Chapter 196: Railways
"So, you want to get involved in that industry too?" Prince Karl Anton asked.
"Not exactly. I just want to test the waters in the colony," Ernst replied frankly, not hiding anything.
"That might be difficult!" Prince Karl Anton said, hardly needing to think. "I know you've got a knack for business, but I suspect you won't profit easily from this. If a colony is just going to lose money, why bother?"
"Uncle Karl, when I say 'test the waters,' I mean building only a short stretch. I'm not talking about a large-scale rollout in East Africa," Ernst explained.
"That still doesn't make sense. If you just want to build it for fun, you don't need to ask me, do you? You can find any German railway company to take on the job, and with your status, nobody would dare cheat you," said Prince Karl Anton.
In Karl Anton's view, Ernst was both a high-ranking German noble and a major capitalist—an unbeatable combination. And given Ernst only wanted a small-scale 'experiment,' no German railway company in its right mind would risk offending a future prince and big businessman for so little profit.
"Well, Uncle Karl, it's like this: I've been eyeing the railway market for a while, but I'm aware that railroads are different from anything I've done before. The technology is already mature, entry barriers are high, and there are many railway companies in the German states. Jumping in right now might be a thankless endeavor. But I do believe in the future of railways. There's no real opening at present, but that might change. And when an opening does appear, you need to be ready. So I want to start laying groundwork," Ernst said.
"I think I get it. You're interested in the business, but don't see immediate prospects for profit, so you don't want to dive in heavily. Instead, you'll do something small-scale to gain experience for later. Is that it?" Prince Karl Anton asked.
"That's exactly what I mean, Uncle Karl. I also have another reason. You know that East Africa doesn't have any large-scale business operations—just organizing immigrants to farm. Most exports are bulk goods like grain and timber. They're bulky and heavy, and if they can't be shipped to Europe, then I'll be out of pocket. I'm really relying on East African grain and resources to recover some costs. But East Africa's transport conditions are the biggest obstacle to getting them out. Take rivers: none run continuously, from the highlands all the way to the sea. There are only a few hundred navigable kilometers at best.
River transport isn't feasible, which is why I thought of rail. But building rail lines is expensive. I need to try it on a small scale in East Africa first to decide whether to expand," Ernst said.
After listening, Prince Karl Anton pondered for a moment. "I've got a question. East Africa's main industry is agriculture, right? Over a large scale, agriculture can be quite profitable, but shipping grain from East Africa to Europe involves hefty maritime costs, plus competition from Germany, Hungary, France, Russia—countries that also produce grain. How profitable can it be?
And I recall your father mentioning that you even bear the cost of bringing in immigrants from outside rather than using local natives, which is another big expense. So where exactly does your colony make money?"
Indeed, Karl Anton knew that overseas colonies could be profitable—otherwise Great Britain couldn't have become the ruler of the seas from a small island. But as a seasoned German Junker politician, Karl Anton was unfamiliar with the particulars of running an overseas colony. Austria had once tried colonizing but had ultimately failed. Over these past decades, Europe had been anything but peaceful—Napoleon's wars, the Crimean War, Prussia's conflicts with Denmark, culminating in war against Austria. All focus had been on the continent. Now, with Prince Constantin heading for East Africa, Karl Anton found himself intrigued by that colony.
Unfortunately, Constantin was gone. So Karl Anton simply asked Ernst.
"Uncle Karl, an East African colony is a long-term venture; you can't judge it right away. The colony is basically a patch of leftovers that the major powers didn't want—no special advantages, meaning an almost pure money sink at the start. Most people couldn't manage it.
So, from the beginning, I never expected immediate profit—just tried to limit the losses. Grain may not be lucrative, but there's lots of land. Although grain prices aren't high, production costs in East Africa are low, and the land is basically free. It only needs development, and once we pay for the boat fare and food, the immigrants become a cheap labor source.
Right now, turning a profit from East Africa is unrealistic, though the future might hold possibilities. Of course, overseas ventures have high risks, and that balances any gains. Meanwhile, running factories here in Europe is nearly guaranteed profit, and high profit at that," Ernst said.
In truth, East Africa already managed a breakeven budget with a slight surplus, mainly thanks to cash crops. The market wasn't just Europe; they sold to North Africa and the Middle East as well. Ernst wasn't hiding the fact—colonial expansion was indeed risky. He'd exploited an opening, picking the right time and place.
"I see. So expanding overseas is no easy thing. I was only curious," Karl Anton said.
"Uncle Karl, there are indeed good locations abroad, but those prime spots were carved up by maritime powers long ago," Ernst remarked.
"Alright. Enough talk about that. Let's go back to the matter of railways. Out with it—no beating around the bush," Prince Karl Anton said.
"In that case, Uncle Karl, I'll be frank. I'd like to acquire a railway company—doesn't have to be huge, but it must have experience in construction. However, I'm not part of that scene. I don't know all the pitfalls, so I came to you," Ernst explained.
Railway construction across German lands was thriving, with many companies, some reputable, some less so. Although Ernst was a big capitalist, he was in a different sector. Leaping in blind was risky; some might dare to take advantage of him. Railways were a pillar industry in Germany, and many companies had close ties to the government. From a business standpoint, fewer competitors was better. A wealthy newcomer like Ernst stepping in would draw attention. But Ernst had no wish to battle them and was mainly interested in acquiring railway expertise for East Africa's future. Meanwhile, conditions were currently excellent for rail, but eventually the market would become saturated and profits would dry up. Ernst planned to make a large-scale move only when that downturn occurred.
Thank you for the support, friends. If you want to read more chapters in advance, go to my Patreon.
Read 20 Chapters In Advance: patreon.com/Canserbero10