(Published in MTimes 14 December 2018)
It was a rude awakening for the new government that took power in December 2014. Growth was sub-par, investments were floundering, saving was at rock-bottom but it was in the external sector that the situation was more serious. Excluding transactions of GBCs, the current account deficit was at 12.8% of GDP in 2014. This was much higher than the 9% allowed by SADC macroeconomic convergence targets.
The constraints faced by the export sector, namely, the rising costs in terms of energy, land prices, and labour was impeding the sector’s competitiveness in addition to subdued demand from trading partners and modest private investment.
Aware that the high deficit in our external accounts was not sustainable and constituted a serious risk to our macroeconomic fundamentals, the new Government decided to give a fillip to the export sector. In 2015 itself, a National Export Strategy was prepared focussing on seven priority sectors namely, food processing, jewellery, scientific and medical devices, systems integration, financial services, aquaculture and fish processing, and cultural tourism. It also looked into cross-sector issues critical to improving SMEs capacity and skills to face the exigencies of exports. Government was also aiming at expanding its export markets through its Africa Strategy.
And over successive budgets a series of measures were announced to further diversify the manufacturing sector and consolidate and diversify both our product base and markets (for e.g Government will introduce the application of 3D printing technology, by equipping the two technopoles at Rivière du Rempart and Rose Belle)
Table I:
Unit
|
2015
|
2016
|
2017
|
2018
| ||
Exports of goods
|
Rs m
|
93,290
|
84,456
|
80,680
|
82,000
| |
o/w- Manufactured goods
|
Rs m
|
41,654
|
37,444
|
34,214
| ||
-Export Oriented Enterprises
|
Rs m
|
48,487
|
44,422
|
43,027
| ||
Exports of services
|
Rs m
|
106,717
|
109,379
|
112,183
|
116,521
| |
o/w -Tourism
|
Rs m
|
50,191
|
55,867
|
60,262
|
64,000
| |
- other services
|
Rs m
|
56,526
|
53,512
|
51,921
|
52,521
| |
Export growth of goods
|
%
|
-2.7
|
-10.5
|
-4.6
|
-0.3
| |
Export growth of services
|
%
|
1.1
|
0.6
|
-0.1
|
1.3
| |
Exports to Africa/total exports
|
%
|
20.0
|
21.0
|
22.5
|
20.3(E)
| |
Exports to Europe/total exports
|
%
|
38.8
|
44.2
|
43.8
|
45.1(E)
| |
E=Estimates
|
But when we have a look at the data at Table I , it shows that both in absolute and growth terms, Government has failed in redressing and diversifying the exports sector. Exclusive of GBCs, the current account deficit is still as high as 11.8% of GDP. With the exception of the tourism sector which has been riding on a worldwide sustained and consistent trend of a growth of 4% and above since 2010, the export performance is indeed very worrying.
There are major risks ahead to durable growth in the external sector, which is under pressure from a number of sources. The deficit on net exports could again widen sizeably as the rebound of oil and commodity prices and the appreciating US dollar raise the value of imports, while exports stagnate. Consumption-driven growth in a highly open economy like Mauritius is not sustainable in the longer term without strong export performance. The introduction of the Negative Income Tax , the minimum Wage and the generous wage awards and compensations will have to be compensated by greater efforts to boost our competitiveness. Thus there is a pressing need for Government to review its export and competitiveness strategy.
