Prestigious Mauritian economic magazine Discover and Invest recently published an article from Business Alliance Managing Partner, Neellen Karuppannang, on the adoption of the fiscal responsibility act. Neellen has provided a summary of the article below, and you can read the article in French by downloading the PDF via this link.
The article was written before the presentation of the national Budget 2021/2022.
As background, it sets out the state in which the Mauritian economy is found. We referred to the three-headed monster, namely: the declining GDP level, the public debt equating that GDP and rising unemployment of youth and women. The tourism sector is at a complete halt, and the country attractivity as an IFC is fading. Our national currency is depreciating vis a vis other major currencies. The offshore sector has taken a severe blow as we are now on the grey list of the FATF, blacklist of EU, red list of UK.
We discourage any attempt to increase taxes and duties for the forthcoming Budget as this might curb economic growth. Instead, we propose stricter control over public expenditures to avoid waste of public funds as denunciated by the national audit report. We strongly advocate for a Fiscal Responsibility Act, transparency in government expenditures, adoption of good governance practices, the implementation of checks and balances from start to the end of major projects, and proactive expenditure control measures.
We also call for:
– a review of the financial incentives being provided to ailing companies, which would by all means die.
– funds to be henceforth channelled to support innovation and circular economy. We believe that creative destruction could become a growth lever.
In a nutshell, we suggest that the Budget should:
1) Bring profound structural reform of our economy;
2) Encourage the Mauritian diaspora to return;
3) Eliminate waste and the adoption of a Fiscal Responsibility Act;
4) Promote good governance and competence in all sectors;
5) Stop supporting lame ducks and zombie companies at all costs;
6) Support innovation (creative destruction) and the circular economy;
7) Apply the targeting for social welfare benefits;
8) Prepare a detailed action plan for opening our borders and welcome tourists. We suggest some measures which could be implemented like mass vaccination, resort bubbles, vaccine passport, etc.
9) Promote the emergence of a new generation of SMEs by creating an enabling entrepreneurial ecosystem;
10) Promote entrepreneurship education at the primary level like in Quebec;
11) Shake-up sclerotic agencies like the DBM & SME Ltd. These entities should be run by dynamic entrepreneurs;
12) Accelerate the digitization of:
(i) the public administration to render it more efficient and flexible;
(ii) public schools to give equal access to schooling to all Mauritian students during the pandemic.
All in all, we believe that the Budget can no more be reduced to a simple accounting exercise where we decide whom to tax (‘take’) and on what to spend (‘give’). We are calling to break with the old practices as we are now in a new normal. There is no more scope for window dressing. Strong and severe measures must be taken to reduce the waste of public funds; good governance practices should be adopted; promote competencies in all quarters, and give a boost to innovation and to professional SMEs.
