Making the Most of the Africa Opportunity

Mauritius starts with a strong position. It has been an economic success story and a beacon of hope in multicultural harmony in this part of the world. It has been an active international trader and forms part of the African Union and African regional bodies. All these strengths can be beneficially leveraged in the present context for us to reach our objective of being a serious player in Africa

The discourse about Mauritius being a platform between Asia and Africa has been around for a very long time. Until only a few years ago this was merely a slogan more than anything else, because in spite of the prevalence of some objective conditions they were not sufficient to turn the concept into anything meaningful.

Those conditions were principally that we are conveniently situated – geographically – between the two continents; we have an ‘edge’ over most African nations in terms of institutional frameworks (property rights, rule of law, democratic parliamentary system) and we have a ‘cultural mix’ in our population which could be leveraged for the purpose. The fact that we did well for ourselves and our highly vaunted ‘economic miracle’ also helped because many African nations would openly admit that they were quite keen to ‘learn’ from the Mauritian experience.

The conditions have remained more or less the same over the past years although it is clear that some of them are relatively less relevant to the extent, for example, that political governance has improved in many African nations and the Continent has registered a solid annual average growth of 5-6% over a continuous period of ten years.

As much as such conditions were necessary for Mauritius to realize its ambition of being a platform between Asia and Africa they were not sufficient. The real window of opportunity has opened up when the other missing conditions emerged over the past decade or so. Globalisation and the emergence of India and China as major global economic actors with liberalized regimes of inward and outward investments have now provided the missing piece of the puzzle.

Lucky “coincidence”

The lucky ‘coincidence’ lies in the fact that at the same time Africa on its part is ‘opening up for business’, as country after country is gaining enough self-confidence to engage with the global economy. Thus foreign direct investments in Sub-Saharan Africa leapt from $6 billion in 2000 to $34 billion in 2012. Countries such as Angola, Namibia and Zambia have successfully issued external debts for the first time, allowing them to raise funds from the international markets to invest for the future.

Enough is being written about the successes and promises of the African economies for us not to dwell any longer on this matter here. However, one still needs to correct an erroneous impression that the overwhelming part of the FDI in African nations is going only to extractive/mineral industries. A rising middle class is spurring investments in the form of shopping malls, spas, fast-food chains as well as better education and health services from the private sector. McKinsey estimates that consumer spending on the African continent will grow to $1.4 trillion by 2020, up from $860 m in 2008.

It is against this new backdrop that we need to reconsider how to position ourselves so as to take advantage of these new conditions for achieving our ambitions of being a significant regional economic player. Unfortunately a cursory look at the literature on how nations are able to take the lead in a global or even regional context is not very encouraging.

Professor Michael Porter who has carried out extensive studies on the Competitiveness of Nations is quite adamant about the notion of size and concludes that small peripheral nations have little chance if any of taking the lead or even a ‘dominant’ role in regional configurations.

This will not be the first time that Mauritius is being given the opportunity to prove an eminent Professor wrong (remember Prof Meade in the 1960s). The real challenge for Mauritius is therefore to build the capacity to think creatively about how to leverage its strengths in order to succeed in taking maximum advantage of the new situation arising both in Africa and Asia, even when it is not in a dominant situation.

The areas of interest are basically in two categories. First it is a matter of identifying those opportunities (markets and investments) where Mauritian firms can grow their footprints on the Continent. Market opportunities will cover not only trade in goods but also trade in services such as export of professional services (those of doctors, accountants, teachers, etc.) As for export of goods these also include products which are not of Mauritian origin but which are re-exported through the Freeport.

The other avenues being of course the setting up of Mauritian owned or joint venture businesses in such sectors as financial services (banking, insurance and leasing) as well as tourism and the booming real estate sector.

The second area of interest is about putting the physical assets (infrastructure including Internet connection) as well as knowledge capital accumulated locally to good use to attract foreign companies which are proposing to invest in Africa to use Mauritius for structuring their operations and headquartering their facilities.

In fact a little of all the above has already started for some time now. On aggregate the presence of Mauritian firms on African soil has been a relative success story especially when one considers that this has been the result of mostly private and ’independent’ initiatives.

Africa Fund initiative

What we are suggesting here is that it is time to build on that experience and for government to design a comprehensive set of policy initiatives which will facilitate and boost such efforts to a scale which will make it a significant contributor to the local economy. To that effect the Africa Fund initiative which provides financial support to companies which are venturing into Africa is a laudable one.

There are two sets of issues which need to be carefully examined if we are to achieve the above goals. The first set is more generic and can be grouped under the heading of installing Transmission Mechanisms between the Continent and Mauritius. What immediately comes to mind is of course improved physical connectivity — air and sea transport — which facilitate movement of goods and people.

This is a critical factor that will surely create many interesting opportunities for building bridges between African nations and our island. Unfortunately it must realistically be considered rather as a mid-term objective although it is highly desirable that at least serious studies should be initiated right now.

This leaves us with the other softer options including the strengthening of institutional and political links — increased diplomatic presence — reinforcing cooperation and exchange at the cultural and educational levels as well as increased people to people links.

Mauritius has many assets which it can leverage in this endeavour. We have been an open, commercially driven economy for more than two centuries. Our long history of engagement with Europe and the diversity of our population hold good promise of an experience which can be adapted to the new circumstances of the day. The problem of logistics notwithstanding the tyranny of distance is now being substituted by the opportunities of proximity.

Over and above these generic propositions there are more sector specific measures which need to be put in place. Tailored support such as fiscal and other forms of incentives to kick-start projects in Africa will have to be worked out. Such incentives are normally required every time government wishes to do away with ’path dependence,’ that is when trying to entice entrepreneurs away from the comfort zones of what they know into the more risky unknown.

Mauritius starts with a strong position. It has been an economic success story and a beacon of hope in multicultural harmony in this part of the world. It has been an active international trader and forms part of the African Union and African regional bodies. All these strengths can be beneficially leveraged in the present context for us to reach our objective of being a serious player in Africa.

* Published in print edition on 26 September 2014