Of economic development, entrepreneurship and Jose Poncini

The importance of strategic thinking for our economic orientation

At a point in time in its economic history, Mauritius was without a clue about its future economic orientation. That was in the 1960s. Day-to-day problems such as growing unemployment were pressing for a solution. It is in this context that a lucid thinker, José Poncini, a hands-on, pragmatic Mauritian of Swiss descent and endowed with high business genius, offered to the British authorities then in control, a light manufacturing way out to get over the lack of our economic opportunities. Of course, José had his own luxury shops and manufacturing unit for the external market, but he was thinking out a viable economic solution for all of us out of his personal experience.

In touch with economic reality

Although José Poncini did not successfully impress the British rulers at first, it is on his idea of introducing light value-adding manufacturing activity in Mauritius based on imported inputs that the Export Processing Zones Act of 1971 was enacted. Textiles and garments came on board at first, absorbing nearly all our unskilled and semi-skilled labour over the years. The prevailing global market condition also proved helpful.

It is on this cornerstone strategy of one of our best entrepreneurs that other layers of economic production got built up subsequently. The economic gloom of pre-Independence soon became something of the past when our educated labour force also started getting employed in another sophisticated layer of production, notably an expanded version of the pre-existing financial sector that would have otherwise shrunk down. It soon brought our legal, financial and accounting skills to the production table. The global economy opened up to us. What a nice strategy all this proved to be!

On this platform, we then espoused information technology. Despite our little grasp of the amount of contribution ICT could have made to our economic upsurge, it can be said we can battle it out some day as more depth catches on in the sector. The foundation was concretely laid for our economic upgrade and it expanded from one platform to another and another. Men like José Poncini have been the architects of this kind of strategy. He left us on Monday last. What better homage can we pay him than to acknowledge that he irrigated the field from which all our outward-oriented economic outreach has sprouted out from what was once considered infertile soil. And he and those who helped cannot be thanked enough for pulling us up.

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Development has its own pitfalls

Mauritius has for quite some time been short on strategic economic planning. We cannot last long on ad hoc programmes. We needed to have a fully integrated plan to adapt to a global economy increasingly characterized by disruptive technologies calling for constant adaptation of the platform of production. We needed to analyse the stock of our achievements. Instead we’ve been losing our way on a lot of legalese that has invaded the stage, thus displacing focus from what should have been our real concerns in the economic chapter. All has to be spun together into a sustainable way forward, as our initial take-off showed. We also have to take steps mindful of the constraints they could land us into if we are not so careful. Consider one late example.

A few months back, the Prime Minister announced, as part of the government’s Economic Mission Statement, that our port activities will become a central part of the going forward economic mission of the country. It jumps to the eye that for a country which is surrounded by the ocean, we should cash on our ocean-going activities. The focus on our port and enhancing its contribution to the economy is therefore useful.

This week, the PM held discussions with the leaders of Dubai on various issues, including flight connections provided by Emirates and the share that Air Mauritius should benefit from in ticket sales. Another project that was announced in the Economic Mission Statement, notably, the provision of bunkering services from Port Louis, was discussed with Dubai’s business leaders. Dubai is apparently interested to invest in this project as well as in Port development.

Bunkering is chiefly about the provision of fuel (diesel, medium and light fuel. gas oil, marine diesel, etc.) to ocean-going vessels. It also consists of supplying fresh water, food and other essential items to ships. One branch of bunkering is referred to as ‘Offshore Bunkering’ in which specialised ships go out to provide services to ships on the high seas.

It was stated in the Economic Mission Statement that of 30,000 vessels which annually ply the ocean in our region, only 3,000 called in Port Louis harbour and that it would be worthwhile to attract more of them in a bid to expand our economic activities, such as in the field of bunkering.

Let’s be open-eyed however

Why not? Anything which adds value on our part should be welcome. Mauritius has a history of being involved in the bunkering business since colonial days, witness the British India Steam Navigation company operating in Port Louis in those days as well as the ship chandlers of Port Louis, some of whom may still be around.

It might have been useful to examine why only a fraction of the ships plying in our region call on our port. From here, one could consider what strong points Mauritius should maintain for itself to attract more of the business. One could consider whether other well-equipped and efficient ports in Eastern and Southern Africa or in Reunion Island are also engaged in the same business. Would it be advantageous to work as part of a collective regional supplier of shipping services not in a bid to undercut the others but to increase the number of vessels coming to our part of the world? Could we target, along with them, an appropriate scale of investment, on which we could consolidate with time as business catches up?

We have past experience from civil aviation from which one could learn. Once we opened up to Dubai’s Emirates, they’ve kept occupying a bigger slice of our passenger and cargo traffic. For good reason. On the other hand, due partly to our own mishandling, Air Mauritius hasn’t been able to take up the challenge. This is not only because Emirates have got a big modern fleet and operate a global aviation hub. It’s also because they’ve got enormous financial clout which permits them to sell services at cost or, temporarily, below cost. It becomes difficult even for the big carriers of the world to compete against such global giants.

The United Arab Emirates, of which Dubai is a part, have been bidding for strategic position in diverse countries. About one year ago, they almost bought up five US harbours which were on offer for privatisation. This deal, which was almost finalized, was averted at the last minute by US Congress on the grounds that ports are of strategic importance to the US and could not be ceded to foreign governments or entities associated with them such as Ports of Dubai which, like the airline Emirates, has become the turntable of much of maritime trade going into and out of Africa. All this happens because they are operating on a long-term strategy.

The point to make is that if Dubai were to come in as an investor in our own port or be part of our bunkering services, it should not be given the position of a dominant shareholder which would enable it to dictate our policies eventually. We can achieve this kind of balancing of powers by bringing alongside into the project other independent investors – possibly existing regional players in this line of business – as well so that no one is so strong as to become indispensable.

Moreover, the government should always be in a position to determine policy in a manner such that the private strategic pursuits of any one investor or club of investors does not end up overriding our national port development objectives. All this, to say that we should not go headlong into a project, like this one, only to enhance the activity undertaken from our shores. We should bring to life a more ambitious project than the one we have after taking the precaution that we should not end up supporting other countries’ strategic pursuits to our own detriment. We need to marry all this with a vision of how to realize our other economic objectives and not be frustrated.

Developing an economy requires a careful matching of supply with potential demand. The more we have identified the sources of demand for our chosen lines of production, the more we have carefully insulated ourselves from adverse consequences, the better we’ll have the opportunity to consolidate upon them. It is the sort of challenge Mauritius has to skilfully respond to today in a global economy that tends to become even more complicated for those who come to it from the bottom.

  • Published in print edition on 27 November 2015

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