FINANCE AND INVESTMENT

By CUSTOS

SIR MONTAGUE EDDY'S eagerly awaited account of his achievements on behalf of the Argentine railway companies provides grounds for cautious hope but not for any extravagant enthusiasm. It is plain enough from his address to stockholders of the Buenos 'Ayres Great Southern that the compromise reached after three months of difficult negotiating has merely saved the railways from a further deterioration of their revenue position without creating a basis for any really substantial improvement in revenue. The Argentine Government's claim for wage refunds has been drastically scaled down, and to cover this, along with fresh increases in wages, the railway companies have been allowed a special exchange concession and a to per cent. increase in freights. Fortunately, gross traffics, thanks to war condi- tions, which have practically eliminated road competition, are running at a high level and can be relied upon to cover the continual rise in operating costs. The fuel bill presents the really serious problem on the costs side, and Sir Montague Eddy put in a strong plea for some help from the British Government in the way of increased coal supplies.

The more general problems surrounding the future of the rail- ways remain unsolved. Stockholders are now told, for example, that the scheme for closer working put forward by the railway boards has been turned down by the Argentine authorities. So, too, has an application for powers to operate road transport, although a verbal assurance has been given that the Argentine Government intends to implement a scheme for co-ordinating road and rail at some later stage. On the question of the depreciated exchange, which, while it represents part of Argentina's general financial policy, hit's the railway companies particularly hard, Sir Montague Eddy was unable to hold out any hopes of immediate or early relief. What is clearly required is a new long-term agreement between the companies and the Argentine Government which will put railway operations on a genuinely sound basis. Meantime, stockholders will derive some comfort from Sir Montague Eddy's declaration that the bapital of the railways is fully represented by assets and bears little relation to the low values at which the stocks are capitalised in the market. At today's levels I advise holding Argentine railway stocks.- Some of the debentures look unduly depressed.

GOOD KAFFIR DIVIDENDS

From the half-yearly payments just announced by the South African mining companies Kaffir shareholders will draw the broad conclusion that dividend rates have grounded after the sharp falls recorded in recent years. While there are very few changes compared with the payments declared in June, there are several small increases which suggest that the mining finance-houses are taking a reasonably hopeful view of the outlook. This year, as in the earlier war years, profits have been held down by onerous taxation, as well as by shortages of labour and materials. So far as taxation is concerned the South African Finance Minister has declared on several occasions his anxiety to ease the burden as soon as general financial conditions allow, so as to facilitate development work. The wages question is still subject to negotiation, while the shipment of necessary supplies of materials depends on the priorities decided upon immediately after the European War.

The status of gold itself seems to be well assured under the proposals for the International Monetary Fund, although that does not provide much guidance as to the likely price in sterling. That will depend on the post-war level of the dollar-sterling exchange. All in all, it will be surprising if gold producers are left after the war with as liberal a margin over costs, including taxation, as was available in pre-war years. At current quotations the established dividend-payers look fairly fully valued for the present. The out- look for the developing concerns is bound up with the results of drilling programmes which have yet to be put into force. At the moment the speculative community in Johannesburg seem to be content to do very little, and London, lacking a lead, is idle. I shall be surprised if there is any great recovery in. Kaffirs before the spring.

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