“Economic prosperity has to be inclusive and shared among the population…

Interview: Rajeev Hasnah CFA & Economist

…this means ensuring that everyone, irrespective of his socio-economic and educational background, has at least the opportunity to earn a decent living and status in society


‘We have in the past been successful and proved the Nobel Laureate economist, James Meade wrong; there is no reason why we cannot repeat a similar feat again!’


Rajeev Hasnah, a Chartered Financial Analyst with degrees from the University of Mauritius and Warwick Business School, is currently Group Head of Financial Planning and Analysis at Harel Mallac Group. He was previously a Blue Delta Advisory, has worked at the COMESA Competition Commission and the Competition Commission of Mauritius. He acquired broad experience in London as a Financial Market Economist and Financial Corporate Finance Manager, besides being well-versed in Management Accounting as well. He also has experience from a public policy and international affairs perspective in the Mauritian economy as well as the COMESA region. He is therefore well qualified to give our readers his views on several aspects of the forthcoming Budget, in particular about whether the country can meet the aspirations and expectations of the millennials, a critical concern not only here but across the developing and developed world too.

Mauritius Times: The 2018-19 budget will be presented in a particular political-cum-economic context: there are 18 months to go before the next general elections, and this could be the government’s last or last but one of its present mandate. One could therefore expect the Finance minister to start doing what politicians usually do when elections draw nearer: put the money where the vote is. Nothing dramatic, ground-breaking in terms of economic initiatives to expect then. What do you think?

Rajeev Hasnah: I believe the budget presentation in Mauritius gathers a good dose of public attention, maybe wrongly or rightly, but a budget remains what it is: a forecast of how much revenue would be generated by the government in the forthcoming year and how it intends to spend it. The focus is thus rather short-term. Ground-breaking economic initiatives, as you put it, do not and cannot normally form part of one single budget; rather the yearly budget presentation should allow for the enactment of measures that would lead to the materialization of the overall economic strategy of the country. As such the contribution of a government in terms of economic development is best assessed over the period of its mandate rather than on a yearly basis. Of course on an annual basis, we should be able to assess how well the government is achieving its objectives and how close or far it is from enacting what it promised to.

We also tend to believe that the government should be the precursor to all major developments in the country. In my view, the role of the government is in particular to provide the appropriate regulatory framework and right incentives for private individuals (whether local or international) to take risks and contribute in the set-up and growth of an industry or sector. For example, the tourism and global business sectors that have contributed significantly in the recent decades in terms of wealth creation and employment are testimony to this good working partnership of government and private interests, whereby each party has acted as it should have.

Democratic countries, where elections are held when they should be, normally have a political business cycle, and Mauritius is no stranger to this phenomenon. The good side of it is that at least elections are held, and the incumbent government stays or makes way for another to take over.

* What does your reading of the present economic situation inform you about how our economy is doing? Is it good, bad or so-so?

The economic performance of Mauritius from a sectoral perspective shows a rather positive picture with notable growth in all key sectors of the country, namely tourism, financial services, construction and real estate in particular.

But when we analyse the economic performance of Mauritius from an expenditure perspective, I am particularly concerned by the dynamics that has become the norm over the years. Around 74% of the 2017 GDP came from household consumption, while investment accounted for only 17% and net exports represented -13%! Over the past 10 years, the household consumption/GDP ratio has averaged around 73% (this compares with 35% for Singapore, for example). Being a consumption-driven economy, which in our context also implies a consistent current account deficit, is certainly not the right fundamental for a middle-income economy that aspires to avoid falling in the middle-income trap. If we add to this the low labour force participation rate of around 60%, the ageing population demographics along with an expected eventual drop in the population size in the coming years, we would have the right mix to actually fall in the middle-income trap.

* We have heard so much about the need for a new economic paradigm, about the so-called “second economic miracle” in the making. None of this has taken shape so far, and we are saddled with the same economic policies of the past two to three decades. Besides, nothing is coming up in terms of new job-rich economic pillars. According to you why is that so?

The thinking and implementation of a new economic paradigm does not and cannot happen over a short period of time. It requires the participation of all stakeholders that involves national and sectoral strategic planning, the setting up of the appropriate regulatory frameworks and incentive mechanisms, and risk-taking initiatives by entrepreneurs and investors.

In my view, this government as well as the previous one has struggled to lay the foundations of the new productive and employment rich sectors, for example the ocean economy. It is, however, important to point out that in a report dated March 2017, the World Bank believed it would take around 15 years for the ocean economy to develop in Mauritius, and would require around Rs 19 billion as investment on a yearly basis over a 10-year period!

The current government is setting up the national planning expertise within the Economic Development Board, and has enacted several measures to set up the appropriate regulatory framework for new sectors, but is struggling in my opinion to set the right mix of incentives so as to attract investors.

* Besides the fact that we do not have a full-time Finance minister, there is also the absence of a government economic think-tank, like the former Ministry of Economic Planning, which many economists say could have worked out a common strategic vision and actionable ideas for Mauritius to progress. Does it seem to you that we are instead addressing issues in a fragmented, piecemeal manner?

Without a clear and shared vision of where we are and where we want to go, we would seem to be fire-fighting and reactive rather than proactive in our decision making. In the absence of a centralised planning authority, we have been addressing issues in a fragmented manner, which is why we are hopeful and look forward to the contribution from the Strategic Planning Directorate of the Economic Development Board to fill in the gap.

On the other hand, with the rather disruptive and volatile nature of international dynamics, be it economic, technological or political, a certain degree of flexibility in reaction is also required, which so far we have been able to adapt and keep on growing, for example, during the global recession of the last decade.

* What would you expect a responsible government to be doing to improve matters in the medium and long terms? Are there also particular areas or issues which, in your view, require the government’s attention and which we would do well to attend to immediately rather than postponing a decision thereon?

The starting point in my view is to identify and acknowledge the issues and challenges that we are currently facing in terms of furthering our economic development. From a long-term perspective, an ageing and declining population size is a key concern for future growth that needs to be addressed. The good thing is that we have started talking about this issue recently. The next step would be an elaboration of the how we could tackle this issue going forward – the government could start by sharing its thoughts on this as well.

The dynamics of our economic growth is also a matter for concern. The quantum of household consumption is not necessarily an issue per se (though households on average are quite indebted), it is rather the contribution of investments and exports of local goods and services that are anaemic. We are currently over-dependent on imports and our exports are dwindling; given that the trend the trade deficit of around Rs 94 billion in 2017 is expected to be sustained and widened further in the foreseeable future. Bold measures have to be taken to ensure the survival and growth of our local manufacturing and provision of services capabilities. It would help a lot if we could dedicate good resources (brains) in the thinking and elaboration of strategies to promote and defend (economically) Mauritius internationally such that the access to international markets as well as the competitiveness of our local entrepreneurs can become further enhanced.

The Mauritius Inc. label has to be developed, nurtured and promoted for any entrepreneur (big or small alike) to have an easier access to international markets. Improving the access to capital for small entrepreneurs in the likes of government-supported venture capital would also go a long way to support promising small and medium businesses to further develop.

* The vast majority of Mauritians and in particular the millennial generation – whether they are semi-skilled or highly qualified professionals – may not be particularly interested in or concerned about how macro-economic fundamentals are doing; what will surely be of interest to them is who will provide them with well-paid jobs that will allow them to lead a reasonably comfortable life. Who will do that for the present and the next one or two generations?

To start with, an unemployment rate of 7.1% in a developing country is not alarming, implying that the majority of the Mauritian labour force is already in employment or self-employed. We also need to have people with the culture or mindset of creating jobs rather than looking for well-paid jobs.

For the coming generations, it is quite difficult to predict today what will be the jobs of tomorrow, given that the near developments in motion control, sensor technologies, and artificial intelligence will inevitably give rise to an entirely new class of robots aimed primarily at consumer markets, and hence likely to render obsolete a good portion of the current pool of jobs.

* In a recent interview to this paper, Lord Meghnad Desai had mentioned that we should not underestimate Mauritius’ ability to rise to the level of a high-income economy, but the only way to do that is the high-tech way, which is presently less capital intensive than manufacturing used to be. “Think of Mauritius as Estonia, or Finland, Latvia – countries with a small, highly educated population, and making huge investments in technology”. That’s the only way, he added. Would you concur with that, especially as regards the future fortunes of the present and next generations?

Investing in the high-tech sector is one of the ways forward and we need to also understand that we are currently talking of a general-purpose technological revolution, which is highly disruptive, as it has the power to continually transform itself, progressively branching out and boosting productivity across all sectors and industries. That said, significant economic gains are expected not just from adopting the high-tech way but also adapting to it as it keeps on evolving and impacting other areas of economic activity.

I would also add that given the current structure of the Mauritian economy, other sectors need to climb up the value added chain or new sectors be simply created. Some examples are provision of high-end financial services, tapping into the potential of the ocean economy (our exclusive economic zone is 1000 times bigger than the land mass of Mauritius, and 3 times bigger than France), development of bunkering services, and medical tourism among others.

Adopting and adapting to the current and upcoming technological transformation that is already defining the way we operate in the current and prospective economic sphere is the way forward.

* To come back to the issue of job creation and the need to go high-tech – that is if this meets with a broad consensus –, do you see the local private sector able to initiate change away from the present focus on property development in IRS, Smart City projects, one-off investments that will not create productive and sustainable jobs like our Global Business sector was doing at one time before a wild elephant came messing about it?

As I have said, the current digital transformation has earned the right to be known as a general-purpose technological revolution, with the only three others that have earned this distinction being: (1) the steam engine, (2) the electricity generator, and (3) the printing press. Such transformations are rare, and I am of the opinion that the change (in the domestic economy) is already happening and the momentum is only expected to keep on accelerating. We should not think of the digital revolution as just a separate activity in itself, but rather as a tool that is permeating all areas of economic activity, not to say a new way of doing business and regulating altogether going forward.

True, investing in real estate developments per se may seem to be non-productive investments, but let’s conduct a counterfactual, which is to ask what development would we have seen had there not been the recent investments in property development. Would Mauritius have been a manufacturing hub or would significant progress have been made in the development of the ocean economy, or would any other job-generating industries have been created? The answer to these questions would seem to be ‘not really’ or ‘plainly no’ to me. So at least it is a good thing that foreign currency is flowing in as investments in the real estate development, which is by the way contributing to finance the current account deficit created in particular by very high levels of household consumption.

That said, creating a new sector of economic activity which can become a major source of income and employment creation requires a significant amount of investment in (1) prospecting and developing the markets where the products or services would be sold, (2) training the right mix of manpower, (3) setting up the right infrastructure, and (4) developing a competitive edge vis-à-vis international competitors. Without a good planning, government support (in the international scene), coordination and a significant amount of investment, this is not an easy feat to achieve.

* Going the high-tech way may require a rethinking of our educational system. For having been yourself a product of the present education system, would you say it can still provide the young of today the skills that will fetch them the jobs of tomorrow?

The current digital transformation would require that everyone (1) acquires the right skills set related to adopting and adapting to technological applications as a user to apply in other field of activities, and (2) becomes a professional in the field of high-tech. No wonder STEM (Science, Technology, Engineering and Mathematics) degrees are the ones that are gaining in popularity and value across the globe. In some countries, learning the basics of computer science so as to be able to do coding or programming is becoming compulsory.

Though we are definitely not at the forefront of the ongoing developments in robotics and artificial intelligence, our educational system should at least be geared towards first ensuring that every student is equipped with the right foundational knowledge to be able to adapt to the upcoming New Economic Order. Arousing the interests of Mauritian youths to choose STEM as advanced studies and providing the right framework for their employability are key objectives that we should set for Mauritius in the coming years.

* Lord Desai also said in his interview his impression about Mauritian youths being risk averse, that used to be said previously about Indian youths, but that is changing with lots of business ventures being launched in the field of IT, car hiring, apps development and driven mostly by people who are well-educated, and versed in the field of computer technology, finance, etc. What’s your take on that?

It is a fact that, on average, we lack the entrepreneurial culture and also being a professional in employment seems to carry more value in society than being a young struggling entrepreneur! I am a strong advocate of inculcating an entrepreneurial culture in our children and youth – it is not necessarily a talent that we are born with; it is, in my opinion, an area of study, a skill and a mindset that needs to be taught.

On top of training our youths to take a calculated risk in a business venture, we also need to ensure that the right support is provided in terms of access to capital, mentoring, and access to markets, especially since the local market is quite restricted with its population size of 1.2 million.

* What else would you say are of concern amongst today’s youths, the millennials? Is it about meritocracy in both the public and private sectors? Insecurity? Rising inequalities? What else?

I believe the issues you are raising are pertinent and a survey among the millennials to understand the matters of concern among today’s youths would do justice.

The high unemployment rate among youths (around 25% for those aged between 16 – 24) is quite worrying and analysing the unemployment data further reveals that the average unemployed is young and with limited education and skills set. As such, from an economic development perspective, it is crucial that economic prosperity is inclusive and shared among the population. In essence this means ensuring that everyone, irrespective of his socio-economic and educational background has at least the opportunity to earn a decent living and status in society. Equipping our youths with the appropriate skills set (academic or technical) and levelling the playing field for equal opportunities would keep us away from any potential frustration and social tensions that may arise from the issues you described.

* What about their perception of what could usually qualify as role models – people who are making a career in politics, those in the religious domain or in civil as well as socio-cultural organisations across the board? Is that getting poorer?

I think those who are taken as role models are the ones that inspire in their conduct and leadership and have succeeded (after repeated failures) in their respective fields. Now in the global village and the age of information that we are living, I believe that role models could also be global and not necessarily confined to our local boundaries. For example, for an aspiring engineer, that role model could be Elon Musk; for an entrepreneur that could be Jack Ma or Steve Jobs, and so on.

* In the time remaining till the end of the government’s mandate, what do you think could be some realistic, achievable goals?

I understand that on average the implementation rate of measures and projects announced in the successive budgets revolves around 40-60%. A quick-win for the government would be to ensure that the announcements made earlier are implemented and that significant progress is achieved in the current projects that have already started. The last point is particularly important in order to prevent wastage of our already limited resources, should there be another government in 18 months with a different vision, especially as regards major projects that have already started.

As such, should the current budget exercise plan for a focus of government resources in achieving all the planned measures and projects that have been announced since 2015, but which unfortunately did not materialise; we would have made a significant progress in the right direction.

* Are you hopeful for our country’s future?

 Yes, I am.

There is no way out, and we should realise that we are a small island state that needs to make full use of its limited resources (people in particular) so as to keep on progressing in the right direction. It is better to have a gradual, sustainable and inclusive development, rather than one that looks good and fast, but which is also volatile and exclusive to a lucky few only.

I believe the starting point is to know where we want to go and to understand what are the obstacles to get to where we want to be. I hope the Strategic Planning Directorate of the Economic Development Board in particular will contribute significantly to obtaining the required clarity such that decisions are taken in a rational and constructive manner.

Having a strong leadership in all quarters (public and private alike) that focuses on empowering people to achieve their respective and common goals of shared prosperity and nation building will get us to where we have to be. As a nation we have in the past been successful and proved the Nobel Laureate economist, James Meade wrong; there is no reason why we cannot repeat a similar feat again!


* Published in print edition on 14 June 2018

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