Mauritius: Ready for a Second Economic Miracle?

On March 12, 2018, Mauritius celebrates 50 years of independence. The country is proud of its economic progress and the government has set an ambitious goal: to transform the remote island state into a high-income country within the next few years. What is the origin of the Mauritian success story?

In 1961 Nobel-prize-winning British economist James Meade wrote off Mauritius as a basket case. Eleven years later fellow Nobel laureate Indo-Trinidadian writer V. S. Naipaul characterized the island nation in the Indian Ocean as an “overcrowded barracoon”. Mauritius has defied these and other critics to become one of Africa’s most socially, economically and politically lauded nations. Located around 2000 kilometers from the south-east African coast the country, which is on the eve of celebrating its 50^th anniversary of independence, is attempting to reposition itself as a bridge between fast-growing economies in Africa and Asia.

Once a low-income mono-crop economy, Mauritius, with GDP now topping $12 billion, has achieved the status of an “upper middle-income country”. Unsurprisingly, the coalition government, led by prime minister Pravind Jugnauth, 56, is keen to push on to become a high-income economy over the next years. But to succeed, Mauritius, which has a population of 1.3 million, needs to find new ways of engaging with the wider world.

A multicultural melting pot

First discovered by Arab sailors, Mauritius was abandoned by Dutch colonizers before being successfully settled by the French beginning in 1715. However, the British, realizing the island’s strategic importance in the colonization and governance of India, rudely wrested control in 1810. Although English remains the official language, French cultural influence, aided by the proximity of French overseas department La Réunion as well as membership of the 58-strong L’Organisation Internationale de la Francophonie, remains considerable in Mauritius – witness the popularity and power of French-language independent radio stations, newspapers and social media.

But French influence does not stop at the cultural level. A small number of Franco-Mauritian families, beneficiaries of imported slave labor and land, acquired by their ancestors to cultivate sugar, continue to dominate the economy with wide-ranging interests, including textiles, IT, offshore finance, and high-end coastal resorts and real estate. As the economy has grown, elite Franco-Mauritians, “les grand blancs” as they are known, have now been joined by a few families from other ethnic groups, notably Hindu, Muslim Indians and Chinese.

Showcase for Sub-Sahara Africa

Because of long-established trading links with Europe, the Great Recession, beginning at the end of 2007, hit Mauritius hard. In particular, tourism, a major source of foreign exchange, suffered, though there has been a sustained attempt to woo visitors from emerging superpowers such as China and India, with some success. Overall, economic growth over the last five years has been in the range of 3 or 4 percent with a forecast of 4.2 percent for 2018 according to projections of the Bank of Mauritius. But the big hope of the Jugnauth-led government is that in the not too distant future foreign direct investment (FDI) in its ocean economy – fishing, hydrocarbon and minerals, marine biotechnology, renewable energy – will not only supercharge GDP for years to come but also more immediately take up some of the slack from the ending of a double taxation avoidance agreement with India.

It works, of course, to Mauritius’ advantage in attracting FDI, that influential global institutions have long heaped praise on the island highlighting its democratic stability and open, adaptive economy. The regional report for South and East Africa of Bertelsmann Stiftungs’ Transformation Index (BTI), for example, recalls that “Mauritius remains the only country in sub-Saharan Africa to fall into the United Nations Development Program’s (UNDP) category of high human development.” And the new 2018 BTI country report, which is about to be published, resumes: “Mauritius has proved to be a stable and viable democracy with a thriving market economy. There are no signs that this will change any time soon. Mauritius’ governments have shown their creativity in the past at adapting to new geopolitical and geo-economic circumstances.”

The island and its people have also charmed high-status visitors, including Columbia University’s Nobel economist Joseph E. Stiglitz. A few years ago, he opined that the US and other so-called advanced economies could learn some valuable lessons from “The Mauritius Miracle” about the benefits of free education, healthcare and a strong social security net in creating and maintaining social cohesion.

There are two often neglected factors that go a long way in explaining Mauritius’ social stability. First, unlike other British colonies such as Fiji, Uganda or Sri Lanka, there was no indigenous population able to claim that the island is “ours” in opposition to those who might sometimes be perceived as pushy incomers. Second, Mauritius is a small place – including its outer islands, such as Agalega, Rodrigues and St Brandon, it measures 2040 square kilometers, about the same size as Luxembourg. The result is that, although different ethnic groups – Hindus, Muslims, Afro-Creoles and Sino- and Franco-Mauritians – often hold stereotypical views of the “others”, day-to-day interactions are remarkably polite. Only occasionally since independence in 1968 have ethnic tensions, largely fuelled by economic inequalities, resulted in short outbreaks of violence.

The “dynastic” character of Mauritian politics

By and large Franco and Sino-Mauritians do not seek political office. This leaves the field open to aspiring Hindus, Muslims and Afro-Creoles – though the system is dominated by mainly male middle-class Hindus, part of a community which makes up just over half of the population. The current government, Alliance Lepep (The People’s Alliance), a coalition dominated by the Mouvement Socialiste Militant (MSM), maintains a sizeable majority and is expected to see out its five-year mandate, which expires in the end of 2019 (or early 2020 at the latest). Much criticized by opposition parties for the transfer of prime ministerial power from Sir Anerood Jugnauth, 87, to Pravind, his only son, in January 2017 without the say-so of the electorate, the MSM decided not to contest a recent by-election in the bellwether constituency of Belle Rose-Quatre Bornes. This was partly to avoid highlighting the government’s own unpopularity, brought about by alleged cronyism and corruption, and partly on the expectation – only partially fulfilled – that the opposition parties would inflict long-term damage on one another.

But whatever the political differences and machinations, there is one cause that unites all Mauritian politicians: the country’s dispute with the UK over their claim to the Chagos Archipelago. An integral part of Mauritian territory since 1814, the archipelago was detached in 1965 to form a new colony, the British Indian Ocean Territory (BIOT), so that the US could use the largest and southernmost island, Diego Garcia, as a strategic military base. In the process, around 1500 islanders were forcibly removed by the UK authorities and most dumped in Port Louis, the Mauritian capital.

Without questioning the continued operation of the US base, Mauritian policy in recent years has been to dispute the UK’s claim to the BIOT and the appalling treatment meted out to the exiled islanders. A Mauritian resolution at the UN to seek an advisory opinion from the International Court of Justice at The Hague (ICJ) on Chagos’ sovereignty was passed in June 2017 by 94 to 15, with the support of India, Nigeria and South Africa. Interestingly, most European countries, including France, Germany and Italy, as well as China abstained, despite considerable pressure from the UK and US. The ICJ is due to give its verdict later this year or 2019.

As the Chagos issue, together with the country’s economic progress and resilience illustrates, Mauritius has come a long way in establishing its independence from its former colonial power. But the “Father-Son” arrangement that happened in January 2017 together with the involvement of the political elite in corruption affairs casts a shadow on its positive prospects and shows the need to reconfigure the political leadership. As the forthcoming BTI country report 2018 puts it: “New and younger politicians, not strongly affiliated with the ruling elite, can help to further the country’s image as a post-colonial success story, which is highly likely to continue.”

Sean Carey is Honorary Senior Research Fellow in the School of Social Sciences, University of Manchester and Fellow of the Young Foundation. He has written on Mauritius for The Guardian, The Independent, New African and African Business.