Chapter 303: The Heavy Industry Zone at Lake Malawi
Regarding the city of Mombasa, the overall impression it left on the Austrian business delegation was fairly good. For investing overseas, stability is the most important factor, and East Africa certainly excels in that area. Although the delegation finds East Africa a bit conservative in how it uses Black labor, the country's scale alone could be enough to tempt them. At present, delegation leader Wolfgang plans to invest in a few small factories in East Africa to test the waters, and the other members share similar thinking. They still have doubts about East Africa's politics. After all, it's a typical feudal monarchy with an extremely conservative style, so they're not fully convinced about the business climate.
…
While Wolfgang and his colleagues were touring the north, the designated southern zone around Lake Malawi—left open for Austrian development—had no takers at all.
First of all, it's in too remote a place, deep inland in East Africa. Although the north's industrial belt includes the Great Lakes area, Mombasa's unmatched port advantage cannot be compared to anything around Lake Malawi. In the south, Mtwara Port is far smaller, so goods produced in that region wouldn't be easily shipped by sea. They'd largely depend on the East African government's internal demand; hence any factory would rely on East Africa's own market for sales, which feels too uncertain.
Second, the region's known coal and iron resources don't impress Austria-Hungary or investors. There's no real incentive for them to come all the way to East Africa and develop it when the Balkans are right next door. And without outside capital, only the Hechingen conglomerate itself can take over.
Finally, East Africa wants the Lake Malawi area to become a heavy-industry zone, which goes against most Austrian investors' inclinations. Everyone knows light industry has small investment costs, short cycles, and quick returns—something heavy industry does not have. So capital generally favors light industry. As a result, East Africa has to develop heavy industry around Lake Malawi on its own, and the Hechingen conglomerate in that sector has zero experience. Though East Africa has relevant activities, they remain at the handicraft level.
The only exception is the Mbeya area's coal mining, somewhat approaching the level of small-scale European mines. With updated equipment, production is steadily rising.
But in heavy industry, not just East Africa but even Hechingen's European side lacks much experience. So East Africa can only pour funds into the region. Luckily, the Hechingen conglomerate is financially strong right now. Merely purchasing bonds in the Franco-Prussian War earned them a huge windfall, so, as usual, Ernst took advantage of bankrupt, small industrial companies in Europe.
One such steel company in the Saar region had relied on a small iron mine, but the war cut short production. Its capital chain broke, and it went bust. Ernst seized the chance to buy it and offered the local unemployed workers a move to East Africa. In the end, about a hundred or so took up the offer—most of them ethnic Germans.
After three months of transitions, the workforce was in place. And to maximize iron-ore extraction, Ernst simply purchased brand-new production equipment from Austria. He also acquired a steel mill in Kapfenberg, Austria, merging the two firms into the "East African United Steel Company." This is how East Africa finally got a foothold in steel production. The Hechingen conglomerate also moved beyond research, light industry, shipbuilding, and trade into heavy-industry manufacturing.
The East African government values Lake Malawi's region highly because it's the only part of (what was) Tanzania that boasts both coal and iron. Having coal and iron is the basic foundation for industrialization.
In a phone conversation with Constantinoo about developing the Lake Malawi area:
Ernst said:
"Heavy industry needs two things: a supply of raw materials and ample government funding, and we in East Africa already have both. Plus, the Lake Malawi area lies in our interior, a relatively safe location—so investing and building things there won't be too risky."
Though Mozambique lies to the south, East Africa can practically disregard it. If it were actually the kingdom of Portugal itself, East Africa might pay more attention, but East Africa's scale is already on par with Portugal's home territory. Admittedly, Portugal's capital is more scattered among private citizens, whereas East Africa's is mainly in government hands.
Constantinoo:
"Now that it's obvious Austria's not interested in the Lake Malawi area, as von der Leyen said in his telegram, they aren't showing any sign of investing there. Even up north, they'd rather stick to Mombasa. If it weren't for the incentives that make Nairobi so appealing, they might not invest at all."
Ernst:
"That's exactly what I expected. Indeed, Lake Malawi's industrial zone has drawbacks up front, particularly given the transport situation. If anyone's going to do it, it'll be up to us. Meanwhile, because they've put money into Mombasa, as long as we make things easy for them so they profit there, they'll gradually boost their investment in the northern industrial belt. It's all about self-interest."
Constantinoo:
"So then what's the plan for Lake Malawi?"
Ernst:
"The Lake Malawi region is designated for heavy industry but will only cover our initial industrial needs. Once East Africa develops further, we'll certainly shift heavy industry toward the Matabele Plateau. So Lake Malawi is there to train our personnel, gather technical expertise, and pave the way for the plateau's eventual buildup. Also, the Lake Malawi region connects Tanganyika and Zambia, letting us influence the interior better, reducing East Africa's reliance on the coast. After all, the coast isn't guaranteed to be safe. At sea, you can face sudden threats, and our navy's not yet strong enough to handle them. On land, though, the East African Army need fear no one. So for safety alone, we must develop inland."
On land, the East African Army is at least a match for any local threat, whereas at sea things are more complicated. Even Mozambique's navy roughly equals East Africa's, not to mention a big maritime power like Portugal behind them.
Ernst:
"Steel production is the most direct measure of a nation's might. East Africa must become steel self-sufficient to handle many more industries. Right now, the Hechingen conglomerate's businesses rely on Germany and Austria's heavy industry. The parts and technology come from them. Only when we handle steel ourselves can we relocate more industries to East Africa.
If the Lake Malawi Industrial Zone succeeds, in three years I can shift at least a third of the conglomerate's assets here to East Africa."
Heavy industry supplies the fundamental machinery for advanced production. The conglomerate's products come from Germanic and Austrian heavy industry, so East Africa must fix that gap to bring it home. All roads lead to local steel output.
Constantinoo:
"So it still comes down to transport. If we had proper transport, everything else would be simpler. The railroad plan's due to start soon, but the 'First Railway' progress is slow. Not sure if it'll succeed."
Ernst:
"The biggest problem is our own limited know-how. Vienna Energy & Power teamed up with Austria, but neither side has enough experience or technology for wide-gauge locomotives. We haven't even produced a working prototype, so perhaps we should scrap that attempt and revert to existing standards. After all, the so-called 'First Railway' was more of a test line. We might as well rebuild it from scratch.
In any event, the attempt wasn't wasted. Vienna Energy & Power gleaned valuable knowledge. Once we finalize a more conventional track gauge, building or acquiring standard locomotives in East Africa will be easier. Then someday we can have our own locally-made trains."
Currently, all Austrian railway firms advise East Africa to pick an established gauge. Austria itself has multiple standards, so suggestions are somewhat scattered, but the main push is for 1,435 mm. They also mention meter gauge or even 760 mm. Indeed, Austria-Hungary has no uniform gauge, which complicates their recommendations. They each propose their own system.
Ernst is tempted by 760 mm in mountainous or mining zones like Lake Malawi, but for main lines, East Africa will likely choose 1,435 mm or something close. He's heard about the 1,524 mm gauge used by Russia and 1,676 mm in India, Argentina, and Chile – with minor differences. Even Portugal at 1,665 mm or Spain at 1,674 mm, as well as 1,520 mm for Russians. Some countries also use 1,600 mm – in Brazil, Australia, Ireland.
Selecting any of these would mean East African rails wouldn't be alone worldwide.
"2,500 mm gauge is too controversial," he jokes. "We'll see what folks vote for. The highest-liked gauge by July 24, 2023, gets adopted."
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