“The MSM will not require close to 50% of votes to win the elections. It simply has to win where it matters”

Interview: Rama Sithanen, Former Minister of Finance

* ‘For the Opposition to secure victory, the Labour Party must persuade enough voters in the North, East, and South regions to shift away from the MSM’

* ‘Inflation, the worst enemy of the population, has become the darling of the Minister of Finance’

In an insightful interview with Rama Sithanen, former Minister of Finance, we delve into the critical issues shaping the country’s economic landscape amidst political maneuvering and electoral strategies. Against a backdrop of escalating feel-good measures by the current government, Rama Sithanen offers a stark assessment of Mauritius’ economic health, highlighting the stark disparities between official narratives and economic realities. With a keen focus on sustainability and structural reform, his perspectives cut through the haze of electoral promises to address the urgent need for economic stability and resilience. His analysis provides a sobering reflection on the challenges ahead and the imperative for decisive action to safeguard Mauritius’ future prosperity. Additionally, Rama Sithanen shares astute observations on the dynamics of the upcoming elections, emphasizing the complex interplay of rural-urban divides, economic policies, and voter sentiment that will define the political landscape in the coming months.

Mauritius Times: The MSM-led government has heavily relied on feel-good measures over the past five years, and even since 2014, despite disapproval from the IMF and local critical voices, in order to cultivate an electoral base and secure election victories. The recent budget, along with anticipated announcements, appears poised to escalate this strategy further. How far can it go without plunging the economy into serious trouble?

Rama Sithanen: The economy is already in dire straits if we consider the true figures of GDP, budget deficit, public debt, export of services and foreign exchange reserves. And the money illusion effect. These key macroeconomic indicators are being cynically doctored to hide the reality.

The very beneficiaries receiving these ‘feel-good measures’ are paying an extremely high price with inflation, loss of purchasing power, rupee depreciation, more taxes, new taxes, a scarcity of foreign exchange and an official black market.

In addition, the population is also being hit substantially with higher VAT revenue and other indirect taxes rising very fast in an economic model based on high consumption, high imports, high depreciation, high inflation, high taxes and high debt. This is clearly unsustainable.

* However, most people are not economists and do not understand these technical issues such as money illusion and foreign exchange deficits. They often only perceive the feel-good measures, don’t they?

There is an immediate payback already. The population feels the exorbitant prices when they go to buy foods. And the lack of foreign exchanges when they carry out daily operations and transfers. The fiscal and monetary expansion have poured gasolene on the flames of inflation.

The Minister’s toxic mix of these two policies is responsible for 75% of inflation for the last three years. Only 25% of inflation is due to external factors. The prices of some basic necessities have soared by over 20% in twelve months. So, people realise that they are being fooled by higher pensions that are immediately engulfed by higher food and medicine prices. Inflation, which is the worst enemy of the population, has become the darling of the Minister of Finance.

There is a conspiracy of silence about the costing and funding of these measures. The opacity is driven by their unsustainability. They have not been adequately costed, and we do not know how they will be funded in the future.

* Regardless of the outcome of the upcoming elections, if your assessment of an impending economic crisis due to the current government’s populist measures, as evoked by you in a recent radio interview, proves correct, what are the key economic priorities that the next government should focus on, and what policies could effectively tackle these challenges?

All economists worth their salt will tell you that the current economic model is unsustainable, as it is based on the illusion of money. We are trapped in a vicious circle and cycle. To address these structural challenges, we need comprehensive structural reforms and economic adjustments, along with the right combination of fiscal and monetary policies.

In his budget speech, the Minister has ignored the key problems facing the country, both in the short and long term. In the short term, there’s nothing on how he will deal with inflation, depreciation, lack of foreign exchange, shortage of workers to run the economy, and nothing on how he will improve the effectiveness in the implementation of measures so that they do not remain ‘des effets d’annonce’.

The Bank of Mauritius (BOM) must intervene to supply USD, it should stop the colourable device of ‘T1 and T2 forward rates’ which is basically an official black market. The Governor should also apply pressure on some corporates that are hoarding foreign currencies for purely speculative purposes. He must also rein in short-term USD/MRU swaps that are distorting the market.

On the other hand, there was no mention in the Budget Speech of how to build a robust, resilient, and sustainable economic future. There was no strategy presented to address pressing issues such as the demographic challenges, climate change, the skills gap, and the significant migration of talent, nor was there any plan for the crucial transition towards technology and AI. Additionally, we have not developed a single new sector for a long time. How do we diversify the economy and elevate it through upmarket transformation? Equally important, how do we enhance productivity, bolster competitiveness to maintain relevance, and establish internal and external buffers to mitigate unforeseen economic shocks?

If we do not address these key issues and do not introduce economic reforms, we are heading towards a major economic crisis like in many other countries such as Ghana, Sri Lanka, Argentina and Greece. How long can we use the depreciation and inflation as an adjustment residual? It is only a question of time before the shit hits the fan.

The severity of the crisis will depend on the duration of the government’s irresponsible actions. If prolonged, it may compel intervention from the IMF, resulting in shock therapy measures that could disproportionately impact the poor and middle-income classes.

* Do you think it’s time to reconsider policies aimed at attracting foreign direct investment (FDI) in the real estate and property development sectors? It seems that these one-off investments in our land-constrained country haven’t had a significant impact and are affecting our food security. What are your thoughts on this?

An extremely high share of FDI is in real estate development. The World Bank has stated that property development is a relatively low productive sector with low multiplier effects. It benefits very few corporates that convert agricultural land into property development, and they gain from tax advantages. However, there is very little FDI into productive and strategic sectors. It is plain that real estate development is crowding out both the nation’s food and energy security.

The food security and renewable energy strategy of government has failed to deliver on its agenda. Neither in terms of import substitution in some key vegetables and fruits, in milk and meat and in agro-processing, nor in terms of lowering the share of fossil fuels in our energy mix.

We urgently need a drastic change in strategy to enhance food security and reduce our dependence on fossil fuels. The corporate sector, which owns most of the land of the country, bears a responsibility to increase investment in agricultural production and energy security.

Short of a land reform, we need a land use reform to have a fair balance among the competing uses of land for food security, renewable energy, real estate and other development objectives.

We have to tweak the tax and subsidy equation and the incentive framework to achieve balanced and sustainable socio-economic land development, as we have successfully done in the past. For every acre of land converted for property development, we should allocate areas for food security and renewable energy, which also require land.

* There is also the pressing issue of climate change and its profound impact on our tourism industry. What immediate and long-term measures do you believe are essential for mitigating these effects and ensuring long-term environmental sustainability?

Tourism and climate change have a reciprocal relationship. On one hand, tourism, particularly long-haul destinations like Mauritius, significantly contributes to climate change as one of the largest emitters of greenhouse gases. On the other hand, climate change effects such as rising temperatures, sea level rise, beach erosion, and coral bleaching threaten tourism infrastructure and the attractiveness of the industry. Therefore, it is imperative that we thoroughly analyze the current and future impacts of climate change on tourism to design adaptation strategies aimed at mitigating these impacts and promoting sustainable tourism. Simultaneously, we must adopt a new tourism model to reduce tourism’s impact on climate change. Urgent measures are needed, including adaptation policies, mitigation efforts, and building resilience.

The strategy must absolutely take into account the current and future economic, social and environmental impacts, the carrying capacity in terms of infrastructure while meeting the needs of visitors, the tourism industry, the environment, communities, and the nation as a whole. It must be driven by national interests and the need for resilience and sustainability. The industry must also be more inclusive and must open up the circle of opportunities to our deserving children.

It’s evident that Mauritius’ current linear tourism model, focused solely on metrics like tourist numbers and gross earnings, is flawed and unsustainable. This approach will simply impair the unique selling proposition of the sector as it contains the seeds of its own destruction. Also, its net contribution to the economy after we factor in the very high leakages is relatively modest. We urgently need to adopt a new business model centred around low-impact, high-value-added tourism. This model should prioritize moderate growth, high-end tourism, increased net earnings, market diversification, resilience, and enhanced local production support. It’s crucial not to bury our heads in the sand by resorting to greenwashing tactics while perpetuating an outdated model.

* At the end of the day, as you are aware, good economics alone do not ensure electoral victory; good politics does. The MSM did it in 2014 and again in 2019, with feel-good measures playing a significant role on both occasions, much to the discomfiture of the Labour Party and the MMM, whether in alliance or separately. Have circumstances today changed enough to prevent a recurrence of those earlier victories?

Yes and no. While circumstances and context are different, it will still be a close contest driven essentially by two key factors: a rural/urban divide and the positive pocket vote versus the negative purchasing power vote. Crucially for the Opposition, there will not be a three-cornered fight as in 2019 even if in some urban constituencies there will be some fragmentation in the anti-MSM votes with third party participation.

The big question is whether the MSM can win a majority with only 37% of national votes as in 2019. There is also the anti-incumbency factor as it has been in power for a long time, and many people want change. There is revulsion against some of policies of the government in terms of democratic backsliding, allegations of fraud, corruption, cronyism and institutional decline. However, very few people vote on these niche subjects as most are concerned with bread-and-butter issues and who offers more in the electoral auction of freebies. The Achilles’ heel of the government is likely to be the severe loss of purchasing power and the drug scourge.

The governing alliance will play its trump cards and we all know what these are: its flagship social measures and its infrastructure achievements. There is clearly a pocket vote as many will vote the government because of these generous and targeted social measures. Especially the old and the low-income groups. This will be counterbalanced by the negative purchasing power vote in favour of the Opposition and the change factor. The MSM will weaponise its comparative advantage in the 4 to 14 constituencies.

We should not ignore that around 50% of voters are still undecided. They need to be ‘seduced’. Besides the core electorate of the two main alliances, many voters have become cynical, perceiving little difference in actual policies between them, viewing elections as merely a change in who runs the country. However, while anti-incumbency sentiments might favour the Opposition, it may not be sufficient to cross the line. The ruling party will vigorously defend its position, especially in a two-party race where the stakes are higher. The Opposition knows the playbook of the MSM very well.

* How do you think the next elections will play out between the MSM and the LP-MMM? Will the MSM be able to have more than 37% of the votes to win the election in a two-cornered fight? Or will change prevail with a united LP-MMM opposition?

Too early to call as there are many uncertainties. Many people ask me this question and seem to believe that the MSM needs close to 50% of votes to win in a two-cornered fight. This is absolutely false, and the Opposition has to be very careful about this. It needs to win where it matters. PEROID.

I follow elections across the world. What matters in a First Past The Post (FPTP) system is not national vote but the distribution of votes in each of the 20 constituencies. I keep telling people who care to listen that the MSM can win the elections with around 40% of the national vote. Let me explain in very simple terms. Electoral experts characterize this as a combination of the geography of votes and wasted votes. It can only happen in FPTP system which we have.

While the MSM polled 37% of national vote in 2019, there was a colossal urban/rural divide between its 30% of vote in constituencies 1,15,16,17,18, its 25% in constituencies 19 and 20 and its 20% of vote in constituencies 2 and 3. However the MSM obtained more than 40% of votes in 4, 5, 6, 12, 13 and 14, more than 45% in number 10 and 11 and around 50% in constituencies 7, 8, 9.

The PM was elected with 57% of votes in number 8 and Hurdoyal with 55% in 10. Maudhoo in 9, Gobin in 7 and Jagutpal in 13 were all elected with over 50% of the votes. Seeruttun in number 11 and Callychurn in 5 won easily with over 45% of the votes.

That makes a total of 7 constituencies already and if the MSM holds its 2019 tally, it can potentially win around 19 to 20 seats out of 21.

One can do a similar exercise in constituencies 4, 6, 12 and 14 and show that they will be tightly contested.

On the other hand, Osman Mohamed in number 2, Shakeel Mohamed in 3 and Bérenger in 19 were returned with over 50% of the vote.

As usual, averages hide many key regional differences which are critical in election strategy.

* How will the distribution of votes across different geographical areas, including wasted votes, influence the electoral strategies of the two main alliances? And which alliance is likely to benefit more from this dynamic?

It seems to me that there will be almost the same pattern of the geography of votes and wasted votes in the forthcoming election. The intensity and amplitude may differ. The MSM knows it extremely well and will craft its electoral strategy around this rural/urban divide. Looking at how candidates are being fielded, I am not sure the Opposition fully grasps the significant implications of this divide in the geography of votes and wasted votes. At its own risks and perils.

Dr Ramgoolam and the LP need to be extremely careful and vigilant about the ramifications of this phenomenon in mapping out his strategy and tactics. For the Opposition to secure victory, the Labour Party (LP) must persuade enough voters in the North, East, and South regions (commonly referred to as belt 4 to 14) to shift away from the MSM. This is crucial as the MMM is relatively weak in many rural constituencies and has even forfeited deposits in some. The support is more balanced in urban ridings between LP and MMM. This is the cruel reality of electoral maths. It has been like this since 1967 and it is unlikely to change except with a few 60-0. And if it is not well understood, it will have devastating consequences.

So clearly the MSM will not require close to 50% of votes to win the elections. It can do it with around 40%. It simply has to win where it matters. Hence the putative strategy of the MSM in the 4 to 14 cluster. There’s nothing mysterious about it — simply concentrating where its electoral strength lies.

The PM will focus heavily on winning most seats in the 4 to 14 belt (33 seats) and will try his level best with his partners and may be the PMSD to take some urban seats, especially where the MSM polled more than 30% of the votes in 2019 (1, 15, 16, 17, and 18) and in case the LP-MMM makes strategic blunders by fielding weak candidates. The split in the anti-MSM vote in some urban constituencies (four-cornered fight in some ridings) may lower the bar for the MSM to win some seats in urban ridings.

* But just like in 2014, it may require more than electoral arithmetic to win the next elections. Do you believe the Opposition alliance has what it takes in terms of leadership, the right team and front bench, innovative ideas, and effective campaign tools to make it this time round?

More than electoral arithmetic, it will depend on how the LP-MMM candidates are aligned in the 20 constituencies. Few are straightforward, some are slightly difficult while some are highly complicated. Assuming all else remains constant, winning requires aligning candidates to maximize electability by leveraging the synergy of their respective socio-demographic allegiances. It’s no secret where each party draws its support, and this must be carefully reflected in candidate selections. This attention to detail is granular but crucial. The MSM campaign will be based of this too.

Besides Ramgoolam and Bérenger, we do not know who will be in charge of key ministries, especially Finance, the composition of the front bench and some other key appointments such as President and the Speaker. We are not aware of the candidates that will be fielded across the 20 ridings. It has not published its manifesto yet except for the 20 measures announced by Dr Ramgoolam on 1st of May.

For the time being it is campaigning on the ‘change’ slogan. More a negative vote than an affirmation vote. The Opposition will need more than revulsion and negative vote to win the elections. It needs a conviction vote, a vote of hope that things will be different in terms of form, style and substance. We have not seen this yet.

With the geography of votes and wasted votes, it is possible for the MSM to lose the national popular vote and still win the elections because of the 4 to 14 phenomenon and many wasted votes and split votes in some urban constituencies.

The MSM will heavily rely on the several social measures to aggressively campaign for another term in office. It will also highlight its infrastructure achievements. It will likely announce other measures such as addressing the wage relativity discrepancies in the public and private sectors, decreasing the price of mogas and even granting an exceptional 14th month bonus in 2024.

Politically the MSM will forcefully deploy an arsenal of firepower to vilify Ramgoolam, Berenger and Mohamed, to appeal strongly to identity politics in the belt of constituencies 4 to 14 by arguing that Berenger will run the country and not Ramgoolam. It will also use, if not abuse, the state apparatus, the MBC and its huge financing capability. Pravind Jugnauth will also campaign that he represents stability as he is the only boss on board compared to the bicephal or tricephal leadership of the current opposition. So, the LP-MMM should factor these into their broad strategy and their granular tactics.

The LP-MMM manifesto should highlight the key differences in policies. Many have become cynical and will say that both will have the same policies in government while not acknowledging it during the campaign. As there is little perceived difference in actual policies, the Opposition absolutely needs to make the difference on renewal and competent faces and a fair number of female candidates to reflect the legitimate aspiration of 50.5% of the population. It must have the right balance in terms ofmen and women, those with experience and expertise and those with competence, innovative ideas and passion. It will be difficult for the Opposition if it does not field enough women and youth as the MSM already has 5 women Ministers and will likely have many women candidates. Diversity is important as women and youth know their rights.

The Opposition manifesto must distinguish itself from the governing alliance’s on critical issues such as education, health, drug, the environment, the management of the economy and many other issues. In substance and not in rhetoric only. There will not much difference in terms of social measures as it will be an auction between the two. However, the Opposition, like in the UK, will be under more pressure to clarify the width and depth of its goodies, their costs and how they will be funded. I hear it every day, especially among the 50% of the population who have not yet decided and are also weighing their options for the upcoming elections.

As far as campaign tools and means are concerned, the Opposition has a major hurdle as the MSM has both the money and the institutions to sell its ideas, especially after the almost blank cheque given by the judgement of the Privy Council.

Mauritius Times ePaper Friday 28 June 2024