A Journey Derailed

Titbits

By Rattan Khushiram

The bottom line in 2014 was that people wanted change. They wanted a new future that would embrace transformation and reorientation to keep pace with their changing sentiments, aspirations, needs and preferences. The old order had to give way to the new. As many politicians had been getting too haughty and out of tune, the voters were willing to try something different, a mixture of old and new, for a new journey driven by the SAJ-Lutchmeenaraidoo duo that are referred to as the architects of our first so-called “miracle”. The voters were willing to give these old hands, supported by some young turks, another chance to fulfil their promise of bringing about a new second “miracle” that would lift all our people with the tide of growth and rid us of the persistent level of absolute poverty.

Their Economic Mission Statement (ECM) offered us a strategic vision for a more diversified and resilient economy and a road map to achieving high income economy status by 2030. The vision statement aimed at creating of 100,000 new jobs during the next five years in 10 sectors of the economy through major investment projects amounting to Rs 185 billion and achieving an average growth rate of 5.5% annually as from 2017.

The new sources of growth that were expected to propel the economy to a high income status involved a revamped and dynamic manufacturing base for the country, leveraging on the Exclusive Maritime Economic Zone to develop the Ocean Industry, revisiting the services sector and renovating the Innovation, Technology and Communications sector as well as the Port sector. Mauritius would gradually be establishing itself as a regional hub for healthcare and medical services as well as a medical education centre of excellence for Africa. The Africa Strategy, another core element of the Economic Mission Statement, which was meant to transform Mauritius into a regional platform for trade, investment and services, would have been achieved through enhanced economic exchanges and improved air and sea connectivity, with the eventual creation of both a regional air and shipping companies.

The last five years have however been a deception for the people of Mauritius. We are stuck with a sluggish economy. The youths have not got the promised jobs. The small farmers have lost hope. Traders are apprehensive about the future. Micro and small medium enterprises are retreating. Women have lost their sense of security. Institutions have lost their independence. Lots of promises were made, but very little has been achieved. Instead lots of freebies have been distributed, and this at the cost of the development agenda.

The impact of the “chantiers” or public investment splurge in terms of expansion of the market and spill-over effects on demand and investments has been marginal. There’s also the reprimands of the IMF which has warned that in the near-term fiscal consolidation is needed to bring down our elevated public debt. For how long will they will continue to dip in the BOM’s reserves to bridge the fiscal deficit?

Comparative Indicators

The greatest disenchantment of the population with this regime is that once in power there was no telling when fair would turn foul and foul fair. The harshest blow is that the lamda citizen has lost his faith in the Lepep government for non-delivery on its promises. What we are left with are prestige projects, questionable statistics, unsustainable growth in consumption and current account deficits, huge debt, and an overall climate of intimidation, cronyism and nepotism. The cracks that they tried to paper over during the past years are widening fast and dramatically pushing the government to the brink. A full blown crisis is unavoidable.

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Putting the record straight about minimum wage, free tertiary education, pension increase and the Workers Rights Bill

There has been recently lots of chest-thumping by government on its so-called pro-poor, pro-workers measures. Let us examine how much of the rhetoric is matched by facts.

Minimum wage: The minimum wage for both the public and private sectors was introduced in January 2018. Among the 400,000 full-time employees, only around 125,000 receive less than the minimum wage. Of the 111,300 full-time workers and 9300 part-time workers in the different sectors of the economy, the main beneficiaries of the minimum wage have been the textile workers who saw their basic wages increase by more than 11% on average.

But when we look at the average monthly earnings (which include wages, overtime, productivity bonuses, commissions, travelling allowances, attendance bonuses, housing and rent allowances and other regular cash payments), we note an average increase of only 4.7% which is only marginally higher than that of the previous year. Thus, in terms of earnings, we cannot say that the textile worker, who has obtained the most substantial increase in terms of minimum wage compensation, is much better off than what he would have obtained going by the trend of growth in earnings.

Why? One possible explanation is that employment in the textile sector is being negatively impacted with the implementation of the minimum wage that has led to the closure of some eight textile firms. The impact could have been worse if some of the enterprises did not opt for orders with higher margins, where possible, and for the abolition of overtime. 

Thus, the increase in minimum wage has not been really beneficial for the workers. On the contrary, it has led to increasing risks for workers losing their jobs as the rising labour costs have, to some extent, undermined the international competitive advantage of the textile industry which experienced a high negative growth of -6.8 in 2018 and is expected to continue declining by -1.4% in 2019.

The minimum wage should have been awarded on a phased basis giving time to the textile sub-sector of the Export Oriented Enterprises to adjust and boost productivity. The textile sector operates in a highly competitive world market. For the flagship textile companies, they can to a large extent absorb the increases in costs through new orders, higher prices of their products or increases in labour productivity. The small enterprises are mostly price-takers and they have little choice but to wind up if they are not given enough time to adjust. 

Now whatever little gains that have been obtained by workers will be eroded by the inflationary pressures that will be unleashed by the accommodating monetary policies of a government rushing to the rescue of the economic elite via lower repo rate, depreciation of the rupee, lower corporate taxes, freight subsidies and other incentives.

Generous pension increases: The generous old-age pension (BRP) increases have led to pension spending pressures which are contributing to an explosive BRP path under both baseline and active scenarios of the projected expenditures. Government has no choice but to take measures to ensure the long-term financial sustainability of the pension system for future generations while providing for a decent, adequate and secured pension income for pensioners so that they do not fall into poverty.

It has instead chosen crowd-pleasing packages and handouts in successive budgets shying away from the need for a bold reform of the pension system that would have secured less drastic future changes and fairer outcomes. But with the projected decline in the workforce and an increase in dependency ratio, the increase in pensions spending will pose fiscal risks or crowd out other priority expenditures. Sooner or later, we will have to confront the hard choices that we have not prepared ourselves for. Does such economic irresponsibility mean being pro-worker?

Free tertiary education: A populist measure that was not well thought through and discussed with all stakeholders. New opportunities, collapsing boundaries, unpredictability, technology and changing attitudes are redefining the academic, social and industrial ecosystems today. We must give ourselves the means to open these avenues and boulevards of knowledge and windows of opportunities for the next generation. But all these have a cost — the cost of building universities of the future that inspire and engage the young to embrace technology creatively and whole-heartedly; the cost of providing students with access to the power of quantum computing, artificial intelligence, robotics, and big data and these have to be second nature to them.

Technology through AI and computers shall be the learning platforms for our local universities. We will be needing more and more of public money to fund all these endeavours and to be truly innovative. Are you being pro-poor when you are jeopardizing the universities of the future and future R&D? We could have opted for enlightened ways of according free facilities to the needy while charging those who can afford to pay.

The Workers’ Rights Bill: The pro-workers stance of the present regime is just for the gallery, élection oblige. Behind the scene the corporates have been dictating, after midnight, the necessary amendments that had to be brought to the Workers’ Rights bill. These amendments called into question everything that had been agreed so far with the workers. The unions have qualified the amendments as “laké ferblan”, which will deprive the 360,000 private sector employees governed by the existing 30 Remunerations Orders (ROs) the benefits of the new law. Moreover, as some trade unionists have pointed out, the new law has codified the intentions of the 2008 law but it will not necessarily be a good law in the long run, because it makes work precarious and seasonal. But once the hurdle of the elections is over, the political and economic elite will shack up to clear some of the remaining irritants or plainly postpone its proclamation to the Greek calends.

This confirms the perception that this government is all hype, dangling all kinds of unrealistic promises in the air while failing to deliver on the ground and lacking the gumption to take bold measures and stand up to the corporates in the interest of workers.


* Published in print edition on 30 August 2019

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