By Sachin Mohabeer, the Acting Deputy Chief Executive Officer of the Economic Development Board of Mauritius (EDBM).
When Mauritius first gained its independence in 1968, the country’s economic future was expected to be bleak. In fact, British economist, James Meade, notoriously condemned Mauritius to be bound by agriculture and predicted that the nation would not exceed the conditions of a third-world economy. However, fast-forward to the present day, and James Meade couldn’t be more wrong, with Mauritius now a thriving hub for business and real estate magnates from all over the world.
So, how exactly has Mauritius transformed from a low-income, agriculturally based economy to a diversified upper-middle income economy with fast-growing financial, industrial and ICT sectors?
Here, we explore the secrets behind the exponential growth of Mauritius, while outlining what investors can expect in the future:
History of Mauritius
Mauritius has been on an impressive growth trajectory since it first gained independence and now boasts one of the highest per capita incomes on the African continent.
Previously a small island nation heavily reliant on trade-led development, the country initially had dominance over three industry sectors comprising of tourism, exports, and sugar before diversifying into other industries, including textiles.
Underpinned by a strategic economic policy, strong institutions and, more recently, its preferential access to trading partners, such as those in the European Union, Mauritian officials have implemented an intuitive and impactful approach to its economic growth.
For example, during the 1990s, Mauritius adopted an informal inflation-targeting approach, which allowed the country to become less reliant on direct monetary instruments and introduced the country to market-based instruments. This was facilitated through weekly auctions of Treasury and Bank of Mauritius bills, which allowed for a positive interest rate. In doing so, the country’s savings grew consistently, far exceeding investment expenditure.
In addition, the country has a minimal borrowing policy from any other global banks. Instead, the government chose to anchor the island’s economic growth by ensuring that the Bank of Mauritius was competitive in the security of their export sectors, while maintaining price stability.
Furthermore, the Mauritian government has recognised the need to continually diversify its economy, investing in various sectors such as light manufacturing, offshore banking and financial services, and service-related information and communication technology.
The country’s receptivity to new ideas and sectors should be considered as one of the main reasons the Mauritian economy remains so resilient, even in the face of global economic crises, such as the 2008/09 recession and COVID-19 pandemic.
Mauritian Investor Policy
Mauritius has worked hard to develop an effective export strategy to deliver much-needed foreign exchange for the country, and while doing so, has incentivised foreign investors through attractive policies, such as tariff-free access on selected items.
The economy today is reflective of this historic growth, with Mauritian exports remaining favourable. This confirmed by the Economic Development Board Mauritius [EDBM], which revealed total exports for 2022 were valued at Rs 101,680 million, representing an increase of 24.0% compared to 2021. In addition, the country’s imports have also increased by 36.1% from 2021, totalling Rs 292,429 million.
Now established as first in Africa and 13th out of 190 countries for ease of doing business, the government of Mauritius has also implemented a number of tax incentives to encourage foreign investment to the island. For example, the country enjoys some of the lowest tax rates in the region and expatriates can expect a 30% tax deduction on their taxable income. Investors also enjoy no taxation on their capital gains and dividends, with general tax rates of the country also significantly lower than anywhere else in the world.
It’s a combination of political unity and careful economic planning that can be attributed to Mauritius’ speedy and impressive economic growth, with the country’s GDP having averaged more than 5 per cent a year since 1970.
With future ready infrastructure and plans to both diversify and accelerate into fast-growth sectors including Biotechnology, Fintech and Artificial Intelligence, the island’s economic growth is only forecast to continue and is already on track to achieve 5% increase by the close of 2023.