African Entrepreneurship Record

Chapter 28: Chapter 24 Raising Funds

”Sir Ernst, if you have no objections, we can sign this agreement.”

Ernst reviewed the agreement contents one last time and signed his name.

The visitor was from the Prussian royal family; recently, there had been heated debates in Prussia over the privatization of the Cologne-Minden railway.

This indicated that the Prussian Kingdom was sparing no effort to raise war funds, and Ernst, a significant catch, had caught Prussia’s attention.

After all, the Blackhagen consortium is a star enterprise in German, with substantial banks under its umbrella, a world-class daily goods company, and Blackhagen Tobacco...

The enormous wealth Ernst had rapidly accumulated garnered attention, but fortunately, Ernst was indeed a second-generation noble, without any grass-roots inspirational rise. Compared to contemporaneous self-made geniuses, he was indeed not very conspicuous.

However, wealth is not something that can be hidden, especially not from the Prussian royal family, as they themselves were Ernst’s clients.

The purpose of the Prussian royal representative visiting Ernst was self-evident. Compared to selling off strategic facilities like railways, they should find solutions from other areas first.

The Cologne-Minden railway was one of the earliest railway lines constructed by Prussia, designed in 1833 and fully completed in 1859, becoming a hub in the Prussian railway system.

The initial purpose of this railway project was to transport coal cheaply from the Ruhr area to Prussia’s industrial production base.

In fact, from the beginning, the Cologne-Minden railway was a large public infrastructure project led by the Prussian government. The Prussian government directly purchased 1/7 of the original shares and guaranteed the railroad bonds issuance at a 3.5% face interest by pledging 14 million Taylor.

As a return, the government could progressively buy company shares and eventually become the sole shareholder of the railway, completing a gradual nationalization.

Railway nationalization was a strategic decision for Prussia, as Prussia valued the capability of the railway to transport troops and materials.

However, tensions between Prussia and Austria were escalating, and Prussian government officials were actively preparing for war.

War requires financial support, and the Cologne-Minden railway was thus brought out for discussion under such circumstances.

Bismarck’s war preparations against Austria required a total of approximately 60 million Taylor. The burden of raising such an astronomical figure for war expenditure fell on Breslau.

In fact, as early as December 1862, Breslau had proposed a highly controversial privatization plan for the Cologne-Minden railway after careful calculation and repeated consideration.

The core of the plan was that instead of the government spending large sums to fully acquire the railway company’s shares in 1870, thus creating huge fiscal pressure, the Prussian government could forgo nationalization and immediately receive compensation from the railway company, simultaneously abandoning bond interest guarantees, which would activate part of the 14 million Taylor deposit.

The plan met with immediate opposition from many who believed Breslau’s scheme incurred long-term governmental loss while enabling railway company shareholders, including Breslau himself, to reap huge profits. According to this plan, the government would lose various rights totaling up to 30 million Taylor, receiving only 10 million Taylor compensation and 4 million Taylor of usable deposit funds in return.

The already developed Cologne-Minden railway was a highly profitable government investment project. The privatization plan could provide the government with emergency funds in the short term; however, the price paid was selling off prime assets at less than half price, simultaneously losing future long-term revenue rights, making it a bad deal for the government in any case.

Based on historical knowledge, Ernst also knew that the unified Germany ultimately nationalized the railways, so the current railway privatization was simply a necessary sacrifice.

Expecting capitalists to perform acts of charity is impossible; they pursue higher profits, so patriotism doesn’t enter the picture.

Behind this Prussian railway privatization, there is the shadow of the Rothschild family, and Breslau is their employee.

The Rothschild family is now based in Vienna, Austria, practically Austrian national, yet they engage in activities preparing war funds for the enemy country.

Certainly unscrupulous conduct, but the benefits gained are tangible, whereas in the East, the Rothschild family would have been exterminated by the emperor long ago.

It is only the European social system today that protects them, and these matters have little to do with Ernst.

Ernst is more concerned with the agreement before him, which is a result of bargaining between the Prussian royal family and Ernst.

Although Ernst is now wealthy, he has many things to attend to, especially the development of the East Africa colony – migration, food reserves, production tools, colonial weapons and equipment, and payroll for staff all require his funds.

So, after deducting the necessary operating funds for the entire consortium, the East Africa colony expenses, and emergency backup funds, only a few million Taylor are actually usable. However, this amount is sufficient, as the Prussian royal family did not originally expect too much; even just a few million Taylor in this era is considered a huge sum, considering the privatization of the Cologne-Minden railway, the Prussian government could only initially secure 4 million Taylor.

One significant reason the Prussian royal family sought Ernst’s assistance was the hope that Ernst would be more conscientious than those banks and consortiums solely targeting economic interests.

After all, Ernst is part of their own, being a member of the Hohenzollern family. Ernst indeed does not require railway bonds; what Ernst has his eyes on is East Africa.

Thus, Ernst also proposed his interests, which were that Prussia must guarantee the Blackhagen royal family’s interests in East Africa in the future.

Currently, Prussia’s priority is German unification; colonies aren’t highly valued. Since Ernst hopes that Prussia, after unifying Germany, will support all of Ernst’s interests in East Africa, so be it.

Therefore, both parties signed the agreement, which involved the Prussian government, the Prussian royal family, and the Blackhagen consortium represented by Ernst.

The specific content was that the Blackhagen consortium would fund the purchase of 40% of the government shares of the Cologne-Minden railway, and the Blackhagen consortium would not prevent Prussia from repurchasing Ernst’s shares in the Cologne-Minden railway at prices above market value in the future.

This is essentially a sleight-of-hand maneuver, where Ernst utilizes idle funds to join Prussia Kingdom in the war effort, and when the war ends, Prussia can simply repay to reclaim the railway as state-owned.

Of course, Ernst is not contributing for free; as a concession, the unified German government must recognize the Blackhagen royal family’s ownership of the East African colony and support the entire Blackhagen consortium’s expansion across Africa.

Such a gentleman’s agreement, although not secure, can avoid numerous issues. In the previous life, German East Africa had no longer a substantial basis or legal grounds; now it’s Blackhagen royal territory.

As a supplement to the agreement, Ernst also seized this opportunity to secure the much-desired ticket.