Magazine article African Business

Africa's Economic Dynamo. (Mauritius)

Magazine article African Business

Africa's Economic Dynamo. (Mauritius)

Article excerpt

Mauritius with an average growth rate of 5% and one of the highest per capita incomes in Africa, is the continent's Indian Ocean economic powerhouse. With AGOA and NEPAD now on stream, this dynamic island nation is all set for a new era of prosperity.

The Mauritian economy, until the early 1990s, was based on three main pillars - manufacturing, agriculture and tourism. It is now firmly based on four pillars, the fourth being the provision of financial and business services. Mauritius has consistently achieved growth rates around 5% and has now a per capita income of around $4,000.

When it achieved independence in 1968, Mauritius was essentially a monocrop economy based on sugar cane cultivation and sugar exports. This activity accounted for more than 95% of export earnings and provided employment to half of the active labour force. It was quickly realised that sugar production alone would be unable to sustain the economy, in spite of the fact that some import-substitution industries had started operating since the early 1960's.

INDUSTRY, TOURISM TAKE OFF

The government took the decision to promote export-oriented industrialisation and created the Export Processing Zone (EPZ) in 1971. While the manufacturing industry was the driving force behind the success of the economy and later became the major foreign exchange earner and the largest single sector employer, the tourism industry also took off, with Mauritius capitalising on its natural beauty and hospitality.

The various incentives offered by the government in the EPZ and in tourism attracted considerable investment in these sectors.

Other positive factors are political and social stability, policy continuity and sustained infrastructural development. Mauritius has also benefited from preferential access of its sugar production and textiles to the European market through the Lome Convention (now the Cotonou Accords) and the Multifibre Arrangement.

FINANCIAL SECTOR DEVELOPMENT

In the late 1980s and early 1990s, the services sector, particularly financial services, was earmarked as an area for further economic development. The objective was to provide a new orientation to the financial services sector that was predominantly focused on banking and insurance. The Banking Act was amended in 1988 to allow offshore banking. The Stock Exchange was established in 1989 and exchange controls abolished in 1994. Legislation authorising non-banking offshore business activities was enacted in 1992. The free-port was also established in 1992.

The strategy during the last decade has been to position Mauritius as a financial business and trading hub in the Indian Ocean region. Mauritius is in fact the gateway to regional markets through its membership of the following regional blocks: The Common Market for Eastern and Southern African Countries (COMESA), the Southern African Development Community (SADC), the Indian Ocean Rim Association for Regional Co-operation (IOR-ARC) and the Indian Ocean Commission (IOC).

A government programme to consistently improve infrastructure led to the creation of modern telecommunication facilities with sophisticated technology and appropriate logistic support. This has further enhanced economic development. Several road projects are being executed, and the construction of a large capacity dam has just been completed. The government is at present engaged in the setting up of a cyber-city, a vast programme of school construction and projects to improve the environment.

STRATEGIC CONSIDERATIONS

Sound political leadership, a dynamic private sector and a highly literate population have been the ingredients for the economic transformation, although it should also be emphasised that the international context, after the oil shocks of the 1970s, turned out to be favourable for Mauritius.

The main strategic elements of industrial policy were liberal fiscal incentives, initially to begin the industrialisation process but later to encourage specific kinds of investments and activities, and industrial targeting via investment incentives. …

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