Palmar Ltd Employees: Government responsibility?
By L.E. Pep
About half a thousand former employees of Palmar Ltd held a sit-in in front of Government House on Monday morning. Faizal Ally Beegun, union representative of the former employees, issued an ultimatum to the government. He wants Government to regularize the workers’ situation by 18 April, failing which these ex-employees will demonstrate in the main streets of the capital with the authorization of the Commissioner of Police. The Communication Unit of the Ministry of Labour, which was contacted, said: “We are not working under ultimatums, but in accordance with the law, tripartism and social dialogue.”
Government has its share of responsibility in the current state of affairs of the textile sector and the plight of its workers. The MSM-PMSD-ML government changed the law regarding severance allowance to the detriment of workers. Moreover their generous wage awards without taking into consideration firms’ capacity to pay the minimum wage award, instead of being implemented on a phased basis which would have given time to the textile firms to adapt to this new economic situation, have aggravated their already precarious situation.
Government just has to send its handyman who has a knack for finding convenient government jobs for redundant workers as it was the case for the school cleaners and those at the CWA. Adding another 500 to the jobs that have been reserved for the chums would not make much of a difference to the government coffers, would they?
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Ageing and pension reform
The share of the 60-and-above seniors in the total population will increase from 16.1% in 2017 to 26.8% in 2037 and 35.2% in 2057. The dependency ratio — defined as the combined child population (under 15 years) and population aged 65 years and over per 1,000 population of intermediate age (15 – 64 years) in a particular year — will increase from 408.0 to 529 and to over 629 over the same period.
Today, there are 6 employees to support a pensioner; by 2037, there will be less than 3. This will lead to pension spending pressures, mainly reflecting non-contributory benefits provided to all citizens above age 60 (Basic Retirement Pension – BRP) and civil service pensions. With regards to the BRP, the IMF had recommended that we should limit the BRP for those above a certain income threshold (means-testing), increase the age of BRP eligibility and index the retirement age to life expectancy, accompanied by such social assistance programs as to protect vulnerable groups and not increase poverty rates. These measures would have helped to contain the explosive path of expenditure projected in the BRP; over the long term, increasing the age of BRP eligibility would have a substantial impact on fiscal sustainability.
The failed attempt at targeting in 2004 was due to that the benefit went from 100 percent to zero above a certain threshold, which distorts incentives around that threshold; it was perceived as being unfair. A gradual phasing out of the benefits should address this problem. If combined with a higher eligibility age, it would reduce BRP expenditure meaningfully by around 8% of GDP by 2050. Together with other measures aimed at reforming the civil service pensions and the NPF, this phased reform agenda could go a long way towards containing the projected rise in the costs of pensions.
Government seems to be aware that it has to ensure the long-term financial sustainability of the pension system for future generations while providing pensioners with a decent, adequate and secured pension income so that they do not fall into poverty. In Budget speech 2016-17, mention is made of the setting up a high-level committee to look into the issue of pension, to hold wide consultations and come up with recommendations. It was meant to add to the long list of “effets d’annonce” of the budget that ensured the cheers of government MPs but not its implementation. After some initial consultations and discussions, the committee on pension reform was dissolved.
With the priority shifting to crowd-pleasing packages and a generous scattering of handouts, we could not expect this government to be serious about a bold reform of the pensions 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.
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Caught in the middle income trap: “Une honte”
At a business forum that the Economic Development Board had organized to improve economic cooperation between Mauritius and Madagascar at The Westin Turtle Bay Resort in Balaclava on Wednesday 13th March, Foreign Minister Vishnu Lutchmeenaraidoo expressed his “shame” at our dismal growth performance. Perhaps it was in reply to our dispirited ex-Minister of Finance that the longstanding senior adviser at the Ministry of Finance bragged about the country doing not so badly, having already achieved 85% of the target for a high income economy status which was earmarked in Budget 2017-18 for 2023.
We keep moving the target forward despite the fact that the benchmark has been consequently revised downwards since 2015. Like in the case of Public Sector Debt (PSD), we keep missing the PSD target of 60% of GDP and we keep shifting the goalposts. We believe that it is quite improbable that the high income economy target will be reached by 2023 without major macroeconomic and sectoral reforms.
We should not be asking by how much we have bridged the gap but why is it taking us so long to reach there. Why are we failing continuously to meet our set targets? Are we pursuing the right sustainable growth strategies and putting in place the drivers of productivity, innovation, and competitiveness while strengthening the economic fundamentals that foster and stabilize growth? It certainly should not be only a question of higher standard of living by encouraging large public expenditures in pursuit of short-run growth performance, as seen in some Latin American countries where subsidies to ineffective projects led to increased wastage and corruption and eventual economic slowdown.
This obsession to boost growth at any cost could lead to unsustainable policies that eventually create trap-like patterns of dismal growth that middle-income countries are trying to avoid in the first place. Future sustainably of the growth spurt is as important, if not more, than increases in GNI per capita. Our senior adviser might have got it wrong — the target of high income status is not a destiny but an obstacle to be overcome.
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The Metro again : Another impediment?
After the concerns of the inhabitants of Quatre Bornes on the implementation of the metro project, especially as regards its entry into that city by the Hillcrest access over the motorway, the project is now caught up in another quandary: the Chebel cave. The cave which has existed for a very long time, according to local inhabitants, is one of the few lava tunnels still in existence in Mauritius. The CEO of Metro Express has brought in a foreign expert for an inspection of the cave linking Chebel to Albion.
Readers will recall that, in reply to a PNQ on 9 November 2018, Nando Bodha refused to submit a copy of an EIA report from the Singapore Cooperation Enterprise consultant. He simply made it clear that the report’s recommendations are being followed by Larsen and Toubro and that the government has no legal obligation to make the report public. Today Government may come to regret the absence of a full-fledged EIA if social groups start a campaign for the inclusion of the cave in the list of our national heritage sites or if it will have to bear the costs of consequent modifications in the initial construction plans.
Environmentalist Vasantt Jogoo was amongst the first to sound the alarm when the Minister of Public Infrastructure, Nando Bodha, announced that the project would be exempt from a general EIA. “The government has made a big mistake by allowing this crucial step to be overtaken because it wants to rush the works. An EIA would have helped to prepare an environmental and social management plan. Now they will have to bear the consequences.”
Indeed, if a proper EIA had been carried out before the start of the works, we would have known about the existence of the cave.. We would not be surprised to see the Metro project being bogged down by yet another set of problems in the future. In their zest to get the project started without adequate planning, the authorities have now to deal with a whole can of worms. Really disturbing!
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The Betamax case: A possible bill of Rs 5 billon plus interests
The Supreme Court’s judgment in the Betamax case in the appeal filed by the State Trading Corporation (STC) is expected any time now. The appeal against the award of the Singapore International Arbitration Centre, given in June 2017, condemning the STC and the State to pay a sum of Rs 5 billion, was heard by our Senior Judges from March 13 to 15, 2018.
The company, headed by Vikram Bhunjun, has claimed damages for unlawful termination of contract. According to Betamax, the government unilaterally decided to terminate the contract with the Bhunjun company for the transportation of petroleum products to Mauritius by the Red Eagle.
The Betamax saga started in January 2015 with the present government’s decision to revisit the contract. The Lepep government believed Betamax had faulted, and that the “lucrative contract” it had entered with the STC had been drawn up explicitly to benefit the former PM and his Minister of Public Infrastructure. The file was first entrusted to Vishnu Lutchmeenaraido, Finance Minister at that time, together with Roshi Bhadain, then Minister of Good Governance, and Attorney General Ravi Yerrigadoo. Xavier-Luc Duval was not far off from the scene.
At first, there were attempts to negotiate. But these failed due to the demands of the ministers which Betamax considered to be disproportionate. While the talks were still in abeyance, Lutchmeenaraidoo stealthily slipped away, leaving Roshi Bhadain to lead the negotiations on behalf of the government, which subsequently unilaterally terminated the negotiations. Roshi Bhadain sought to obtain seeking legal advice in Dubai. Betamax was left with no choice but to call for arbitration as prescribed by the contract in the event of disagreement between the two parties. The police opened an investigation and arrested Anil Bachoo, Ranjit Soomaroah, the former director-general of STC, and Kalindee Bhanji, then Permanent Secretary at the PMO. The Director of Public Prosecutions, however, ruled that there was no matter for prosecution. The government was relying on criminal prosecution to strengthen its case with the Singapore Arbitration Tribunal, but the DPP’s decision thwarted their plan.
The upcoming Supreme Court ruling will say whether the Singapore International Arbitration Centre was right or whether the government has illegally terminated the contract between STC and Betamax. It should be noted that since the award of the Singapore International Arbitration Centre, interest of more than Rs 400,000 has been accumulating daily on the damages to be paid and this not good for our budget deficit or public debt figures that will have go up by around 1.1% of GDP.
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State capture, nepotism and cronyism: Worse than the previous regime
Over the past few years, crony capitalism has become rampant and a new breed of cronies has emerged in an environment characterized by governance and ethical deficits. The nexus between business, politics and cronies or “rodeur-boute” was never out in the open as it has been recently. Under the previous regime the supposed democratisation of the economy has enriched only cronies and some specific conglomerates through allocations of licenses, lands, contracts and special deals.
The same process is being repeated again and again with this regime across different sectors. WhatsApp abounds with caricatures and clips on some of the recent examples of cronyism: biscuit contracts, fish for the prisons, notary fees to the tune of millions, new radio licences, allocation of barachois, government advertising, millions for an IT company being sued by government… you name it, it’s there. Every other day, our local press reports on various “allegations” relating to the nexus between politicians, business groups and cronies. The “rodeur-boute” mentality has not spared any section of our society.
These “rodeur-boute” and crony capitalists who influence politicians in ways that let them run rings around rules have to denounced. The only way, our Mauritian way, of ensuring that the lambda citizen does not vote for such venal politicians is to show the links of state capture and crony capitalism crudely. Otherwise it will remain confined to the privy talks and boardrooms of the elite. How long will they be taking the people for a ride?
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MBC: The pot calling the kettle “black”
The Labour Party organised a demonstration in front of the premises of the national television on Saturday March 16th. The demonstrators denounced the MBC for acting like a doormat for the MSM and Pravind Jugnauth. Thus, Patrick Assirvaden, president of the Labour Party, justified the decision of his party to stage a demonstration against the MBC on the grounds that it would have really touched the bottom in terms of political propaganda and partisanship.
In the run up to every election, party leaders promise to free the national TV from government control. But once in power, they remove the MBC President and members of the personnel perceived to have been too close to the former regime, and thereafter bring in those more in tune with the new regime. Public television in this country is run by the politicians. This has always been the case, and whatever they say when they are in the opposition, it is likely to be the same in the future.
But there appears to be an unexpected cost to the Government’s manipulation of public television and its overbearingly irritating servility to the masters of the day. Public TV is losing its pre-eminence among viewers and registering lower and lower audience figures. Viewers seem to be voting with their thumbs and now favour private TV and radio stations over the MBC, even for news and information which are considered to be of a higher level in terms of quality, rigor and independence.
We need not worry so much about the monopoly of the national television because viewers are now well aware that the struggle to preserve democratic practices and institutions will be between the Government controlled public television and radio stations on the one hand and the private radio stations backed by social media and a free press on the other.
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The Sugar sector: Absence of a long term view
At a workshop recently on the agricultural sector at the Labourdonais Hotel, the representative of the Ministry of Finance in his presentation showed that the sugar sector has been declining since 2010. This sector, previously of fundamental importance to the Mauritian economy, has become very “inefficient” and for being very much dependent on financial support from government for its survival and advancement, it has become a burden to the economy. If worse comes to worse, we’ll have to do without the sugar sector but this has to be planned. This is exactly what has been missing at the MOF. Now that the sugar sector is gasping for breath, he recommends “une décision devra être prise pour ce secteur”.
Guided by short-termism, the authorities have kicked the can down the road. They have been doing it for years, and wasted precious government resources in the process. They preferred to sweep the issues under the carpet with short-term measures and the usual promises, like the one made to planters to set up an Agricultural Land Management System or to bring unutilised abandoned cane lands of small planters under productive use or with measures like providing an additional revenue of Rs 1,820 per tonne of sugar for planters producing up to 60 tonnes of sugar or even the introduction and adoption of drone technology, the use of biomass such as cane trash and woodchips and the waiving of registration duty payable on leases of agricultural lands of up to 10 hectares. What kind of costing was carried out by the MOF in proposing these measures when they knew very well that the decaying sugar sector was “un secteur très inefficace”?
Again with the plunging world sugar prices, Government unveiled a series of short-term measures in support of the planters. They knew very well that these were not sustainable. Besides the agreement with China for the export of some 50,000 tons of special sugars, the government did not have a consistent rescue package for the sector and, most importantly, none of the measures were based on long-term considerations. The Ministerial Committee set up to assess the situation in the cane industry and to come up with an appropriate action plan for to meet its challenges has been relégué aux calendes greques. Lindsay Rivière in a recent interview hits the nail right on its head when he sums it thus: ”It seems that now Mauritius is abandoning long-term planning for short-term policies and that’s a bad sign for us. Wherever we look now, it’s always patching up things here and there. We are still under four per cent growth.”
After years of patching up, the MOF suddenly wakes up from its torpor and decides we must now plan for an alternative to sugar. Something that should have been done years back if they had been able to overcome their short termism to have a longer term perspective.
* Published in print edition on 22 March 2019
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