Has Mauritius's growth stalled? - African Business Magazine
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Has Mauritius’s growth stalled?

Has Mauritius’s growth stalled?

As Mauritius prepares to celebrate the 49th anniversary of its independence on 12 March 1968, a national debate has broken out over falling growth rates.

The economy grew by an average of 5.3% a year between 1969 and 2013, well ahead of the trend for Sub-Saharan Africa as a whole, but growth has averaged just 3.4% over the past six years, leading critics to assume that the economy has run out of steam. Yet it would be wrong to overlook just how well the country has developed.

The African Economic Outlook stated: “The Mauritian economy recorded actual growth of 3.7% in 2015, up from the 3.6% recorded in 2014 and is projected to grow by 3.8% in 2016 and 4.0% in 2017 on the back of stronger domestic and external demand.” The IMF blames recent weaker growth on a long decline in construction and weak external demand.

The Fund was also concerned about the size of the offshore banking sector. Yet given the fragility in the global economy, such a consistent growth rate seems reasonable if not spectacular.

The budget deficit is certainly higher than it should be given the state of the economy, at 4.65% in 2015. The government is worried about the country’s ageing population, as Mauritius adopts a similar demographic profile to the industrialised world, rather than one that is typical of Sub-Saharan Africa.

The population is growing by just 0.4% a year. Addressing this will require cultural changes: either immigration or encouraging more women into skilled work.

Long term context

A country that was originally highly dependent on sugar cultivation now has one of the most developed and diverse economies in Africa. Successive governments managed to encourage the emergence of new sectors, starting with textiles, then tourism, financial services and ICT.

Each new industry has not displaced the others but has help promote stable growth by ironing out variations in tourist numbers and sugar prices. Sugar cultivation now accounts for just 2% of GDP, down from 20% in the mid-1970s. This has created a more secure economy than in many other relatively prosperous African countries, such as Equatorial Guinea and Gabon, which are heavily dependent on the export of a single commodity: oil.

The government expects tourist numbers to rise from 1.28m in 2016 to 1.34m this year, generating R58bn ($1.64bn) in revenue in the process. The sector, which contributes 8% of GDP, is based on attracting wealthy tourists – a strategy that is made easier by the cost of travelling to the island.

Port Louis is continuing with its drive towards growth in the ICT sector that it began with the Cyber Cities initiative twelve years ago. It now hopes to oversee the development of eight Smart Cities and five ‘Techno Parks’. As other countries around the world have seen, it is easier to draft such initiatives than it is to see them brought to fruition. However, Mauritius has had a great deal of success to date in attracting financial and ICT investors, with GDP in the two sectors growing by 5.6% and 6.3% respectively last year. It will be interesting to see how the strategy develops.

Public image

Mauritius certainly benefits from a positive international image. The World Economic Forum’s Global Competitiveness Report, which was published in September, ranks Mauritius as the most competitive economy in Africa. However, at 45th in the world, this is more a function of problems elsewhere in the continent than of Mauritius’ ability to support investors.

In surveys of this type, the island nation scores highly for the ease of setting up a business and employing workers, investment protection, property rights, legal security and access to electricity. The New World Wealth Investment Review predicts that the number of US dollar millionaires in the country will rise from 3,200 in 2015 to 7,400 in 2025, putting it in the top five economies in the world by this measure, although whether or not this is a good thing is open to debate.

Mauritius also has a reputation as a stable democracy, with regular changes of government at the ten elections that have been held since independence, an independent judiciary and free and fair elections. It is good to debate whether more rapid economic growth could be achieved; and the government’s vision of development could be tweaked. Yet it is important to recognise the stability and growth that has been achieved already.

Neil Ford

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Written by Neil Ford

  • Suraj Luchmadu

    Can you explain how encouraging women into skilled work will address population Growth?

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