Mauritius, an Indian Ocean island nation, is known for its beaches, lagoons and reefs. The mountainous interior includes Black River Gorges National Park, with rainforests, waterfalls, hiking trails and wildlife like the flying fox. Capital Port Louis has sites such as the Champs de Mars horse track, Eureka plantation house and 18th-century Sir Seewoosagur Ramgoolam Botanical Gardens.
Mauritius is often championed as a success story for developing economies, having successfully transitioned out of the low-income group of economies to become today one of the most economically, politically and socially sound countries in Africa. The journey was fraught with challenges, with several eminent economists and writers, including Nobel Prize winners such as James Meade and V.S. Naipaul expressing their apprehensions concerning the future of the economy.
However, fifty years after independence, the island has been successful in evolving from its mono-crop agricultural model to a well-diversified economy, having gone through successive and timely structural changes that have mirrored the mercurial demands of the global economy.
Today, the tertiary sector, which comprises of financial services, tourism and ICT amongst others make up for more than 75% of the Mauritian economy, with the secondary and primary sectors representing around 17% and 4% of the GDP respectively.
The Development of Mauritius
The transformation into a services-based economy has been gradual over the years. Pre-independence, the economy was largely dependent on sugar cane production for the European market, with preferential access. As was the case in most British colonies in Africa, Asia and America, production in Mauritius was dictated by the colonial government. The objective was to supply raw materials, agricultural produces and minerals to manufacturing industries in the United Kingdom. Thus, like many other British colonies in the Caribbean region, Mauritius was an economy based solely on the sugar sector and all economic activities revolved around it.
Post-independence, it rapidly came to light that this model of economic management could not be sustained, especially as sugar production had reached its physical limits to development and the economy was going through a period of falling real revenue. In addition, the agriculture sector remained particularly prone to adverse climatic conditions, which for tropical countries like Mauritius remains a recurrent phenomenon.
An overhaul of the development agenda led to an import substitution strategy which unfortunately was not particularly successful, with inadequate capital or entrepreneurial nous from local businesspersons. In the 1970s therefore, the government came forward with an export led development model, making use of available cheap labour, preferential access to EU market and attractive fiscal incentives to fuel the emergence of an export-oriented industrial sector.
The windfall gains from the export of products, especially in textile, then were reinvested in developing the tourism sector and powering the expansion of the financial services industry, in particular the offshore segment in the 1980s and 1990s. The 2000s saw the rise of ICT and BPO activities.
Today, Mauritius is a country with successful containment measures regarding the Covid-19 pandemic and strong fiscal measures sustaining the economic structure. The country GNI per capita for the year 2019 stood at USD 12, 740 (World Bank).
Investing in Mauritius
With a diverse and multicultural nation of 1.3 million people, the country offers a range of investment opportunities in different sectors. Its ease of doing business ranking (1st in Africa), stable governance and business environment makes it the perfect platform to investment into.
Several incentives have been put in place, including an investment tax credit for high tech machinery and inclusion of machinery as part of the performance requirements for occupation permits for investors. Most importantly though, the recent measure to tax income from the export of manufactured goods at 3 % provides a competitive edge over and above those already existing through preferential market access to SADC and COMESA markets. Recently four trade agreements namely CECPA with India, the China FTA, UK-ESA and the African Continental FTA came into operation, opening new windows of opportunities for investors.
Moreover, the country is also witnessing the rise of Smart Cities, which will integrate and encourage different complementary sectors and provide clustering benefits while attracting skills and talents from all over the world. Smart Cities will provide an additional impetus to an already booming real estate and property development segment and offers several advantages for businesses willing to operate within the smart cities.
At the same time, the financial services sector has been revisited by embracing higher value- added services and activities. The Mauritius International Financial Centre will focus on the development of capital markets to attract world-class liquidity providers, treasury management, international brokers, investment banks & fund managers, overseas family offices, captive insurance and regional headquarters. New schemes have been introduced to this end to incentivise large MNCs to use Mauritius as a platform to tap the opportunities that Africa offers in terms of financing infrastructure and energy projects for instance.
Mauritius External Trade
Mauritius has a liberal economic and trade policy, with a trade-to-GDP ratio of 92% (World Bank, 2019). The country is a member of the WTO, as well as other regional economic groups (COMESA, SADC, IOC). Mauritius aims to transform the island into an open and globally competitive economy and to fully integrate it into the world trade system through its trade policies.
Comparatively, the island does not have many trade barriers and customs duties are low (the average applied tariff is only 0.81%). In 2019, Mauritius exports were led by prepared or preserved fish, clothing (mainly t-shirts, shirts and suits), and cane or beet sugar (sugarcane occupies 85% of the country’s cultivated land); while the country imported chiefly petroleum products, cars, frozen fish, medicaments and radio transmission equipment.
The country’s main trading partners are France (12.6% of the global total), the United Kingdom (11.1%), the United States (10.8%), South Africa (10.4%), Madagascar (7%), Italy (5.5%), and Spain (4.4%); with imports originating in China (16.7%), India (13.9%), South Africa (8.1%), the UAE (7.3%), and France (7%).
Mauritius imports more than it exports. In 2019, both export and imports of merchandise had remained stable compared to the previous year, at USD 2.2 billion and USD 5.6 billion, respectively. However, the country is a net service exporter (USD 2.9 billion of commercial services export against USD 2.1 billion of imports).
In 1961, Professor James Meade painted a bleak picture of the economic prospects of Mauritius, which then had a population of 650,000. All the disadvantages associated with smallness of island states weighed heavily in his conviction that Mauritius was caught in a Malthusian trap and, therefore, if economic progress could at all be achieved, it would be to a very limited extent. Since independence in 1968, Mauritius has developed from a low-income, agriculturally based economy to a high-income diversified economy with growing industrial, financial, ICT and tourist sectors.
For most of the period, annual growth has been roughly 4%. This compares very favourably with other sub-Saharan African countries and is largely due to sustained progress in economic conditions; between 1977 and 2008, growth averaged 4.6% compared with a 2.9% average in sub-Saharan Africa.
Also important is that it has achieved what few fast growing economies achieve, a more equitable income distribution and inequality (as measured by the Gini coefficient) fell from 45.7 to 38.9 between 1980 and 2006. This remarkable achievement has been reflected in increased life expectancy, lowered infant mortality, and a much-improved infrastructure. Sugarcane is grown on about 90% of the cultivated land area and accounts for 25% of export earnings.
The government’s development strategy centers on expanding local financial institutions and building a domestic information telecommunications industry. Mauritius has attracted more than 9,000 offshore entities, many aimed at commerce in India and South Africa, and investment in the banking sector alone has reached over $1 billion. Mauritius, with its strong textile sector, has been well poised to take advantage of the Africa Growth and Opportunity Act (AGOA).
Mauritius has attracted US$10.98 billion in Foreign direct investment inflows. Top sectors attracting FDI inflows from Mauritius (from January 2000 to December, 2005) are electrical equipment, telecommunications, fuels, cement and gypsum products and services sector (financial and non-financial).
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