“The first lesson of economics is scarcity: there is never enough of anything to fully satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics.” Thomas SOWELL

Vladimir Putin’s ‘special operation’ in Ukraine is still going on, four months short of three full years, making it a ‘very special’ operation indeed, which some might even call a war! It is also just over a year ago since Gaza’s Hamas launched a deadly raid in Israel, which led to massive destruction in Gaza and a startling redistribution of cards in the Middle East. Gone now are the promises of the better neighbourhoods of the Abraham Accord and the prospects of peace of the West with the communist East, leading to global denuclearisation and growth. China, grappling with serious economic issues of its own, is regularly sabre-rattling around Taiwan and all around the 9-dash line it wishes to impose on its maritime neighbours in the South China seas…

These sizeable geo-political cesspools could have heavily doused world prospects of economic growth and yet, by July last, the IMF’s outlook was steady, with growth of 3.2% projected in 2024 and more of the same proposed next year. Most of the world’s stock exchanges have been soaring. The main worry still looked to be inflation and especially services inflation, leading the IMF to promote the prospect of higher-foreven-longer interest rates with its attendant impact on external, fiscal and financial risks.

However, that was four months ago…

However, that was four months ago… At the end of September, the US Fed cut interest rates by a full ½ %! The ECB, having cut rates by ¼% in June and again in September leads markets to expect the key deposit rate will be down to 3% by December. Bank of China’s prime rate has been on a downward path from the 3.85% of December 2021 and is a half point lower by now. They all believe that inflation is essentially mastered. Of course, price levels, in general, are standing far higher today than they were barely 4 years ago and that is why consumers are still feeling the pinch, if their purchasing power has not kept up since. The world’s stock markets still show optimism and are likely making rich people even richer…

Article IV consultations for Mauritius took place in January 2024 and were published in May and whilst applauding the strong bounce back since the covid epidemic, they point out (i) that there is a strong need to reduce debt and rebuild fiscal buffers made use of during the pandemic, (ii) that financial sector risks must be continuously monitored, with emphasis on global business companies and AML/ CFT compliance (iii) that structural reforms are needed, including those to enhance skill sets and female participation rates in the labour market, stimulate digitalization and climate-resilient infrastructure investment and (iv)that there is a need to promptly amend the BoM Act to better protect central bank independence and the credibility of BoM’s monetary policies and to ensure the gradual transition of MIC away from BoM ownership. The risks of an ageing population, an absence of pension reform and, explicitly, the “high risk of large fiscal slippages ahead of elections” were also covered leading to an assessment that Mauritius has a ‘high risk’ of “sovereign stress, reflecting mostly a high level of vulnerability in the medium and long term horizons”.

It may just be noted here that no major structural reform has been heard of over the last months, that the modification of section 47 of the BoM Act (item 6 of the 2024 Finance Act), does not look like better protecting the independence of the Central Bank for now and that the MIC, though it had signed its 30th June 2023 accounts by 27th October 2023, has still not yet posted them publicly on its website. The “gradual transition of MIC away from BoM ownership” does not look to be on anyone’s agenda either. If government took over MIC’s Rs 80 Bn in full, that would add some 12 % of GDP to government’s debt/GDP ratio. The electoral promises’ frenzy, mostly of a social transfer nature, that is currently being lived through will likely upset the already fragile financial situation even more, as production to pay for it all, seems to be of little immediate concern to most.

“Welfare’s purpose should be to eliminate, as far as is possible, the need for its own existence” Ronald Reagan

It may be useful to note that Manufacturing has no longer been the largest contributor to the Gross Value Added in the economy for some time now, having been overtaken by the Financial services sector with 13.4% of total GVA in 2024. Manufacturing now stands at 12.3% followed by wholesale n Retail trade (10.2%), with Construction itself (8.6%) just ahead of Tourism at 8.5% and ICT trailing at 5.5%. Global business, embedded within the financial sector, stands at 7.8% of GVA on its own. The largest jump in contribution is to be put to Construction’s credit which clocked an increase of a full 3.4% of GVA in just two years , but it can be questioned whether a sectoral growth rate of above 35%, two years running, is maintainable. It may also be of concern to somebody, maybe some well-stocked ministry, that the ICT sector’s future hangs onto a 96th ranking in Ookla’s world table of broadband speeds, lying behind surprising countries like Armenia (93), Venezuela (90), Palestine (82!), Nepal (77), or Ukraine (66). Our reliance on a relatively foot-loose Global Business sector is fortunately down by 0.8% points from the 8.6% of GVA of 4 years ago.

This year’s budget, on the eve of elections, which gave the IMF their predictable shivers, highlighted notable progress of social indicators, namely a material reduction in inequalities. The average household monthly income thus nominally progressed by 51.1% since 2017 to reach Rs 55,600 in 2023. The unfortunate fact is that in dollar terms this progression was more like 24 % only, the rupee having slipped quite badly over the period. Progress is clear, but it should not be overstated. Instead of an average yearly progress of some 7.3%, we are closer to 3.4% per year in real terms. Not bad, but not quite as good…

The vast majority of the lofty figures served to the nation also need to be deflated the same way for the lost purchasing power of the rupee v/s the main international currencies. The sizeable devaluation of the rupee, together with imported inflation, freight hikes and a bit of profit gouging, no doubt, has translated itself into hefty price rises in local shops which do not always seem to be reflected by the CPI and which has led government to try to compensate lost purchasing power quite frequently. It is also noteworthy that unemployment is down and that several sectors find it necessary to import labour, whilst headline inflation is falling and investment progress levels, at close to 25% of GDP, are looking positive…

Measures to open the economy even further to foreigners are no doubt welcome to boost purchasing powers and consumption in general , though calling someone who comes to work here for Rs 22,500 per month ($ 505) a “professional” sounds a little over the top… For how long government can continue to bankroll SMEs and other private sector firms which are too weak to swallow ordained cost increases, namely on salaries, remains a very open question, since subsidy habits, once ingrained, may die hard! The same applies to the numerous grants, subsidies and loan write-offs littering the last budget, even though the objective of greater food security is commendable. The much vaunted Blue Economy, however, remains very low key, prospects-wise and the much paraded shift of energy production to 60% renewables by 2030 (with coal being totally eliminated) is looking more challenging as each year goes by… The IMF, worryingly, projects that the country’s oil imports will progress from 1.3 Bn USD in 2024 to 1.7 Bn by 2029 (+ 30%). Social welfare costs are increasing every year and might likely boost an ‘entitlement’ economy whilst discouraging effort. “The budget should be balanced, the treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and assistance to foreign lands should be curtailed, lest Rome become bankrupt!” Cicero

The TOP 100 sample of companies surveyed covered over 500 companies for the first time, including parastatals, compared to 437 last time around. A new sector, real estate agents, is now within our sample. The consolidated figures for turnover, progressed at a slower pace this year (+17.2%) than in our last report (+19.2%), but, excluding parastatals, the contrast was even more impressive (+13.2% versus +25%). Excluding parastatals, which lost another Rs 6.9 Bn this time round v/s Rs 4 Bn in our last review, profits moved more favourably, registering an impressive growth of 64.8% and reaching a commendable 9.2% on turnover.

A special mention must here be reserved to IBL group whose “Beyond Borders” strategy led it to become the first ever Mauritian group, besides a banking group, to achieve more than Rs 1 billion in turnover in the territory. As a matter of fact, the group’s consolidated turnover doubled over the last year, essentially as a result of acquisitions in both East Africa and Reunion, namely through taking control of Naivas, a 106 store operation in Kenya, the hypermarket network of Runmarket in Reunion (currently in a turnaround phase…) and of Harley’s, an importer and distributor of medical products in East Africa.

As a result, the Commercial and Distribution segment, comprising of Winners locally, now represents almost 80% of the group’s turnover, with the risks spread over the region rather than Mauritius only. The same segment brought in 63% of the group’s consolidated profit of Rs 5.4 Bn with ‘Hospitality n Services’ contributing another 37% or Rs 2.0 Bn. Despite these important acquisitions, gearing remained stable at 47%. Further ROI improvements are being sought.

Within the larger corporations, one must also underline that Rogers & Co made it to the Top 10, turnover-wise and that Médine (21.7%), Rogers (31.4%), Sun ltd (23.2%), The Mutual Aid Association (54.4%), Alteo (25.4%), CIM (38.7%), SICOM (34.6%), Beau Vallon (49%), Proximed (23%) and… Landscope (106%!) achieved higher than normal profit returns on turnover, though it is quite clear that we are not always comparing like with like, given revaluations for example.

Within the Banking segment, MCB group is proceeding from strength to strength, its profits attaining Rs 20.2 Bn and improving year on year by close to 14%. Those who still say that this level of profitability is ‘indecent’, must perhaps again be reminded that such returns are proportionate to the risks taken, as illustrated by balance sheet assets which have grown to Rs 937.2 Billion, one trillion being clearly on the way! On this relative basis, the MCB is generating a return on assets of 2.17% which is superior to the 0.9 to 1.7% return of the cluster of banks focused on the local market almost exclusively but lower than the 2.2 to 3.15% return of banking groups dealing even more heavily overseas (Afrasia -3.15%, HSBc – 2.8%, Investec – 2.9%, Standard Chartered – 2.8%, Standard Bank – 3.0%, etc.). We should also be reminded that bank earnings from overseas bring in precious forex to the local market…

The weightiest amongst other segments, Hotels, both turnover and profitswise had a very favourable year. As hinted in last year’s Foreword to Top 100, there was room for improvement on the turnover side and the latest consolidation shows a 27.7% progress, associated with a 52.2% improvement in profitability. These figures look indeed promising with respect to prepandemic ones, but cannot hide the fact that the losses of Rs 12.9 Bn accumulated over 2020 and 2021 are only now being covered by sector profits of Rs 6.9 Bn in 2022 and Rs 10.5 Bn in 2023. For such a capital-intensive industry, facing the sizeable challenges of climate change, one cannot say the sector is out of the woods yet, even though this time round, only four companies registered losses out of 31 in the sample. New Mauritius Hotels led the line, turnover – wise, but Sun Resorts beat it into second place on profitability metrics, with a hefty 30.3% profit margin on revenue. Within the top 10 hotel operations, Constance hotel services ranked fourth on turnover but had, at 7%, the lowest profit level with respect to turnover. An upside is surely possible here.

The Agriculture sector is today quite diversified with overseas investments, land property deals and power generation agreements. Omnicane heads the rankings with a turnover of Rs 7.6 Bn as at December 2023, but has seen its profits swing back to Rs 608 M. Of note, Rogers Agri switched to a profitable situation and Alteo topped the chart profitability-wise.

The total sales output of the Textiles segment is ominously stuck at some Rs 41 Bn, with Ciel Textiles representing a full 38 % of this total. Profitability improved marginally and, be thankful for small mercies; only one textile operation is now losing money, down from six in the preceding year. Only five companies made profits superior to Rs 100 m , namely Ciel Textiles (Rs 797 M), RT Knits(Rs 357 M), Denim de l’ile (Rs 313 M), Laguna Clothing (Rs 265 M) and CMT (Rs 208 M).

“In economics, hope and faith, coexist with great scientific pretension and also a deep desire for respectability” John Kenneth Galbraith

The Construction sector had another great year, shifting its turnover upwards by 19%, almost beating the ‘oil and energy’ sector to the second spot, sales-wise. However, this growth is far from coming close to the massive 37% growth rate indicated by government for 2023 which either suggests that our sample is way inadequate with respect to government’s or that government’s definition of ‘related activities’ is far more extensive than ours .

Nevertheless, all the major operators look like being covered in our sample of 53 and though UBP tops the list sales wise, it is Larsen n Toubro that heads the profit rankings, aligning staggering profits of Rs 2.12 billion for the year ending 31st December 2023, on a turnover of almost Rs 5 billion. The last accounts to 31st March 2021 had showed profits of close to Rs 1.2 Bn on sales of Rs 4.5 Bn. The initial contract (Port-Louis to Curepipe) was earmarked at some Rs 18.8 Bn and the extension to Réduit, on its way to Ébene and Côte-d’Or at anywhere between Rs 5.5 and Rs 13 Bn, but financials so far gathered look far off those marks.

Generally speaking, suppliers of construction materials look like they are again doing better than actual construction operators, with the notorious exception of cement producing operations like Kolos which generated only Rs 12 M profit on Rs 2.5 Bn turnover and Cementis which did only slightly better generating profits of Rs 21.4 M on sales of Rs 2.1 billion. Those shocking results which cannot possibly ensure enough cash flows to repay debt and fuel necessary investments and which flow directly from ‘politically motivated’ price controls since 2022, may well lead to supply issues soon, especially if the dollar surges even more…

Could it be the sale of more hybrid and electric cars that caused a drop of turnover within the Oil and energy sector? Only a finer analysis could tell since this sector also includes gas, lubricants and other items like jet fuel. The jury is out. And silent.

The Insurance sector seems to be battling with financial reporting of late. Regulatory issues or new IFRS requirements may both be responsible , but what is certain is that the audited figures that are published are a little outdated, the two largest groups, Swan and MUA having published no audited report (at time of writing) since December 2022. Swan at least has published condensed, unaudited financial statements to September 2023.

“Do not save what is left after spending, but rather spend what is left after saving reasonably” Warren Buffett

Within the Supermarkets/ distribution segment, the overall profit margin on sales remained about the same, reducing by 0.1% from the preceding year on sales which progressed by a material 17.7%. This does not indicate abnormal profits and even possibly points to price wars within this well stocked segment. Pick and Buy Ltd (Winners) remained clearly dominant at the top, seeing its sales move ahead by a further 19.5%; however, its net profit on sales dropped from 2 to 1.7%. The second slot which had swung back to Super U last year, reversed back, by a wee margin in favour of Seven Seven, but Super U had the clearly better returns, possibly because of the location of some of its major outlets in plusher zones... In any case, Intermart’s management of its resources and assets is again top of the pile, its 16.6% return on sales back in December 2021, having now been upped to 19.9% on sales two years later. This is no mean feat when having to handle such matters as perishable goods, just-in-time stock management, pilferage, selecting the most remunerative lines of sale or merchandise with expiry dates… As illustrated by the five entities reporting losses for this year (only 3 last year), you can fast get it wrong!

The average return on sales inside the Commerce n Trade segment of 43 reporting companies is, at 5.3% on sales, a full 2% higher than for supermarkets and has even improved slightly, year on year. It may also be pertinent to underline that this segment’s consolidated sales are, at Rs 28.3 billion, some 40 % lower than those of the Supermarkets/ distribution segment, a possible indication of the relatively weak degree of sophistication of the local consumption market. Courts Mammouth still ranked first, but was still being given a close race by its nearest challenger, The Brandhouse. It is also noteworthy that the efficiency with which profits are made on sales is not necessarily a question of economies of scale, margins being generally fatter as you go down the turnover table. J. Kalachand, the 6th ranked in sales remains a telling exception.

You are not likely to see much of an improvement in traffic fluidity over the coming year or two in spite of all the civil works, of which bypasses, fly-overs, and round-abouts that we all see across the country, if we refer to the ever-increasing sales of vehicles in the country. Indeed, the Automotive segment registers a hefty 34% increase in sales this last year after a neat increase of 13.3% in the previous year. There is, of course, also need to account for the weakening of the rupee, actual changes in FOB prices, the higher average price of hybrids and EVs, the mix of passenger cars and utility vehicles.

However, at the end of the day, the pace at which vehicles are being put on the road is outstripping the rate at which the road network is getting extended and this can only indicate more time ‘travelling’ or, rather, more time waiting for traffic jams to get untangled. Leal and Co was last year beaten by a whisker to second slot by Axess, but a Rs 21 M gap last year is this year extended to Rs 270 M. However, Leal’s profitability this year (‘other income’ of Rs 1.343 Bn doing the trick – property revaluation?) comes in at a staggering Rs 1.6 Bn, a fivefold increase on the performance of 30th June 2022.

Mauritius Telecom grew its annual turnover by 11.1%, which is almost twice as fast as the runner-up, Emtel. However, profitability-wise, Emtel held on to its coveted record of leading the profits to sales stakes, with a return of 9.9%. In this Telecommunications sector, Mahanagar Telephone posted another, though smaller, year of loss in a segment which has been doing well for years. A loss at Orange Business Services is surprising.

Within the Betting and Lottery sector, we are, this year, delisting ‘five companies which have not filed accounts since December 2019’, which was even before the pandemic! These are Sports Lepep, Global Sports, Caudan Waterfront Casinos, Casino de Maurice Ltd and Pallagames. This looks, quite surprisingly, like a troubled sector for, besides the financial reporting lateness of some companies, the 8 out of 18 loss making companies of last year(44%), have now grown to 8 out of 15 (53%). Lottotech still heads the pack but looks stalled growth wise. SMS Pariaz looks like the only operation making meaningful progress for the year.

Contrary to betting, the Health services sector is growing nicely. For the time being! Thirty seven companies churning Rs 14.5 billion last year have this time round grown to fourty five clocking Rs 17.3 billion worth of sales (+ 18.6%). It is to be underlined that the whole government budget for Health in 2024/25 is Rs 17.4 billion… This is a segment whose dynamics will be interesting to watch over the coming years, as more and more operators and especially clinics get into the game as they sense , just like for private education, that the freely accessible government services are sufficiently riddled with inefficiencies and insufficiencies to give them an opening. However, too quick a rush of private funds into this line may also lead to oversupply with respect to existing purchasing powers, to margin crashes and ultimately to heavy losses and eventual demise. Electorally promised free medicine and drugs will likely reshuffle the cards fundamentally.

CIEL Healthcare (C Care, Wellkin) towers above the other operations within the segment and ensures healthy margins so far (no pun intended), which must be reflecting satisfactory customer ratings , even though the management approach is beginning to sound a little too money minded . City Clinic’s tighter operations almost doubled its profits on turnover to Rs 168 M and Jyoti’s clinic more than doubled theirs to Rs 157 M or 42% on sales. Not much sign of a surge from a pharmaceutical industry carrying government’s hopes for the future: even Ajanta had a bad year…

“Inflation is when you pay Rs 150 for a Rs 100 haircut, you used to get for just Rs 50… when you had hair !” Anon

Velogic held its own topping the Freight/Logistics segment which grew by 12.4% year on year, sales-wise and 21.7% profits-wise. Logidis and Hellman registered sizeable losses again, which will surely require attention, as the rest of the sector looks to be doing quite well. Celero ltd overtook FTL group, which had clawed its way up to second spot last year, and MFD was a new entry at fourth.

Amongst smaller segments, Mediacom registered an ‘out of the ordinary’ profit of Rs 1.414 billion on sales of Rs 125 M, which can only mean that it won one or more of its legal cases in France or sold something big. While radio stations look to be in good shape in the Media segment, the printed press is struggling even more badly and MBC, already loss making, cannot possibly welcome the prospect of losing its TV licence fees of Rs 150 per month… Or does it indeed care? La Sentinelle sold assets to cover losses. The Printing sector is generally in good shape, to the exception of Impress and so is the Advertising/events/communication sector with the exception of Impact Production. Publicly owned Polytechnics Mauritius and the Reduit University, though contributing positively course-wise, were sizeable loss-making outliers within the Tertiary education sector, while the Real Estate agents (a fresh addition) looked healthy enough, led by Pam Golding, Sotheby’s and Barnes occupying the first three slots.

As to Parastatals, STC doubled its turnover as the dollar surged and as it dabbled in milk, cooking oil and other things, ending up registering a loss of Rs 3.7 billion. Buying petrol supplies in rupees does not look like it helped much…. CEB having lost Rs 4.2 Bn to June 2022 lost another Rs 5 Bn in the following year. Those are sizeable amounts! Of the 13 parastatals highlighted last year as publishing their accounts very late, only four updated their latest accounts. These are CWA (+ 2 years), MTD (+ 2 years), Beach Authority (+1 year), POWC (+3 years). The largest profit generating parastatals were the FSC (+Rs 1.2 billion), the CWA (+ Rs 834 M, though this required the write off of loans and interest totalling Rs 1.087 billion and accounting for Rs 261 million in government grants) and the SIFB (+ Rs 534 M, since no cyclone/drought compensations were paid out).

This is an election year. Need I say anything more than what IMF says?

“There is a HIGH RISK of large fiscal slippages ahead of elections”, wrote the IMF back in May, adding that we also face a “HIGH RISK of sovereign stress, reflecting mostly a high level of vulnerability in the medium and long term horizons.”

Pa dir, pann dir!