Lessons from Mauritius

 Culled from the BusinessDay Newspaper of 29/12/012

For over a decade, a stable macroeconomic environment and accommodative regulation in some sectors have drawn investors to Africa. Ease of doing profitable business is a function of an adequate legal framework. Hence investment institutions such as private equity firms have made Mauritius the hub for their pan-Africa activities.

Improvement in property rights, monetary freedom and fiscal prudence led to Mauritius’ stellar performance on the 2012 Index of Economic Freedom. The index, which has been compiled since 2001 by the Heritage Foundation, a Washington-based think tank, evaluates the economic freedom of countries in terms of rule of law, government intrusiveness, regulatory efficiency and the openness of markets.

Mauritius, an island state, ranked 8th in the global ranking, is the first country from sub-Sahara Africa to make the top 10. It topped the chart of 46 African countries.

What’s the secret to Mauritius’ impressive progress? A strong respect for the rule of law (the country’s “Independent Commission Against Corruption investigates offences, and can confiscate the proceeds of corruption and money laundering”). Income and tax rates are competitive: a flat 15 percent; regulation is efficient and openness to trade lures financial institutions. In terms of trade freedom, investment freedom, and financial freedom, it ranked 8th, 2nd and 17th respectively.

Politics and policy in this island with little or no natural resource, have been forwarding looking. Sugar, for some time, was the major export but the country has diversified by promoting free trade zones, exporting textiles (gloves and sweaters), information communication technology outsourcing, tourism, financial and business services and seafood processing.

Mauritius’ remote location was not a deterrent to developing a Business Process Outsourcing/Information Technology (BPO/IT) industry. This fact may be put to its Indian roots. Nevertheless, bandwidth cost and capacity help the country compete in the BPO/IT industry and as a result, provide employment opportunities. Foreign Direct Investment per person is larger than India. Mauritius is connected to the South Atlantic 3/West Africa Submarine Cable/South Africa Far East (SAT-3/WASC/SAFE) fibre optic cable system.

Mauritius may be small, its impact on Africa’s economy negligible, but coastal states in Africa’s supposed giant i.e, Lagos, Rivers, Akwa Ibom, and Cross River can learn from Mauritius, to, say, turn their seaside and cultural history into tourist attractions.

Lagos State, arguably is in the forefront of improving its financial and tourist credentials. Firstly, it recognises the importance of a functioning financial and legal system and has updated its law to permit limited liability partnerships and companies, has set up the Lagos State Partnerships Registry and the Lagos Multi-door Courthouse. These mechanisms, together with the Lagos Court of Arbitration, a private-sector initiative, should pull investors to Lagos.

Secondly, Lagos state is committed to correcting the perception about personal insecurity. Furthermore, Lagos is actively promoting itself, filling the perception vacuum with new things: laws, ideas (Kuramo Conference, Ignite TV), policies, products (Monopoly), art, science (Innovate Lagos, Lagos School of Transportation).