In 2020, the World Bank classified Mauritius as a “high-income country” after its annual per capita earnings hit $12,500 — quite something for an island nation which, at independence in 1968, had been a mono-crop sugar producer with average incomes per person of roughly $200.
In the half century since, the way Mauritius has diversified its economy and climbed the value chain by moving into textiles, manufacturing, tourism, banking and financial services has been textbook development.
But if Mauritius, a functional democracy with a minimum wage and free education and healthcare, has become the closest thing Africa has to an economic miracle, it is one that has been rudely interrupted.
As the World Bank was announcing Mauritius’ admission to the high-income club — based on 2019 figures — the island was grappling with its worst crisis since independence.
$12,500
Pre-pandemic annual per capita earnings
For an economy that depends on the free inflow of tourists, goods and capital, the Covid-19 pandemic proved devastating. The economy shrank 15 per cent in 2020. Per capita income collapsed to about $8,600. “For eight months, we were a high-income country,” says Rama Sithanen, a former finance minister. “Now, we have gone back to where we were 10 years ago.”
As the pandemic struck, the government adopted what amounted to a zero-Covid policy. That was partly dictated by the 1.3mn population’s high incidence of diabetes and cardiovascular disease — a byproduct of increasing affluence — comorbidities that made Mauritians particularly vulnerable to Covid. The official death toll has been limited to 786.
The authorities screened people arriving from China from January 2020. In March, just after the government announced the first three Covid cases, it adopted measures such as sending tourists back to their home countries and severely restricting movement outdoors of its own people.
“By July, there was no Covid, but there were also no tourists,” says Azim Currimjee, a managing director at the Currimjee telecoms-to-beverages conglomerate. Arrivals went from an annual 1.4mn to practically zero, as tourism — the island’s biggest employer, accounting for more than 100,000 jobs and at least one-fifth of gross domestic product — tipped into paralysis.
Then, in July 2020, the MV Wakashio, a Japanese bulk carrier, ran aground on a coral reef close to an ecologically sensitive part of the island’s south-eastern shore — although away from big tourist resorts. It leaked an estimated 1,000 tonnes of oil, in what some called the island’s worst environmental disaster. Tens of thousands of people demonstrated in Port Louis, the capital, accusing the government of incompetence.
As for efforts to prop up the Covid-stricken economy, the government responded with one of the most ambitious stimulus packages on the continent, including generous wage support. With the help of 80bn rupees from the central bank, it established the Mauritius Investment Corporation (MIC) to lend money to some of the biggest companies in struggling sectors such as tourism. In return, employers were prohibited from laying off staff.
“We threw the textbook out of the window,” says Currimjee. “The policy was, first, to make sure we stay alive and, second, to make sure there is no economic damage.”
Since October, tourists have returned. The IMF expects growth of 6.7 per cent in 2022, with some private sector economists putting it slightly lower. But government opponents have criticised how emergency funds were distributed. “Lack of transparency has fuelled a lot of suspicion,” says former President Ameenah Gurib-Fakim, who herself lost office over a financial scandal in 2018.
“We went on a spending spree and, today, we are facing the consequences of our giveaway,” says Arvin Boolell, a former leader of the opposition Labour party. The central bank, he adds, has lost its credibility through what he deems accounting tricks in creating the funds to give to the MIC.
“The adjustment is taking place via the rupee at the expense of the poor,” Boolell says of the central bank’s tolerance of a sliding currency and the resulting imported inflation.
Renganaden Padayachy, finance minister, and Harvesh Kumar Seegolam, central bank governor, did not agree to be interviewed for this report. However, the government argues that its extraordinary measures were prudent.
$8,600
Annual per capita earnings after the pandemic hit
It points to the appointment of an outsider — Lord Meghnad Desai, professor emeritus of the London School of Economics — as the first chair of the MIC as evidence of good governance. “As long as the money is spent judiciously and on the main purpose for which it was designed — save the jobs, save the affected companies, give them some breathing space — I am not particularly concerned,” Desai has said.
“The fact that Mauritius is a middle-income prosperous country, and well run by and large, will help it ride out the pandemic relatively well,” he added.
Mauritius’ longer-term task is to continue its upward trajectory. Pravind Jugnauth, the prime minister re-elected for a second term in late 2019, has set the island’s sights on emulating Singapore, albeit the Asian city state’s GDP per capita is about six times that of Mauritius.
Government supporters point to Mauritius’ sophistication as an offshore financial centre — including as a conduit for investment to Africa and India — as evidence that it can continue to move up the value chain.
A decision by the intergovernmental Financial Action Task Force (FATF) last year to remove Mauritius from its “grey list” should also alleviate some concerns about the island’s reputation as a secretive tax haven. “There have been a few cases that have hit the headlines,” says Sithanen, now chair in Mauritius of Sanne Group, a UK-listed asset management company, “We sat down with FATF and addressed the deficiencies.”
Financial services aside, officials highlight the completion of infrastructure projects — notably a light railway linking Port Louis with the inland town of Curepipe — and the development of niche high-value-added businesses in medical devices and pharmaceuticals.
In addition, they foresee the expansion of education and the so-called blue economy — sustainable use of ocean resources from rare-earth mining to tuna processing. Politicians, meanwhile, say the country should do more to protect and sustainably exploit its exclusive economic zone ranging across 2.3mn square kilometres.
Indranarain Ramlall, associate economics professor at the University of Mauritius, argues that the island’s success has been continually to reinvent itself but, recently, it has failed to embrace new industries such as IT and robotics. “We badly need to develop another sector,” he says. “Things are changing fast, so we need to adapt in order to survive.”
The writer is the FT’s Africa editor and author of The Growth Delusion: Wealth, Poverty and the Well-Being of Nations (Bloomsbury, 2018)
