Since the beginning of the 21st Century the history of business development in Mauritius is witnessing one of the most radical changes in the structure of businesses and firms in the country. The starting point is of course the transformation of the erstwhile sugar industry into what is now being dubbed as the Cane Industry – sugar production including refined and special sugars + energy generation + ethanol production — which has been driven by a programme of centralization of milling and associated activities.
While the Corporate end of the industry has managed to do a pretty successful lifting of its operations, on the flip side of these developments one can witness the sorry plight of planters, especially the small planter community having to grapple with the wrath of the new aggressively competitive global market and its vicissitudes. A direct consequence of this is that one of the main pillars of the industry, namely the planter-miller equation is being challenged. The future of the small planter community and of what remains of the erstwhile sugar industry is clearly dependent on finding an appropriate formula which favours the convergence of the interests of all parties as has been the case throughout most of the history of the industry.
As a result of globalisation and liberalisation, many sectors such as the small manufacturing enterprises have been facing the harsh consequences of competition from “cheap” imports from places like China and Indonesia following the dismantling of tariff barriers and other bureaucratic impediments to imports. Some have had to close shop after failing to compete. Although less and less frequent one can still hear protests against such liberalisation which is blamed for the admittedly dire social consequences of enterprises either having to close down or reduce their number of employees.
A more constructive approach would be to draw the necessary lessons from these inevitable consequences of a changing external environment which are beyond our control. A smoother integration of the national economy in the new global environment requires that transitional measures be put in place in order to mitigate the most serious social disruptions. For these to be really transitional, however, there is a need to concomitantly rationalize and strengthen institutional support to improve the organisational and managerial and marketing capacities of the firms in those sectors.
The most crucial lesson remains the fact that the days of cosy if not crony capitalism are rapidly drawing to a close. Eventually all economic sectors will be irreversibly positioned in a global free market paradigm and subjected to the need for rapid modernisation and the adoption of appropriate tools to improve their competitiveness. Several of the major conglomerates in the country have undergone major restructuration and mergers over the past year or two. This exercise can be construed as a first phase of a longer process of rationalization and is related primarily to the ownership of the companies involved, purportedly with a view to facilitate decision-making.
An unintended (?) consequence of all these moves is that they have inevitably led to further concentration of investment/economic decision-making in the hands of fewer people. This is a fact which is characteristic of the consequences of globalisation in general but which nevertheless flies in the face of the declared policy of economic democratisation of the government.
Given our history and the sensitiveness of such issues this may have serious political implications which need be dealt with instead of putting one’s head in the sand. It is not our purpose to go into these considerations now although they need to be mentioned. Suffice it to say that some proactive actions such as a wider adherence to the rules of good governance, more transparency and communication, especially among companies which are quoted on the stock exchange, and an acceleration of the diversification of boards would go a long way towards mitigating some of the most potentially contentious issues.
The second phase of rationalisation with regard to firms would presumably have to deal with the larger issues of what is required for local enterprises to survive in the new environment. Caught in the midst of a global and open market oriented economy firms from different industries, whether in services (banking and finance, Information and Communications Technology, education, etc.) or manufacturing will have no option other than to grow in scale both in terms of volume as well as in terms of geographical footprints in order to remain competitive.
The most successful and largest companies in the garments and textiles industry have already shown the way by investing in manufacturing units in countries such as India, Madagascar or Bangladesh. There has been a significant diversification of export markets towards the South African market over the past few years. Considerable export of capital from Mauritius to many African countries in sectors such as agriculture (sugar plantation and milling as well as chicken production) has been recorded over the past years.
In services many Mauritian banks and insurance companies are now present either under their own brands or through major shareholding in existing enterprises. The largest Mauritian bank now claims that more than 50% of its revenue is generated from its overseas operations. The trend which had started rather slowly some years ago has definitely been gathering momentum over the past year or so.
These transformations reflect the need for these firms to improve their return on assets or whatever measurement of efficiency firms vying for profits in a liberal open market framework choose to adopt. The sad part of the story is that all the developments outlined above have been happening at a time when private investments in the national economy have been constantly declining.
Conspiracy theorists (quite surprisingly coming from the ranks of those who generally keep attacking the government for being hand in glove with the same private sector) have seen in this coincidence some sinister political motives resulting from a well-designed plan for twisting the arms of the government. The real concern could be that there is a widening gap between the dominant logic of the private sector firms and the capacity of government to respond with a new framework for reining in this logic in the best interest of the national economy.
A new strategy of product and market diversification on a regional scale, for example, requires new sources of capital distinct from the traditional bank loans. This creates opportunities for development of capital markets including a private bond market. Similarly a vast array of avenues will open up ranging from the need for training to the provision of more connectivity through IT as well as new airlines. A future Ministry of Economic Planning and Development, or by whatever politically correct name it may be called, will have its task cut out for the next mandate.
* Published in print edition on 13 June 2014