Flashback 3 years ago to 2019 when I had the opportunity to be interviewed three times by the main Mauritian newspapers. At that time, my call to the authorities and also the private sector was that the start of a new decade as we moved into 2020, will be one of many challenges and uncertainties characterised by one or multi global recession(s), geopolitics leading to either regional proxy wars or global cold wars, the rising probability of pandemics and also the scarcity of basic resources such as water, energy and food supply. The aim was for it to act like a wake-up call to the small elite club who run Mauritius and it was all about future turbulences, lack of visibility and predictability and eventually, Mauritius needing to get its act together and urgently start planning for a new road map. A road map that will be characterised by fundamental and structural changes in the global economy. The world, as we’ve known it over the last 20 years, was about to change and Mauritius had to prepare a well-thought plan to reposition itself in this global economic change. The global economy is changing and this is not a first in human history. We have always evolved over centuries, but the changes we are now seeing in front of us are happening much quicker than ever in a recently globalised hyper-connected world. This globalised world has been characterised by regional blocs being formed over the last 50 years with the likes of EU, NAFTA, SADC, Comesa, Asean, Mercosur, amongst others. By forming regional blocs, markets got relatively bigger, and companies had the opportunity to move their production facilities where labour and cost of production were cheaper and thereafter move goods within the regional blocs tax-free. As such, we started seeing the same regional blocs interconnecting with each other until such time when companies and multinationals searched for the cheapest source of production typically being somewhere in Asia or sometimes in Africa, and that was the supply side of the story.
A storm is coming
On the demand side, we have seen, since the 1980s, systematic reduction in central banks’ interest rate (for example, US Fed Reserve rate were in the late teens back in 1980 and been trending near zero since 2009), which led to cheap funding being available for consumers as banks and other financial institutions started dishing cheap money, with the concept of ‘buy now pay later’ on the back of a YOLO (you only live once) lifestyle, and we were even getting to an era of “buy now and get your future generations to pay for you”. But here’s the dilemma. During the last decade, after the financial crisis of 2007/08, central banks across the world have been printing cheap money, and most likely the cheapest money ever in history for a long period despite interest rates being at an all-time low. Back in 2019, well before Covid, there were signs that the global economy was heading for a recession, as in August 2019, the US government 10 to 2 Year Treasury Yield Spread went down to negative territory and in history every time this went to negative, a recession was pretty much on the way. As I am writing this article, we are already seeing the same spread going down to near zero being at 0.24% on the 04th of March 2022, another warning a recession is sniffing closely. Covid in 2020 accelerated the global recession and the impact was much worse than without Covid. Let me be frank: without Covid, the world recession would have happened by 2021, as all the signs were there in 2019 that major economies including the likes of Germany were running out of steam. And hence coming back to Mauritius, I raised the alarm that a recession in this decade will be worst for Mauritius as the state of our economy, the state of our balance sheet and cash flow, were weak, and pretty much unprepared. Reminding me of an economy that was built by the grasshopper rather than the ant. And today, we are paying the price of a very slow recovery, because the grasshopper never bothered to prepare for winter and now we are on the verge of being hit by another very hard and long winter, being the Russia-Ukraine crisis, which at the time of writing, will have more profound economic scars and these won’t be only temporary, but will also leave the Mauritian economy with even more long-term structural scars.
“We can’t aspire to double our GDP per capita solely on the back of the locals. We need fresh brains, fresh capital, fresh expertise if we want to unlock the potential of Mauritius”
Back to Mauritius. We have inherent fundamental problems as we close the Old World Order chapter and begin the New World Order phase. These problems can be summed as the following: increasing inflation rate in a stagflation era, the impoverishment of our low to middle class, high unemployment rate exceeding 10% and more so, the ever increasing rate of the youth unemployment rate nearing 30%, our GDP per capita in US$ has taken a knock of 10 years, our GDP growth rate of bad quality and being low and will remain low as I don’t see anything new that will bring the necessary uplift in the near future, increasing government debt to GDP, increasing external debt (double whammy as interest rates globally start to rise and also as the rupee continues to slide), a rupee that’s resembling more and more like a typical African currency and hence keeps sliding against the major Forex, our stock exchange of Mauritius with Semdex currently being at levels of 2011 demonstrating investors have been stuck with a flat market for more than 1 decade, our insatiability for imports while export revenues in forex keep going down since 2012 and leading to our ever growing annual trade deficits, our inability to attract significant FDI as we rarely exceed the US$500M per year and in this Covid, even the previous target of US$500M seems to be wishful thinking as hitting not more than US$300M/year, our various sectors (engines of the economy) are finding it hard to reinvent with the latest one being our tourism sector that has had a very slow recovery compared to Seychelles and Maldives, and our sheer inability to create any new valueadded sector and our slowness in making the energy transition a reality. The list can go on, but I would rather stop there and that’s sufficient to make stock of a really depressing state of the Mauritian economy. But that’s the sheer reality and we should stop burying our heads in the sand and pretend all is well. In fact, the Mauritian economy is sick! And paracetamol quick fix won’t work anymore as we waited for too long to tackle the inherent structural problems of the Mauritian economy since 2010! And like a cancer growing over the years, and which we didn’t bother to treat, the remedy today is we actually need serious chemotherapy. And this is where the real pain will start, as it will take a toll on the population and also a long process. But we have to do it, else it will be too late.
Repositioning Mauritius
What Mauritius needs is a radical repositioning in terms of this New World Order. To be able to do that, we need a vision and a well-established action plan. As of now, whenever I ask friends in both the public and private sector, whether they know where Mauritius is going and which direction and what’s the vision for 2030/2040, it seems ‘silence’ is the best answer I normally get. My fear is no one knows where we are going. And that’s why we need to work together to come up with a plan, a business plan, a plan for the future. And this should also be communicated to the people. Interestingly, China has recently updated its economic plan, and I was fascinated they had a conference beamed live on their TV channels, so that the Chinese people know where the leaders are taking the ship to.
We need to sort out a number of issues in the very short term, we need to make food security a must (more so now given the real issues coming out from the Russia/ Ukraine crisis with rippling effects on the global food chain) and also ensure we solve our problems of water availability and energy transition. We need to reduce our bill of imports (driven by imported food we eat, oil/ gas we use to drive our cars and switch on the lights and factories, etc). In the short to medium term, we need to rebrand Mauritius in the international context. With ever increasing geopolitics playing out the script of wars, we need to position Mauritius as a safe place, the same safety that would attract many to come and live, work and retire in Mauritius. But for that to happen, we need excellent fibre connectivity all around the island, and also excellent healthcare system. Our current healthcare, be it public or private, is the Achilles’ heel of our so-called silver economy that we have been trying to launch over the last 7 years. For the long term, we need to be able to have an environment where Mauritius is good to live for both locals, diaspora and foreigners, and here we need to educate the locals on the importance of opening Mauritius. We can’t aspire to double our GDP per capita (with good quality GDP growth rates) solely on the back of the locals. It won’t happen. We need fresh brains, fresh capital, fresh expertise if we want to unlock the potential of Mauritius. We all know what Einstein said: “Insanity is doing the same thing over and over again and expecting different results”. We need disruption today more so than ever! And let’s hope as we reach the 54th anniversary of our independence, we can really leave the past and take on the future with not only new recipes, but also with new ingredients and new cooks. And this is so needed, more so as we see the unfolding of this new chapter of New World Order and it’s up to us to be smart in respect of our positioning in this new chapter.
“We need disruption today more so than ever! And let’s hope we can really leave the past and take on the future with not only new recipes, but also with new ingredients and new cooks”