Financial Services | Political dynasties and the Mauritius banking and finance system

Those who read my previous article will understand my line of thought throughout this article.  When I worked in the banking and finance industry in the UK, I did so in a very structured and regulated framework.  That framework did not and does not have any political influence.
The appointment of the governor of the bank of England is made by the Chancellor of the Exchequer (minister of finance) but the governor does not have to resign or leave his/her job should another political party take control of the government of Great Britain.  Similarly the head of the body that regulates the financial industry in the UK does not have to leave / resign from his/her job should the UK government be ruled by another party after a general election.

In Mauritius, every time there is a change in governance, the people who are meant to steer major decision making organisations in Mauritius are replaced by people who are close to the current ruling political dynasty.  Instability is what seems to be the name of the game.  For me, the worse is that all this is done as if it is something that is normal and everyone just accepts the change.

Recently we learnt that the SBM had to write off most of its profits due mostly to a bad loan given to an Indian man who is now accused of fraud and under investigation in the UAE.  How did an Indian residing in the UAE manage to get himself a USD $50m (approx. Rs. 1.7 billion at that time) loan in Mauritius without the required checks any self-respecting and compliant bank would do?  According to some Mauritius newspapers and online news outlets that Indian is close to the Indian PM.
Lucky that loan could be written off from SBM’s profits.  What if the loan was bigger than SBM’s profits for that year?

We had our dear Air Mauritius, running for voluntary administration as soon as the going gets tough.  Seems to me that Air Mauritius is a company that is run on a month by month basis with no cash in the bank, which should not be the case for such an airline.  You would argue that many of the world’s airlines are about to go into or are already in administration and the same fate could hit Air Mauritius.  But look around, only a handful of airlines have gone into administration.  Air Mauritius is an airline business being run very badly and Air Mauritius banks with SBM.

On the 1^st of October 2020 it looks like Mauritius will have the honour of being part of the EU’s revised list of high risk jurisdiction for money laundering and terror funding.

Last week, we learnt that The Reserve Bank of India (RBI) is scrutinising foreign direct investment in non-banking financial companies routed through private equity and venture capital funds domiciled in Mauritius and that the RBI rejected applications for investments or acquisitions.

It certainly looks like the RBI is of the view that it cannot carry out satisfactory due diligence for granting registration because the funding is from a jurisdiction that has been identified by the Financial Action Task Force as having weak measures to combat money laundering and terrorist funding.

Being on EU’s blacklist because of the lack of compliance that prevails in Mauritius in the financial services and banking sectors does not really come as a shock to me.  After all; Mauritius did welcome some very famous Angolan names to come and partake in its financial services sector offerings in the past few years.  Some simple google searches will bring up those names in major European news publications linking those Angolan names to ongoing investigations in Portugal and Switzerland.  Those names are linked to the downfall of major banks, fraudulent loans and other unsavoury financial criminal acts.

Yet in Mauritius we have elected officials who are more than willing to do business with those unsavoury characters.  Officials not elected by us, Mauritians.  But elected by our dear political dynasties.

All decision-making companies/institutions that have the tasks of making major decisions that impact Mauritius as a whole are government owned entities.  Being a government owned entity is really not a problem.  But it is a problem when those entities become political play things where every whim of every dynasty appointed representative is satisfied.  It is a problem when those entities are considered as cash cows for every political dynasty that have so far ruled Mauritius.

I for one find it funny that it took a virus to really show the damage that has been caused and is being caused by this political game that is played in Mauritius and that most Mauritians love.  We encourage a politics that has made a handful of people so powerful that they can pick and choose who they wish to put in charge of government run entities that have major impact on every Mauritian.  We have years of negative results from such behavior but yet we carry on feeding the beast that is swallowing us.

Whilst writing this article, I found out that the BoM has approved a Rs. 60 billion bailout package for the Mauritius government.  We know that the bailout funds are for the hotel and manufacturing industries but the explanation following the announcement is very vague and does not clearly indicate how that money will be used.  But let us be realistic here.  When has an announcement in this country been clear and concise?

For as long as there will be ‘dynasty politics’ with their appointed representatives placed in every conceivable decision making position in every government owned entity in Mauritius, we will always be in the same position.  It is clear that this will never change unless Mauritians one day decide that we should now act as Mauritians.

I personally have absolutely no hope that the needed majority of Mauritians will change.  Some will change and some have changed but most Mauritians are incapable of looking at another Mauritian and simply see a Mauritian.