Shifting the Paradigm

African island nation Mauritius is moving upmarket as it strives to become a high-income nation.

A tropical island paradise with an economy based on finance, tourism and textiles. For years this described Mauritius’ growth model, and the country has been rightly hailed as an African success story. When gaining independence from the United Kingdom in 1968, the Indian Ocean Island was completely dependent on sugar. These difficult conditions led Nobel Prize Winner in economics James Meade to predict stagnation and ultimate catastrophe. However, the open, outward-looking small island state has since then progressed and today boasts one of the highest incomes per capita among African nations. One of the great questions facing Mauritius is how its economy can continue to achieve the results it has been witnessing for the past 30 years. The island’s government, elected in December 2014, is pinning its hopes on a number of mega projects and a stronger push to promote the island as an entrepôt to Africa.

Getaway Position

Located 2,000 kilometres southeast of the coast of the African continent, Mauritius is strategically positioned as a gateway to Africa and the Asia-Pacific region. In addition to the island of Mauritius, Mauritian territory also incorporates the island of Rodrigues, some 600 kilometres to the east, as well as two tiny islands to the north of Mauritius, which are unpopulated. The capital city of Mauritius is Port Louis, located on the island’s northwest coast. Boasting a coastline of 330 kilometres – mainly white sandy beaches – Mauritius is 45 kilometres in width and 65 kilometres in length. Inland features include a vast central plateau, subtropical forests, rivers, streams and waterfalls, making Mauritius one of the most beautiful island’s in the Indian Ocean.

Fusion Nation

Created by volcanic activity more than 8 million years ago, Mauritius was first inhabited when the Dutch took possession of it in 1598. Abandoned in 1710, it was taken over by the French in 1715, who developed the island into an important naval base overseeing the Indian Ocean trade and established a plantation economy of sugar cane. Mauritius was taken over by the British during the Napoleonic Wars and was granted independence in 1968. It became a republic in 1992. Today, the island is home to about 1.3 million people, mainly an ethically and diverse mix of people of Indian, African, French and Chinese heritage. While English is the official language, most Mauritians are bilingual being equally fluent in English and French. Asian languages such as Tamil, Urdu, Hindi or Mandarin are also spoken by the Indian and Chinese population and form part of the linguistic mosaic. Mauritians are also highly skilled people, and the island boasts a literacy rate of 86%, the highest in Africa.

“The Stock Exchange of Mauritius gives to any international or domestic issuers the flexibility to list, trade and settle in five different currencies. This is unique in sub-Saharan Africa.”

Sunil Benimadhu, CEO of the Stock Exchange of Mauritius

A Democratic Model

The Financial Times recently described Mauritius as ‘a beacon of flourishing democracy for Africa’, and indeed the island has long enjoyed a relatively stable political landscape. The country is well respected and often consulted for its economic success and democratic experience by its African neighbours. Mauritius has a multiparty parliamentary democracy where the president is the head of state and the prime minister has full executive powers and heads the government. The last elections were held in December 2014 and were won by the Alliance Lepep, a party composed of the Militant Socialist Movement (MSM), the Mauritian Social Democrat Party (PMSD) and the Liberation Movement. Sir Anerood Jugnauth became Prime Minister. He already held this post between 1982 and 1995 and again between 2000 and 2003. Jugnauth was the mastermind behind Mauritius’ economic miracle in the 1980s, when the island liberalised its economy and began the process of reducing its dependency on the sugar industry. The hopes are high for Jugnauth to repeat this success, and the promise of a ‘second economic miracle’ was a key part of his election campaign.

“The growth model which has served the country for years and decades is losing steam. We must rekindle the machine in view to generate sustained growth and job creation at a higher pace. But we can only achieve this by initiating a paradigm shift in the way we develop and run our economy.”

Vishnu Lutchmeenaraidoo, Minister of Finance and Economic Development

New Economic Journey

Mauritius has a small, open economy. Both SMEs as well as a handful of large conglomerates and diversified groups, including GML, ENL, IBL and CIEL, play a major role in driving economic development. While Mauritius is one of the wealthiest and most advanced countries in Africa, the island seems to have reached the end of an economic cycle. Growth, which averaged 4 to 5% in the 2000-08 period, has slowed to 3 to 4% since the global financial crisis. The unemployment rate has been hovering around 7.4% recently. The Mauritian government has drawn up a blue-print for growth laying out the ‘Vision 2030’. The plan calls for annual GDP growth of 8 to 9% and an increased focus on ICT, the seafood and marine industry, as well as financial, business and biomedical services. Mauritius’ manufacturing industry is being encouraged to move into high-tech and high-precision activities. Tourism will remain an integral part of the island’s economic strategy. In 2015 the tourism sector registered a record-breaking year, welcoming 1.15 million visitors. Other solutions include the development of ‘smart cities’, a project aimed at stimulating research and technological activities, and the development of an ‘ocean economy’, which would focus on marine activities. In addition, Mauritius is planning to fully exploit its location in the middle of the Indian Ocean as a finance and connection hub as trade between Africa and Asia ramps up. The International Monetary Fund (IMF) predicts that Mauritius’ economy will grow by 4% in 2016, while the World Bank’s forecast of 3.7% is slightly more conservative. While those growth rates are below the government’s ambitious targets, the country’s leaders are convinced that the economy will pick up speed in 2017.

“The country’s new government is extremely committed to strengthening the economy. Mauritius will start constructing the first smart cities shortly and has already been successful in attracting investment into the port and the airline business, particularly from China, Dubai and Singapore. I think government’s focus for the coming years will be on the creation of jobs. Overall, we are pretty optimistic about the prospects of Mauritius.”

Parvin Jain, Interim CEO of BanyanTree Bank

Towards a Confident Future

Despite the fact that the island nation regularly claims Africa’s top spot in surveys measuring its competitiveness and the ease of doing business, many analysts say Mauritius is at a tricky juncture. The island’s future depends on the success of the structural reforms that the government has initiated, and modern Mauritius is racing to adopt best practices in a wide range of sectors that are expected to benefit from and fuel the country’s growth. By 2020, Mauritius wants to reach high-income status. While some say this goal is optimistic, other analysts say it is not far-fetched. Had he been witness to Mauritius’ progress in recent years, Nobel Prize Winner James Meade might have approved too.