Year 1 of the New World Order
Every crisis paves the way for new opportunities. The present Government has chosen not to seize them fully
By Chetan Ramchurn
Budgets, as overhyped as they are in Mauritius, have often been stale exercises with little for the middle class and small business owners. We have been told repeatedly that the times are unprecedented for we are now going through a triple-debt crisis affecting private entities, households as well as states simultaneously. The blueprint used to deal with same dates to 2008 with quantitative easing chosen despite inflationary risks and serious doubts expressed on the independence of Central banks.
“In these tough times, not enough is being done to help small businesses. Easy access to finance at a time when working capital is meagre should have been addressed. The process is still cumbersome and guarantees still a requisite. Announcing Rs 10 billion for SMEs in distress is one thing, getting the finance to entrepreneurs is another…”
Presented against the backdrop of amended legislations that have weakened workers’ rights, the removal of the ceiling for national debt levels, our presence on the FATF grey list of ‘jurisdictions under increased monitoring’ (which only serves to highlight the eroded credibility of most of our regulators), this is the first budget under Pravind Jugnauth as PM with a popular mandate. Expectations had been tempered prior to its presentation with many experts averring that the Minister could not do much. With Rs 60 billion from the Central Bank, this was simply not true. As is customary now, the budget is being hyped by members of the Government and riled by those in opposition ranks. The PM was quick to congratulate his colleague who in turn heaped praise over his boss. This is the usual shtick. Like all budgets, this one has a litany of promises that will never be delivered. As with all editions, this one has some good measures and some questionable ones.
The Good & Promising
The Rs 15,000 compensation to law enforcers and hospital staff is a welcome decision and shows the gratitude of citizens towards frontliners. It was the least we could do. May we also hope that access to protective equipment will not be an issue should there be a second wave. The introduction of an additional dose of progressive taxation in the form of an increased solidarity levy was long-awaited as is the additional charge imposed on the gross income of companies where it exceeds Rs 500M.
Another positive intent hosted in this budget is the National Agri-Food Development Programme which aspires to lead the country to self-sufficiency. A number of measures which include pledges of greater technical support, subsidies on the purchase of seeds, grants on the cost of netting will definitely help planters. Whether Landscope Mauritius Ltd is the best organism to handle the supply of land remains to be seen. 12,000 housing units have also been announced at a cost of Rs 12 billion. The figures seem very exaggerated but even if half of them are actually built, it would be a step in the right direction.
“The Rs 15,000 compensation to law enforcers and hospital staff is a welcome decision and shows the gratitude of citizens towards frontliners. It was the least we could do. May we also hope that access to protective equipment will not be an issue should there be a second wave. The introduction of an additional dose of progressive taxation in the form of an increased solidarity levy was long-awaited…”
The Bad & Farcical
That this is being presented as a balanced budget should not mask the fact that such would not have been the case without the Bank of Mauritius. The latter has been under greater scrutiny over the last few years; questions on its independence have rightly been raised with lackeys abiding to the whims of those in office. Of concern is the track record of some nominees who were inept in their previous postings: failures that have tarnished our image as a jurisdiction of good standing.
The new sectors that have been announced bear a strong sense of déjà-vu: Artificial Intelligence, the Ocean Economy (rebranded as Blue Economy), Technopoles of past now marketed as the Côte d’Or Data technological park as well as a pharmaceutical industry. The leader of opposition has already outlined the opacity surrounding the likely beneficiary of incentives towards the creation of this new sector.
At a time where globalisation is plateauing, you would expect regional collaborations to be high on the agenda. While Africa is mentioned and it is even laid down that: “It is hand in hand that our socio-economic pathway will be written”, the strategy of focusing on Special Economic Zones is the wrong one – having met with little success in Congo-Brazaville and Senegal. No mention whatsoever is made of the importance of additional diplomatic presence in more African countries.
What is also to be resented is that we are not working towards the upgrading and addition of new skills to our workforce. This is the perfect moment for people to learn and train for a new paradigm. This is missing from Minister Padayachy’s speech and the words training or apprenticeship are not even mentioned in the budget.
In these tough times, not enough is being done to help small businesses. Easy access to finance at a time when working capital is meagre should have been addressed. The process is still cumbersome and guarantees still a requisite. Announcing Rs 10 billion for SMEs in distress is one thing, getting the finance to entrepreneurs is another. The Minister mentioned the New Deal in his speech. Maybe he does not know that the US Government was the employer of last resort with the Civilian Conservation Corps that enrolled 2 million unemployed men between 18 and 25 for a variety of tasks which are still very relevant: participation in conservation projects such as planting trees to fight soil erosion and conserve national forests, eliminating pollution in rivers and the creation of fish, game and bird sanctuaries.
How have Mauritians achieved progress? They have saved in a disciplined manner at the cost of great hardships over years. Since 2006, this culture has been derailed. The Minister of Finance should have tried to incentivise this savings culture.
The Minister has announced the decision of “abolishing the NPF as it is not only unsustainable but also unfair and regressive.” What we need to know is the state of our pension fund, how sustainable it really is? How will the Contribution Sociale Generalisée be managed? Will these funds be used to balance our national budgets in the future? Nothing seems to be off limits.
One of the looming dangers is ‘cash-for-trash’ acquisitions by the recently incepted MIC. Buying toxic assets from private companies is quite possible, even more so in the absence of proper supervision. High standards of transparency should similarly be applied to applicants of the Hotel Reconstruction and Renovation Scheme so that the industry can look at the future with greater serenity.
Most people do not care much about quantitative easing or artificial intelligence. What ultimately matters to them is the price of commodities. These will increase in the coming months with a depreciated rupee leaving them even more vulnerable. As Neugebauer writes in Jacobin Magazine, “once the state had socialized the losses, it could move on to making the working class pay for corporate debt and […] bailouts.” This being a pro-big business Government, the roadmap is not hard to fathom.
While this budget has some progressive aspects that should be recognised, we should keep in mind that Rs 80 billion will go towards bailing out asset-laden companies in the near future. This Government is merely doing what Ambrose Evans-Pritchard of the Daily Telegraph preaches: “To avert socialism, we must briefly become socialists.”
Every crisis paves the way for new opportunities. The present Government has chosen not to seize them fully.
* Published in print edition on 5 June 2020
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