By L.E. Pep
Since last Friday, some brands of milk powder and drinks – both soft and alcoholic – have become more expensive. This is translating into more pain for consumers who will face a noticeable rise in their monthly budget. The question everyone asks is : will other prices go up too? Jayen Chellum, Secretary General of the Consumers Association of Mauritius (ACIM) explains that “these increases result from a depreciation of the rupee against major foreign currencies”.
This artificial depreciation of 3.0% against the US dollar between May 2018 and May 2019 — according to the statistics of the Central Bank – is a direct result of the aggressive intervention of the Bank of Mauritius (BOM) on foreign exchange markets with a view to depreciating the rupee since March 2019, thereby putting pressure on banks to align their rates to the BOM pre-determined rates.
The reason for this flagrant exchange rate manipulation, generating valuation gains of Rs 7 billion, has to do with the measure announced in the budget to transfer Rs18 bn from the BOM Special Reserve Fund to pay off the country’s debts. Phoenix Beverages, for example, recently pointed out that the increases since last Friday are due to “a rise in the prices of raw materials and other overheads internationally, as well as currency fluctuations”. Should we expect other prices to rise? Coming just after the sweet pills of Budget 2019-20, Mauritian consumers face the prospect of having to pay more for everyday goods, due mostly to the depreciation of the rupee. Some of the price hikes are still in the planning stage and not all retailers are sure they will be able to raise prices, due to competitive pressures. The weaker rupee is probably not going to hit prices until later this month. But, as we depend heavily on imports, especially for food products, importers are seeing their costs go up, and as to be expected they’ll pass on any increases to consumers.
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SBM holdings: Jackpot for the tribe
The chairman of SBM Holdings Ltd, Kee Chong Li Kwong Wing, received Rs 5.5 million as remuneration in 2018 (Rs 430,000 per month). In office since January 27, 2018, the Group Chief Executive Officer (CEO), the British Andrew Bainbridge, has pocketed Rs 24.1 million per annum. According to the 2018 annual report of the holding company, the political nominee of the MSM benefited from fees of Rs 2.22 million for his chairmanship of SBM Holdings and Rs 3.76 million for the other subsidiaries of the group. These though are mainly fees, excluding other benefits to which a chairman is entitled. However, the Lepep Alliance had argued in 2015 for a consolidation of the finances of public companies. To avoid abuses by the nominees of the previous regime, it had fixed allowances to which the chairpersons are entitled to: a maximum of Rs 75,000 per month. Kee Chong Li Kwong Wing, who had been critical of the take-home package of the ex-Chairman, Muni Krishna Reddy, cannot be compared to the latter who was holding several positions including the post of Executive Chairman. We note that for the eight months when the former CEO, Raj Dussoye, was in office in 2018, he received a package of Rs 15.3 million, or nearly Rs 2 million per month.
For his part, Prakash Maunthrooa, a close associate of the Prime Minister, sitting on several boards of state companies, received Rs 1.7 million as director at SBM Holdings. As for Nayen Koomar Ballah, he received Rs 2.5 million as chairman of the banking division of SBM Group in 2018. In addition to the State Bank, he sits on the boards of many institutions where Government is the majority shareholder.
Please note there have not been any deductions from the allowances of board directors for under-performance related to the noxious bank practices that made the headlines, namely, (a) the notorious euro-loan allowed to an ex-minister, (b) financial losses arising from bad debts written off, (c) provisions for doubtful debts made due to the insolvency or delinquency of big foreign clients who have defaulted on their loans, and (d) the SBM cyber fraud.
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Internet outage: Network vulnerability affected again and again
On the evening of Saturday, June 22nd, at around 20:30, thousands of Mauritius Telecom (MT) fixed Internet subscribers were affected by internet breakdown due to the rupture of an optical fiber cable at Richelieu. According to the telecommunications company, the rupture cut was caused by a contractor operating on a construction site on behalf of another firm. This is not the first time this has happened. In fact the fiber-optic network is vulnerable to the anarchic way many projects are currently underway in the country.
The Internet outage on June 22 puts the spotlight on the vulnerability of the fiber- optic network in the country. Thousands of My.T subscribers were affected. In particular, they were deprived of 118 television channels, and connections to the fixed and mobile Internet were slowed down. Though MT claims that the failure was localized mainly to the Coromandel region for fixed Internet and television, internet users on social networks reported slowdowns all over the island. MT acknowledges that the outage could have been more widespread as the damaged cable was linked mainly to the Albion, Coromandel and Pointe-aux-Sables network. Indeed, widespread network failures could be on the cards for internet users if we do not address the causes of regular ruptures of the optic cables.
According to Ganesh Ramalingum, former director of a telecommunications company and former president of the Telecommunications Outsourcing Association of Mauritius (OTAM), some precautionary measures could have prevented this outage. First, he refers to better planning of projects that are currently ongoing across the country. “There is pressure to finish projects quickly. Moreover, as OTAM has been saying for several years, the country must adopt a ducting (underground pipelines) policy for fiber optic cables, as is the case for Central Water Authority (CWA) pipes and Central Electricity Board electrical wires (CEB). Thus in case of maintenance and repair works, it would not be necessary to dig up the roads,” said Ganesh Ramalingum.
We could have avoided this outage if there was more of professionalism at MT with greater focus on its main activities with the service vision of always doing its best for its customers (service delivery, the cost of internet and broadband speed) than toadying to the PM and diverting its resources and energy on partisan projects like MUGA and Safe City which are not in line with its core business. We live in a global world; we can’t afford to be cut off because of the amateurism of some chums of the regime.
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Erosion at La Butte: Inhabitants fear the worst
A barricade installed by Metro Express workers at La Butte collapsed at Belvedere Street, following erosion in this area, causing fear among residents. “Ena bann dimounn ki abitie asiz-la, zot get bannla travay. Zis zordi pa’nn ena dimounn,” says Steeve, an inhabitant of La Butte. Larsen and Toubro, the company responsible for the works, reassures: “This is not a landslide; it is the erosion of the earth because of the rain that has caused the collapse. The barricades have fallen. We have secured the crossing, because pedestrians take this route,” says Nausheen Aullybux. A team of experts was called in at the scene to take stock of the extent of the damage.
Adrien Duval, who in his speech on the Budget was very critical of the government’s decision to exempt the Metro Express project from an Environmental Impact Assessment (EIA) permit, laid the blame for that landslide at the door of government. “What happened at La Butte is ominous. It’s starting to give way. The government must take a firm decision and ensure that no project is exempt from the EIA permit in future,” he said.
After the collapse of the barricade, the inhabitants fear that during the passage of the Metro Express vibrations will be felt in the region. According to Poorranarnenden Sungeelee, Mechanical Engineer and member of the consumer association ACIM, there will indeed be vibrations that will be felt at La Butte when the metro will be in operation. He also expressed doubts about the region’s resilience. “In the 1950s, we tried to build a road around the Montagne-des-Signaux. The bulldozers that were used slid each time. Aster-la-pran trin met lor la sa trasé la !” Adrien Duval is right; for years we will have to bear the consequences of not having made a proper EIA of the Metro project and for not making it available for analysis by our local experts.
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Pomponette Beach: Rezistans ek Alternativ calls for the restitution of the beach to the public
Clear Ocean Hotel and Resorts Ltd’s deadline to start construction expires on June 30. Four years after having inherited the Midas Acropolis lease for the construction of a hotel in Pomponette, Clear Ocean Hotel and Resorts Ltd (COHRL) has not been able to implement this project, despite several delays granted by the government. The Ministry of Lands and Housing granted it a final extension until June 30, 2019 to produce a new EIA permit and start construction. But that apparently has not been the case so far. Rezistans ek Alternativ (ReA) alerts us to the fact that every time the promoters of hotel projects have been criticised, the government “and its emissaries” have done everything to defend them. The “grabbing” of public beaches goes unabated with the complicity of several political parties. In 2006, it was under the Labour-PMSD regime that Midas Acropolis had first obtained the “lease agreement” for the Pomponette public beach. Though the present government had taken the commitment, as spelled out in its electoral manifesto, to restore the beach to the public, it has failed to do so; it has instead allowed the lease to be transferred to Clear Ocean Ltd. Rezistans ek Alterantiv, as a founding member of the collective Aret Kokin Nou Laplaz, has since the beginning been opposed to the grabbing of the beach of Pomponette. Today, the Alliance Lepep government must recognize that ReA and AKNL have been right about Pomponette and that it is time to stop with the policy of selling off our beaches. Pomponette must become public again! ReA is inviting all the Mauritian people to take possession of the Pomponette beach on Sunday 30 June from noon and proclaim our right to the freedom to enjoy and preserve our beach as a common wealth, for us and our children.
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Doubtful measures to meet the public debt target
The statutory debt target of 60% of GDP will be met in June 2021 — not earlier — as announced in the budget by using part of the accumulated undistributed surplus held at the Bank of Mauritius (BOM), and prepaying external debt. However, if Public Sector Debt (PSD) ratios are calculated without the drawing of Rs18 bn from the BOM, and without external debt pre-payment, the PSD ratio as at June 2021 will then stand at 63% of GDP.
However if we do away with the tortuous accounting practices used to manipulate the debt figures, namely by excluding the arbitrary debt “consolidation adjustment” amounting to Rs 8 bn, or 1.4% of GDP and take into account that the government will be able to realize only 50% on the projected sale of Rs11 bn of unidentified state-owned assets by June 2021, representing Rs 5.5 bn, or 1% of GDP, PSD is likely to reach even higher to 65.4% of GDP at June 2021.
Government is resorting to extreme measures to bring down PSD, including raiding central bank reserves, as it may be fearful of public apprehensions about national indebtedness, especially in view of the looming general elections.
Kugan Parapen, economist and member of Rezistans ek Alternativ, questions such extreme measures in these terms: “By repaying part of the debt with the country’s piggy bank, Pravind Jugnauth is only kicking the debt can down the road. He is merely postponing the day of reckoning. What will we do the next time? How will we repay the debt then? Will we have to sell the family’s jewels? Shall we have to privatise the port and the airport? Shall we have to lease some of the territory of Mauritius? Shall we relinquish part of our maritime territory?
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Board to decide on BOM’s capital framework
Readers will recall that last year, the Indian Finance Minister expressed the wish that the excess capital reserves of the Reserve Bank of India (RBI) should be transferred to the Indian government. That was one of several issues that led the then RBI Governor, Urjit Patel, to resign in December 2018. In the same month, a 6-member expert committee was set up by the RBI, chaired by a former RBI Governor, to review the economic capital framework of the RBI. The panel, which was originally supposed to submit the report in April, postponed it for the fourth time due to lack of consensus. The panel is now expected to submit its report after the federal budget in July. Meanwhile, Viral Acharya, a strong believer in RBI’s independence and autonomy (especially government’s eying RBIs capital buffers) has resigned.
In his summing up of the budget debates, PM Jugnauth announced that the Board of the BOM will decide on the adequate level of provisioning for the capital of the Bank, to meet the cost of monetary policy operations and meet repayment of central government external debt obligations before authorizing the transfer from the Special Reserve Funds. What was then the purpose of announcing a transfer of Rs 18 billion from Special Reserve Funds?
We doubt whether the BOM’s board is independent enough to be able to decide on these three priorities. As K. Parapen puts it in his timely article “Jugnauth goes for the piggy bank by raiding the Central Bank, dated 20th June: “In Mauritius, it is up to the Prime Minister and the Minister of Finance to choose who shall sit on the Board of the MPC without any provision for checks and balances. Isn’t it revealing that over the last sixteen quarterly meetings of the MPC, starting 6th April 2015, the MPC has reached unanimous interest rate decisions on fourteen of those occasions? Have members of the MPC become rubber stamps for the Governor of the Bank of Mauritius?
We think it will be more appropriate to leave it to the IMF to decide on the appropriate economic capital framework for the BOM and to determine the level and adequacy of the BOM’s capital reserves, and review its surplus distribution policy.
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“Another Betamax”: Allegations of the leader of the Reform party
Roshi Bhadain alleges that the contract for the smart city at Trianon is a new “Betamax”. The former strongman of the government of Pravind Jugnauth, and, leader of the Reform Party, revealed that Hermes Properties Ltd, obtained on June 13, a building permit from the Municipal Council of Quatre-Bornes for the development of a Smart City in Trianon. But he said the permit was initially refused by the Council which had asked for an “amended plan” that would include a “jogging track”.
But according to Roshi Bhadain, the Prime Minister’s Office allegedly intervened and lobbied for the company. The mayor of Quatre-Bornes, Soolekha Jepaul-Raddhoa, who is also president of the Permit and Business Monitoring Committee, denied any such intervention by the PMO. “It does not work like Bhadain presents it, it’s political demagoguery, it’s not true, and there was no meeting at the PMO about Hermes.”
Roshi Bhadain recalled that it is Hermes Properties Ltd that has secured some hectares of land for the Smart City, while the Heritage City project in Highlands has been shelved because of the risks associated with its proximity to Bagatelle Dam. This, he said, smacks of another scandal.
* Published in print edition on 28 June 2019