The public and private sectors are inherently dissimilar animals driven by different incentives. However the recent history of Mauritius has shown that there is sufficient commonality of interests to provide for a shared platform
A recent interview of the former Cabinet Secretary and Head of the Civil Service Mr Satteadev Seebaluck in l’express, this week, has caused some stir, leading to a communique from Business Mauritius – the official mouthpiece of the private sector. The essence of the controversy turns around a statement by Mr Seebaluck to the effect that the private sector suffers from a form of a “chronique attente” when it comes to investment decisions.
This incident will no doubt provoke further reactions from the entrenched supporters of the private sector as well as the opposite camp in what would be a non-ending blame game. For the sake of clarity, it might be useful before proceeding further to make a distinction between the corporate sector, which is the object of most controversies, and the private sector. Whereas the former is constituted of the large formally structured organisations, the latter also includes the many Small and Medium Enterprises (SMEs) as well as individual entrepreneurs operating in the country. It should be obvious that any debate concerning the one does not necessarily reflect on the other.
To come back to what is the main cause of grief of Mr Seebaluck, namely the lack of investments from the corporate sector over the past years, it is an incontestable truth that private sector investments, including Foreign Direct Investments, in the national economy have been constantly dwindling over the past decade or so. From around 26% of GDP, it is now lingering around only 16%.
What is even more worrying is that by far the largest fraction of those investments have been directed to the real estate sector – leading many observers to remark that this has been akin to the “parcellisation” of Mauritius with no promise of long-term economic returns for the country. Under the circumstances, the claim pertaining to the “private sector” having contributed up to 70% of those measly total investments in the country is not very helpful because it does not even begin to address the real causes of the conundrum.
Furthermore, only this morning one could read a statement from someone quoted as being an executive of the State Investment Corporation (the investment arm of the Government of Mauritius) to the effect that the SIC would henceforth stop investing BLINDLY as was the case in the recent past!
Between a government institution investing “blindly” and dearth of really productive investments coming from the corporate sector, there surely must be a set of issues which need to be sorted out for this country to at long last resume the path of sustainable economic growth by tapping into its full potential. For a small island developing state like Mauritius with a well-structured and fairly developed corporate sector, the relationship between government and the corporate sector was bound to be a critical part of the equation when it comes to defining the socio-economic model which most befits its future prospects.
The Welfare State, on the one hand, and a peculiar model of public-private sector partnership, on the other, have constituted the foundation of the model instituted since independence. Globalisation and the forced opening up of the economy constitute extraneous factors which have seriously strained the existing framework over the past decades but have failed to conjure up the appropriate internal structural changes to match. The economic stagnation of the past years has only served to expose these underlying structural weaknesses and will, if unattended, further accentuate the tragic trifecta of unemployment, inequality and accelerating breakdown of law and order in the country.
It is therefore futile to engage in a sterile blame game in which inevitably at the end both parties are bound to be partly responsible. The public sector would be blamed for not having created the necessary conditions which favour profitable investments. The private sector will not escape criticisms for not being bold enough for engaging in innovative and creative albeit more risky initiatives outside of the trodden paths.
It is well known that those who have power and privilege (public and private sectors) in an existing socio-economic model produce their own unique mode of organisation, develop their own cultural and political biases and translate their privilege into unique channels of influence. It is the breakdown of the existing paradigm under the influence of external forces which is the main cause of most of our present miseries. The leaders of the private and public sectors are struggling to find their feet during this transition from a fading model and the establishment of a new operating framework.
The total absence of strategic thrust on behalf of government at a time when it was most needed has been largely responsible for the sorry plight of the country over these past years. It was Professor Michael Porter who famously said that the essence of strategy was choosing what not to do. A task at which our leaders seem to have failed miserably, as would be demonstrated by a cursory glance at the long list of failed projects which have wasted so much time, energy and resources since the turn of this century.
The private sector, on the other hand, will claim that they have an inherent duty of protecting their investor’s interests and cannot be expected to recklessly invest in new projects or acquisitions. The lack of investment opportunities would thus be blamed on scarcity of “bankable” projects. This is indeed a conservative view of how things work and is, generally speaking, a valid criticism of the local private sector who too often invokes uncertainty in the environment and lack of clarity while awaiting irrefutable evidence of economic turn-around.
This excessively cautious posture goes against the essence of entrepreneurial decision-making which relies on educated decisions that balance risks and rewards and indeed favours the “marginal” risks which will make the difference.
In conclusion, it must be said that the public and private sectors are inherently dissimilar animals with their own operational modes and objectives and driven by different incentives. However the recent history of Mauritius has shown that there is sufficient commonality of interests to provide for a shared platform that can lead to consensus on a shared strategy with a view to improving the general welfare of the country. These are what we should be searching for.