The State of the Economy

Was the whole BAI saga pre-planned and coldly executed and are there enduring financial costs to the country?

By  S. Callikan

Let us spare some thought for the macro-economic situation any new incoming government and, in particular, its putative Minister of Finance and Economic Development will inherit in a few weeks or months from now.

While the IMF representatives may have been perhaps extraordinarily quiescent about the real state of public sector and total debts and liabilities conveniently shelved in Special Purpose Vehicles, we suspect both the incoming Chancellor, and the population at large, will only find the real hard data after a thorough audit of all burdens and hidden liabilities saddled onto the camel’s back, ours that is. A state of the economy, including the situation at a special-reserve depleted Bank of Mauritius and government’s unrealized fire sale of national assets if any, is more than necessary, even if that may send some awkward but momentary shivers.

We understand that total public debt and borrowings may have skyrocketed in absolute terms from some 220 billion to more than 350 billion rupees in less than five years. As these cannot have been used to fund recurrent expenditure or social benefits, the layman and the population at large must know what capital projects have contributed to such an abyss, if the biggest visible items are motorway road repairs and the unending saga of Bagatelle Dam and if the modest operational portion of the tramway has till now been entirely funded from the grant component of India. Foreign generosity in terms of grants from different sources, including India, China and the Saudi kingdom, have been used to the hilt and may be in very short supply in the near future when loan components and disbursements will start hitting the fan.

Many affairs of considerable socio-economic magnitude have rocked the Alliance Lepep carriage since it took office, not least of which is the Bramer/BAI mega-scandal. Even if authorities had some legitimacy in requesting that the BAI Group or the Bank restructure its finances to be more in line with prudential practices, how did the henchmen intervene so brutally, without any credible judiciary process or oversight? Was the whole saga pre-planned and coldly executed and are there enduring financial costs to the country, over and above the shocking treatment meted out to a respected but non-legacy business leader and his family? Will there ever be light about the plight imposed on the business empire and the subsequent fire sale of its assets, under less than transparent conditions?

Any state of the economy will also have to estimate what financial loads the authorities will have to bear to subsidize such mega projects as the Metro Express, the Cote d’Or Multisport Complex or the annual outlay of half a billion Rupees over twenty years for facial recognition and monitoring systems of MT-Huawei, over and above normal police budgets. No state of the economy would be complete without some assessment of the “zougader” (gambling) houses in every village. It would be amiss if it did not also evaluate the benefits of massive financial and fiscal generosities involved in colossal property development schemes since 2015, when the macro-economic growth rates have stubbornly and consistently stuck to their sputtering 3.8% levels.

Virtually all our traditional mainstays of the economy look to be fragile, awaiting policy orientations or strategies, from sugarcane agriculture, textiles and local manufacturing, tourism and hostelry, to even the financial sector following the grace period post-DTAA renegotiation with India. New pillars have not been explored either, if the quasi-esoteric Artificial Intelligence of the EDB or the fabled air-corridor are excluded, that is.

Beyond the temporary panacea of disparate short-term schemes or public employment, our youth face stark employment prospects and dismal opportunities for productive self-employment. The hurdles and the tasks facing a new incumbent will indeed be challenging for, somehow, beyond the acute despondency of unearthed realities, he and the new PM would need all their acumen and skills to weave a new story, one of reasoned hope, of shared ambitions and of achievable destinations in a more turbulent world.

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Impact of Thomas Cook (UK) collapse 

When Thomas Cook (UK), one of the travelling world’s biggest brand names, files for bankruptcy, with dozens of subsidiaries in European countries, with tourist packages across 60 destinations, with a major stake (49%) in an established airline company like Condor, with dozens of thousands of employees, the repercussions are bound to be worldwide.

The plight of 600,000 (150,000 from the UK) stranded holiday-makers, stuck in such diverse places as Goa, Crete, Turkey and Spain, have been on air and in the media over the past two weeks. The UK authorities with the help of local partners, ex-Thomas Cook staff working for free and airlines, have acted with commendable celerity to ensure what has been dubbed the UK’s largest peacetime repatriation exercise in history. With the compulsory liquidation process adopted, it seems clear that around 21,000 worldwide employees, including 9,000 UK staff, are being left without jobs, with such unfolding personal dramas piling on to the Brexit conundrum and PM Boris Johnson’s woes on many fronts.

Several affiliates, partners or wholly-owned outfits of Thomas Cook UK, are under pressure, some having filed for insolvency while others may soon be forced to do so. Thomas Cook (Germany), for instance, a major subsidiary of TC (UK), has announced it is filing for insolvency in an attempt to save its national brands after the collapse of the UK parent company. The German government through the UE has rapidly extended bridging finance of some 400m$ to Condor in an attempt to keep the airline company afloat while they are considering similar bridging finance for TC (Germany) which itself owns several reputable travel & tourism brands.

Many hundreds of hotels and travel-related businesses across Europe have depended on TC (UK) tour-operator, packager and airline activities. As at present, it seems that Spain & Baleares, Greece and Turkey, all of whose hotels, air-traffic and tourist numbers depended relatively heavily on the TC turnover from UK and European subsidiaries, may be the worst hit. Thomas Cook in China, Scandinavia, India (of which the Mauritius branch is an affiliate) have been spared the worst being substantially autonomous in their organisation structures and operations.

Thomas Cook (Mtius) has been quick to inform and reassure its customers that the sad demise of TC (UK) does not affect its own operations. Nevertheless, more generally in the hospitality and tourism-related sector, there have been significant reverberations already as the planetary shock-wave hit our shores. Although data on TC-specific travellers and holiday-makers is hard to come by and key players (hoteliers, AHRIM, MTPA, airlines, tour-ops) have been relatively discrete, as would be expected, in their public pronouncements, we can at least surmise the following two areas of concern.

Many hoteliers, and in particular those depending on TC (UK) & Europe for significant volumes, will have been hit by a double whammy: loss of revenue from TC customers who stayed and have left since as far back as July 2019, with minimal prospects of recovering any of that foregone revenue; secondly, the cancellations of TC-travellers for the high season from October through December and even during early next year.

Not all those TC cancellations will be recouped from alternative operators. Financial losses and lowered occupancy rates in the coming months are not the sort of prospects our hotel and related industries needed right now with the ongoing Brexit uncertainties looming high in tourist calculations. Neither did our authorities need another wake-up call that the industry has not been in a buoyant mood, with little that could be called concerted and pro-active planning of a somewhat overdue rejuvenation of policies, offerings and brands.

Our national flag carrier may feel some pinch over any decrease in passenger flights due to TC disruptions. Although other carriers like Turkish or Emirates or Condor may share the probable reduced passenger flows, our carrier will not have ignored the potential impact on its operations during the festive season. Not the sort of prospect that Air Mauritius (MK) needed when it is still feeling the financial weight of new airplane purchases and internal management issues.

We cannot but feel that the authorities imbued with pro-activity and a sense of concern would have already conducted some high-level stakeholder consultations to evaluate and implement any coordinated strategy or at least a set of effective counter-measures, both for the national carrier MK and the hotel, travel and tourism sector during this uneasy and perhaps difficult patch for some. Despite the urgency, somehow we doubt that either the Economic Development Board, Mauritius Tourism Promotion Authority, Association des Hôteliers et Restaurateurs de l’île Maurice, MK or the parent Ministries are equipped or mandated to have taken the lead in this politically sensitive period. If inaction is due to a suspected abeyance to pre-electoral political spin and messaging, it would be unfortunate.

* Published in print edition on 4 October 2019