Transparency, Accountability and the MIC

Editorial

The global economic devastation wrought by the Covid-19 pandemic compelled governments to undertake unprecedented fiscal interventions. Financial packages worth trillions of dollars were deployed to support livelihoods, save jobs, and stabilize economies. While this strategy helped prevent immediate economic collapse, it also raised serious questions about transparency, accountability, and the equitable use of public funds. For Mauritius, a small island economy with limited resources, these concerns resonate deeply.

The creation of the Mauritius Investment Corporation Ltd (MIC) as a Special Purpose Vehicle under the aegis of the Bank of Mauritius (BOM) epitomized the government’s response to the pandemic’s economic fallout. Backed by an initial allocation of Rs 60 billion, later expanded to some Rs 80 billion, the MIC aimed to mitigate systemic risks to the banking and financial sectors while supporting “distressed” companies. Since the monies came not from the BOM reserves, it was the equivalent of printing money on a massive scale, which was to have dire consequences down the road (devaluation of the currency, impairment of BOM’s financial standing, spiralling cost of living, etc). Moreover, from its inception, the MIC’s operations have been cloaked in opacity. Public concern and criticism grew louder, particularly as questions remained unanswered about the criteria for disbursement, the beneficiaries, and the outcomes of this significant injection of public funds into the economy.

Public funds are, by definition, a national asset. Whether raised through taxation, borrowing, or central bank disbursements, these funds belong to the people and should be utilized with the utmost care and accountability. When these funds are deployed to save private enterprises, it becomes even more imperative to establish and enforce clear rules and conditions to ensure their effective use. Democracy demands that public money be spent in ways that are transparent, fair, and consistent with the public interest. Unfortunately, the MIC’s track record falls short of these expectations. Despite assurances that the MIC would operate with full transparency, its operations remained shrouded in secrecy, with officials often citing confidentiality clauses as a reason for non-disclosure. This lack of openness is not only counterproductive but also fundamentally undemocratic. The public deserves to know how their resources are being used, especially when those resources are being deployed to support private enterprises.

The principle of burden sharing must underpin any bailout of private enterprises using public funds. It is unacceptable for governments to socialize losses while allowing profits to remain privatized. If public money is used to save a company, that company should be required to make sacrifices and demonstrate accountability to the public. This approach not only ensures the fair use of funds but also helps to maintain public trust and support for government interventions. In an earlier interview to this paper during the time the MSM was at the helm, Rajiv Servansing outlined a framework for conditionalities that should govern the allocation of public funds to private enterprises. His suggestions included requiring companies that previously distributed substantial dividends to shareholders to call on those shareholders for recapitalization before seeking state aid. He also argued that companies receiving soft loans or other financial support from the state should suspend dividend payouts until those obligations have been fully repaid. Additionally, the state should have the right to convert part of its financial assistance into equity stakes in these companies, ensuring that public funds are not only a temporary lifeline but also a long-term investment in the nation’s economic future. Rajiv Servansing further recommended prohibiting share buybacks and involuntary redundancies for as long as companies remain indebted to the state. These conditions represent a balanced and fair approach to ensuring that public funds are used responsibly and to the benefit of the entire population.

Despite these compelling arguments, it would seem the MIC has failed to adopt or enforce such rigorous conditionalities. The lack of transparency surrounding its operations exacerbates concerns about its effectiveness and fairness. Dr Rama Sithanen, the current Governor of the Bank of Mauritius, recently disclosed that Rs 56.8 billion of the MIC’s funds had been disbursed to 60 companies as of September 2024, with Rs 23.6 billion still available. While this disclosure provides some insight, it raises further questions about the evaluation criteria used to select recipients, the mechanisms for monitoring the use of funds, and the MIC’s capacity to recover its investments.

Moreover, the argument that confidentiality clauses prevent the disclosure of information about the MIC’s operations is both unconvincing and troubling. The MIC’s capital originates from the Bank of Mauritius, a public interest entity. As such, it is subject to public accountability. Secrecy in the use of public funds creates fertile ground for suspicion and mistrust, even if wrongdoing has not occurred. The perception of corruption or favouritism can be as damaging as actual misconduct, eroding public confidence in government institutions and widening the democratic deficit. Equally worrying, as the IMF had been pressing, the BOM’s MIC could not pretend to become a consequential player in the business market while the BOM retained its regulatory mandate and priorities.

Governments have a responsibility to ensure that public resources are managed transparently and effectively. This principle is especially critical in times of crisis when citizens are asked to make sacrifices for the collective good. When governments fail to provide adequate oversight, refuses to answer questions in Parliament or allow secrecy to prevail, they undermine the very trust that sustains democratic governance. Transparency is not merely a bureaucratic requirement; it is a cornerstone of accountability and a safeguard against abuse.

The MIC’s operations should be subject to independent oversight to ensure that its decisions align with the public interest. An independent audit of the MIC’s activities could help to restore public confidence by providing a clear and objective assessment of its performance. Such an audit should evaluate not only the financial returns on the MIC’s investments but also their broader economic and social impact. For example, did the MIC’s interventions succeed in saving jobs and stabilizing key sectors of the economy? Were funds allocated equitably and based on transparent criteria? What expertise did they call on to evaluate assets, equity or lands bartered for public funds? Have some of those company majors returned to healthy profitability post-MIC intervention and how much have they re-imbursed of the outlays? These are some of the questions that must be answered to assess the MIC’s effectiveness and justify its continued operation.

In conclusion, the MIC’s operations must undergo substantial reforms to uphold transparency, accountability, and alignment with the public interest. Citizens must be kept informed about how their resources are being used and the rationale behind key decisions. This requires proactive communication from government officials and the MIC. When citizens are informed and engaged, they are more likely to support government initiatives and less likely to succumb to suspicion or misinformation.

The government and the MIC therefore bear a moral and democratic obligation to clearly disclose how public funds have been utilized and whether strict conditions governed their allocation. Only such measures can restore public trust. The new government, elected on a platform of openness and transparency, must ensure that the opacity surrounding public fund disbursements in mega-projects like Metro, Safe City and Air Mauritius Holdings Ltd becomes a relic of the past.

Mauritius Times ePaper Friday 13 December 2024