In my opinion, as someone who lived through the worst recession (in 2007/08) since the great depression in 1929 (1929-1933 officially) and as someone who worked in investment in London for approximately 15 years for major banks and for myself; I can assure you that the economy is not well. And it is not going to be well for some time to come.
I do not want to come across as a ‘doom and gloom’ doctor. There are always opportunities in declining markets.
How I see our economy.
Mauritius is primarily a consumer country. We import a lot of what we consume. We produce very little. Our manufacturing industry is predominantly the textiles sector which faces stiff competition from textiles manufacturers in India, Bangladesh etc and rely mostly on the European markets as their clients.
We could be competitive when it comes to the textile industry. All we have to do is produce our own raw materials. As most of you who read Citoyens News, know that I am the President of 100% Citoyens and as a political party, one of our main political agenda is the growing of hemp and medical cannabis. Hemp is the saviour of our textiles industry. Hemp is the plant that will allow us to produce our own raw materials and help the textiles industry to cut manufacturing costs and therefore afford to employ more Mauritians instead of Bangladeshis.
I have no issue with people from Bangladesh. They are actually hard workers. But when these partly educated workers are given the right to vote in our country and some say they’ve been paid to make sure that the Oranges win, they become a problem.
The last few months have been tempestuous for the textile sector. We’ve seen textile companies established for years having to go into voluntary administration as they need to do some damage limitation and not risk outright bankruptcy in the near future. This is only the beginning. And it is simple to understand why. As clothes retail chains and individual clothes shops close on the high streets of Europe due to failing demand and the pressure of paying rent, rates and salaries, that will have a direct effect on our textile sector eventually leading to closures. The best case scenario is that some high street clothes retail chains manage to make it through this forced recession due to Covid and manage to bounce back once demand is back. That too there is a big question mark on that scenario. The likelihood of those retailers opting for the cheaper ‘outsourcing’ option found in countries like Bangladesh, India, Vietnam etc will certainly play against Mauritius’s textile sector.
We have a tourism / hotel sector that is literally on its knees right now due to Covid. Some hotel groups have become heavily reliant on funds injected by the Bank Of Mauritius (BoM) which in turn is using a financial instrument called: Quantitative Easing to inject cash into the hotel industry. Simply put, BoM is creating electronic money against no collateral which is supposedly used to buy corporate bonds with. But we are yet to be made aware of the exact mechanism of the MIC (Mauritius Investment Corporation Ltd) and therefore, we are unaware of how this quantitative easing is being done.
Our borders have been shut since March 2020. With no tourists coming to Mauritius, we have a shortage of foreign currency; with local banks refusing to convert large sums into USD and other major currencies. We all have first hand experience at how the cost of living has gone up since. This is purely due to the fact that the BoM foreign exchange reserves are going down due to no tourists spending their USD, GBP and Euro in our country and as the BoM’s foreign exchange reserves go down so does the value of our Rupee against those major currencies.
Every imported item that Mauritius consumes has gone up in price in the past few months and that is a simple fact. But yet I more or less guarantee that when the office of statistics will publish its figures for the rate of inflation for the last few quarters of 2020, they will be lower than what I expect. There are major manipulation of key rates in this country whereby as an ex investment banker I am sometimes unable to reconcile the ‘office of statistics’ figures with real life Mauritius.
As someone who has very strong links to the UK, Hong Kong and South Africa, I am frustrated by the fact that I cannot visit loved ones nor can they visit me at the moment. Having our borders closed is certainly frustrating but I can also understand the reason behind such a strict stance that the government has taken. But yet we all hear how some people get preferential treatment, flying in by private jet and not being subjected to the legally compulsory quarantine.
The Seychelles have opened their border to allow tourists to start coming. Obviously they do have protocols in place to make sure that the spread of Covid is kept at a minimum. I do not understand why Mauritius cannot copy Seychelles’s protocols and start opening up our borders to safe countries and crank up the engine that runs our tourism industry.
We should forget about the textile industry going back to some normality for sometime to come. As the textile industry depends mostly on the European markets, where Covid has hit the most and mass unemployment will follow as soon as government backed schemes are pulled back leaving the masses to preoccupy themselves about what to eat rather that what to wear, it is clear that the textile industry across the world will suffer due to lack of demand.
The closure of big high street names like GAP and recently the voluntary administration of the Arcadia Group that operates in the UK and other European countries which owns TopShop, Dorothy Perkins etc are an indication of what is happening in Europe which happens to be a main market for Mauritius textiles. First are the closures then you have a wave of unemployment.
The only way for our economy to start breathing and not fall in a pit that we might find is bottomless if the government is not careful and carry on with this strategy of creating debt for future generations to be burdened with through taxation, is to allow this one pillar of our economy: Tourism to start again by carefully opening up our borders as soon as possible and fully open them once those newly created vaccines are available throughout the world.
The construction sector has slowed down over the last 9 months. Covid is the main reason why. The announcement of various construction projects by the government is good but plunging the economy further into the red to support the construction industry and taking the risk that these assets will either remain unsold or untenanted for the foreseeable future is an even more idiotic strategy drummed up by people who think that the Mauritian economy needs the same remedy that it has for the past 40 years.
The Mauritius economy is highly dependant on external markets. The construction sector, although mostly reliant on local demand, has also been propped up by construction demand for IRS/RES projects where foreigners are entitled to own immoveable assets in Mauritius subject to specific rules and regulations.
With Covid and the fact that air travel is at a standstill and might be for another few months, investors will be more reticent to invest in such assets. The fact that Mauritius is on the EU blacklist does not help either.
We have an offshore / finance sector that is currently in limbo. Some investors will carry on using the Mauritius offshore structure as a tax shelter and tax avoidance instrument. But a lot will stop doing so because they hold European issued financial licences. When these entities stop using Mauritius as their tax shelter instrument, the flow of funds will decrease and I hope that Mauritians understand that the government itself makes money from the offshore sector mainly through taxation and fees levied on those offshore entities.
The creation of jobs through the offshore sector is another way the government makes money through taxation. In other words tax paid by the employees.
So, the EU blacklists Mauritius. Blacklisted because of poor compliance, poor governance and lack of trust. When a country has been run by the same people for a long time, it gives these people time to put in place systems that will benefit them and people close to them. We must not lie to ourselves and think that what I have just stated does not happen in Mauritius. We must not be ignorant and stupid to think that mainstream politicians have not made the government corrupt and that they will hesitate to make the offshore sector as corrupt as they are. Of course that will happen and it has already happened.
Placing a country on a blacklist by a European institution is not something that is done in a day or a week or even a year. The bureaucracy involved in such a decision by the EU entails numerous meetings, assessments, communication with the country in question and discussions to find a way to try and avoid being blacklisted.
I ran a fund in London and I have first hand experience with regulators and the way they operate. No one wants a disruption of business unless it is truly necessary or unless financial laws are being broken.
Due to bad governance, due to the inherent lack of compliance and rabid corruption within all departments of our government that has been run by the same people for so long it is inevitable that one day we would be faced with such consequences as being on the backlist of our biggest business partner. Being on such a list makes every single financial transaction that Mauritius does with Europe a headache. Especially big transactions. I can assure you that financial transactions will be vetted in more details and any investment coming from Europe will be looked at with magnifying glasses.
After the fall of the twin towers in September 2001, America and Europe started to tighten up financial regulations with a view to make the movement of money harder for terrorist organisations. Fast forward a few years and we hit the worst recession the world has seen for decades. It even eclipses recessions that the world suffered through the second world war.
Between 2001 and 2007/8 European countries including the UK start to heavily regulate their financial sectors. These regulations become even tighter after 2008 and have been tightening even more since these countries have been trying to come out of a long drawn Japanese style recession. Whilst coming up with new rules and regulations to keep the financial sector safe, these countries also started to look at their taxation systems rather closely. In doing so they realised that a lot of money that should have been paid in taxes in European countries are ending up in tax shelters (some like to call these countries: Tax Havens) due to the ease of setting up such tax shelter instruments in countries like Mauritius, The Cayman Island, Panama etc and paying 2-3% tax instead of approximately 25% corporate tax (in some European countries).
Less Tax derived funds means less investments in the country itself. Something has to be done to lessen that loss. So it is of the utmost importance that, if we want the EU as a financial partner and if we want to attract investments from European companies and individuals, we have to act accordingly and that means putting in place compliance structures that reflects that of the European regulators.
In my opinion, we will not be off that list until major changes are made in the political arena. Due to the flow of money around the world and due to the fact that the main financial centres in the world are New York, London and Hong Kong (Hong Kong’s position will shift as China takes over), through which most daily trades are cleared, it is understandable that the west wants to maintain a stronghold on the world’s finance. And as the last few wars have proved, America and Europe hates political dynasties. They are of the opinion that; familiarity breeds contempt and they are absolutely right and we see that everyday in the Mauritian political arena.
Europe will make sure that Mauritius does not advance any further with its offshore financial sector and they will block any attempt from Mauritius gaining any significant share of the fin-tech sector that has seen a steady investor acceptance since the inception of Bit-Coin. This is another potentially lucrative sector that Mauritius will not be able to fully participate in because of the lack of confidence and trust that the Europeans and Americans have in the governance of Mauritius.
One thing that the political dynasties of Mauritius tend to forget is that we have European and American embassies in Mauritius. Whatever happens in Mauritius which is of importance to those countries is certainly relayed to those governing those countries.
I remember years ago, Tony Blair refused to meet with Paul Beranger who was then the prime minister of Mauritius. Recently, despite a ruling by the UN, the UK throws dirt in Jugnauth Senior and Junior’s face by blatantly telling Mauritius to bugger off when it comes to Diego Garcia.
It is perfectly clear how the political dynasties of Mauritius are viewed by our European partners.
What are the solutions I hear some say? The solutions are clear and very simple. First we get rid of the people who have made the life of all Mauritians, all businesses in Mauritius, our taxation system and our government into their own family business. These people need to go for Mauritius to start from a clean slate and with discipline.
We talk about emulating what Singapore did with its economy but yet we are unable to jail a prime minister and ministers for blatant abuse of power and corruption. It is only by taking action against the top that we will instil discipline in the rest of people who are charged with the governance of Mauritius.
The other thing that we must do as a country is to make every single drug legal. We must do what Portugal, Switzerland and Holland have done in order to deal with the problem that we have when it comes to hard drugs.
Every single Mauritian is aware as to how political dynasties finance their political campaigns. The Lam Shang Been report on drugs is truly an eye opener. The interrogation of lawyers that are close to a main political party on the subject of hard drugs is an indication of where and who that inquiry is pointing towards. During his interrogation, Peeroumal Veeren, a drug smuggler and dealer serving a life sentence in prison and he has nothing to lose by telling the truth stated that the prime minister of Mauritius, Mr Jugnauth Jr financially backs the importation of heroin in Mauritius. This can be linked to the whole debacle of the Wakashio, the readily available hard drugs during lockdown, the amount of money being thrown around during the general elections and during the village elections.
It is not a coincidence that political dynasties surround themselves with individuals known for their associations with the hard drugs trade.
The other solution is: Agriculture.
Agriculture is not given the importance it should in Mauritius. Some understand the importance of having a good and solid agriculture sector but most in Mauritius just do not care as long as they can go to the supermarkets and buy everything they want off the shelves.
Political dynasties have an even more nonchalant attitude towards agriculture. It is all good to bark away wonderfully written speeches in really bad english. But actions speak louder than words. As someone who is now in the agriculture business, I know how hard it is for planters to make a decent living. Especially planters that grow in open field (soil). The fact that prices are not even controlled properly makes it hard for the planter. Then add to that middlemen that want to become millionaires off the back of planters. In the end very few young people want to be involved in that business.
The worse thing is that solutions to take the middlemen out of the supply chain do exist but there needs to be a political and business will to make that change. By doing that, people, restaurant and hotel businesses will be better off as vegetable prices will be lower and planters will make more and that is the way it should be.
Vegetable resellers should also be regulated and only allowed to make a specified profit margin. I know for a fact that when I deliver say tomatoes at the wholesale market for say Rs 50/kg, the reseller at the market / bazaar will sell these tomatoes for Rs 100/kg. What has the reseller done to substantiate making 100% profit?
We have approximately 22,000 acres of abandoned land and what do the political dynasties do when in power; they lease government owned land to people who helped these politicians during political campaigns instead to allowing real planters access to those land.
I even have information that the ministry that manages land that belongs to the government picks and chooses who those lands should go to. This is a blatant, in your face type of nepotism that is being done at the detriment of Mauritius’s food security.
The one thing that I have been a supporter of is the growing of Hemp. I will not go into details but we all know by now how beneficial this would be to our island. Again the lack of political will and the knowledge that all Mauritians now have about how linked politics and hard drugs smuggling are, bring us to the conclusion that for as long as the same idiots will remain in power because of inherent religious racism, we will never see hemp and medical cannabis being grown in Mauritius.
Personally, I am not optimistic at all when it comes to the future of Mauritius. And now with this CSG (contribution sociale généralisé), which is a form of taxation rather than contribution, it is clear that the current breed of politicians have ran out of ideas. So much so that they have to borrow ideas from a country like France to come up with a new taxation system and even that they could not do properly. In France it is actually a general contribution into a pension system whereas in Mauritius it is stealing from the private sector to feed the public sector because the current breed of politicians have bled the government dry and they will carry on doing so because we carry on paying our taxes. On top of it they steal like there is no tomorrow.
And the tragedy is that there are Mauritians who support these political dynasties. Mauritians who are unpatriotic and downright religious racists.
I am frankly in despair of the situation in Mauritius. Lately thefts have gone up. Everyday we read about people being attacked violently, people running scams and even people being murdered because of money or lack thereof. We have to realise that most people do not want to steal or commit violent crimes to get money. But when one is pushed against the wall, through loss of their job and unable to feed their family, these things are bound to happen.
The level of thefts, may it be violent or not gives a very good indication of what is happening in a country in terms of jobs and the lack of money.
As we move away from 2020 and into 2021, when we will see a lot more companies closing down, people losing their jobs, making less money and in many cases making no money at all. Do not be alarmed to see a spike in thefts.
There are so many things that are wrong with this country. Yet the dynasties paint a beautiful lie by manipulating key data, lying, getting away with murder, hard drugs smuggling, nepotism, election rigging, corruption, daylight robbery of our government etc; all the things that we read about daily in newspapers and online but yet a majority of Mauritians carry on voting for the same crap.
I find myself asking myself this one question: it is worth it as a politician to fight for this people that clearly does not want any change?
When will the majority of Mauritians wake up? When their kids will start paying for the metro express, the money that we are borrowing from India and the various pointless infrastructure projects commissioned by the dynasties?
The dynasties and their kids are happy with the commissions they stole whilst in power. Lots of corruption money stashed away in offshore banks whilst the coming generation will have to pay all this back through taxes.
When will enough be enough? When will the lambs wake up? Is it worth fighting for a people that clearly wants to stay ignorant, uneducated, gullible, dumb and easily bought with hard drugs money that kills their children?
Or do I say to myself, forget about these people and live your life quietly and let the ‘couyons’ suffer?
