Ensuring That Every Rupee Is Accountable

Mauritius Investment Corporation and the bailout of distressed companies

MIC must ensure that bailout terms provide a fair return, funds are secured and it truly becomes a potent instrument of transformational change to help recast the ownership of prime assets in the country

 By Mrinal Roy

The Covid-19 pandemic has brought the whole world on its knees. It has caused an unprecedented health crisis, a high death toll and costly socio-economic fallouts. More than nine months after the coronavirus outbreak, the world is still fighting an uphill battle against the virus. The closure of frontiers and the enforcement of diverse restrictions by countries across the world to contain the spread of Covid-19 have disrupted supply chains and trade flows, sapped economies, employment and the livelihoods of people.

“The first commitment of Rs 1 billion by the MIC to LUX* Resorts & Hotels have already raised legitimate interrogations in the press by professionals in this specialized field questioning the rationale of the terms agreed and highlighting the unfairness of the deal for the MIC. This should be a jolting wake-up call for government and people at large. This is the more so as the MIC has an obvious negotiating leverage when bailing out a distressed company with the support of substantial funds. This will not do…”


It is in times of crisis that the mettle, competence and management acumen of governments and its leaders are tested. In Mauritius tens of billions of Rupees are being spent to manage the Covid-19 crisis in a context where government revenue is significantly reduced and GDP is expected to contract by 13%. Total government debt stood at 73.4% of GDP as at June 2020. The trade deficit for 2020 is forecast at around Rs 123.3 billion.

The current state of the Covid-19 pandemic in the world marked by new spikes of infection in Europe and other countries across the world and the enforcement of new lockdowns and diverse restrictions has heightened uncertainties and impacts the decisions of governments, economic actors and consumers. In a context of rising prices of essential consumer goods and precarity, consumers in Mauritius are in a prudent spending mode in order to tide over the difficult times ahead. Supermarkets are multiplying their sales campaigns to wean consumers with significant eye opening price discounts under the nose of government consumer protection services.

In such a grim economic context, it is therefore essential that government manages public finances with rigour and competence, the more so as the Covid-19 crisis is expected to be a long drawn one and likely to continue into 2021 until a safe, effective and affordable vaccine is available for dissemination across the world. Government will therefore have to continue to provide, where necessary, wage assistance support and other support measures to economic actors to help them tide over the crisis which will put additional strain on limited government finances.

No to spending largesse

The Organization for Economic Cooperation and Development (OECD) has forecast that the impact Covid-19 on the major economies will be four times worse than the 2008 global financial crisis. We must therefore realize as a nation that we are in this difficult battle together. It is a time for unequivocal solidarity. We must individually and collectively cushion some of the impact of the crisis ourselves. The government cannot be expected to finance all and sundry indiscriminately and grapple with the multiple challenges of the Covid-19 crisis on its own. This is the time for us to ‘ask what we can do for our country’. We above all need to get our priorities right and have clarity of thought in these difficult times. Other stakeholders having the means and resources to do so must contribute to alleviate the burden on government finances and help the most vulnerable and destitute.

Government must however first put its house in order to ensure that every Rupee is judiciously spent. The country cannot afford the questionable spending largesse of a whopping Rs 381 million contract between the Mauritius Tourism Promotion Authority and the Liverpool Football Club for two minutes of advertisement to promote Mauritius during every Liverpool match over three years at a time when our borders are closed. It is evident that this important sum of scarce funds can be better used in these challenging times.

Similarly, questions were recently raised regarding the tenders for the procurement of essential medicine and protective gear during the Covid-19 lockdown period. It is therefore important that government ensures that all procurement tenders and procedures involving government expenditure are transparent, accountable and above all value for money. It is also high time to put an end through above board tender procedures to the whispering campaign of innuendos and allegations which have plagued government procurement tenders.

It is equally important that the Rs 60 billion provided by the Bank of Mauritius to the government for economic stabilization in the context of the adverse fallouts of the Covid-19 crisis be judiciously used in a transparent and accountable manner. There is therefore an imperative need for regular reports on the use of these funds to be made available for public scrutiny and comment.

Game changer

However, what is much more important to monitor and oversee is the fund of up to US $ 2 billion (about Rs 80 billion) drawn from the foreign exchange reserves of the Bank of Mauritius provided to the Mauritius Investment Corporation Ltd (MIC) to assist important and viable companies in Mauritius, which are financially distressed as a result of the Covid-19 pandemic. MIC will inter alia invest in large and medium-sized enterprises having a minimum annual turnover of Rs100 million. The key objective of the MIC is to invest these funds through a number of investment tools including both equity and quasi-equity instruments and manage them with a view of building a value base for the citizens of Mauritius.

It is therefore imperative to lift the opacity which shrouds the decisions of the MIC involving substantial bailout funds to support large distressed companies.

If judiciously managed, the MIC investments could be a game changer in the shareholding of prime assets in the country. The people are therefore tuned and alert as to the manner the $ 2 billion advanced by the Bank of Mauritius to the Mauritius Investment Corporation Ltd will be managed.

– Will this colossal sum of scarce financial resources be rigorously allocated on the basis of strict business savvy decisions grounded on pointed technical analysis and financial best practice norms?
– Will they be secured by sound guarantees and provide a fair return?
– Will the financially distressed companies seeking MIC bailout funds be subject to a thorough due diligence evaluation, a commercial assessment, cede equivalent equity and grant
board membership to assure oversight of the company’s decisions and strict adherence to principles of corporate good governance and sustainable development?

As a custodian of substantial national funds, MIC must therefore review its structure and beef up its technical team with in-house experts having the pointed skills required to competently carry out its mandate with if required the advice of seasoned professionals in the field of distressed investing.

The first commitment of Rs 1 billion by the MIC to LUX* Resorts & Hotels have already raised legitimate interrogations in the press by professionals in this specialized field questioning the rationale of the terms agreed and highlighting the unfairness of the deal for the MIC. This should be a jolting wake-up call for government and people at large. This is the more so as the MIC has an obvious negotiating leverage when bailing out a distressed company with the support of substantial funds. This will not do. The hotel industry which was heavily indebted has borne the brunt of the Covid-19 pandemic in the wake of the closure of borders. It has accumulated debts exceeding Rs 70 billion. According to the United Nations World Tourism Organization (UNWTO), the Covid-19 pandemic will result in a contraction of the tourism sector by 20% to 30% in 2020.

Drawing lessons from 2008

The world has drawn potent lessons from the 2008 financial crisis. When governments bailed out distressed banks with public funds at the time they should have obtained an adequate shareholding of the banks as a trade off but they did not. In essence, public funds were used to bolster the finances of distressed banks. The risk taken by taxpayers’ money was never remunerated with a fair return and more importantly with a share of the enormous profits made when the situation was normalized. The same mistakes cannot be repeated.

Similarly, there is a debate currently raging in the US that the stimulus package provided to businesses during the Covid-19 pandemic disproportionately favours large companies as opposed to small businesses.

Every commitment of funds by the MIC must therefore be effected in a transparent and accountable manner. It must also meet the test of public and expert scrutiny. The country therefore needs to put an end to the long list of costly botched decisions and past blunders by ensuring that all its key institutions are manned by seasoned and competent professionals. It must ensure that every Rupee is accountable. It is therefore imperative that urgent corrective steps are taken to review the thrust of the MIC with the induction of the professional team of experts required to ensure that the bailout terms agreed provide a fair return, that the funds are secured and that above all the MIC truly becomes a potent instrument of transformational change to help recast the ownership of prime assets in the country for the common good.

Beyond the rhetoric, it is opportune to finally deliver on the seminal promise of a real democratization of the economy.


* Published in print edition on 9 October 2020

An Appeal

Dear Reader

65 years ago Mauritius Times was founded with a resolve to fight for justice and fairness and the advancement of the public good. It has never deviated from this principle no matter how daunting the challenges and how costly the price it has had to pay at different times of our history.

With print journalism struggling to keep afloat due to falling advertising revenues and the wide availability of free sources of information, it is crucially important for the Mauritius Times to survive and prosper. We can only continue doing it with the support of our readers.

The best way you can support our efforts is to take a subscription or by making a recurring donation through a Standing Order to our non-profit Foundation.
Thank you.

Add a Comment

Your email address will not be published.