September 6, 2015    4 minute read

Mauritius: A Sweet Success?

   September 6, 2015    4 minute read

Mauritius: A Sweet Success?

Traditionally, the economy of the African island state of Mauritius was largely based on agriculture, especially the export of sugar and goods derived from it. However, over the past few decades, there has been a steep curve in the country’s diversification into expanding other sectors of the economy, namely: financial services, tourism and more recently, manufactured goods. The question that springs to mind here is why these reforms were necessary, a question we will explore further over the course of this article.

Economies based on agriculture have generally been considered to be relatively stable in their growth, given that shortages can often be resolved using stockpiles built up from periods of stronger production levels. Nonetheless, sugar prices have hit a 7 year low despite bad weather in many areas and countless farmers cutting back their production and expected surplus. In mid-August, the International Sugar Organization published forecasts revising up its predictions for a surplus to 3.37 million tons this year (up from 2.2 million tons), a shocking value which allows us to see why the sugar industry has developed such an unreliable nature. Due to the 86 million ton stockpile of sugar that has built up in countries worldwide over the past half-decade, the market is expected to remain oversupplied notwithstanding predicted lower production levels in the coming year.

The demand for ethanol is also falling worldwide due to petrol and diesel following oil prices on their decline; this fall has had an adverse effect on ethanol (another significant factor for sugar prices), which is commonly seen as a cheaper alternative to petroleum-based fuel. Over supply is not just a problem concerning sugar, and the Bloomberg Commodity Index has in fact fallen to its lowest level since 2002, with the current downturn in many commodity’s prices falling because of huge accumulations of goods.

Yet, Mauritius’ economy predicted to grow by 5.5% per annum from 2017, a forecast made possible by the significant push policymakers have made towards an economy based on manufactured goods in addition to the existing sectors of tourism, financial services and agricultural goods exports. The move is mainly in increasing the manufacturing of pharmaceuticals, jewellery and various consumer goods, allowing the economy to produce more of its own goods domestically. As well as this, diversifying the portfolio of manufactured goods enables Mauritius to make gains from creating competitive trade agreements such as that with the European Economic Community, which receives over 50% of the textiles exported by Mauritius.

Anerood Jugnauth, the country’s prime minister, said

“There are, right now, some 40 major private sector investment projects [mainly focusing on expanding the manufactured goods industry] to the tune of 183 billion rupees, of which foreign direct investment represent 140 billion rupees”.

These projects have been estimated to have the potential to create 100,000 new direct and indirect jobs over the coming five year period, with around 16,000 new jobs being created during the current financial year alone. Furthermore, over the next five years the government will invest 75 billion rupees (US$2.13 billion) in the water and waste water management sectors, electricity, roads, transport infrastructure, the port, airport and communication.

In the current global climate, there is significant evidence showing the primary goods industry being progressively devalued as raw materials are increasingly produced domestically or within trading blocs, meaning developing countries are struggling to find producers who will buy their goods for a reasonable price and are consequently receiving less and less for their primary goods. Hence, we can see why the actions taken by the Mauritian government are highly necessary and important for development. It is certain that many more agriculture-based economies have already or will proceed to follow suit and expand their economies to aid growth in such a fiercely competitive global climate.

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