Bank of Africa

Part of the debate – in the House of Commons at 12:00 am on 4th August 1961.

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Photo of Mr Hugh Fraser Mr Hugh Fraser , Stafford and Stone 12:00 am, 4th August 1961

I am sure that we shall all join in thanking my hon. and learned Friend the Member for Northwich (Mr. J. Foster) for having raised this subject. We have had a well-informed, swift and important debate.

This matters falls into two parts: to encourage British companies and financial institutions to make an even wider stake in the development of Africa, and then turns to a specific project for an African bank which is to have its centre in Salisbury. My remarks, as I am sure my hon. and learned Friend will understand, must be general. Not only is the main proposal put forward outside the territorial scope of my Department, but I think it is only proper that Ministers of the Crown should speak in general terms and not particularise on individual commercial projects unless, of course, there is a direct Government participation.

In general terms, may I say at once that I welcome, and I am sure that the House does, the general spirit and objective of the speeches which have been made this afternoon. In the few remarks that I propose to address to the House, I think that it would be appropriate to deal with four main topics—the general economic conditions in East and Central Africa; the need for further capital; the action already taken by British financial institutions; and the desirability of further African participation.

I think that it is interesting for those who are having doubts or are rumoured to be having doubts about the economic future of these two areas that, in spite of political uncertainty and some loss of confidence and the fall in raw material prices, purely from an economic point of view a very considerable advance has been made in these territories since 1957. In Central Africa, there has been an increase in copper production, in Nyasaland a rise in tea exports from 20 million lb. in 1958 to nearly 24 million lb. in 1960. There has been an increase in the production of cotton in Nyasaland from 3·6 million lb. in 1957–58 to well over 8 million lb. in 1959–60.

Turning to East Africa, although in the five years between 1954 and 1959 there was a very heavy deterioration in the terms of trade in this area, Kenya deteriorating by 19 per cent., Tanganyika by 10 per cent. and Uganda by over 30 per cent., the average real income per head is estimated to have risen in Kenya by nearly 40 per cent., in Tanganyika by about 20 per cent. and even in Uganda, where there has been a catastrophic fall in coffee prices, it has risen very slightly The export figures also have continued and are continuing to rise.

Last year exports from Tanganyika rose by nearly £9 million to a total of some £56 million in that year. Even in Kenya, despite the drought, the worst possibly in recorded memory, and the loss of confidence that undoubtedly has taken place in part of the private sector, but only in part of it, development expenditure there this year will probably be the highest ever recorded.

I mention these facts because I think that they are vital to show to people in this country that in purely economic terms the rate of expansion, even in those difficult years, has been great and rapid. If it is to be continued, we must look for new capital resources in every field, through Government savings, whether they be in this country or Government savings in the local territories, from Government institutions, the Post Office Savings Bank and other local institutions, or overseas banking resources, and, of course, there are the indigenous savings of the local communities.

Here I am sure that a well-run, sound African bank would have a part of great importance to play, in no way conflicting with the already well-established British and other banks which have helped in such an excellent way to "father", if I may use the word, the expansion we have seen over the last few years. These resources are necessary and more resources are necessary, not merely for the continuation of existing public or private programmes but to meet the aspirations of the peoples of those territories.

I believe that the character of African nationalism is changing. It is ceasing to be the simple chauvinistic, emotional and, if I may say so, economically purposeless nationalism which distinguished that movement so often in 19th Century Europe, and not so very far from here. African nationalism, whether it be white or black, is under pressure not merely to produce independence but also a standard of living and of education compatible with modern social aspirations.

Africa needs money far beyond what it itself can generate. To put about the ideas which some people may have thought of at the Cairo Conference with this foolish talk of neo-colonialism or the equally foolish talk of rivalry, which comes from our own people, between African and European institutions, is to throw away the substance of advance for the shadow of political promotion. I think that over the years ahead there will be room for growth provided we can achieve political stability—room for growth in which many sorts of financial institutions can participate.

It is worth while for a moment to turn to the kind of help already given by British financial institutions. Even here there is a limit. I welcome very much the new interest of West European and American bankers in the development of East and Central Africa. There is the example, which I think an excellent one, of the expansion of existing British and Commonwealth banks in East and Central Africa. There has been a threefold expansion in the number of branches over the last ten years. We should remember that those have not been easy years, although sometimes the difficulties have been exaggerated by people not resident in those countries. It is still remarkable that in ten years the number of branches has been more than trebled.

The scope of enterprise in Kenya and East Africa generally is shown in that on 31st March this year in Kenya loans outstanding to agriculture and industry by the two overseas banks with their headquarters in London amounted to £11·3 million. In Tanganyika the amount was £5·3 million and in Uganda it was Over £8 million. Their total advances in East Africa were no less than £69 million. In addition, these banks are catering for more long-term capital needs—here I do not want to cross swords with the right hon. Member for Middlesbrough, East (Mr. Marquand), on purely doctrinal grounds—in the development corporations they have set up apart from ordinary banking services. In one case investment and loans already outstanding in East Africa total £4 million. In addition, there are large development sums invested by building and insurance companies.

The point made by my hon. Friend the Member for Worcester (Mr. Walker) is of great merit and value. Training and Africanisation for the banks in East Africa is taking place and it is also taking place in Central Africa. Contractors of British banks have sought to bring people from the African territories back here. I shall certainly draw to the attention of my right hon. Friend the point the hon. Member made about the Department for Technical Co-operation. On the training side there may be scope for the Government to endeavour to be of assistance.

There is, however, a tremendous demand in every field of advance not merely in banking, but in education, Government services, the Forces and all these developing institutions. The demand for trained African manpower is colossal and overwhelming. It is worth while looking to see if we can be of some assistance in that sphere, Africanisation in itself does not wholly meet the aspirations of those whose activities and interests my hon. and learned Friend has this afternoon so eloquently described. We should welcome any progress stemming from African initiative as a valuable contribution to the general economic health of the territories with which my right hon. Friend and I are concerned. It may be that in the richly variegated economic pattern of Africa there is scope for development along the lines indicated by the speeches made in this debate.

I am sure that what those going into the African bank, or whatever institution it may be, want to find is not the old ways of established banks but new lines of business. The model we have to look at is the Bank of America, which is the biggest commercial bank in the world, or one of the biggest. Its progress flows from the backing of the small immigrant, especially of Italian origin, going out to the new lands of California and so on at the end of the nineteenth century. One of my hon. Friends spoke of the difficulties of American banking operations in the catastrophes of the twenty-nines and the thirties. It is important that in this developing field new institutions should look for new ranges of activity rather than the old ranges which are already catered for.

I am sure that the enthusiasm we have seen this afternoon is of great importance, but I am also sure that any scheme put forward should be initially of a modest and sound sort. No banking system has ever sprung into being entirely armed without a degree of training and expertise and a sound basis. Although we should like to see an indigenous banking system develop on traditionally sound lines and catering for the special needs and circumstances of each territory, any attempt to force the pace would undoubtedly do more harm than good, as experience, alas, has shown elsewhere.

I am sure that the general aspirations put forward this afternoon will be of real benefit. I trust that all the ideas which have been suggested here and in Africa will be soundly based. This is an expanding field for every form of economic institution. In this I am sure the Africans will take their rightful and proper part.