Rhodesia was thrown out of the sterling area and lost her Commonwealth trading preferences. She retaliated by abolishing the preference accorded to British goods (in terms of the Rhodes Clause, which had been a traditional feature of the customs tariff throughout our history), and through import control regulations aimed to cut the volume of imports during 1966 by about one-third of the normal level.
But what aroused the greatest ire was the British Government's action in seizing Rhodesia's sterling reserves in London and appointing a group of London financiers, headed by Sir Sydney Caine, as the "official" board of the Rhodesian Reserve Bank to control these reserves and also to find, and then control, the Bank's foreign assets outside of Britain.
Rhodesia could no longer meet her international obligations from her London balances, and the loss to Britain under the heading of investments in the Balance of Payments account was estimated at around £26 million a year. Rhodesia was also unable to meet her public debt obligations to Britain and the World Bank, aggregating £108 million.
But the situation was not without its advantages to Rhodesia. Since Britain had failed to honour its undertaking to assist Rhodesia with development finance in return for the financial obligations accepted by Rhodesia as a consequence of the Federal dissolution, the money saved through her inability to meet her external obligations was applied to financing development schemes within the country. These embraced expansion in agriculture and mining, development of the Tribal Trust areas and African education and a scheme in the Lowveld to increase the production of wheat, a considerable item in Rhodesia's annual import bill.
The screw was tightened during December by two new measures to restrict Rhodesia's ability to deal in foreign currencies. Britain announced that payments for goods and services bought from her would have to be made in nominated convertible currencies other than sterling, and the Swiss Government ordered the Swiss National Bank to block funds Iodged with it by the Rhodesian Reserve Bank. Other members of the sterling area were asked to insist also on payment in convertible currencies for goods or services bought by Rhodesia.
One aspect of sanctions that caused worry was the replacement of the country's bank notes, which had always been printed in Britain. As time went on the stocks held in the country became decidedly the worse for wear and one wondered how much longer they could last. Then, in July, 1967, came the surprise - the Reserve Bank in Salisbury had printed its own, in the greatest secrecy on its own premises. They were of the highest quality, and they gave morale a tremendous boost.
To begin with, sanctions had a telling effect on the Rhodesian economy, but as the months passed and adjustments were made their impact was blunted. Rhodesian manufacturers quickly turned to other than their traditional (British) sources of supply, and found that the foreign article was usually every bit as good as the British, was generally cheaper and was delivered with a regard for dates to which the British suppliers were often strangers.
The need for substitution to replace articles that had hitherto been imported also caused the Rhodesian manufacturer to consider his diversification potential and to exercise his ingenuity. Established manufacturers broadened their operations, and new companies were formed to manufacture goods outside their range. The imposition of sanctions was a stimulus to Rhodesian industry.
Traditional British brand names disappeared from the shops, to be replaced by either local or foreign goods of equal or sometimes even better quality. There were no shortages of essentials, and the effect of sanctions on the man in the street was barely noticeable. There was not the remotest possibility that they would induce the Rhodesian electorate to overthrow the "Smith regime". Harold Wilson's prediction that they would do so "in a matter of weeks rather than months" was wildly optimistic.
In one aspect, however, sanctions have certainly been effective - tobacco. Rhodesia led the world in the efficiency of her Virginia flue-cured industry and her three auction floors in Salisbury were a model of smooth organization. She was Britain's main supplier since 40 per cent of each year's crop went to British manufacturers. The Americans lost no time in filling the gap, but at a price.
The Government took steps to counter sanctions by setting up the Tobacco Corporation to undertake the selling of tobacco to whatever markets were available. The growing policy was also changed, with the emphasis on the production of low-nicotine tobacco, which was in demand. Thus the industry reorganized itself to achieve its main object - survival.
Many growers surrendered their tobacco quotas and left the industry. Others sought to augment the reduced value of their tobacco crop by diversifying into other aspects of agriculture, cattle, pigs and sheep and such crops as soya beans, sorghums and cotton. With that resilience which has been a characteristic of the Rhodesian farmer since pioneer days, they turned adversity to advantage.
Unemployment hit other sections of the community in the early stages. Two big motor assembly firms producing British cars were compelled to close down when their assembly kits were exhausted. They have since been replaced by other assembly firms producing foreign cars.
Just as foreign goods replaced British, so foreign buyers appeared for Rhodesian products that had formerly been sold almost exclusively to Britain. They came from many parts of the world, and they operated in secret. It soon became evident that while their Governments might utter pious phrases about Rhodesia's UDI, their commercial nationals, with an eye to the main chance, were only too willing to fill the vacuum that Britain's hostility had created.
The building industry had fallen into the doldrums after the break-up of the Federation, when confidence ebbed and outside investment capital went elsewhere. It was worse after UDI as the recession deepened into stagnation. To safeguard their funds the building societies were compelled to clamp down on building loans, and the industry was at a standstill. But the exchange control regulations prevented the export of money, and as the volume of investment capital within the country built up the societies were able to loosen the purse-strings. Before the first year of UDI was ended the building industry was beginning to show welcome signs of returning life, stimulated by the decisions of two major insurance companies to erect large office blocks in the heart of Salisbury. Things began to look up.
Immigrants began pouring in from Zambia and other countries to the north as their white inhabitants became more and more disillusioned with African government and sought the security and tranquillity of life in Rhodesia. The emigration trend was reversed and as the European population increased so the building industry was further stimulated. New homes were built, housing estates were opened up, throughout the country the wave of building activity produced an exhilirating sense of growth.
An important part of Rhodesia's foreign earnings has always come from the mining industry. Beneath her soil lies a wealth of minerals-coal, chrome, asbestos, copper, iron, lithium, gold and many others-which were readily sold to the Western world. When the United States joined Britain in applying sanctions our exports of chrome, asbestos and lithium suffered a heavy blow.
But vigorous efforts to find alternative markets for the minerals the world still wanted were crowned with success. Every year since 1965 the value of Rhodesia's mineral production has steadily increased, and with a dynamic programme of expansion future prospects are bright. Intensive prospecting has revealed mineral wealth hitherto unsuspected, particularly in copper, nickel and platinum, and international companies are active in promoting their production.
No doubt it would have done had Rhodesia been dependent on only the pipeline and the refinery. But she had more strings to her bow. She had first-class communication by rail and road with the great refineries in South Africa and at Lourenco Marques, which the British could not shut off. And there was the ready sympathy of the people of South Africa and Mozambique for their Rhodesian neighbours, and admiration of their stand. Action was rapid.
The South African Government, with strict regard for legality, told the world that it would maintain rigid neutrality in the dispute and would do nothing officially to help Rhodesia beat the British embargoes. But, added Dr. Verwoerd, who was then Prime Minister, nothing would be done to hinder normal trading nor to prevent private gifts being made to the people of Rhodesia by the people of South Africa. The mere hint was enough.
With their customary generosity, the South Africans began spontaneously to organize gifts for a neighbour whom they imagined to be almost in a state of siege. A body called "Friends of Rhodesia" came into being to arrange gifts of petrol. At service stations throughout South Africa private motorists were asked to donate the price of a gallon. The idea aroused tremendous enthusiasm.
The first "Petrol for Rhodesia" was a gift of 1,400 gallons donated by 30 farmers in the Bethlehem area of the Orange Free State which two young men drove up in a lorry. They reached Salisbury at the height of the Saturday morning shopping rush on February 12, 1966, and were given a great reception. They were the spearhead, and the trickle swiftly developed into a flood.
Portugal also took a hand. On February 24 Lisbon told London that petrol and oil for Rhodesia would be allowed to go through Mozambique ports without hindrance. The railway line from Lourenco Marques to Rhodesia became congested with fuel tank cars.
The British naval blockade of Beira, however, was effective in discouraging tankers with oil for Rhodesia from entering the port. Portugal deeply resented the British action and relations between these two partners in an "ancient and honourable alliance" reached an extremely low ebb. The blockade was aimed exclusively at Beira, yet an immense volume of oil and refined petroleum was reaching Rhodesia by overland routes. Britain had plugged a small hole in the dyke but left the main breach wide open.
Strict petrol rationing had been introduced as soon as the British embargo was applied, but as the supply position improved so the restrictions were relaxed until, in effect, rationing became a mere formality.
Thanks to the help of South Africa and Portugal, Harold Wilson's main weapon which he hoped would bring Rhodesia to her knees turned out to be a blunt instrument. Mr. Wilson's bluff had been called.
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