Economic relaunch: 2017 The make-or-break year

2017 has been announced by the government as the year of economic revival. Short of fulfilling its promise of taking the country through a “second economic miracle” made during the electoral campaign at the end of 2014, the Alliance Lepep has promised that major infrastructural projects will be kickstarted this year.

Construction has shown a lacklustre performance over the past few years, more specifically since the global economic crisis in 2008. Last year, this all important sector which employs around 50,800 persons as at end 2015, according to official figures of Statistics Mauritius. Comparatively, the country’s total workforce stood at 538,300 during the same period. Moreover, construction jobs mop up the unemployment issues affecting lower-skilled persons who would otherwise find it difficult to access gainful employment.

As economic theory would have it, brick and mortar have a multiplier effect on a country’s economic activity and hence, any uptake in the sector’s level of activity would translate into higher gains for the whole economy. In 2017, construction is set to rebound by 7% after a no-growth year in 2016, according to Statistics Mauritius.

These revised estimates, the latest available, were published in December last year and assume that public investment projects announced in the last Budget Speech would be implemented during the year. The government is heavily relying on infrastructural projects to revamp the economy, as it embarks in the third year of its 5-year mandate, with general elections due by end-2019. In addition, private sector projects previously announced and which suffered delays in their implementation during 2016, are expected to pick-up this year.

During its first Budget, the Alliance Lepep government announced the construction of 13 Smart Cities across the island. This behemoth ambition it was thought, and might still be thought, would have seen a major transformation of the socio-economic landscape of the island with cities sprouting like mushrooms from North to South, East to West. It was told Smart Cities would change the lives of Mauritians and bring about a “second economic miracle”, thus fulfilling the government’s promise.

In 2016, the real estate sector received Foreign Direct Investments of Rs 7.6 billion, mostly geared towards the former IRS/RES projects. The construction sector contributes, in nominal terms, around Rs 16 billion (2016) towards the country’s GDP and represents 4.2% of the country’s GDP in relative terms. 

The Board of Investment has since issued development permits to three Smart City projects last year. Those three are: Jinfei Smart City (North), Cap Tamarin from Trimetys Group (West), and Mon Trésor Smart City from Omnicane, next to the airport (South). In all the Smart City projects for this year will require some Rs 5.2 billion investments and will create some 3,000 jobs.

During 2017, another four projects will be kickstarted. These are: the Smart City of Médine in Flic-en-Flac, including an Education Village; Moka Smart City of the ENL Group, which extends over the land surrounding the bypass of St-Pierre; Trianon Smart City, opposite the CyberCity and along the motorway; and Yihai Smart City project at Domaine Les Pailles, a joint initiative of the State Investment Corporation and the Chinese company Yihai International Investment Management Ltd.

PUBLIC INVESTMENTS

Another major project announced for this year, is the Metro Express. The construction of this light railway transport system to the tune of Rs 18 billion and has benefited from the financial support of the government of India. The Prime Minister will launch the project in March 2016, on Independence Day.

Other infrastructural works due to start this year are road networks, falling under the Road Decongestion Programme. The different components are: the construction of a grade separated junction at Jumbo/Phoenix/Dowlut Roundabouts (estimated cost Rs 2.4 billion); the construction of A1-M1 New Road, Bridge and Interchange at Sorèze to link Coromandel A1 road to Motorway M1 (estimated cost Rs 2.3 billion); the construction of Port Louis Ring Road Phase 2, including a 1.2 km tunnel with entrance at Quoin Bluff and exit at Champ de Mars at Boulevard Victoria (estimated cost Rs 5 billion); the construction of Port Louis Ring Road Phase 3 linking Boulevard Victoria to Motorway M2 including a viaduct (estimated cost Rs 2.9 billion); and the construction of A3-A1 Link Road from Gros Cailloux to Coromandel to enable rapid connection of traffic from the West to the City Centre and to the North via the new A1-M1 Link Road (estimated cost Rs 200 million).

Vishal Rughoobur: “Mauritius can achieve a growth of 4%”

Taking into consideration the forecast made by Statistic Mauritius on economic growth, economist Vishal Rughoobur states that if all the big projects announced are implemented in due course, Mauritius can achieve a growth of 4%. “There is no doubt that the construction sector is improving. There are major upcoming construction projects and major investments will be done. Success will be achieved when the projects are implemented within the prescribed time period. In case there are delays, no positive effect will be felt. There will be doubt which will prevail among operators,” he says. He further explains that with the economic revival, more jobs can be created in the construction sector. “With the projects initiated, many small and medium enterprises will employ more people. So, development will occur once the projects are launched.”

Rajiv Servansingh: “The construction sector is a major pillar”

Chairman of MindAfrica and economist Rajiv Servansingh believes that once the projects are initiated, there will be a boost not only for the construction sector which has been in decline over the past years but also for the economy as a whole. “The construction sector is a major pillar of the Mauritian economy. The private sector has already started with projects like the Aquarium at Les Salines, refurbishment of St-Geran Hotel and Omnicane projects. There are other construction sites which will be set up in the near future. If all the constructions start opening up, there will be multiplying effect in the economy, as more direct and indirect jobs will be created in sectors like transport and logistics,” he says. He believes that the government must boost construction, as exports are set to face difficulties in the near future. “As we know, the euro is sliding and manufacturers will have a tough time to export. So we have to depend on construction sector to relaunch the economy. The government needs to launch more construction projects. Additionally, political stability should prevail, as it gives investors and operators more confidence.”

Gerard Uckoor: “No room for error” 

President of the Association of Small Contractors, Gerard Uckoor, is very optimist about the construction sector and is hoping for a boom. “This year, there is no room for error. The construction sector is a major pillar of our economy. If this sector works well, the country will prosper. If it is stagnant then the economy is stagnant. Various projects have been announced for this year and some have even been started in various regions. Achieving economic growth will take some time but it will come eventually. We need to be patient.”

According to him, Smart Cities can bring another dimension in terms of infrastructure and development. “Various towns like Rose Hill are 30 years old and need to be renovated. It is high time to introduce a culture of maintenance which will keep the construction sector alive. A law must be passed encouraging renovation to take place every four to five years. This will prove beneficial for the country.”

Avin Purmanund: “Catastrophic situation” 

Commercial Director of Buildnex, Avin Purmanund, says that the construction sector is in a catastrophic situation. “In 2015 we have witnessed a decline, in 2016, it was a deadlock and now in 2017, we are in a moment of inertia. If no proper action is taken, by June 2017 everything will grind to a halt. At one point the government is saying it is initiating different projects but at the same time, they do not have enough finance. On the other hand, investors are afraid to invest in Mauritius after the BAI crash. So there is a big question on the means of financing of the different projects announced.” 

When asked how the construction sector can be boosted again, he replies: “It is time to regain the confidence of investors. Whatever happened in the past should be forgotten. We should promote investment. At the same time, the government must favour local construction companies rather than relying solely on international firms for local projects. We have around 17 construction companies and barely two or three projects, the competitions are already high but with the presence of Chinese firms in Mauritius, competition is tough. If these firms bag all the tenders, nothing will remain for local firms. We will be the ones to suffer.”