THE ECONOMY SHOULD VEER COURSE

General economic slowdown is a global phenomenon. It has affected the rich countries in particular since the onset of the international economic crisis in 2008. It has gone on to affect the emerging economies as well. China, India, Brazil, Indonesia and South Africa are all beset by falling growth rates. Commodity exporters, including from Africa, are doing relatively better but, unless demand is sustained in the markets at the global level, they also risk going in the direction of dampening growth.

In the case of Mauritius, the rate of growth of the economy has been on a declining trend for successive years. Statistics Mauritius forecasts that the economy will grow by 3.2% in 2013, down from 3.4% last year. Understandably, a sector such as construction has a significant weight in the overall economy. The fact that it has been successively contracting (-9.4% in 2013, -3.0% in 2012) from year to year impacts on the overall growth rate of the economy itself, despite certain sectors keeping it up, albeit at a slower pace. ICT is to grow by 7.7% in 2013, that is, lower than the 8.6% of last year. This was also the case for the financial sector which is to grow by 5.3% in 2013 as compared with 5.7% in 2012.

These figures show that it is not clear that certain key sectors of activity are forging ahead, compensating for others, such as export oriented manufacturing, which have had a somewhat erratic performance over the years. There are some hopes that the hospitality sector will pick up, but not enough to overtake the slack emerging from other areas of economic activity. While inflation at 3.7% for the year looks tame enough, overall investment is not picking up; as a ratio of GDP, total investment is set at 21.2% for 2013 but it was higher at 23% in 2012. The rate of inflation may not be reflecting in actual fact the kind of pressure people are facing against a spate of rising prices of basic goods and services. Couple that with a tendency for unemployment estimated to go up to 8.4% of the working population from below 8% in preceding years, it will help to see the emerging dampening overall outlook.

In the circumstances, it will serve no purpose to put it all to the rather gloomy external economic conditions. Of course, those conditions are brought to bear on our slowing economic performance. The question is whether we could let that happen and, further, if we don’t, what should we do to overcome the downtrend?

Obviously, the economy has been signalling for a number of years now that it was in need for re-engineering, if only by its continuously falling pace of overall growth. The re-engineering takes time. You have to remove the slack that usually settles down in conventional areas of activity. You identify the factors that are preventing those slowing sectors from taking on the markets more forcefully. This is followed by the adoption of corrective policy/administrative actions which enable obstacles to growth being removed. Some call them “reforms”. In many cases, you have to innovate; firms like Apple and Samsung, for example, keep smoothing the rough edges as they put on the market a novel version of the previous product just to eke up demand.

In the case of our tourism sector, for instance, you have to keep up the creative aspect of the hospitality activity until a new and better product emerges but you have, at the same time, to keep the price in an acceptable range and mix all this up with travel facilities so that you give the most efficient connections to customers. There are many ends to manage simultaneously; there is no escaping or shifting the blame upon one or the other that will do the trick. You need to move out from your shell to get hold of markets that others are after just like you. We have, even in good times, to keep renovating the product on offer and this is what is called productivity growth. It makes the market impregnable when bad times, like right now, are on. It seems we have instead allowed ourselves to be overtaken by events, even after the international economic downturn came in.

There is a price to pay for overlooking the slide in the purchasing power of normal customers and also for not lifting up the market’s profile for those better able to afford even in bad times. What goes for our tourism sector applies just the same for the other activities we undertake. You have to put yourself always a step ahead of the market. Look at the frenetic efforts car sellers are making right now to get you to buy one despite the economic gloom; and, buyers are unable to resist. Once an activity starts declining, the risk is to lose it altogether if one does not perk it up before it goes down too far and below the point of resuscitation. The right management of enterprises is an imperative from which one can escape at serious cost. The consequences of not attending to it are seen in growing unemployment and widening of the scale of poverty.

Dynamic countries are always on the lookout to introduce fresh lines of economic activity suited to the combination of local resources and emerging global market patterns. Although we announced adding to our scope by going out for what was called an “ocean economy”, we have yet to see what kind of scope is being given to it. Have we been ordering vessels equipped with the best technology has on offer to churn up growth from this activity? Have we been designing new courses to equip our people to command this proposed new area of growth? Have we been measuring the stages of development we will go into, given the limitation of our resources and/or the amount of joint ventures we could reasonably undertake?

Instead of focussing on all sorts of day-to-day pedestrian problems, we could have started motivating the population to shift attention to possibilities for engaging in this sector, by mopping up financial and other resources so as not to end up giving it all in the hands of monopolising economic agents. Financial engineering was a must to set off projects of the sort on course. We don’t appear to have paid attention to it. It is only by clearly enunciating the blueprint that one could have enlarged the scope of the economy in this manner despite all the odds of the international economic downturn. The same goes for our stated policy towards engaging more fully with Africa. What exactly are we planning to join up with? Since we are essentially a service-providing country, what are the relevant Africa-specific skills we have embarked upon?

What all this shows is the need for effective economic, social and political leaderships to get their acts together. It is not by targeting the sloth of one or other of these agents of progress that we can make it. We have to assemble all our resources to face up to the challenging situation. It is for the country’s leadership to turn real and chart as clear a course as possible. Without it, the economy will not veer course the way it is required to do so at this stage.

M.K.

 


* Published in print edition on 27 September 2013

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