IF YOU DON’T INVEST IN RECOVERY, YOU DON’T HAVE RECOVERY.

Economic and social blues created by the recent claims emanating from every stakeholders in Mauritius created a need for a budget that could bring consensus all across and without jeopardising at the same time the very basis of growth. Trade Unions claim for higher pay to compensate the fall in purchasing power, the quest of employers to sustain business growth, and the government objective of creating, if not retaining, jobs with forthcoming elections, all seemed so conflicting to be achieved in one and a single budget and the burden of which to be carried by one and a single person, the Finance Minister.
Indeed, especially our leaders, must now tell us from where our future growth will come. The most destructive financial implosion has left many viable projects on hold pending remediation of urgent immediate issues. The sustainable energy project is a good example. Rescue plans and employment safeguarding needed additional funds, and the falling tax revenues does not add to the existing dilemma of the Government. While increasing the funds allocated to rescue of jobs, the fundamental question of the source of economic growth remains untapped.

The largest and broadest shoulders must carry the burden. Increased tax rate for high income earners has been a solution adopted by many countries. However, Mauritius has chosen to go the other way round. Pay cuts from a number of ministers who can be counted within our fingers, is not sharing the burden but a demonstration of the spirit we must all adopt. The main path that ought to have been adopted by the Government should have been the ‘sharing the cake of growth’ and increased tax rates for higher income earners goes in that direction. Mauritius is still much better as compared to the 50% rate imposed in UK for high income earners, thus any point in complaining would have been seen as selfish and secluded from the patriotic moves needed at these tough times.

Regardless of which party was presenting the budget, it would have been customary to assume that taxes would go up. However, Government has chosen to keep taxes untouched, save a few levies on profitable companies. The spirit is seemingly to boosting the purchasing power and thus consumption. Increasing VAT would have been a killer for consumption at such times and the Government has been very precautions in not doing so. However, some increases in VAT may be expected in the next budget should the crisis further create major fissures in our economy.

With all the funds being ‘spurred’ in the various rescue plans, contrary to visionary forward looking plans, the sudden hollowing of the public finances may leave us knocking at the doors of the IMF. However, before this is the case, the Government should have recognised the need for cuts in public spending, save infrastructural spending which will create jobs. The axe must fall according to the Audit reports and culprits must also be recognised as burden to the society. Various governmental bodies are just absorbing public monies and the need for sustainable savings must come from there.

The Minister of Finance must have been thinking of looking at welfare state and the services that the State must provide. However, given the political pressure and the elections fast approaching, it is no doubt that this important ‘funds gobbler’ has been left out of the budget. Public savings is a matter of paramount importance and some state provided services should have been revisited, and on which the budget has gone silent. Just as we need the vision to what will bring economic prosperity sustainable over the years, our leaders must decide once and for all as to what costs can the government be incurring, in the name of welfare state.

The provision of a levy on the profits of banks has been a relief and will certainly help the country in financing viable projects. However, the major question remains as to the implementation of same and the people who will be ‘nominated’ to gear the funds. The scars that may be left if managed by self-serving nominees may leave us many blues after the Air Mauritius stroke. A serious suggestion is to get away with the old political methods and start appointing the right people to drive such schemes. Tempted to quote President Barack Obama “If you don’t invest in the future, you don’t have a future”, let us add “If you don’t invest in the recovery, you don’t have a recovery”.

From the world around, we are being shunned with the realities to come, and this budget goes in the same vein. Projected growth should be further reviewed downwards and last year’s or last month’s claims of growth have yet to be identified from where it will come. The shrinking pace of the tourism and textile sectors leaves no room for growth. The decline is worst and is being supplemented by mounting risk aversion and confidence indexes are all in red. The budget has tried to improve on same but confidence does not come from blurring, rather from sternness. Almost every economic sector is declining and manufacturing sector is phasing out, there are few doubts that job loss and unemployment will be at its highest. Let us all open our eyes and stop dreaming of an immediate or eventual recovery.

Should we start singing the National Anthem in the morning to remind us that we are one, wait for coupons from the Government for basic necessities, 4 days off per week, go to bed early since electricity is ‘rationed’, forget ironed clothes etc.? Most of us may have never envisaged such scenarios, and given the actual economic trend, we must stand by ‘contingencies’. Should we go for a string of privatisation of the ‘lame ducks’ to mend the holed finance bucket? Most of the time, Government mends the bucket when the population is already thirsty.

Where is the ‘strong future demand’ sector promotion? The fundamental linearity that the public sector must also dwindle by the proportion or more of the economic slowdown is the sector where revenues can be ‘saved’, thus this is the sector which will bring the highest revenue for the country in a sustainable manner. Echoing the aspirations of many Mauritians to have a better living year by year, the budget has enhanced various SME schemes which are certainly a boost.

Government has come with issuing gilts (Sharia’h compliant – Sukuk) in raising funds, and these are to be strongly tested in the actual scenario where even trades from ‘Islamic Finance’ have gone down, though not to the extent of conventional financing. The reversal of capital flows has already been discernible and emerging markets like Mauritius will further suffer if ‘cash-flush’ countries start tax claims from tax heavens like Mauritius. The scale and speed of the economic and social climate deterioration is alarming. The country fellowmen are expected to get away with the welfare safety net, which for too long has addicted us and driven us away from the ‘resilience’ and ‘adaptive capability’ for which Mauritians are known world over.

Feroz Dahoo - Thomas Cook