Holy Roman Empire

Chapter 496: Striving Hard to Not Become an African Emperor

The Anglo-Boer War had ended, but as one of the victors, the Austrian government couldn’t feel the least bit happy. Once again, reality proved that in modern warfare, relying on war reparations could no longer cover the losses.

Through the armistice treaty, the Austrian government received 3 million pounds as a land buyback fee, and with the ransom for prisoners, the total came to 6.1268 million pounds, equivalent to 12.2536 million guilders.

This might seem like a huge sum, but compared to the costs of the war, it was just a drop in the bucket, not even covering a quarter of the expenses.

This was even with the French secretly helping out. Otherwise, the price paid would have been even higher.

The spoils of war amounted to nothing more than a barren land. Due to the war, the territory obtained from British South Africa barely contained any native tribes, let alone settlers.

If not for strategically opening up a South African sea route and compressing British power into a corner, thus ensuring the safety of the Transvaal Republic and the Orange Free State, it would have been a complete loss.

Despite the losses, with the victory of the war, there had to be recognition and rewards.

However, since it was fought under the guise of the Boer Republics, the calculation of merits had to be circumvented and would be settled once Austria annexed these regions.

The original elites within the Boer Republics, except for a few clever ones who made the right choices, had faded into obscurity in this power reshuffling.

This was a matter of scale. In the former Boer Republics, having hundreds of workers made one a top capitalist, but in Austria, that was just a small-town enterprise.

With the British invasion, their bargaining power vanished. They had dug their own pit by neglecting military preparedness, forcing them to seek Austria’s help against the British.

They initially thought Austria would have to rely on them as local intermediaries, but while they guessed the beginning, they did not predict the end.

The strength of the British was not as formidable as imagined, reducing Austria’s dependence on them. Those wise enough to adjust their mindset and promptly align themselves suffered no losses.

However, those who reacted a bit too late faced unfortunate consequences. The economic losses were one thing, but their political influence was also weakened. Their connections within the Boer Republics’ governments were now severely impacted.

Reality is cruel. Without a power reshuffling, how can those loyal to Austria be promoted?

The nobles who came to fight with their own resources also had interests to protect, and they obviously wanted a share in the redistribution of power.

Even if their roots were not here and they didn’t plan to stay and develop, they could still send a family member to establish themselves here. Expanding branches is how old nobility sustains itself.

These new interest groups would form the foundation for Austria’s future rule in South Africa. As for the original interest groups, unfortunately, their misjudgments led to their downfall.

With the signing of the Treaty of Cape Town, the biggest obstacle to the formation of an Anglo-Franco-Austrian alliance was removed. On July 1, 1871, representatives from Britain, France, and Austria signed an alliance treaty at the Palace of Versailles, marking the beginning of a new era of dominance for the great powers.

Due to various reasons, the treaty was only set to last for five years. It was clear that all three countries lacked full confidence in the alliance, viewing it as merely an experiment.

Whether to renew the alliance after five years would depend on whether all parties could gain more benefits during that time. Relations between countries are based on practicality, and only mutual benefits can sustain such an alliance.

Even so, the European world was in an uproar. This alliance full of contradictions had frightened quite a few people.

For smaller nations that had relied on conflicts among the great powers to survive, life became increasingly difficult. Breaking up this alliance became a common goal for numerous European countries.

At the Vienna Palace, Franz was holding a cabinet meeting to discuss the African railway network plan.

Prime Minister Felix proposed, “Your Majesty, considering the issue of operating costs, the African railway network plan should be delayed. For now, we only need to complete the East-West and Southwest strategic railways.

Blindly proceeding with the construction of a railway network would place a heavy burden on our finances. Take our domestic railway network as an example. Despite the government’s many preferential policies, many railway companies still went bankrupt.

As a result, the capital market has become less enthusiastic about investing in railways. To this day, there are not many profitable railway companies in the country.

If we initiate the African railway network plan, relying on financing from the capital market is almost impossible, and this burden would fall entirely on the government.

This massive railway plan has already exceeded our financial capacity, and it might not even break even within a hundred years.”

The bankruptcy of the railway companies was Franz’s responsibility. To quickly establish a railway network in Austria, he applied methods from the future of internet development.

He introduced a concept and painted a grand picture to attract capital. Railway networks are inherently monopolistic enterprises. Once the initial investment phase is over, profitability is not hard to achieve.

This grand vision was much more conscientious than future virtual concepts, and achieving this goal wasn’t impossible. It just required significant upfront investment and a longer timeframe to become profitable.

With the power of capital, Austria was able to build its railway network in the shortest possible time. As for the railway companies that went bankrupt along the way, they all had a common problem: an issue with cash flow.

This was due to their mismanagement and not because Franz intentionally set them up for the government to take over.

Investments carry risks, and entering the market requires caution. In a capitalist market economy, failing to consider economic crises is the responsibility of the investors themselves.

Of course, Franz never publicly stated this. He never stepped to the forefront, as the ones promoting railway investments were experts, and those who managed railway companies into bankruptcy were capitalists. The Emperor had nothing to do with it.

The surviving railway companies proved that as long as one didn’t lose their mind and carefully chose high-quality railway routes, even if bundled with branch lines, it was possible to make a profit.

Of course, the prerequisite is that you need enough money to get through the long investment period, but the return on investment in the later stages is relatively considerable.

Don’t compare profits with stock prices as those are all bubbles. No company’s profits can match the growth rate of its stock price.

At its peak, the total market value of Austrian railway companies once reached the mythical figure of 20 billion guilders. Is the Austrian railway network really worth 20 billion guilders?

Undoubtedly, this is impossible. 20 billion guilders in this era is an astronomical number, and all the gold that has been mined worldwide wouldn’t be enough to cover it.

If there were that much money, it would be enough not only for the domestic railway network but also to lay railway networks in every inhabited region worldwide.

It’s important to note that when calculated together, the Austrian railway network’s annual profit is less than 100 million guilders, or to be precise, less than 5 million guilders in net profit.

Of course, there’s still significant room for growth. Railway companies that have stabilized and aren’t continuing construction are generally maintaining a growth rate of over 30% in annual profits.

This isn’t because their profit growth is fast, but because the base is so low that growth naturally seems rapid. A 1% increase in freight volume could potentially increase a railway company’s profit by 4-5%.

It’s not an issue of high or low freight rates, but rather insufficient business, causing many railway lines to operate at a loss. Increasing business volume allows many branch lines to turn profitable, which looks impressive given the overall low profits.

Take the Draco Railway Company as an example. In 1869, its profit was 12,000 guilders, and in 1870, its total profit was 1.386 million guilders. On the surface, it looks like more than a hundredfold increase, but in reality, its annual business volume only grew by 5%.

This seemingly explosive growth is actually still insignificant. It’s worth noting that Draco Railway Company’s net assets amount to 130 million guilders, with a market value of 530 million guilders, and at its peak, the market value even reached 1.68 billion guilders.

Otherwise, with such rapid growth, the price-to-earnings ratio would be unbearable. It’s impossible to recover the investment cost through profits in less than ten to twenty years.

The same trick can only be played once, and capitalists aren’t fools. Using the African railway network to fool people only works if people believe it, right?

Relying on small private investors is unfortunate as these small fry haven’t grown up yet, and there’s not much to harvest even if you want to. Unless financial management laws are relaxed to allow small capital investments into the market.

Clearly, this is not possible. If this were done and a stock market crash occurred, the impact would be widespread.

In this era, life is not easy, and ordinary people struggle daily for survival, having no risk tolerance. If they get trapped in a financial scheme, it would be like handing revolutionaries a group of cannon fodder.

Doing something that undermines one’s own foundation is out of the question. As for the construction of the African railway network, delaying it a bit is fine.

Why develop the colonies so much? As long as they can provide industrial raw materials and a market, that’s enough. Even if there’s going to be significant development, it should wait until after integration.

Franz nodded and said, “The construction of the African railway network is indeed too costly. Even the current two railways need to be replanned.

We already have some railways in Africa, and these should not be wasted. The Southwest Railway could directly connect to the Congo region, and the East-West Railway could also connect midway through the Southwest Railway.

In this way, the strategic objectives can still be achieved. Though it might seem like a stretch for long-term development, it allows for reducing investments to the bare minimum in the short term.”

This isn’t shortsightedness on Franz’s part. It was quite the opposite as this approach has deeper significance. Through this railway, resources from Africa’s interior can be transported to the nearest port and shipped back home.

The strategic purpose has been achieved, and although the railway is not the shortest route, which increases the integration cost of resources across Africa, this is a means of controlling the colonies.

Haven’t you seen how the British have built a mess of railways in India, and even by the 21st century, the Indians still haven’t sorted them out? It’s a method of controlling the colony.

Franz’s approach is already very restrained. At least he hasn’t standardized the rail gauge completely. Well, it’s not entirely standardized as some railways dedicated to transporting ore might still be narrow gauge.

These railways transport directly to the port without needing to connect to the main railway line. At least for mines not far from the coast, these railways will be built.

Otherwise, leveraging local resources could inadvertently lead to a complete industrial system in Austro-African territories in ten or twenty years, and if integration hasn’t been achieved by then, it would be a big problem.

As the homeland struggles to maintain control over its colonies, Franz is unwilling to relocate the seat of power to Africa and assume the role of an African emperor during his lifetime. This remains true even if such a move could lead to the unification of Africa and the creation of the world’s largest empire.

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