By Krishna Bhardwaj
This is a time when markets are in a muddle. The hoped-for economic recovery following the financial crisis which erupted in the west in 2007 is taking too long to start taking concrete shape. In the past 6 months, the prices of base metals have gone up by 25%, those of foodstuffs by 40%. Within the latter, wheat prices have shot up by 70%. Cotton prices have gone up by no less than 70%. Compared with the start of 2007, when economic conditions were more stable in the world, oil prices have risen by 110% and gas prices by 130%. Further rises in world commodity and energy prices cannot be ruled out. A lot of these international price increases have already seeped into local inflation; others are on the way. The effect of price increases is to erode the real wages of workers. Add to this growing inequality in income and wealth distribution and you have a feeling among the majority of the people that it is they who are being made to pick up the tab.
Here is a condition that would normally have summoned up our utmost efforts to insulate as best we can our economic activity and the people’s standard of living in view of foreseeable difficulties. Instead of that, what has become our main preoccupation? It is a transaction involving the purchase by the government of the Med Point Hospital of Solferino, Vacoas. This hospital was the property until December last of persons close to the President of the Republic and his son, the Deputy Prime Minister and Minister of Finance, leader of the MSM party. We do not have information whether the hospital was a sound going concern but its main promoter and administrator, Dr Malhotra, who is SAJ’s son-in-law, was sorely attacked by two individuals some years ago whereby his eyesight has been severely impaired. This must have had an adverse impact on the business and proper upkeep of the hospital.
In the ordinary course of business, a public advertisement is launched or private contacts are made with prospective buyers when an enterprise of the sort is up for sale. We are not aware of any such initiative having been taken by the owners of the hospital. It turns out however that a couple of months before last year’s general elections, the then government announced its intention to set up a geriatric hospital dedicated to look after the healthcare of the aged. On 10th June 2010, that is, a little more than one month after the Labour-MSM-PMSD alliance secured victory at the polls after several failed efforts on the part of the MMM to forge an alliance itself with Labour, the Central Procurement Board (CPB) of the government launched an invitation for bids from owners of properties for this geriatric hospital project, with a closing deadline for submission of bids set for 30th June 2010. Specifications that bidders had to satisfy were laid down by the CPB which is itself governed by certain rules of public disclosure and accountability in such matters.
Four bids were received, including one from the Med Point Hospital. On considering the different bids received, the CPB decided to go for the purchase of the Med Point Hospital at a global price of around Rs. 144 million, including the medical equipment found in the hospital. It turns out that the deed of sale was signed up between the parties on 29th December 2010, i.e., two working days before the close of the previous fiscal year, and the papers witnessing the transaction were registered on 4th January 2011, being the first working day of the current fiscal year. It also turns out that according to the Budget of the government presented by the Deputy Prime Minister and Minister of Finance last November, a capital gains tax of 10% is applicable on the capital appreciation of properties against the established value of the property in a specified benchmark year as from 1 January this year.
The fact that the transaction was finalised only towards the end of last year has been interpreted by some members of the MMM opposition as a device employed to avoid paying up the capital gains tax on the capital appreciation. Others have been claiming that the capital gains tax ought to have been paid in view of the fact of official registration of the transaction having taken place at a time when the tax was effective, i.e., in 2011. It is therefore assumed that no such tax, if at all it was payable, was actually paid. There are two matters to sort out: was the tax payable? was a device employed to avoid paying the tax? This is the responsibility of the Mauritius Revenue Authority (MRA). It is for it to track down any possible loss of revenue by the exchequer and to recuperate the same, a task that it routinely undertakes not only in this high profile transaction but in all other cases as well. The Deputy Prime Minister and Minister of Finance should be all too happy whenever the MRA brings back to the coffers of the MoF funds that would have otherwise strayed around, whether or not he is directly involved. This kind of ministerial attitude is obviously dictated by the detachment and dispassion with which one is expected to run a public office. Had Parliament been in session, the opposition would easily have obtained all the details and satisfied itself that all dues to the Treasury have been fully paid up.
Speculation has now been formed in the opposition that the decision to buy up Med Point Hospital was pre-determined. This speculation has gone further to state that the Med Point deal would have been a pre-condition for MSM’s alliance with Labour in the general elections.
The implication obviously is that the CPB was a mere rubber stamp for making made-to-measure specifications to enable the sale of the hospital at an unacceptably high price. It is for the Valuation Office, the CPB and the ordering Ministry, namely the Ministry of Health, which has an MSM member as Minister, to explain to the public as to the reasons for the logistics of the acquisition, the valuation and timing of the transaction. This will have to be done lucidly and convincingly enough so as not to leave the least doubt in the mind of the public about any potential influence peddling. Transparency Mauritius has put forward the claim that the transaction would be tainted with conflict of interest. One would wish to better understand as to how it comes to this opinion so that we can know whether such trespassing has been consciously undertaken irrespective of its damaging consequences. A person normally knows when he is in conflict and, on such occasions, he abstains from participating in substantive decisions in which conflict would come into play. We need to know whether Pravind Jugnauth has failed to satisfy this condition.
Thus, allegations have been made that there could have been an element of tax evasion; that the transaction was part of the political arrangement between the MSM and Labour for concluding an alliance; that Pravind Jugnauth would have acted in a conflicting situation. Risks that such allegations could have been made were present as soon as it was known to the stakeholders in the transaction that Med Point Hospital will bid. Despite knowing this, why has it been taking so much time to clear the deck of doubts and suspicions that rules of the game would not have been followed? It is true that no one could have prevented Med Point from disposing of its property but when the government is concerned and you form part of the government, would it not have been appropriate to make it clear that you will always play by the rules of the game? And that this has actually been the case?
We mentioned earlier that the plight of the economy demands a lot of attention. Distracting attention to other things amounts to a disservice to the principal cause for which the government should have been fighting on all fronts. We find ourselves in this position of being distracted, unfortunately. Michaël Gorbachev, who wrote himself out of a prestigious job as the leader of the USSR, once said: “a statesman does what he believes best for his country, a politician does what best gets him re-elected”. We are badly in need of statesmen at this juncture because, of politicians we are not short in any way. Will they arise, those in whom we have placed our trust not to make us mistake the trees for the forest? Have not the Wall Street fat cats running after their greedy objects brought the economic financial system to disaster and taught important lessons on what to abstain from? One thing is certain: it is a luxury to lose our serenity because the short term sometimes takes the upper hand on the longer-run objectives that we should have pursued instead.
* Published in print edition on 28 January 2011