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South Africa and the VOC

South Africa , Ons vir Jou Suid Afrika ?

To what and to whom do we pledge our oath?


South Africa has had many flags since 1652... The very first flag introducing a new business cartel to South Africa belonged to the Dutch East India Co...also known as VOC...25 flags later... the old regime heralded by the orange, white and excert : At the time, it was customary for a company to be set up only for the duration of a single voyage, and to be liquidated upon the return of the fleet. Investment in these expeditions was a very high-risk venture, not only because of the usual dangers of piracy, disease and shipwreck, but also because the interplay of inelastic demand and relatively elastic supply[14] of spices could make prices tumble at just the wrong moment, thereby ruining prospects of profitability.

To manage such risk the forming of a cartel to control supply would seem logical. The English had been the first to adopt this approach, by bundling their resources into a monopoly enterprise, the English East India Company in 1600, thereby threatening their Dutch competitors with ruin.[15] In 1602 the Dutch government followed suit, sponsoring the creation of a single "United East Indies Company" that was also granted monopoly over the Asian trade. The charter of the new company empowered it to build forts, maintain armies, and conclude treaties with Asian rulers.

It provided for a venture that would continue for 21 years, with a financial accounting only at the end of each decade.[15] Dutch Batavia in 1681, built in what is now North Jakarta. In 1603, the first permanent Dutch trading post in Indonesia was established in Banten, West Java and in 1611, another was established at Jakarta (later "Batavia" and then "Jakarta").[16] In 1610, the VOC established the post of Governor General to more firmly control their affairs in Asia. To advise and control the risk of despotic Governors General, a Council of the Indies (Raad van Indiƫ) was created.

The Governor General effectively became the main administrator of the VOC's activities in Asia, although the Heeren XVII, a body of 17 shareholders representing different chambers, continued to officially have overall control.[11] VOC headquarters were located in Ambon during the tenures of the first three Governors General (1610–1619), but it was not a satisfactory location.

Although it was at the centre of the spice production areas, it was far from the Asian trade routes and other VOC areas of activity ranging from Africa to India to Japan.[17][18] A location in the west of the archipelago was thus sought; the Straits of Malacca were strategic, but had become dangerous following the Portuguese conquest and the first permanent VOC settlement in Banten was controlled by a powerful local ruler and subject to stiff competition from Chinese and English traders.[11] The Isle of Amboina In 1604, a second English East India Company voyage commanded by Sir Henry Middleton reached the islands of Ternate, Tidore, Ambon and Banda; in Banda, they encountered severe VOC hostility, which saw the beginning of Anglo-Dutch competition for access to spices.[16] From 1611 to 1617, the English established trading posts at Sukadana (southwest Kalimantan), Makassar, Jayakarta and Jepara in Java, and Aceh, Pariaman and Jambi in Sumatra which threatened Dutch ambitions for a monopoly on East Indies trade.[16] Diplomatic agreements in Europe in 1620 ushered in a period of cooperation between the Dutch and the English over the spice trade.[16] This ended with a notorious, but disputed incident, known as the 'Amboyna massacre', where ten Englishmen were arrested, tried and beheaded for conspiracy against the Dutch government.[19] Although this caused outrage in Europe and a diplomatic crisis, the English quietly withdrew from most of their Indonesian activities (except trading in Bantam) and focused on other Asian interests. Growth[edit] Graves of Dutch dignitaries in the ruined St. Paul's Church, Malacca in the former Dutch Malacca In 1619, Jan Pieterszoon Coen was appointed Governor-General of the VOC.

He saw the possibility of the VOC becoming an Asian power, both political and economic. On 30 May 1619, Coen, backed by a force of nineteen ships, stormed Jayakarta driving out the Banten forces; and from the ashes established Batavia as the VOC headquarters. In the 1620s almost the entire native population of the Banda Islands was driven away, starved to death, or killed in an attempt to replace them with Dutch plantations.[20] These plantations were used to grow cloves and nutmeg for export. Coen hoped to settle large numbers of Dutch colonists in the East Indies, but implementation of this policy never materialized, mainly because very few Dutch were willing to emigrate to Asia.[21] Another of Coen's ventures was more successful. A major problem in the European trade with Asia at the time was that the Europeans could offer few goods that Asian consumers wanted, except silver and gold. European traders therefore had to pay for spices with the precious metals, and this was in short supply in Europe, except for Spain and Portugal.

The Dutch and English had to obtain it by creating a trade surplus with other European countries. Coen discovered the obvious solution for the problem: to start an intra-Asiatic trade system, whose profits could be used to finance the spice trade with Europe. In the long run this obviated the need for exports of precious metals from Europe, though at first it required the formation of a large trading-capital fund in the Indies. The VOC reinvested a large share of its profits to this end in the period up to 1630.[22] The VOC traded throughout Asia. Ships coming into Batavia from the Netherlands carried supplies for VOC settlements in Asia. Silver and copper from Japan were used to trade with India and China for silk, cotton, porcelain, and textiles. These products were either traded within Asia for the coveted spices or brought back to Europe. The VOC was also instrumental in introducing European ideas and technology to Asia. The Company supported Christian missionaries and traded modern technology with China and Japan. A more peaceful VOC trade post on Dejima, an artificial island off the coast of Nagasaki, was for more than two hundred years the only place where Europeans were permitted to trade with Japan.[23] In 1640, the VOC obtained the port of Galle, Ceylon, from the Portuguese and broke the latter's monopoly of the cinnamon trade. In 1658, Gerard Pietersz. Hulft laid siege to Colombo, which was captured with the help of King Rajasinghe II of Kandy. By 1659, the Portuguese had been expelled from the coastal regions, which were then occupied by the VOC, securing for it the monopoly over cinnamon. To prevent the Portuguese or the English from ever recapturing Sri Lanka, the VOC went on to conquer the entire Malabar Coast from the Portuguese, almost entirely driving them from the west coast of India. When news of a peace agreement between Portugal and the Netherlands reached Asia in 1663, Goa was the only remaining Portuguese city on the west coast.[24] VOC Monogram formerly above the entrance to the Castle of Good Hope.


In 1652, Jan van Riebeeck established an outpost at the Cape of Good Hope (the southwestern tip of Africa, currently in Cape Town, South Africa) to re-supply VOC ships on their journey to East Asia. This post later became a full-fledged colony, the Cape Colony, when more Dutch and other Europeans started to settle there.

Dutch factory of Hugly-Chinsurah in Bengal VOC trading posts were also established in Persia, Bengal, Malacca, Siam, Canton[verification needed], Formosa (now Taiwan), as well as the Malabar and Coromandel coasts in India. In 1662, however, Koxinga expelled the Dutch from Taiwan[25] (see History of Taiwan). In 1663, the VOC signed "Painan Treaty" with several local lords in the Painan area that were revolting against the Aceh Sultanate. The treaty resulted in VOC to build a trading post in the area and eventually monopolize the trade there, especially in gold trade.[26] By 1669, the VOC was the richest private company the world had ever seen, with over 150 merchant ships, 40 warships, 50,000 employees, a private army of 10,000 soldiers, and a dividend payment of 40% on the original investment.[27]

Many of the VOC employees inter-mixed with the indigenous peoples and expanded the Mestizo population of Indos in pre-colonial history [28][29] Reorientation[edit] Dutch ships in Chittagong, Bengal. Around 1670, two events caused the growth of VOC trade to stall. In the first place, the highly profitable trade with Japan started to decline. The loss of the outpost on Formosa to Koxinga and related internal turmoil in China (where the Ming dynasty was being replaced with the Qing dynasty) brought an end to the silk trade after 1666. Though the VOC substituted Bengali for Chinese silk other forces affected the supply of Japanese silver and gold. The shogunate enacted a number of measures to limit the export of these precious metals, in the process limiting VOC opportunities for trade, and severely worsening the terms of trade.

Therefore, Japan ceased to function as the lynchpin of the intra-Asiatic trade of the VOC by 1685.[30] Even more importantly, the Third Anglo-Dutch War temporarily interrupted VOC trade with Europe. The wisdom of such a policy was illustrated when a fierce price war with the EIC ensued, as that company flooded the market with new supplies from India. In this struggle for market share, the VOC (which had much larger financial resources) could wait out the EIC. Indeed by 1683, the latter came close to bankruptcy; its share price plummeted from 600 to 250; and its president Josiah Child was temporarily forced from office.[31] However, the writing was on the wall. Other companies, like the French East India Company and the Danish East India Company also started to make inroads on the Dutch system.

The VOC therefore closed the heretofore flourishing open pepper emporium of Bantam by a treaty of 1684 with the Sultan. Also, on the Coromandel Coast, it moved its chief stronghold from Pulicat to Negapatnam, so as to secure a monopoly on the pepper trade at the detriment of the French and the Danes.[32] However, the importance of these traditional commodities in the Asian-European trade was diminishing rapidly at the time. The military outlays that the VOC needed to make to enhance its monopoly were not justified by the increased profits of this declining trade.[33] Nevertheless, this lesson was slow to sink in and at first the VOC made the strategic decision to improve its military position on the Malabar Coast (hoping thereby to curtail English influence in the area, and end the drain on its resources from the cost of the Malabar garrisons) by using force to compel the Zamorin of Calicut to submit to Dutch domination. In 1710, the Zamorin was made to sign a treaty with the VOC undertaking to trade exclusively with the VOC and expel other European traders.

For a brief time, this appeared to improve the Company's prospects. However, in 1715, with EIC encouragement, the Zamorin renounced the treaty. Though a Dutch army managed to suppress this insurrection temporarily, the Zamorin continued to trade with the English and the French, which led to an appreciable upsurge in English and French traffic. The VOC decided in 1721 that it was no longer worth the trouble to try to dominate the Malabar pepper and spice trade. A strategic decision was taken to scale down the Dutch military presence and in effect yield the area to EIC influence.[34] The 1741 Battle of Colachel by Nairs of Travancore under Raja Marthanda Varma was therefore a rearguard action. The Dutch commander Captain Eustachius De Lannoy was captured. Marthanda Varma agreed to spare the Dutch captain's life on condition that he joined his army and trained his soldiers on modern lines. This defeat in the Travancore-Dutch War is considered the earliest example of an organized Asian power overcoming European military technology and tactics; and it signaled the decline of Dutch power in India.[35] The attempt to continue as before as a low volume-high profit business enterprise with its core business in the spice trade had therefore failed. The Company had however already (reluctantly) followed the example of its European competitors in diversifying into other Asian commodities, like tea, coffee, cotton, textiles, and sugar. These commodities provided a lower profit margin and therefore required a larger sales volume to generate the same amount of revenue. This structural change in the commodity composition of the VOC's trade started in the early 1680s, after the temporary collapse of the EIC around 1683 offered an excellent opportunity to enter these markets. The actual cause for the change lies, however, in two structural features of this new era. In the first place, there was a revolutionary change in the tastes affecting European demand for Asian textiles, and coffee and tea, around the turn of the 18th century. Secondly, a new era of an abundant supply of capital at low interest rates suddenly opened around this time. The second factor enabled the Company to easily finance its expansion in the new areas of commerce.[36] Between the 1680s and 1720s, the VOC was therefore able to equip and man an appreciable expansion of its fleet, and acquire a large amount of precious metals to finance the purchase of large amounts of Asian commodities, for shipment to Europe.

The overall effect was to approximately double the size of the company.[37] The tonnage of the returning ships rose by 125 percent in this period. However, the Company's revenues from the sale of goods landed in Europe rose by only 78 percent. This reflects the basic change in the VOC's circumstances that had occurred: it now operated in new markets for goods with an elastic demand, in which it had to compete on an equal footing with other suppliers. This made for low profit margins.[38] Unfortunately, the business information systems of the time made this difficult to discern for the managers of the company, which may partly explain the mistakes they made from hindsight. This lack of information might have been counteracted (as in earlier times in the VOC's history) by the business acumen of the directors. Unfortunately by this time these were almost exclusively recruited from the political regent class, which had long since lost its close relationship with merchant circles.[39] Low profit margins in themselves don't explain the deterioration of revenues. To a large extent the costs of the operation of the VOC had a "fixed" character (military establishments; maintenance of the fleet and such). Profit levels might therefore have been maintained if the increase in the scale of trading operations that in fact took place, had resulted in economies of scale. However, though larger ships transported the growing volume of goods, labor productivity did not go up sufficiently to realize these. In general the Company's overhead rose in step with the growth in trade volume; declining gross margins translated directly into a decline in profitability of the invested capital.

The era of expansion was one of "profitless growth".[40] Concretely: "[t]he long-term average annual profit in the VOC's 1630–70 'Golden Age' was 2.1 million guilders, of which just under half was distributed as dividends and the remainder reinvested. The long-term average annual profit in the 'Expansion Age' (1680–1730) was 2.0 million guilders, of which three-quarters was distributed as dividend and one-quarter reinvested. In the earlier period, profits averaged 18 percent of total revenues; in the latter period, 10 percent. The annual return of invested capital in the earlier period stood at approximately 6 percent; in the latter period, 3.4 percent."[40] Nevertheless, in the eyes of investors the VOC did not do too badly. The share price hovered consistently around the 400 mark from the mid-1680s (excepting a hiccup around the Glorious Revolution in 1688), and they reached an all-time high of around 642 in the 1720s. VOC shares then yielded a return of 3.5 percent, only slightly less than the yield on Dutch government bonds.[41]
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