Halt The ‘Genocide’ of the Small Sugar Cane Planting Community

Masking reality

The intrinsic lack of competitiveness of exports cannot be fixed by stop gap measures and windfall revenues related to currency rate adjustments

The world is today materially different from what it was in 2000. With the emergence of China and India as economic giants, there has been a shift of economic gravity to the East. China started its ascent in the galaxy of the world’s top economies in the 1990s. India appeared on the screen by late 2000s. According to forecasts by the United States Department of Agriculture, China and India are expected to become the second and third largest economies after the United States in a bit more than a decade, by 2030. Japan is forecast to be in fourth position.

Last week’s Economist highlights that India ranks 130th in the World Bank Ease of Doing Business standings, suffers from poor infrastructure and distribution networks and has a huge informal economy. Yet, the listed Indian firms have, thanks to their business entrepreneurship in a complex marketplace, registered an average return on equity (ROE) of 19% since 2011 which is eight percentage points above the figure for companies in rich markets and five percentage points above those in emerging markets.

The 2008 international financial crisis and its lasting aftermath have also taken their toll in our main markets in Europe and the US in terms of stunted growth rates, unemployment and social distress resulting in the emergence of grassroots political movements which have recently rocked Europe and the United States. The situation has been exacerbated by the diktats of economic liberalism and its disputed policy responses comprising stringent austerity measures which failed to conjure the financial crisis, deepened inequalities, heightened the distress of the common man and generally thwarted the legitimate aspirations of the people.

This is epitomized by the Oxfam findings released earlier this year that just eight men own the same wealth as the 3.6 billion people who make up the poorest half of humanity and that seven out of 10 people live in a country that has seen a rise in inequality in the last 30 years. Inequalities undermine business. The upshot is that voices are being raised by a new wave of political leaders such as the US senator Bernie Sanders for a new socio-economic order anchored on narrowing inequalities, inclusiveness and the imperative of addressing the daunting challenges of global warming and climate change by replacing fossil fuels and highly polluting coal by renewable and green energy sources.

The world has again been jolted by the raw reality of climate change by a series of climatic calamities which have caused havoc and widespread distress among the people across the world in recent months. Unchecked spoilage and wanton depredation of nature and our planet over decades are provoking Nature’s own Armageddon. Floods and landslides caused by severe weather in Southern China and Peru, extensive floods in India, Sri Lanka, Bangladesh and Nepal caused by monsoons as well as the immense damage and destruction wreaked by hurricanes Harvey and ‘monster’ cyclone Irma in the Caribbean and the US are potent reminders that the world urgently needs to take the necessary steps to reverse the destructive fall-outs of climate change. The bill for Harvey is estimated at a whopping US$180 billion against the US 120 billion spent for cyclone Katrina in 2005.

The policy thrust of the Donald Trump presidency and the seismic impact of the Brexit vote are also making matters worse. The Pound sterling has fallen by some 11% against the dollar and by about 15% against the Euro since the UK voted to leave the EU in the June 2016 referendum. The dollar has also fallen by some 12% against the Euro since Donald Trump was sworn in as President in January 2017. It must be said that markets love a weak dollar.

A new rigour

International trade liberalization and the abolition of guaranteed rent providing preferential agreements have imposed a new rigour on economic actors to be above all competitive and to continuously go up the value chain to survive. It also means moving the weight of the economy from an agricultural and manufacturing base to a high value added services sector and a higher income based economy.

Owing to higher local costs resulting from higher standards of living, key companies across the world have for decades now delocalized their primary and manufacturing activities abroad in order to take advantage of competitive advantages overseas to remain viable and stay in the business. The world corporate history is full of examples of such strategic delocalization. For example, electronic equipment, household appliances, textile or car manufacturing industries, etc., have all been delocalized abroad to take advantage of comparative advantages.

Similarly, key operators in the local textile sector have since some years already delocalized important sections of their activities abroad. Such strategic moves overseas obviously reduce the quantum of our exports. Others have invested in opportunities in their core businesses such as in the sugar sector, overseas. However, what is most important is to ensure that the re-engineering of the economy towards the higher value added services based sector significantly improves the fundamentals of the economy and generates higher growth, employment, standards of living and inclusive prosperity.

All these game changing developments are important and material elements of the new world economic reality which must be factored in by economic actors and government while framing corporate strategies and national policies. For government to be able to frame sound policies, they need to ensure that they fully grasp their facts and figures obtained from various reliable statistical sources and, above all, have the technical understanding and intellect to be able to sort the wheat from the chaff. One of the galling disappointments of the government has been its inability to do so. They have too often swallowed hook, line and sinker all the flawed proposals of vested lobbies in the teeth of objective analysis and the holistic interests of a sector and all its stakeholders.

Halt the genocide

Last week’s stop gap measures in favour of the sugar sector are the latest case in point. They neither address nor resolve the fundamental problems of annual losses incurred through falling revenue by the sugar planting community nor provide a parity of treatment to them in terms of remunerative revenue streams from the various sugar cane industry ventures using their by-products as feedstock, instead of the pittance obtained presently. It is only a parity of treatment and fairness in respect of their sugar cane revenue and the exemption of taxes to realize their land assets and tap market opportunities available which is going to halt the ‘genocide’ of the small sugar cane planting community over recent years under the watch of successive governments clamouring to safeguard their interests.

Isn’t it also time to stop the hollow pro small planter rhetoric which masks the reality behind such measures? Based on 2016 crop production figures and dwindling numbers of small planters, only some 9% of the Rs 700 million earmarked last week to prop the sugar sector will benefit the small planters owning up to 1.99 hectares (4.92 acres). Some 2.3% of this sum will benefit producers owing between 10-99 hectares (24.7-244.6 acres) whereas producers owning more than 100 hectares (247 acres) and millers in the corporate sector will obtain some 82% of the sum. Every government measure tom-tommed on a small planter rhetoric but applicable generally to all producers is apportioned accordingly.

 La roupie forte

 La roupie forte has once again become the leitmotiv of the institutions of the private sector and Business Mauritius. This red flag has been brandished so many times before. La roupie forte has been repeatedly pilloried for basically being responsible for all the sins of Israel and corporate difficulties. This glib slogan masks reality and the fact that both the US dollar and the pound sterling have fallen in absolute terms owing to the adverse fallouts of the Donald Trump presidency and Brexit. The upshot is that even the Euro has appreciated against both falling currencies.

Currency cannot tweak or be an arbiter of competitiveness. The intrinsic lack of competitiveness of exports cannot be fixed by stop gap measures and windfall revenues related to currency rate adjustments at the expense of the country’s economic fundamentals, the stakeholders of a much diversified economy and consumers in an import dependent country.

The liberalized world trading order basically means the survival of the fittest, the most entrepreneurial and efficient and the most innovative to stay ahead of the game. Crying wolf every time operators cannot match competition or seeking tenuous lifelines to keep their heads above water is not a sustainable option for the future. Doing so is tantamount to admitting being out of one’s depths to be viable in a more competitive marketplace.

It is time to show our true mettle and successfully adapt to the new ball game. Akin to the emerging economies, we cannot miss the boat.

 

  • Published in print edition on 15 September 2017

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