The Year Ahead

By S. Callikan

The population will be attentive to next year’s first budget speech of Dr Padayachy, to see the leeway and deftness he has in tackling the existing woes of all traditional sectors, strengthening or developing new economic pillars…

The year ahead offers some sobering perspectives to the incoming economic team and, in particular, to the newly appointed Minister of Finance and Economic Development. As he was reportedly one of the close economic advisers to PM Pravind Jugnauth, no doubt helping through some innovative social measures like Negative Income Tax or Minimum Wage, Dr Renganaden Padayachy is well-placed to follow-on, but his batting skills on the country’s economic development front will be tested both on the 2020 and on the medium-term horizons.

In a global economy marred by trade and tariff wars, US electioneering, Brexit uncertainties and sub-regional problems nearer to us, world GDP growth rates have been forecast to ebb down and hover between 2.7% (2019) to 2.9% in 2020. India’s up and down official GDP growth rates through the past five years, have now banked down worryingly, though still at what many countries might consider an enviable 4.5% (cf, thepolicytimes.com)

Closer to us on the African continent is the other major driver, South Africa, whose economy and currency has been in dire straits year after year, on the back of numerous unresolved internal socio-economic problems, including rising fiscal deficits, high unemployment, public and household debt, inequality, gangland criminality and thuggery. Unabated national debts and fiscal deficits, widespread corrupt practices at State and state-owned enterprises, ghastly mismanagement and regular load-shedding by the national electricity supplier, poor rainfall and harsher climatic conditions, political interference and bungling at national levels, are not helping either. Both Moody’s and the World Bank have downgraded prospects further below the 1% growth rate for 2019 and hold even dimmer prospects for 2020 as the Finance Minister is forced to axe down public spending in the coming budget.

The exodus of the middle-income south African and mostly Boer bourgeoisie over the past five-six years may indeed have fuelled the rapid real-estate developments, particularly visible on our West Coast, now so distinctly a riviera for the semi-exclusive retreats of south African expatriates. That the South African fuelled property bubble lasts or remains a desirable future feature is a matter of policy for the Jugnauth 2.0 government. It will have certainly generated a property boom, simultaneously making land or housing less affordable to locals without a foot on the rung, generated low-skill jobs in the area, fuelled consumption abodes and brought in the forex and capital inflow to mask our growing fiscal or balance of trade deficits.

But should a large chunk of our future continue to be based on such grounds is pregnant with uncertainties and difficulties. To guide policy-makers, the Economic Development Board or the University of Mauritius could do well to study and report on the extent of this West Coast penetration and the accruing benefits, particularly to identify sectors of the economy these new relatively wealthy inhabitants have invested any of their funds or resources.

While property developments on once forlorn or barren lands with little alternative usage or agri-food potential are certainly a boon, its rather indiscriminate extension through Smart Cities to fertile cane and agricultural lands remains a matter of some policy concern. Complaints from the large traditional upmarket and closed-shop hostelry sectors facing the pinch from high-end rentals in such real-estate developments, should not be a deterrence so long as forex revenues flow in and the local jobs and trades prosper. In fact there might even be a case to relax conditions of schemes such as the Invest Hotel Scheme (IHS) or favour more dual purpose property-hotel development schemes if we want to reach the 2m target of tourist arrivals.

There is no reason why the up-market tourism segments cannot co-exist concurrently with a mid-market broad-band appeal strategy including a variety of niche markets. It does require some degree of strategic planning, differentiation and promotion/branding which the EDB, the Mauritius Tourism Promotion Authority, even our Universities and the operator associations are sufficiently equipped to undertake jointly and with greater thrust than by the previous government. The state of the tourism sector and its revenue-generating capacity is clearly in an insidious sputtering mode. Many of our beach-side villages and public beaches, it must be admitted, lack ordinary cleanliness, facilities or charm while disease-laden stray dogs shock today’s travellers. The rise in sea-water levels, dilution of salinity by real-estate developments, the erosion of sands and shores cannot continue unaddressed. It is hoped the new Ministers of Finance and Tourism will earnestly try to buck the trend with fresh thinking and energies launched in 2020.

In that same context, the extension of the Sir Gaetan Duval airport with a new runway at Plaine Corail, once judged too onerous at Rs 3 billion in July 2017 by PM Pravind Jugnauth, is now scheduled for start of works late 2020 after the signature last week of a loan agreement of Rs 3.3 billion from the French Agence de Développement and a grant of Rs 600m from the EU. While continuing on its track of favouring large infrastructure-modernising projects, this will undoubtedly give a boost to tourism in Rodrigues, the planned 2km runway allowing direct flights of Airbuses either from Mauritius or directly from Reunion island.

It would have been an obvious anomaly if Agalega were to get shortly a 3km runway while Rodrigues stayed with its limited air-flight infrastructures at SGD airport. Speaking of Agalega, we trust if the jetty, airport runway and some associated hospitality facilities are completed sometime during 2020 or even later, government will find it appropriate to provide as many Mauritians the opportunity to visit and perhaps even have a short stay at the idyllic island at subsidized rates.

If real estate and property development remains buoyant, operators and observers recognize that tourism is sputtering along in a downswing path, manufacturing has been battered by internal and external shocks beyond the purview of operators (e.g. Minimum Wage or Portable Retirement Scheme) and cane sugar’s future remains clouded with uncertainties, both in its main production (raw and refined sugars) and inequity in sharing the proceeds of the variety of profitable side products (molasses, ethanol, bagasse, IPPs and renewable energy). We now scrape through with at best a 350,000 tonnes production, a far cry from the 750,000 tonne output of the industry’s heyday and while small planters have received some palliatives for the past couple of crops, this is not a sustainable situation. Will the upcoming World Bank report and recommendations provide a fairer sharing of the sector’s milk cows so that the industry’s basics (cane production) do contribute to collective prosperity, including that of the small planters? The responsible Ministers will have food on their plate to revitalize all sectors which have been more in policy paralysis than forward planning mode.

Undoubtedly the country’s infrastructure has been slowly changing with new hospitals, sports and Multi Use Games Area facilities, and new road and traffic upgraded round-abouts at major congestion points. The coming into operation of the urban terminals and the completion of the tram-rail linkage (Metro Express) between Port-Louis and Curepipe, would be a major achievement for government. In addition from the urban terminal revenues, the success of the park and ride features, the feeder bus network and their pricing, the safety and security features will ultimately impact on the overall commercial viability of the project. From the cursory data presented a few years ago, with a running capacity at rush hours (say 2.5 hrs) of twenty trains of 300 travellers, either morning or afternoon, the impact on traffic may not be enormous and commercial viability may remain tenuous without significant subsidies from all countrymen. Addition of another priority, the Metro, as player onto our already congested road network may not contribute to alleviate traffic congestion and in fact aggravate road usage conditions in some quarters. For the moment users can bask in its modernity until full operation provides better insight on traffic impact and commercial viability.

The festive season has been buoyed by the payment of campaign promises but observers and the population will be attentive to next year’s first budget speech of Dr Padayachy, to see the leeway and deftness he has in tackling the existing woes of all traditional sectors, strengthening or developing new economic pillars, promoting SMEs, while inviting non-property investments (local or foreign) and keeping the fiscal deficits from their ballooning tracks. In 2015, payments of campaign pledges were mopped up by rupee depreciation, a Rs 3 additional tax on road fuel and higher VAT revenues and the economy benefited from the massive bonanza of external generosity from India, China and the Saudi Kingdom among others. Public debts and those parked in Special Purpose Vehicles may not yet be alarming, but the new Finance minister and his team will need their wits to induce greater optimism from economic operators. We wish them success in their endeavours to take the country on the trajectory of greater sustainable development.


* Published in print edition on 27 December 2019

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