Rajiv Servansingh: “The challenge for 2016 is to break away from the past”

Rajiv Servansingh has been for the past years actively involved in the economic development of the country while he was at the Mauritius Chamber of Commerce and Industry and as Vice-Chairman of the Competition Commission of Mauritius. He is currently the chairman of MindAfrica, a consultancy group and a keen observer of the economic and political evolution of Mauritius. On the eve of 2016, News on Sunday sought his views on what we should expect for Mauritius for the coming year after a tumultuous 2015.

How do you foresee 2016, will it be the same as 2015?

I find that there are good reasons to believe that we have reached rock bottom in 2015 and that 2016 could be a better year in terms of economic growth. One of the conditions for this to happen is fairly reasonable expectations. We should at all cost avoid a repeat of scandals like the BAI affair. This demise of one of the largest financial conglomerates in the island must have cost us some fractions of growth if not units, not only in terms of the economic value destruction it has caused – some experts estimate that the total cost of the BAI affair could be as high as Rs 15 billion for the country. There is also the cost of distraction from the other priorities of government including the definition of an economic strategy. For a government which has been elected on the premise of an economic miracle, this was a substantial flaw. It was only as late as August that the Prime Minister came out with the Economic Vision 2030 Statement and set up structured dialogue with the private sector. Of course, government will plead that this scandal had to be dealt with or else it would have continued to be like a Damocles sword hanging over our head. In any case it may be a good thing that it has been dealt with sooner rather than later. The other favourable factor could be that after one year the government, which according to general consensus was not prepared to exercise power – being given the conditions under which it was elected – would now be geared to implement a more elaborate and coherent economic strategy.

Sir Anerood Jugnauth and his government claim the groundwork has been done this year and construction work begins in 2016. What are your views?

As I have just told you, the first year has been mostly taken up by the BAI affair but not only. There has also been the “cleansing operations” and almost weekly breaking news about a new scandal involving mostly political personalities. In terms of groundwork, it must be admitted that the Mauritian economy has shown some surprising resilience over the past years in spite of very few major decisions. The rate of economic growth in 2015 is within the average trend of the preceding years. The challenge for 2016 is obviously to break away from this trend and leapfrog to a rate of at least more than 4 %. This does not seem to be an impossible task if the government sticks to a coherent and comprehensive strategy which includes objectives for picking the low hanging fruits as well as a long term plan for more structural changes. That the government is intent on tackling the economic issues as a matter of priority during the next year is not only credible but also desirable.

What could help revamping the economy – construction, export or FDI?

There needs to be a comprehensive plan which will help all economic operators. The paradox in these situations is that the poor performance of the past year turns out to be a positive thing because it opens up the scope for improvement. Take the case of agriculture, sugar production has been one of the worst on record for a number of recent years. Part of the explanation for this is due to factors beyond human control but it would be misleading to limit it to that. The community of planters have been going through a phase of disappointment ever since the “new deal” described as the transformation of the sugar industry into the cane industry has been in the offing – and that dates back now to some years. They labour under a sentiment of having been let down by the authorities. The recent measure concerning an increase in revenue on bagasse is a step in the right direction although far from sufficient. It is nevertheless probably the first step taken in the context of the famous transformation. Anyway, there is definitely room for policies which will motivate small planters to produce more cane next year. As regards construction, we are again in a situation where the performance of last year leaves ample room for progress. If only some of the grand projects announced by the authorities materialise. Smart cities are a great concept, but I am a firm believer that we should be more realistic in our objectives or else we are shooting ourselves in the foot. In India, with a population of 1.2 billion people and growing and an economy which is among the ten largest in the world, the government has a programme for 100 Smart cities. I leave it to you to make the comparative calculations. As regards FDI, it is very important to remember that an economy has a limited capacity to absorb a given level of investments. This is where government policy can be most effective or damaging. It is government policy which defines the constraints on the capacity to absorb capital in a national economy. Regulatory institutions, political stability, the level of education and training of the labour force, the conditions of health, etc, are among the factors which determine the volume and the effectiveness of FDI in contributing to the economic growth of a country. I am not convinced that FDI directed at real estate development as the largest fraction is actually, in itself, a sustainable contributor to the economic welfare of the nation. There are many other factors which need to be considered. However, the most important one remains the policies to foster the spirit of entrepreneurship and the development of SMEs. Only today, (28 December), I heard on the news that Rs 40 billion will be invested to construct 17 hotels which will create 3,000 jobs – on the assumption that those hotel rooms are occupied. One million rupees invested in a successful SME would create at least 5 direct jobs within a year. Food for thought…