The Energy Saga Continues: Ivan Strikes Again

Now that the Independent Power Producers’ contracts are due for renegotiations, Ivan Le Terrible finds it opportune — now or never — to deal them a death blow that would leave his mark in our history

By Rattan Khushiram 

Now that the MSM’s  ardent attempts at courtship of the MMM have been spurned and the former reacting with a Rs 50 million defamation case against its potential partner, Ivan Le Terrible could not see better opportunity to strike again. Notre Ivan le terrible persiste et signe.

Taking advantage of a meeting in Seychelles on building consensus for a common Liquefied Natural Gas (LNG) supply system for “greener and smarter energy”, he shrewdly roped in ministers Nando Bodha and Ashit Gungah, to revive his liquefied natural gas project and put it back on the agenda. But this time the frontal attack was on a wider front and more aggressive. The Deputy Prime Minister and Minister of Energy did specify that the government’s long-term strategy in the energy sector is to make use of liquefied natural gas as an alternative to coal and heavy oil. Thus the use of alternative sources such as LNG was not only for the production of electricity but also for all our energy needs.

The use of LNG is expected to result in a drop of 30-40% in carbon dioxide emissions. The construction of a 100-120 MW power plant using the combined cycle technology based on natural gas may go ahead. It seems that the preliminary report on the introduction of LNG has not been dumped. It is still being studied by a ministerial committee. Whether it will remain at the study level or move forward will depend on how firm-footed are our politicians vis-à-vis the lobbies of an embattled private sector intent on rescuing a besieged cane industry. And please add the need for electoral campaign financing from the very private sector!

Meanwhile Ivan Le Terrible puts on the pressure. At the inauguration of the Grid-Scale Battery Energy Storage System at Amaury, he alerted us to the fact that even little neighbour Seychelles has realised the importance of LNG while fulminating against the local coal lobbies and the pollution they cause – their consumption of coal has nearly quadrupled between 2000 and 2018 from 200,000 to 700,000 tons. Now that the Independent Power Producers’ contracts are due for renegotiations, Ivan Le Terrible finds it opportune — now or never — to deal them a death blow that would leave his mark in our history of acrimonious relationship with the sugar barons: “Ivan, le pourfendeur des sugar barons!” It’s the Chihuahua nipping at the Great Dane.

But it need not necessarily be either/or extremes- all for coal or all for LNG. There is a middle way. We could opt for the combined-cycle gas turbine which will be cheaper in power generation and we will gradually diminish our dependence on coal as we move in the long term to Liquefied Natural Gas (LNG). The cost of having LNG terminals and supply lines may be too burdensome for us now and it may turn out to be another prestige product that we could have done without for the moment. Meanwhile the CPB, caught between the hammer and the anvil, will continue pretending that it is still seeking additional information. The show goes on!!!

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Opening up the economy to foreign talents: The easy way out

The private sector is pressing Government to adopt a policy of opening our borders to attract young foreign talents and emulate Singapore, Dubai and Canada. We are being told by the MCCI that “these talents should not be feared because they will help the country to start the second stage of its development.”

Without having to compare ourselves to Singapore or Dubai which are filled with MNCs (multinational corporations) that send their own people there to set up shop, we are aware that the fastest way to be competitive on a global scale is to hire foreign talent, and learn from their knowledge and experience. But we do not have to emulate Singapore because the policy choice of relying heavily on foreign talent enables the Singapore government to hold down investment in education without having any significant detrimental effect on the economy.

According to Arturo Bris, the director of the IMD World Competitiveness Centre, Singapore relies a lot more on foreign talent because it spends relatively little money on education to develop and nurture its own people compared to other developed or developing countries. For instance, Singapore spends 2.9 percent of its GDP on education while Denmark, which is much less reliant on foreign talent, spends about 6-7 percent. The OECD average is 5.2 percent. The Mauritian government spends around 3.6% of GDP on education.

We should opt for the perfect combination of an education system that prepares people to meet the economy’s needs: technical education and innovative skills and produce generally educated people with the capability/adaptability to learn new technologies. But for the higher and specialised skills, we can open up our borders to foreign talent and to our dispersed Mauritian diaspora. At the same time, we should encourage more of our local conglomerates to offer the right package to attract the best local talents and the Mauritian diaspora. For quite some time our corporate landscape has been characterized by a concentrated ownership structure dominated by a handful of families exercising control through pyramids and complex crossholdings. This has not encouraged the hiring of local talents and we do not see many locals in senior positions in the corporate sector. If the only reason for this was their quality, why is it that these same locals perform well when employed by established and reputed firms abroad?

Moreover, one of the important issues in hiring foreign talents is skills transfer to home-grown talent and how to exploit them without increasing costs. Thus instead of blanket approval for the hiring of foreign talents, we have to be more selective in our approach without unduly constraining some emerging and innovative sectors that will be needing foreign talents to fill in the gap.

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The Fitch Report: Slowdown of growth in 2019

According to the Fitch Solutions Macro Research, growth will decelerate in 2019 as a result of the continuous decline in sugar production and the worrying trends in the financial sector. Amid plunging world sugar prices as a larger than expected supply surplus weighs on the market, the sector will remain in trouble well into 2019, weighing on the manufacturing and agribusiness sectors. As for the GBC sector, it noted that “foreign liabilities held in the system have fallen by 35.2% between April 2018 and July 2018 and we expect that the raising of CGT to Indian levels in April 2019 will see this process accelerate as foreigners lose the advantage of basing capital in Mauritius.”

In light of these developments, Fitch Solutions expect that real growth will fall from 3.7% in 2018 to 3.5% in 2019, before averaging 4.3% up to 2027. Thus growth deceleration will be temporary. Its optimistic scenario of average growth of 4.3% , however, is based on a) ongoing rapid expansion of output in the construction sector, b) a weaker rupee relative to the dollar and the euro c) a pickup in exports of textiles and tourist arrivals from key markets d) increasing opportunities from the FTA with China and the transhipment and financial hub on China’s Maritime Silk Road trade route and e) a recovery of the financial services sector from the impact of double tax treaty revisions in the coming year. This promising narrative is not necessarily out of the realm of possibilities but it will be likely to take a longer time to come to fruition.

* Published in print edition on 1 November 2018

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