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The Collapse of the Royal African Company: How Open Trade Trumped the Monopoly

Lee Hathaway
Dr. Barry Gaspar

History 168A

December 12, 2007

After the Restoration in 1660, the British Crown shifted its allegiance from privateer slave traders to monopoly companies (Walvin, 55). With the sugar boom in Barbados producing a growing demand for labor and the conquest of Jamaica lessening the hazards to English cargoes, Parliament decided to emulate the example set by Holland’s thriving Dutch West India Company. Thus, the Company of Royal Adventures soon was granted the first British monopoly charter over the English slave trade in 1663 (Rawley, 132). Although severe financial deterioration and debt accumulation forced the Adventurers to surrender their charter, Charles II managed to re-incorporate the creditors and shareholders who assented to the reconstruction scheme as the “Royal African Company of England in 1672” (Scott, 244). Receiving initial royal investment from the Duke of York, Prince Rupert, the earl of Bath, and subscribers such as philosopher John Locke, under the charter of 1672 the RAC was granted usual privileges of incorporation and rights to “the whole entire and only trade” from Sallee to the Cape of Good Hope and of all nearby islands according to British Treasury Records (244). Enjoying monarchical favor, the RAC began vigorously engaging in the slave trade, capturing a significant portion of the international slave trade for England, and eventually emerged as a multi-product monopsonist with slaves accounting for only 40% of total English trade with Africa (Carlos, 322).

Despite the fact that the RAC ended England’s dependence upon other nations for slaves, had helped put the nation in the front rank of slaving countries by 1700, had maintained the English interest in Africa, and had helped make possible the development of the English sugar industry, it was doomed to fail (Rawley, 141). By the late 1690s its enviable position as a legal monopoly in an expanding and profitable industry slipped away as it began licensing private traders. In 1712 it lost its footing to free trade once and for all with the expiry of the Ten Percent Act in 1712, and by the 1730s the RAC had virtually disappeared (Carlos, 291). Accumulation of financial burdens, rising ambition of private traders, an internal principal-agent problem, and a change in government coupled with growing national sentiment against monopolies, all combined to dismantle the RAC and allow free trade to triumph in the British slave industry.

As debt and expenses began adding up, the initial £111,100 of capital the RAC started with quickly proved insufficient for its needs (Morgan, xiii). In addition to the debt the Company inherited from the Adventurers, by 1682 the yearly total of new debt reached £48,565, increasing to £50,947 in 1683 (Davies, 77). Compared to 1675 when only £12,300 was borrowed, the RAC management demonstrated a significant affinity toward raising capital via debt (77). Compounding their debt nightmares, the Company experienced serious drains in cash flows as Caribbean buyers chose credit as their preferred method of payment. Within eight years after winning its charter it bore £120,000 owed in planters’ debts (Rawley, 137). By 1690, the company was owed £170,000 in Barbados, Jamaica, and the Leewards in credit accounts (Morgan, xiii). While collection efforts ran into obstructions erected by colonial courts and assemblies, planters continued to be more than willing to take advantage of the company’s willingness to extend long credit as they quickly paid private traders for slaves behind closed doors (Davies, 312-315). Thus, limited cash flow and amounting debt placed serious burdens on the RAC’s financial standing.

In addition to the financial deterioration experienced in colonial RAC operations, the forts, factories and lodges in West Africa placed enormous stress on the RAC’s books. The Company had paid nearly one third of its initial capital to obtain forts on the Gold Coast and had spent around £20,000 per year defending them from other expanding European forces like the Dutch and French (Morgan, xiii). Additionally, Davies cites how death rates were higher among slaves held in the forts even for short durations, making them more expensive for the Company in both the short and long run. However, despite any inclinations the RAC may have had to abandon these operations, the Company was required to maintain the English forts in return for receiving its charter (Carlos, 292). Thus, regardless of how little financial benefit the forts generated for slave trade operations, the Company was stuck with them and with the task of providing financial support for them.

RAC revenue and overall operations were also plagued by difficult wartime trading conditions during the War of the Spanish Succession when French privateers roamed the English Channel and the sea lanes leading out into the Atlantic, capturing British vessels and seizing their cargoes as prizes (Morgan, xvii). During the war years of 1688-97 and 1702-12, the RAC lost a quarter of the 183 ships that departed from England and 114 vessels on the homeward run from the West Indies. By 1708, forty-four ships had been lost en route to Africa, costing the company £124,652, and goods worth £136,641 were lost from ships returning home from the Caribbean (Davies, 206-208). Thus, as Davies describes in The Royal African Company, between 1691 and 1708 the company’s deteriorating financial position was met by substantial borrowing and calls for greater amounts of capital. Unfortunately for the RAC, taking out loans meant new debt charges. By the end of 1708 the RAC held debts at interest of £301,195 and book debts of £11,429 (Morgan, xiii). By 1712 such were the financial burdens of the company that had become technically insolvent (xiv).

The level of the company’s exports to Africa and its supply of slaves to the Americas also failed to meet long run expectations, which fueled advocacy for free trade. Planter dissatisfaction serves as an extremely visible expression of disappointment in the Company’s operations. During the late 17th century, complaints regarding the “foul monopoly” became commonplace and were supported with arguments that the RAC failed to supply sufficient numbers, kept prices high, and sometimes delivered slaves of poor quality (Rawley, 137). Historical research by Littleton, Donnan, and Davies all supports the notion that the majority of these planters appear to have the best argument regarding the adequacy of supply except for those in Barbados, where the slave population was growing at a slower rate than in the other islands, and those in Nevis, from where there was no complaint against the monopoly until 1689 (137).

Frustration with the RAC quickly gave planters more incentive to seek other more competitive options to fulfill their labor demands, resulting in diminishing returns and poor forward expectations for the Company. For example, from 1686-1687 when traffic was thriving RAC ships delivered 10,815 African captives to the West Indies (Davies, 363). Within a couple of years that figure fell to below 3,000 slaves annually and then remained at a relatively modest level (363). Additionally, according to West Indian governors in a Report on the Trade to Africa included in Elizabeth Donnan’s documents, during the period of June 24th 1698 to December 1707 the company delivered 6,854 slaves to Jamaica compared to 35,718 from the separate traders (Morgan, xxii). In Barbados during the same time period, the RAC delivered 9,006 compared to 25,577 slaves from separate traders (xxii). The cumulative loss of £300,000 in merchant shipping to foreign privateers during the War of the League of Augsburg during 1689-97 and the War of the Spanish Succession from 1702-13 also demonstrates the decrease in company expectations (xiv). Despite the king’s proclamation in 1674 which prohibited his subjects from encroaching upon the monopoly and enforced royal officials to keep interlopers from taking part in the “privileged trade” with seizures of illegal cargoes and ships, interlopers flourished. Thus, as expectations for the RAC began to diminish toward the end of the 17th century, faith in private traders surged as they assailed the unpopular monopoly, offered competitive prices, and most importantly provided laborers to rapacious planters (Rawley, 137).

As mentioned earlier, the Company faced competition from illegal traders or interlopers as well as separate traders from inception. Although these traders could legally carry slaves from Madagascar, which lay outside the monopoly’s limits, the King prohibited any interference with the RAC’s monopoly of all other African trade (137). Interlopers could be stopped anywhere in the journey from England to Africa and on to the West Indies, but in practice they were most likely to be caught in England before leaving port, along the coast of Africa while trying to purchase slaves, and on arrival in the West Indies (Carlos, 304). However, the vastness of Atlantic basin forming the global arena in which the RAC conducted business, made monitoring and enforcing the stipulations of the charter along every inch of the journey extremely difficult and resource-intensive.

Private traders faced many advantages unavailable to the RAC despite the risks and costs of smuggling associated with their business endeavors. Interlopers and private traders conducted their transactions as and when they wanted. They lacked the obligation of continuous involvement, and certainly were not bound to the parts of West Africa where established forts and factories existed. Thus, each decision regarding their trading endeavors was fairly flexible and could take into account various matters such as slave patterns in different regions, the current purchase prices for African captives, the assortment of goods required to meet different local African demands, the state of international competition on different parts of the West African coast, and the political circumstances of African societies that controlled the supply of slaves (Morgan, xxiv). Being able to change their  business plan regarding when and where to export and import slaves in sync with current economic and political changes allowed private traders to remain profitable, whereas political or economic strife in an RAC dependent African or West Indies area posed a huge threat toward the monopoly’s profitability. Also, private traders registering a losing voyage could stay out of the trade or declare bankruptcy, whereas the RAC had to continue trading according to schedule even after loss-making voyages (xxiv). The derivations of interloper market share yielding 50.6% in 1679 to 62.4% in 1689 in the Leeward Islands by Carlos and Kruse from the population estimates of Curtin, McCusker and Menard demonstrates an upward trend in illegal trading despite the RAC’s best efforts to protect its government backed monopoly charter (Carlos and Kruse, 310).  Thus, although the RAC actively sought to increase the smuggling costs facing Carlos’s “fringe firms’” and pursued the improvement of the quality and quantity of naval policing throughout the Atlantic basin in order to reduce the level of interloper penetration into the Company’s controlled market, the push for free trade proved impossible to restrain. 

   More dangerously, principal-agent problems often plagued the RAC’s monopoly, exemplified by the illegal internal trading conducted by captains and shipmates. In a sense, the captains were in a position to trade on their own accord, possessing the ability to utilize company property to purchase slaves and potentially smuggle the healthiest ones off the ship to generate private rather than company revenue (Carlos, 298). The RAC recognized this from its earliest days and complained about the inefficiency and dishonesty of their employees frequently. A letter the Company wrote in 1691 stating, “We have reason to complain that our factors and some of the chiefs manage private trade, which is the way to encourage interlopers and ruin our stock by bearing the charge without having the advantage,” demonstrates their ongoing problem with employees favoring or consorting with interlopers (Davies, 255).  The RAC attempted to combat these problems by employing instruments which either decreased the probability of successful smuggling or increased the returns paid for appropriate behavior (298). Hired “waiters,” paid a percentage of contraband found, searched vessels entering port in London, the RAC instituted a system of security bonds and gratuities, and captains were required to take an oath of loyalty promising not to act contrary to the interest of the Company (298-299). However, the bonding structure used by the RAC failed to be an optimal solution to the problems of adverse selection it faced and the oath certainly didn’t resolve the firm’s moral hazard problem (Carlos, 144). Thus, regardless of successful efforts to moderate illegal activity at the homeport of London, resulting in the findings of “5 Negroe boyes, 1 Negroe girle, 46 Ellephants teeth, 1 cask wax, 1 Elephants tooth” onboard the Unity, smuggling flourished during the difficult-to-monitor African to West Indies portion of the transatlantic business (Carlos, 299). Captains found themselves able to utilize space onboard the ship directly at the Company’s expense, and when confronted by anti-smuggling efforts similar to those used by agents in London, they utilized clever tactics of evasion such as emptying their private stashes off the boat under the cover of night, in a nearby bay before reaching the harbor or ultimately unloading at less-regulated ports (300). When these situations occurred, the agents often heard about the landing after it had taken place, then had to recapture the missing slaves, and had difficulties prosecuting the offenders (300). According to RAC documents in the Public Records Office of England between Augusts 1679 to March 1681, captains attempted to smuggle approximately 311 slaves on 14 out of 25 recorded transports, roughly six percent of the total number of Company slaves delivered to the islands during this time period (Carlos, 302-303). The fact that captains were also able to gather expertise and experience with each voyage allowed them to exploit the RAC system and engage in illegal private endeavors. For example, in a letter from Jamaica to the London office, Company agents reported former employee Captain Daniels having illegally landed 250 slaves on the island, having lost only two or three on the voyage (Carlos, 303). Thus, in combination with the larger increase of illegal trading, RAC employees acting on their own interests hurt the monopoly held by Britain’s only official slave trading company.

Licenses for private traders also reflect the declining ability of the RAC to enforce its monopoly and the effectiveness of the free slave trade movement gaining momentum after 1688. Beginning licensing in 1686—following the precedent set by the Company of Royal Adventures who granted separate traders licenses to trade in 1669 for a charge of £3 per ton or 10% on the value of the cargo—the RAC attempted to gain capital and improve cash flow by charging premiums on the goods onboard privately owned ships (Bean, 102). This allowed more private traders to legitimately establish themselves in the industry as long as they were willing to pay a 40% premium on the value of the goods exported from England before 1688, 25% on goods provided by the RAC and 15% on goods provided by the licensee in 1690, and 15% on goods provided by the RAC in 1693, and £1 for each slave shipped in 1695 (Davies, 125-126). With the termination of the RAC’s charter and the fall of their respective monopoly, the Ten-Percent Act of 1698 emerged requiring all slave ships operating from any English port apart from London to pay a 10% levy or tax on slave cargoes(Plymouth City Council). This lasted until the Act was repealed and removed from the Statue Book in 1712. The RAC’s willingness to engage in licensing of privately operated ventures demonstrates their acknowledgement of the competitive threat illegal trading posed and the need to find a profitable solution to combat the menace. However, by allowing private traders to prove their efficacy and legitimacy, the RAC dealt itself an internal destructive blow in the ongoing battle of monopoly versus the double threat of perfect competition and free trade.

The revolution of 1688 curbing the royal prerogative that had bestowed the RAC with its privileges, effectively ended the Company’s claim to a monopoly (Rawley, 138). In 1690 the Company attempted to secure confirmation of its charter since royal monopolies had increasingly come under the scrutiny of a Parliament strengthened by the political settlement associated with the Glorious Revolution under William III’s government (Morgan, xvi). Encouraged by the critical view of chartered organizations, influential lobbyists petitioned Parliament to open up the slave trade to a wider group of merchants than only the single joint-stock company which had delivered more slaves to the western hemisphere by the late 17th century than any other single business (Eltis, 212-213). The petitions from 1690 to 1713 ran five to one against the African monopoly, as complaints and defense turned to questions of national policy, with the majority of the opposition coming from separate traders, planters, and manufacturers (Rawley 138-139). For example, in Systema Africanum, mariner William Wilkinson set out to expose the company’s abuses of separate traders, its ruin of the trade and its bringing dishonor on the English nation (139). Jamaicans had long complained about being undersupplied with over-priced, low-quality slaves, while seeing Spanish buyers take the best Africans. Similar arguments emerged from RAC dissenters in the emerging slave economies of Virginia and Maryland in 1696. Additionally, two London merchants, Gilbert Hetchott and James Gardner, recited to a parliamentary committee a lengthy list of reasons why free trade to Africa should be allowed, including, “The advantage it will be to the Nation to have many buyers of our Woolen Manufactury and much greater Quantities exported” (139). Despite the fact that many members of royalty remained invested RAC shareholders in the late 17th century, it proved difficult to ignore the positive benefits opening the slave trade to all traders held for England’s economy and the growing national sentiment against the Company.

The conclusion of the War of the League of Augsburg, in which the company claimed to lose approximately £400,000, prompted the House of Commons to make a settlement of the controversy over the African Trade (Davies, 132-135). The Act of 1698 accepted the company’s arguments that “the Trade to Africa is highly beneficial and advantageous to this kingdom,” and that the forts “are undoubtedly necessary” for its preservation (132-135). Additionally, it opened the whole trade to West Africa from Cape Blanco to the Cape of Good Hope to His Majesty’s subjects, but they were required to pay the aforementioned duty of ten percent on all exports to Africa which would be collected by Customs officers to be given to the RAC still charged with the responsibility for fort maintenance (Rawley, 139). Despite the fact the RAC now received compensation for the financial burdens inflicted by the forts, separate traders benefited immensely (139). For a nominal fee, they secured protection from the forts and also could now legally erect factories of their own, providing them with the competitive legal framework they had been seeking for quite some time. 

In the first years of open trade the RAC enjoyed a resurgence of business. But during the longer period 1698-1707, the company delivered slaves at an annual rate of 2,700, while the private traders were delivering at a rate of about 8,800 (Davies, 363). However, in the last years under the Act of 1698, the private traders raced ahead, so much so that in 1711, the last full year of the Act, the RAC delivered a mere 395 slaves in the West Indies (363). Realizing its market share and presence rapidly slipping away, the RAC turned to the government requesting restoration of its monopoly with the argument in the words of James Rawley that “the 10 percent duty did not meet its expenses in maintaining the forts, that competition was the death of trade, that slave prices had been driven up both in African and America, and that in consequence of these matters England stood in danger of losing its African trade” (Rawley, 140). In response, the Board of Trade launched an inquiry, asking colonial governors to report on the numbers of slaves delivered by the RAC and by the separate traders since 1698. Finding that in less than a decade 93,000 had been delivered to the colonies with 75,000 of these having been supplied by private traders (a volume that the RAC in its heyday had never attained), the Board’s report in 1709 clearly demonstrated that open trade was expanding the colonial slave labor force far more rapidly than had ever occurred under the monopoly (140). Areas previously dissatisfied with and neglected by the RAC like Jamaica, Virginia and Maryland were all beneficiaries of the new policy and received greater quantities of slave imports to match their growing slave economies. In support of free trade, the Board noted that Portugal, with the brief exception of five years, pursued open trade, and carried off more enslaved Africans yearly “than all other Nations in Europe,” which supported their overall decision that unrestricted trade “is much more advantageous to the Publick than that of an Exclusive joynt Stock” (140). 

Despite the fact that the RAC wasn’t dissolved by Parliament until 1750, the loss of the government sanctioned monopoly over the British slave trade dealt the company a death blow from which it was never able to recuperate. Ultimately, the success and failure of the Royal African Company hinged on the political supportive structure which gave it birth, and when that structure was dismantled following financial deterioration, poor performance, a rise in interloper activity, and a change in national sentiment, the company faltered. As private slave trading emerged victorious around the turn of the 18th century, open trade gained competitive momentum to surpass the standards set by the RAC in terms of supporting and supplying the blossoming economies and industries of England, Africa, and the British Colonies. The labor intensive sugar industry along with increasing mortality rates of slaves in the West Indies fueled demand for enormous quantities of slaves which private traders actively and successfully supplied until 1807 when Britain became one of the first nations to pass an Act to abolish its participation in the slave trade. Despite the shortcomings of the RAC discussed heavily in this paper, the Company successfully ended England’s dependence upon other nations for slaves, helped to put the nation out in front of slaving nations by 1700, maintained English interest in Africa, and helped make English sugar industry development possible. However, its greatest contribution to the Atlantic world occurred in its act of folding, thus giving way to private traders and a legal open British slave trade once and for all. This allowed England to create a model of open trade beneficial to their political and economical state, which the French, Dutch, and Spanish would emulate later on in the 18th century while instituting open slave trading systems of their own. 


Toyin Falola & Amanda Warnock (eds.) - Encyclopedia of the Middle Passage, 2007