V.Bhardwaj

The Propertied Oligarchy and their Veto Power

The fundamental electoral issue is not about the representation of ethnic components of the population, but about plutocratic private interests versus the enlightened national interest 

— V. Bhardwaj 

As no man is a prophet in his own land, the tapping of external sources, instead of railing against the double standards of a partisan media, may be more useful in driving our point that our local politics continues to be influenced by the moves of the old propertied oligarchy. The recent report of the BTI 2010 — Mauritius Country Report. Gütersloh: Bertelsmann Stiftung, 2009 shares our views that “…However, democratic institutions have not succeeded in breaking up the veto power of the old propertied white oligarchy or in bringing it under democratic control. Democracy, a cornerstone of Mauritian national identity, ends on the sugar cane plantation, at the bank and at the factory gate. Under the surface of ethnic and cultural pluralism, the economic dominance of the Franco-Mauritian upper class is still effective.”

 The oligarchy-dominated private sector continues in its determination to drive the course of our politics and alliances. In the 2005 elections they succeeded once again in positioning their men at the Ministry of Finance. Their men had already proved immensely helpful to their interests, especially by abolishing the historic sugar export tax, while camouflaging the real objective through the establishment of a Sugar Investment Trust, which would supposedly democratize ownership of the sugar industry. Since 2005 with the help of the TINAwallahs (There Is No Alternative), they have dutifully carried out the agenda of their backers and sponsors. The TINAwallahs have pursued the IRS scheme with increased determination, an abomination decried by independent economists as a speculative and unproductive use of the country’s strategic land assets by selling them to foreigners. Land prices rose out of reach of most Mauritian households, while sugar barons extracted huge profits on their large property holdings, but contributed marginally to taxation (a capital gains tax could have been introduced).

To add insult to injury, the middle classes were made to pay higher property taxes — the infamous NPRT. They slashed corporate taxation, gave huge promotion budgets to the tourism sector, and most importantly, ensured that the EU compensation money for the restructuring of the sugar industry went to the sugar barons, instead of supporting those who had shed their sweat and toil for decades to enrich these barons. The IRS scheme fitted like a glove in the hand of the private sector in maximizing their land values, and also in its employment of foreigners, notably South Africans fleeing from black business empowerment, and providing them with owned or rented residences. The local conglomerates are strong practitioners of South African dominated employment at the highest levels of its management, and not coincidentally, also executing parallel IRS schemes designed mainly for South Africans.

Till the anti-TINAwallahs and part of the opposition, later to be known as the “loyal opposition” started probing some of the astronomical benefits that were being reaped under the Sugar Sector Reform and the explosive implications of the grossly inequitable distribution of EU compensation. They tried belatedly to restore some fair balance by demanding 2000 arpents of land for the public good. The EU’s support for an exclusive role to the sugar barons in electricity generation was another component of the EU plan. The anti-TINAwallahs saw through this, and a first major rift arose between the TINAs and anti-TiNAs.

Depreciation of the rupee

The TINAs also pressed in favour of the depreciation of the rupee to boost sugar and other export revenues of the oligarchy, which the Governor of the Central Bank resisted, arguing that the population, especially the poor, were bearing too high an inflation burden. He also happened to have been the Minister of Finance who re-imposed the sugar export tax. This explains why he had to be done away with, a repetition of a previous episode when he was hounded out of office by a partisan press after having been set up in connection with a harmless administrative transfer between the Central Bank and Government.

More recently, the private sector became increasingly concerned that the TINAs were no longer quite effective in delivering the goods. The anti-TINAs seem to have become less willing to allow their rivals to further the selfish interests of the private sector in government. During the last two years, they, with guidance from the economic adviser of the PM, Andrew Scott, have taken the reins of budget formulation, with a reorientation toward social objectives. The private sector now began to hold the view that it was preferable for both of the big parties to join forces, so as to exert the strongest pressure on Big Boss, the anticipated clear winner of the forthcoming elections. Especially as Big Boss in his drive to meet his democratisation agenda was once again insisting on reviewing the electricity IPPs in the light of an independent consultant’s report and findings.

The BTI Report states that our “markets and free competition are limited by the actions of the oligarchic families who dominate major plantations, financial institutions, real estate, trade and telecommunications. The World Bank has called for improvements in corporate governance, noting that the country’s larger corporations continue to be offshoots of the old sugar barons’ holdings. On paper the companies are independent, but in practice are managed by the same families.”

That explains the concerted drive for a Labour-MMM alliance by the private sector and their stooges in the press, deceptively couched in the garb of ethnic stability. The TINAs themselves engaged personally as intermediaries. A press-led chorus thus became active in recent months in loudly and unabashedly singing the praises of a Labour-MMM alliance, especially by the former RMM crowd, and a self-proclaimed political sociologist belonging to the conglomerate stable. Understandably, the same press has over the last five years tried to build the TINAs and its leader as the most brilliant and super competent intellectual/bureaucrat/technician that ever walked on Mauritian soil.

Unbelievably, these were the same people who were ardent opponents of the introduction of VAT, and openly and defiantly expressed their objections to the proposed introduction of VAT, in 1993, indicating their preference for maintaining the Sales Tax. They were either poor economists or, as a more charitable explanation, their masters must have found the VAT to be more menacing to their retail business activities than the Sales Tax. It befell to a medical doctor, ably advised by a new Financial Secretary, to introduce the VAT in 1997, the single most important fiscal measure taken in Mauritius since the Sales Tax in 1983.

Another fiscal development of fundamental importance took place soon after under the helm of a non-economist, as Minister of Finance, during 2003-2005, namely the setting up of a Revenue Authority. If the budget has benefited from rising revenues, the integrated operations of the different tax departments under a unified Revenue Authority have played a critical role, not the NPRT or the taxation of savings.

With much improved tax administration, higher economic growth has automatically brought more revenue under VAT and other taxes. Yet, fiscal revenue as a proportion of GDP has stagnated at 20% of GDP, despite the breast-thumping of the TINAs. A simple yardstick of competence of successful fiscal consolidation is the extent to which fiscal revenue has been strengthened, not in absolute terms, but as a proportion of the country’s total income. The reason for this failure to consolidate fiscal revenue is known, notably the largesse extended to the private sector in terms of reduced corporate taxation. Even at these generous tax rates, the corporate sector fails to bear its fair burden, on account of opaque accounting practices that shield the true extent of its profitability.

Stimulus spending for infrastructure

The TINAs were able to reduce the fiscal deficit for two reasons. One is that the programme of capital expenditure, especially on the construction of schools, by the preceding government came to an end. Second, they slashed capital expenditures sharply. Now, another mark of a performing technician/minister, besides strengthening revenue, is to reduce the proportion of current spending as against capital spending. Instead, they did the opposite, and put the burden of fiscal adjustment on capital expenditures, which are sorely needed to boost the country’s infrastructure. It is only after the global financial crisis that they agreed to apply stimulus spending for infrastructure. If meeting the country’s infrastructure needs is so critical, they should have done more budget-cutting on current expenditures in earlier years, or raised more revenue, to provide enough fiscal space for badly-needed infrastructure spending.

Under their watch, unsound, albeit unviable, hedging activities at Air Mauritius and STC have swallowed billions of rupees, and burdened the national debt. The Ministry of Finance is supposed to have a representative on the Board of our national airline company to precisely have an oversight over such financial issues. And the conglomerates are also represented on the Board, but strangely invisible. I can imagine how certain sections of the press would have reacted had Bheenick been the Minister of Finance when this financial catastrophe struck – “ccandale financier du Siècle – the guy must go”. At the time, you could have heard the sound of a pin dropping every second in press offices. It is astounding that TINAs should even contemplate to announce a fact finding committee on the Governor of the Central Bank, and yet this is the blow that was inflicted to the independence of a key institution of the country. Some nominees on the Board of the Central Bank disgraced themselves and did incalculable harm to the standing and reputation of the Bank, and also damaged the country’s image as a well-governed financial centre. So much for our paragons of competence.

We have to ensure that the Mauritian government is not captured by the private sector, by refusing to succumb to the blatant pressures to present the TINAs as irreplaceable at the Ministry of Finance. The oligarchs should understand that Mauritius will chart its destiny for the national interest and the common good. They have to be told that the honesty and integrity of this country’s sons and daughters cannot be bought to serve the self-centred and egoistical objectives of a few to the detriment of many. The Mauritian public will not be hoodwinked by the shenanigans of those whose believe that their hold on economic power and wealth is unassailable.

Even the layman knows that the fundamental electoral issue is not about the representation of ethnic components of the population, but about plutocratic private interests versus the enlightened national interest. The anti-TINAwallahs are already making life so difficult for the latter, demystyfing and clearing the “national unity” smokescreen — the perennial dreamy rhetoric and the necessary double-speak of an election campaign masking the contentious issues — to prevent the propertied oligarchy from having a freer hand to push forward their economic agenda without conceding much of their entrenched interests. 

V. Bhardwaj