were unable to receive a premium for the increased risk they faced.

In this chapter, we study the return on investment in North Africa from 1869 to 1969. Most equities traded on the London Stock Exchange for companies operating in that region were related to Egypt. The chapter will therefore mainly engage with these investments and only briefly discuss other parts of North Africa. Investors were particularly targeting the Suez Canal Company. We put our estimates on the return on investment in their historical context, including the Dual Control and the occupation of Egypt, the colonial period as well as the period of decolonization. We therefore draw heavily on previous research in the field. We also contribute to the historiography of the region by providing evidence on the return on investment there, which generally has been lacking in the previous research.

In this chapter, we focus upon the return on investment in West Africa. Most of the companies in the sample operating in this region were engaged in operations on the Gold Coast (current-day Ghana) or in Nigeria. The sample exhibits a variety of different companies, including commercial and shipping companies, banks and mining companies. Similar to the other regional studies, in this chapter, we put our estimates into their historical context, drawing heavily on previous research in the field. We also contribute to the historiography of the region by providing evidence on the return on investment there, which generally has been lacking in previous research.

In this chapter, we study the return on investment in companies operating in Central or Southern Africa. This includes not only companies operating in Northern and Southern Rhodesia but also investments in some of the neighbouring countries, such as Belgian Congo. The chartered British South Africa Company was initially the largest company in the sample, but its relative dominance faded during the early decades of the twentieth century, as the number of companies operating in the region and traded on the London Stock Exchange expanded. Investments remained focussed on the mining sector throughout the studied period. Similar to the previous two chapters, we put our estimates into their historical context, drawing heavily on previous research. We also contribute to the historiography of the region by providing evidence on the actual return on investment, which generally has been lacking in previous research.

In this chapter, we study the return on investment in the companies operating in the area of current-day South Africa. The equity traded on the London Stock Exchange for companies operating in this region was primarily related to mining—diamond, gold and copper (but indirectly also through railways and utilities). The mining elite became influential politically, actively shaping the institutions of South Africa—and potentially also the geography of the British Empire. The aim of this chapter is to put our estimates for the return on investment in South Africa into proper historical context, and for that purpose, we draw heavily on previous research in the field. We also contribute with new estimates of the return on investment in South Africa over the century from 1869 to 1969, for a number of important companies as well as for different portfolios of investments.

In previous chapters, we have analysed the outcome for different regions of Africa. In the present chapter, we zoom in to a much more detailed level to analyse how the macro-oriented financial history approach can be merged with a more micro-oriented business history approach. We will here use the data from our general dataset and analyse it in tandem with archival material and contemporary business press. In order to discuss the outcome for investors and other stakeholders, we focus on the Corner House group and particularly on the South African gold company Rand Mines Limited during the 1890s. Although this was one of the most important mining companies operating on Witwatersrand at the time, it has received scant attention in previous scholarly literature. We here analyse the formation of inside positions in the company and how these positions can help to explain the varying results for different kinds of investors.

In this chapter, we analyse what role a number of imperialist policies and colonial institutions played for the estimated return on investment in Africa. We study whether two particular imperialist events—the occupation of Egypt in 1882 and the South African War of 1899–1902—had any impact upon the return on investment in these respective parts of Africa. We furthermore study the impact of different colonial institutions. One such institution studied here is the use of chartered companies for the colonization of African countries. We furthermore exploit the distinction between settler and non-settler colonies to analyse the impact of a bundle of colonial institutions associated with settler colonies, in particular, upon the return on investment in these types of colonies. We finally turn to studying the return on investment in connection with decolonization during the 1950s and 1960s and whether decolonization led to the realization of country risk for the investors. We conclude that while specific imperial policies and colonial institutions influenced the return on investment temporarily, this did not translate into a higher average return on investment throughout the period under study.

As has been shown in previous chapters of this book, investments in Africa were, to a large extent, concentrated to mining. Hence, the overall return on investment was, to a large extent, determined by the development of this particular industry. African mines were not the only ones being developed during the period in question. Many investors might have taken a commodity perspective, rather than a regional perspective—that is, to invest in diamonds, gold or copper, regardless of their geographical location. This chapter therefore puts the South African mining industry in a global comparative perspective, comparing its performance to the performance of mining investments elsewhere in the world. The overall conclusion is that the return on investment in the African mines was, on average, higher than comparable mining investments elsewhere in the world.

This chapter summarizes the main findings of the book. The results show that the relationship between capital and colonialism was highly complex. While return from investing in African colonies on average was not extraordinary, there were certainly many occasions where investors enjoyed high return due to various forms of exploitation. While there were actors with rational calculations and deliberate strategies, there was also an important element of chance in determining the return on investment—not least in the mining sector, which overall was the most important business for investment in African ventures during this period. The book finally also demonstrates that the different paths of decolonization in Africa had very diverse effects for investors.