Economic Growth in Mauritius

Melanie Veness:  PCB CEO

I am busy reading Moeletsi Mbeki’s book: “Advocates for Change: How to Overcome Africa’s Challenges”, and it makes for fascinating reading. Moeletsi  both edited the book and wrote the introduction. Each subsequent chapter has been written by experts on the relevant topic.  I was particularly intrigued by the chapter written by L. Amédée Darga, a former Minister of Mauritius, regarding Mauritius’s economic and social success story. He attributes the success to the “pragmatic management of the challenge of vulnerability”.

He starts by saying that some very learned people, including two Nobel Prize winners, predicted that “post independence Mauritius, had little hope but to await a bleak future”.  Forty two years after this dire prognosis, Mauritius can boast the following successes: an increase in per capita income from US$260 to US$11 400, the highest GDP per capita in Africa (71st in the world) and  being ranked 17th out of 183 economies in the World Bank’s “Doing Business Survey 2010”. In addition, Port Louis is ranked as offering the best quality of living of all African cities (Mercer Survey 2009).

With a low taxation rate of 15% for both companies and individuals, the country manages to provide free schooling and tertiary education; free total health care and free transport for students and elderly citizens. It is important at this point to note the literacy rate of 95.4% for people between the ages of 15 and 24 years.

In addition to the above, citizens over the age of 60 qualify for a basic retirement pension (non-contributory). The country also boasts an 86% home ownership rate, which is one of the highest in the world.

Mauritius went from a mono-crop economy (sugar accounted for 92% of total export earnings) to one focused on eight economic pillars: cane, manufacturing, seafood, finance, tourism, Information Technology, Business Process Outsourcing and knowledge service exporting.

Mauritius has not only managed sustained economic growth (averaging 4.6% GDP growth between 1977 and 2008), but it has also managed to achieve real human development and has achieved impressive reductions in inequality. In other words, the economic growth has resulted in improved standards of living for all.  It sounds rather too good to be true, so how did they do it?

The author suggests that much can be attributed to the pragmatic approach by the leadership – deciding what you want to achieve and then working out how to get there. The political leadership recognizes that private entrepreneurship, not the state, drives wealth and job creation. There is also an inherent understanding that nobody owes anybody a living, and that development and problem solving are necessary for survival. The leadership have also recognised the importance of developing human capital and have invested heavily in health and education, going as far as to offer tax breaks if people invest in tertiary education outside of the country.

They have effectively managed diversity, and they have understood the importance of not “killing the goose that lays the golden eggs”. In other words they have used the established businesses as a base for fueling investment. They have worked with existing business to create a more equitable society without restricting profits and growth. They have established attractive investment options to insure that profits are reinvested in the country.  The leadership have built a middle class and focused on building an entrepreneurial class to drive job creation and to build national wealth. And they have industrialized.

The important thing to note is that no model was applied. The leadership consulted and sought tangible solutions to challenges in order to achieve concrete objectives. The desired outcomes determined policy, and the state’s role has been one of facilitation.  Certainly, we can learn a great deal from Mauritius.

In closing, the author says that, in societies that are ethnically divided, development is only possible when “co-operation is promoted between competing groups to achieve a viable proposition and a functioning reality with common goals. And the state must be perceived as an honest broker for ensuring balanced distribution of benefits”.  To my mind, a very sensible assessment.

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