The Democratisation Agenda

Yes, but with a clear objective

The government stated its objective to ‘democratize’ the economy since it last went for elections. The recent digging up near the beach of Trou aux Biches with a view to construction of a restaurant by a newcomer on the business scene has raised eyebrows in certain quarters. The latter consider this development to be a political favour but they don’t go as far as to prove that this is actually so or that the necessary transparent procedures were not followed in this case before allocating on lease this piece of public property to the said businessman. In retaliation against those remarks, the Prime Minister stated that he has asked the Minister of Finance to accelerate the process of ‘democratisation of the economy’ in the coming years.

An expression such as ‘democratisation of the economy’ may denote different things to different persons, depending on the perspective from which you are looking at it. In our view, it should apply to a situation of regular flux on markets so that those who are able to generate sustainable economic growth and steady employment, given a fair chance to all potential players, should be empowered to overcome the obstacles which hold them down from contributing to increase the potential of the economy. In a small place like Mauritius, the economic mission can be no other than to go out and conquer markets. This is achieved by expanding the scope of the economy. Whoever can do this, black or white, brown or yellow, short or tall, slim or fat, whatever, should be given the affirmative action chance to make the breakthrough for the sake of growing our economy. In this sense, ‘democratisation of the economy’ is a neutral term denoting the removal of blockages so that the best and newest come up on the top.

In theory, Mauritius provides a platform for everyone who is capable to engage in business activity to do so. We are a market economy. In practice, there is a dense thicket of interconnections in the way business is done in different sectors with the result that the same persons who have, historically, captured the heights of the economy each time there is an interesting big new opportunity to do profitable business, do so over and again. Others are incapacitated right from the start. The resulting status quo means that none other than the existing capitalists make inroads into business in any meaningful sense. In fact, traditional capitalists go on extending their scope in almost anything incremental coming up in the business field to the exclusion of potential “intruders”.

One example is the rapid growth of Independent Power Producers (IPPs) since the late 1990s; policies were, as it were, tailor-made for a handful of our classic entrepreneurs to take over the production of electricity which had so far been the sole preserve of the CEB. No doubt, it was easier for someone already engaged in the sugar industry to go for coal-bagasse-thermal power producing plants than for all the rest of the population who had neither the connections nor the financial linkages to be able to invest in this lucrative and profit-guaranteed business. The coming on of the IPPs amounted to a consolidation of the traditional economic elite and, by the same token, a distancing from the main economic pillars of others, who might have aspired to share in the new development whereby the CEB was being dismantled for the benefit of a few. Unless something changes in the overall framework, the same economic elite will take on the next economic opportunity that arises without bringing benefits to the population at large. This style of economic development has nurtured a business-foreclosing and rent-seeking mentality among the handful of our established business class.

If you look at the structure of company holding in the West over time, you will observe that many are here which dominate the scene or are in the process of climbing up the ladder, which were not here yesterday. Google, Microsoft, Yahoo!, Apple, Dell, DHL, Wal-Mart, Sainsbury’s, Tesco, Caterpillar, Nokia, Ericson, MacDonald’s and several others: these are all new names that did not exist only decades ago. Similarly, many start-ups of yesterday have moved up from their lowly stations and made a name not only in the West but have actually spread out from over there to the rest of the world. It will be recalled that the American giant Apple had its beginnings in a garage. The order in which global companies appear in ‘Fortune 500’ keeps changing as newcomers head for the top.

But the coming on stage of new enterprising firms is not limited to the West; there are Japanese, Chinese and South Korean firms which have appeared on the firmament of entrepreneurship from nowhere. Today, Toyota, Huawei, Samsung, among several others, have become common household names and their dominance of global markets is no less as compared with their western counterparts. In such entrepreneurial places, there is a constant churn of business enterprises. New ones come on stage; old ones which failed to adapt moved out of the screen.

It will be recalled that only some decades ago, when global financial markets were taken up with the craze for mergers and acquisitions, firms bought up other firms at a frenzied pace unseen before. Many added such clumsy collections of business lines to their core activity in the process that they could not manage it and went under; others unbundled themselves before disaster struck and were able to survive in leaner outfits. In contrast, there are businesses – could be as simple as watch-making in Switzerland or precision-engineering in Germany– which were not engulfed by such greed to keep “extending the empire”. They have survived splendidly. In Mauritius, the tendency has been for big firms to pick up every brick and mortar they can lay their hands on along their growth path, leaving nearly nothing to others. Such greed by our top business leaders to accaparate all for themselves alone will not unleash the entrepreneurial dynamism we should have been fostering to make new breakthroughs.

It will be recalled how the Alcodis project of Roland Maurel to produce ethanol had its wings clipped. It was as if he should not be allowed to join the ranks of the magnates in our business class. In the meantime, most of Brazil’s vehicles are running on ethanol or a mix of fossil fuel and ethanol since a number of years now. We have kept exporting our molasses to others who, if they wished, could use it to produce ethanol on their own. This kind of foreclosing to prevent “others” from entering the select narrow local club or to fill only specific pockets damages the country’s potential. If ‘democratisation of the economy’ would go in the direction of breaking such attitudes and giving a fair chance to the “others” as well, it would not be economically damaging. Quite the contrary.

It is important to bear in mind however that when we aim at bringing up more and newer entrepreneurs to do business by the process of ‘democratisation’, the businesses should be viable and sustainable over time. That calls for good, disciplined and knowledgeable management and an unflinching attitude of adapting to the market. It will be recalled in this context that the DBM has recently had no alternative than to write off a large number of relatively small loans given to SMEs in particular. Why? Because either those SMEs were mismanaged or failed to evolve along with market demand.

While businesses of all sorts and sizes can fail, it is extremely important to keep ‘emerging’ businesses from failing as this could send the bad signal that they were solely conduits for mishandling of resources without making a strict business sense. This will stand in the way of such activities coming up in sufficient numbers and at well-established maturity levels to make a difference eventually to the classic concentration of dominant business houses that has otherwise been our lot.

* Published in print edition on 14 September 2013