There is this island nation, Mauritius. The World Economic Forum ranked it the most competitive economy in Africa for the period 2013/14. It topped the 2008 Ibrahim Index of African Governance. The World Bank assessed it to be the best among African economies on Ease of Doing Business in 2013 and the Wall Street Journal found it to be the freest economy on the continent in its 2014 Index of Economic Freedom. Pitted against the best in the world, Mauritius does hold its own. On global competitiveness, it is ranked 45th out of 148 countries (just 1.22 points behind the global leader Switzerland), it is ranked 19th out of 183 countries on Ease of Doing Business, and it is ranked 8th out of 183 countries on economic openness.
A small island measuring 2040 square kilometres with a population of just under 1.3 million and no exploitable mineral resources but with a GDP per capita of US$16,100, a 3.5% inflation rate, a US$10.98 billion attracted in Foreign Direct Investment (FDI) inflows, and an unemployment rate of below 8%, Mauritius must have some effective ‘tricks up her sleeve’.
Gaining independence from Britain in 1968, Mauritius had an income per capita of just US$400 and the economy was characterised almost only by the growing of sugarcane. Nobel Prize-winning economist James Meade wrote in 1961: “It is going to be a great achievement if (the country) can find productive employment for its population without a serious reduction in the existing standard of living … (The) outlook for peaceful development is weak.” Unbeknown to Meade, the Mauritians gradually and painstakingly built a diversified economy that includes tourism, finance, textiles and advanced technology, and in most of this period the annual growth has been in the order of 5% to 6% annually.
Has this phenomenal growth translated to improved standards of living for the Mauritians? Mauritians enjoy free education from pre-primary through tertiary level, students, the elderly, and the disabled are provided free transport by the state, and Mauritians enjoy free health care for all, including heart surgery. Home ownership in Mauritius stands at 87%.
Someone may argue that this story might as well have been plagiarised from the Botswana book. Well, the Botswana miracle was premised on diamonds. So, what are Mauritius’ ‘tricks up her sleeve?’ Maybe we can replicate it here.
Joseph Stiglitz of The Guardian identifies three major lessons for us: 1. Mauritians have mastered how to organise society. They have chosen a path that leads to higher levels of social cohesion, welfare and economic growth – and to a lower level of inequality. 2. They have cut down on most military spending. 3. Mauritius recognised that without natural resources, its people were its only asset. Maybe that appreciation for its human resources is also what led Mauritius to realise that, particularly given the country’s potential religious, ethnic, and political differences – education for all was crucial to social unity.
Laurent Belsie, business editor for the Christian Science Monitor, seems to concur and her three major lessons to be learnt from the Mauritian miracle are: First, trade is crucial for growth. Second, ethnic differences can be overcome by a well-designed parliamentary political system, and third, democracies can reform economic systems in ways that foster economic growth.
Perhaps more telling phenomenon is the analysis by the NBER Africa Project at the Harvard University: 1. Adaptability. Mauritius has always adapted to its changed circumstances. During the 19th century when slavery was abolished, there was shortage of labour in the sugar plantations. Indentured workers were brought in from India. At independence, bad conditions were predicted for building a new country but Mauritius achieved a trade-led economy anyway. It responded to bad trade shocks by implementing reform programmes on tax and business facilitation and survived the 2008 recession through its counter-cyclical policy.
So here is a case study for us, and indeed the rest of Africa, to learn from. For Botswana in particular, economic diversification away from minerals to other sectors, especially manufacturing for export, and services, largely tourism and financial services.