Printer Friendly

Africa's economic dynamo. (Mauritius).

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.


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.


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.


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. This was modified over time to reflect the shift from labour-intensive, low technology industries, mostly textiles, to skills-and capital-intensive industries.


The agricultural sector is predominantly sugar production and has been the back bone of the Mauritius economy for more than three centuries until the 1980s when the manufacturing sector, mainly textile production spearheaded economic growth in Mauritius.

The contribution of agriculture to GDP in 2000 was 7%. In terms of export earnings, total sugar exports currently represent 20% of total domestic exports, compared to over 70% two decades ago. The sugar industry has long benefited from guaranteed prices and preferential access into the European markets under the Sugar Protocol of the Lome Convention.

However with trade liberalisation and the aftermath of WTO meetings, the effects of globalisation and the development of regional groupings, such preferential treatment is under pressure and recently Brazil and Australia have raised this particular issue at the WTO.


The manufacturing sector, developed principally by Export Processing Zone (EPZ) companies, has brought about a structural transformation of the Mauritian economy. Between 1980 and 1990, there was a five-fold increase in the number of EPZ companies as investors from France, Germany, Hong Kong, the Netherlands and Singapore sought preferential access into European markets. During this period, employment in the EPZ sector grew from approximately 21,000 to almost 90,000.

Over the last decade, the share of the EPZ sector in GDP averaged 12.3%, while net EPZ exports constituted an average of 36.1% of total exports during the same period. In terms of gross earnings, EPZ exports represented 73.9% of total domestic exports, remaining by far the largest gross and net foreign exchange earner on the island.

The outlook for the Mauritian EPZ sector remains positive specially with the opportunities provided by the Africa Growth and Opportunity Act which allows for quota-free access in apparel from sub-Saharan Africa and duty-free access for a number of items.


During the past decade, the tourism industry has emerged as the fastest growing sector and established itself as the third pillar of the Mauritian economy. It is the second largest foreign exchange earner. Mauritius has deliberately attracted high-spending tourists so as to maintain the island's up-market profile as a luxury beach holiday destination.

Tourist earnings amounted to Rsl8bn in 2001, a 27% increase over the year 2000. With the involvement of Mauritius in the SADC and COMESA and the African Union, the concept of regional tourism is poised to take substance by coupling the attractiveness of the African wilderness with Mauritius' beaches and coastal resorts.


The creation of the Financial Services Commission, the Financial Services Promotion Agency and the Mauritius Freeport Authority are contributing to the modernisation of the financial services sector. Over the past 10 years the business and financial services sector comprising the banking, insurance, capital market, global business and other financial intermediary components has witnessed annual growth rates averaging 8.4%. It is expected that the economy will reach an overall growth rate of 5.6% to 7.3% with such business opportunities.

It is estimated that value-added by banks, insurance and other financial institutions has grown from Rs5.5bn to Rsl4bn.

The current range of financial businesses also includes payment and credit services, asset accumulation, custodial services and real estate. In addition, corporate finance, risk management and financial data processing are other types of activities being provided to the business sector.


After having successfully diversified its economic base, the Mauritian economy is gearing itself to face the challenges of globalisation. Apart from the established sectors - sugar, textiles and tourism - the financial services sector is expected to gain further momentum, while the government will be investing heavily to transform Mauritius into a cyber island and develop a viable Information and Communication Technology (ICT) industry.

The presence of the regional headquarters of Microsoft on the island, together with other companies like IBM and HP, is highly significant. The planned cyber-cities are being financed by the Indian Government.

Already, Indian IT giants Infosys and Satyam Computers are investing in Mauritius in order to take advantage of the bilingual status of the Mauritian people to penetrate both the African market and Europe as well as America.

The 2002-2003 budget provides for massive public funding in education infrastructure, ICT, improvement of infrastructure and environment protection and management

In this connection measures are being taken to eliminate administrative bottlenecks and streamline procedures for issuing licenses and permits. The strategy is to market Mauritius both as an attractive investment location and a quality tourist destination. An Integrated Resort Scheme is being introduced under which high net-worth foreigners will be allowed to invest in luxury housing units within designated complexes.

Note: US$1: equivalent 29.54 Mauritian Rupees

Mauritius an island covering 1,865sq km is situated some 2,000 km off the coast of Africa. More than 150km of white sandy beaches and transparent lagoons are protected from the ocean by the world's third largest coral reef which almost surrounds the island.


Being of volcanic origin, Mauritius has a plateau about 400m above sea level. Mountains scattered throughout the island, fast flowing rivers, tropical forests and plants are other features that add to the natural beauty of the island.


The Portuguese were the first Europeans to have visited Mauritius at the beginning of the 16th century. The Dutch settled on the island in 1598 and named it after their ruler, Prince Maurice Van Nassau.

It was under the French Governor Mahe de Labourdonnais, that Mauritius experienced its first development: a harbour was built at Port-Louis, which became the capital of Mauritius. Port-Louis, being the safest harbour for vessels on their way to India, prompted the British to occupy the island in 1810. Indentured labourers were brought in, mainly from India to work in the sugar cane fields.

Mauritius achieved independence on March 12, 1968 and adopted a constitution based on the British parliamentary system. On March 12 1992, Mauritius became a republic and it continues to form part of the British Commonwealth.

Mauritius is a Pesidential democracy modelled on the British parliamentary system, which guarantees the separation of the legislative, executive and judicial powers.

The President is the Head of State and although executive authority is vested in him, he acts on the advice of cabinet in the government of the Republic of Mauritius.

The Prime Minister is the head of the government, and he wields considerable authority through his constitutional power to advise the President to appoint or remove Ministers or dissolve Parliament. The 62 members of Parliament are elected every five years by universal adult suffrage. Democracy is well entrenched in Mauritius, and all major political parties have parliamentary representation.
COPYRIGHT 2003 IC Publications Ltd.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2003 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Publication:African Business
Date:Jan 1, 2003
Previous Article:AGOA - the nuts and bolts. (Mauritius Forum).
Next Article:African airline of the year. (Air Mauritius).

Related Articles
Mauritius A role model for Africa.
African airline of the year. (Air Mauritius).
Mauritius: island unruffled by leadership change: the Indian Ocean state of Mauritius has recently been thrust into the spotlight as a result of the...
Southern Africa.
The dividends of good governance: a new IMF report suggests that weak institutions are a major constraint on economic growth in most African...
Island leads world in IT coverage: Mauritius is set to become the first country in the world to achieve nationwide wireless broadband access,...
In Africa, something new in the air: reform, and hope.
Mauritius leads but Kenya shows strength in depth.

Terms of use | Privacy policy | Copyright © 2019 Farlex, Inc. | Feedback | For webmasters