314 TH E SOUTH AFRICAN NATIONAL PEBT. 



say that the late Governments of Cape Colony and Xatal had to 

 pay 0.6 per cent, more than that of Great Britain, for loans. The 

 Union Government, if it- adopts a wise policy, should do a little 

 better. 



It may be added that towards the end of its career the Gov- 

 ernment of Cape Colony grew somewhat reckless, and raised 

 money on short loans at excessive rates — the London market, it 

 was supposed, becoming somewhat shy of the Cape as a borrower. 

 Air. Merriman becoming Premier, and finding it still impossible 

 to do without a loan, raised one very successfully in Cape Colony 

 itself. Before that date there had been several small local loans, 

 and some considerable issues of Cape 3^ per cent, in 1892-3-4, and 

 3 per cent, in 1894 and 1900, but a good deal of this stock had 

 been transferred gradually to the London register. Mr. Merri- 

 man's loan in 1908, though appearing in the table as at a higher 

 rate of interest than the preceding long date loans, was really at 

 almost the same rate, on account of the saving in expenses of 

 issue. Thus the loan of January, 1908, cost the Cape Govern- 

 ment 3.97 per cent., that of September only a trifle over 4 per 

 cent., and probably it would not have been possible, then, to get 

 a loan floated in London at even the price of January. 



A curious point of psychology appears in these figures, and 

 is, I think, confirmed elsewhere. Sometimes a borrower is in 

 doubt between two nominal rates of interest — e.g., in 1902 the 

 Cape Government could get a premium on 3^ per cent, stock, but 

 had to allow a discount on 3 per cent. Logically the prices ought 

 to be adjusted so that, allowing for redemption, the yields should 

 be the same. But practically lenders like to get a discount, and 

 will not give a high enough premium. It is, therefore, cheaper 

 for the borrower to choose the lower nominal rate. Thus in 

 January, 1902, the Government had to pay 3.40 per cent, on 

 three-and-a-halfs, although in June of that year, when credit con- 

 ditions were no better, it was still able to raise money on three per 

 cent, stock at 3.18 per cent. 



The earlier loans were in the form of debentures to bearer ; 

 but for many years now inscribed or registered stock has been pre- 

 ferred. Lately the home market has shown an inclination for 

 bearer securities, so that it may become advantageous to re-adopt 

 that form. The question depends largely on the treatment the 

 Home and Colonial authorities give to these different securities 

 in the matter of taxation. The laws as to taxation of securities 

 that are held internationally are becoming so confused that it is 

 to be hoped an international conference may be held on the 

 subject before long. 



All the South African Governments have adopted the sound 

 plan of promising to repay their loans at fixed dates, in no case 

 exceeding fifty years ahead. The only exception is in some early 

 issues of Cape stock, at 5 and 4^ per cent, of indefinite currency, 

 and of these only three-quarters of a million are now outstanding. 

 It is true that when loans fall due, fresh loans are usually con- 



