Returns on investments during the colonial era: the case of Congo

Before the First World War a global wave of foreign direct investment materialised. Belgium participated in it on a global scale but after the War a shift towards the Belgian colony (Congo) was observed. With regard to these colonial investments, it is commonly argued that higher (expected) profit rates were a strong incentive, although others propose that the colonial powers actually lost money on their overseas possessions. We measure ex-post performance in terms of the time weighted rate of return by making use of a new database on Congo stocks. We demonstrate that, as far as the Congo sample is concerned in comparison with the Belgian sample, returns on Congo stocks were much higher, at least until country risk became a reality (1955-1960).