manynovel #497 - Railway development in Rhodesia
#497 - Railway development in Rhodesia
Rhodesia.
Sir Philip, the local governor of Rhodesia, approached Ding Wei, the "strongest landlord" in Black Africa.
"Dear Ding, we have a big deal to discuss. You know what Rhodesia really needs. In this place lacking connection with the world, Rhodesia will never have room for development relying solely on the few unreliable roads we have now," Sir Philip said to Ding Wei directly, without beating around the bush.
"It's time for us to build a railway trunk line out of Rhodesia."
Ding Wei is now very famous in Rhodesia, not only as the largest landlord in Rhodesia, but also as the largest landlord in Black Africa. With his base rooted in Rhodesia, Ding Wei often deals with Sir Philip, and they are very familiar with each other.
So there's no need for formalities between them.
"Sir Philip, do you mean the Rhodesian authorities are ready to build a railway to the sea?" Ding Wei was not surprised at all.
Given Rhodesia's current development, the newly discovered huge copper mine needs to be exploited on a large scale.
To achieve this, a railway trunk line is essential to support the large-scale mining activities. Millions of tons of copper ore need to be transported from the northern mountainous areas of Rhodesia, and only a railway trunk line can support the transportation of millions of tons of ore.
Otherwise, relying on a few poorly maintained roads, it is basically impossible to complete such a huge transportation task.
Copper is a strategic bulk metal product. Before the start of World War I in the Bright Sword world, the world's copper production had just exceeded 1 million tons. By the end of World War II, the world's copper production had reached more than 5 million tons. The overall copper price was in a low range of 300-500 US dollars/ton.
However, since the end of World War II, the post-war reconstruction and industrialization process in Western countries has accelerated, leading to a double increase in global copper production and demand.
In the Bright Sword world, although Dongda's development has not received support from any country in the world, relying on its own strong technological development capabilities, its economy has entered the fast lane decades in advance. Since the 1950s, it has begun to import a large amount of raw materials such as iron ore, copper ore, and coal, which has had an impact on the international market. This has led to a growth rate of over 10% in world copper production during this period. Strong demand has basically absorbed the increase in supply, and copper prices have steadily increased by more than a thousand US dollars.
The copper price has more than doubled compared to the stable pre-war price. More importantly, the situation in major copper-producing countries is still unstable, and copper miners' strikes are making international copper prices even more volatile.
This makes the Rhodesian authorities even more eager to develop transportation and turn their huge copper mine advantage in the north into an advantage for developing the Rhodesian economy.
Sir Philip's proposal to develop a Rhodesian railway trunk line to the sea is based on this background.
"Yes, dear Ding, we in Rhodesia are ready, or rather, we've had enough of this terrible transportation and must take action," Sir Philip said.
"You see, thanks to Dongda's efficient plantation operations and your hybrid technology, we have now completely solved the problem of food in Rhodesia. We are even exporting grain on a large scale, becoming a major grain-producing area, which provides us with the inherent conditions for building a Rhodesian railway trunk line to the sea."
"Now, according to our preliminary research and plans, the construction of this Rhodesian railway trunk line to the sea has received very good feedback from the capital market. Our friends in the financial world have carefully told us that if we need to raise funds to build this railway trunk line, our friends in Wudu Finance can provide sufficient funds for this railway trunk line.
It's just that Dongda is not convenient to propose it itself.
Now that Sir Philip has proposed it, it is exactly what he wants, and he can take the opportunity to feel out their bottom line.
"This is our current plan. This railway trunk line starts from Chawuma in northern Rhodesia, passes through Mongu, Lusaka, Harare, and goes directly to Beira to the sea, which is about 1680 kilometers of route.
In terms of investment, we estimate the overall development and construction cost to be 200 million pounds, of which railway construction materials and equipment are about 100 million pounds, land costs are 40 million, construction project costs are 50 million, and the remaining 10 million is for working capital.
Regarding the main shareholders of the railway, we are considering three major blocks: the Rhodesian local authorities, the Wudu financial financiers, and Dongda as the construction party. We will establish a railway company and take out 45% of the equity to raise 100 million pounds of investment in the Wudu financial market, which will be directly used to purchase railway construction equipment and materials.
Of the remaining 55% equity, 20% of the dividend rights will be reserved for the Rhodesian authorities to hold, as the transfer fee for providing railway trunk line land, and also become one of the long-term income sources for the Rhodesian local area.
The next 20% will be used as Dongda construction party project input, and the last 15% equity will be used as railway management and operation senior management stock option incentives. What do you think, dear Ding?" Sir Philip directly divided the cake and placed it in front of Ding Wei.
Ding Wei was not surprised by this outcome. Rhodesia was so poor that it was impossible for them to contribute any money. However, constructing the railway here would inevitably bring some benefits to the local area, and Ding Wei had no objections to them wanting to retain 20%.
However, Sir Philip only allocated 20% to the construction costs, clearly wanting to exploit Dongda. After all, the price he offered was one that no one from John Bull's country would accept.
Sir Philip naturally understood that no consortium from John Bull's country would participate in this railway at such a cost, which is why he approached Ding Wei about it.
Given John Bull's current railway construction standards and labor costs, a budget of 50 million pounds wouldn't be enough; even 70 million pounds might be insufficient. Considering Rhodesia's geological conditions, there would be many bridges and tunnels. John Bull's labor and machinery costs would be at least 50% higher than Dongda's railway construction costs!
Moreover, without Dongda's full participation, raising another 100 million pounds in funding from the City of London's financial circles would be problematic.
Anyone with eyes could see that Sir Philip, representing the Rhodesian authorities, was essentially trying to use capital operations to get something for nothing!
Of course, not entirely. At least he was responsible for providing the land. However, land in Black Africa was worthless, and the Black African tribes had no concept of demolition compensation. Therefore, Sir Philip was playing a huge trick regarding the land costs.
Based on the current land use situation for infrastructure construction in Rhodesia, the land occupied by railways and highways would at most be replaced with designated land elsewhere. After all, at least one-third of Rhodesia's land has not been well developed.
Sir Philip had plenty of undeveloped land to replace the land occupied by railway construction, effectively allowing the Rhodesian authorities to gain the opportunity to transfer 40 million pounds worth of land for free.
However, these were matters for the landlord's family, and Ding Wei didn't care how Sir Philip handled the land for the railway.
"Sir Philip, I believe the investment in the construction part is severely underestimated. We suggest a minimum of 25%, and we need 30% of the seats in the operational leadership to protect our interests," Ding Wei said after pondering for a moment, presenting some figures he had calculated at home. Based on the difficulty and construction costs of the project, a 25% construction cost ratio would be about right in Dongda.
However, considering that this was in Black Africa, our construction engineers and workers would have to travel a long way from the country, and the actual cost might be more than 30%. If it were John Bull's construction team, even 40% might not be enough, because their labor costs are much higher than Dongda's.
This was also why Sir Philip approached Ding Wei. Starting with the construction of plantations in previous years, John Bull had witnessed Dongda's terrifying infrastructure capabilities.
They had turned a loss-making grain plantation into a profitable project, allowing them to expand plantations everywhere in Black Africa.
However, it was thanks to Dongda's terrifying infrastructure and planting capabilities that half of Black Africa was fed, allowing John Bull's crumbling colonial system to continue and giving the declining British Empire a breather.
They didn't have to be constrained by their successful eldest son, North America, everywhere.
This allowed old aristocratic politicians like Sir Philip to still have the confidence to say no to the rogue eagle.
John Bull in this world was not as dilapidated as in the main world. At least, the relatively stable colonies in Black Africa, such as Nigeria and Rhodesia, supported the development of the domestic economy through the development of mineral and agricultural resources. Overall, John Bull's economy was still firmly in third place in the world.
"No problem. In principle, we will start constructing the East Africa International Railway Company based on this distribution," Sir Philip said without much objection after listening to Ding Wei's bargaining. Of course, he had also investigated the market beforehand and was very clear about the actual construction costs of the railway.
If calculated according to John Bull's market prices for construction labor and machinery, a 25% share of the profits would be very generous, even a big profit.
As for taking 30% of the seats in the management, this was not a fundamental issue. At least his 20% share of the profits representing Rhodesia remained unchanged. What did he care about the loss of interests of the management team? He himself would not participate in the operation.
The loss of interests of these professional managers had no impact on Sir Philip.
In this way, Dongda would effectively receive a 28% share of the profits through the investment in construction costs. The 30% of management seats meant a 3% share of the profits.
Although there was still a certain gap from the 30% profit share, Ren Zhong believed it was worth doing when the news came back.
Even if there was no opportunity to build the Tanzania-Zambia Railway now, this Rhodesian sea outlet line was not bad.
It would be good to start the large-scale development of the East African railway ahead of the Tanzania-Zambia Railway, which would also further promote Dongda's infrastructure army to the world.
The iron ore transportation line built by Dongda in Nigeria must have left a deep impression on the people of John Bull, which is why they took the initiative to come to us.
Ren Zhong was not thinking of making much money from this new East African railway line. It would be good to break even or make a small profit.
The most important thing was to develop Rhodesia's copper resources. Transporting the copper ore was very important to Dongda, especially now that Dongda's industrialization and electrification were at a critical moment, and the demand for copper ore was huge. The tense situation in supply and demand had already led to a significant increase in international copper ore prices.
If Rhodesia's copper mines were developed on a large scale, it would add a new channel with a stable supply to the international copper ore supply, which would be very beneficial to expanding the supply of copper ore in the entire international market. It could reduce the imbalance between supply and demand of copper ore, which would be equivalent to reducing the opportunity for further price increases of copper ore. This was especially important for Dongda, which had the largest demand for copper ore.
Of course, this was a win-win situation for Sir Philip and his people.
On the one hand, in addition to getting a 20% share of the railway for free, they could also make a fortune from the copper mines.
After all, the current price of copper ore was indeed tempting. Turning these resources into money would strengthen John Bull's strength. After all, buried underground, these things were of no benefit to John Bull. (End of this chapter)