Economy Expertspeak: Mauritius must move up the value chain
AfricaMoney spoke to Dev Chamroo, CEO, Enterprise Mauritius, who articulated his much-cherished dream of Mauritius turning into the Fashion Capital of Africa.
AfricaMoney spoke to Dev Chamroo, CEO, Enterprise Mauritius, on what it will take for the export-led economy to emerge as a leader on the world stage. Our articulate and incisive expert took us through the export landscape in Mauritius, highlighting that the island economy has successfully diversified exports away from its traditional markets of Europe and USA. Noting that Mauritius must move up the value chain to improve its competitive edge, the economics major spoke about his much-cherished dream of Mauritius turning into the Fashion Capital of Africa.
Edited excerpts from an interview:
Please comment on key achievements of Enterprise Mauritius in 2013.
Enterprise Mauritius sets targets on multiple parameters – promoting exports, product development and enterprise development.
On export promotion, total exports in the 11 months till November showed an annual growth of 7% over last year’s corresponding period. Most importantly, June-July marked the first time that non-traditional markets contributed more than half of total exports from Mauritius.
On product development, we increased the number of products exported from Mauritius, with a twin focus on Export Oriented Enterprises and import substitution industries, known as Domestic Oriented Enterprises.
Finally, on Enterprise Development, we helped 338 companies participate in our trade fairs and our marketing efforts abroad, of which 232 were SMEs.
What are the main challenges that EM expects to face in 2014?
There are constraints on both demand and supply sides. Let me address the top three issues on each front.
On the demand side, first of all, our traditional markets in Europe are not growing at the rate we would have wished them to. At EM, we look after the routine consumption space of consumer products, and not a specialized industry like the technology space. If demand is under pressure in Europe, these countries will not buy from us but will simply turn inwards for daily domestic consumption.
Secondly, we have new competition emerging, not necessarily from China, but most certainly from other emerging economies like Vietnam, Bangladesh, Sri Lanka and even certain countries in Africa.
Thirdly, and most dangerously, reshoring is eating into our export share. Some major companies which had outsourced production are now relocating it to their country. With EU expanding from a lowly base of 12 to as many as 27 members, the labour pool of the Eurozone is increasing. Not only is Mauritius facing tepid demand from Europe, but even for the demand that does exist, European countries are looking at local produce.
On the supply side, first of all, Mauritius does not have enough excess capacity to capture new emerging markets. More so, we cannot compete in the price sensitive space, due to lack of labour, so we operate in a narrow band where competition can easily cripple us.
Secondly, in the new markets we are trying to tap into, there too we face competition from India, China, Vietnam, among others. So, even in these markets, Mauritius is not an export leader. We are not, to use a colourful phrase, “the most beautiful girl in town”.
Finally, the new markets we are looking at, do not have much propensity for growth. Mauritius is there, but our capacity to make a significant impact in such markets is limited. In the SADC and COMESA space, liberalization has not completely arrived. But, yes, reforms have slowly started and are still going on, albeit slowly.
In EM’s latest newsletter, you mention that market diversification is going strong, as 56% of exports have been made to non-traditional markets. What has led to this success and what is the target for next year?
Aggressive marketing by EM is the main factor behind this successful diversification of our market base.
Sustained efforts are crucial as going to non-traditional markets is a tough task, since a contact established today will materialize into an order in 12-18 months at the earliest.
Also, it is important to have an open mind and not make assumptions about the market you seek to enter. For instance, Turkey is a textile major, but you will be surprised to learn that the country is extremely open to Mauritian clothing and accessories. In fact, we are already exporting to Turkey. It is natural that consumers prefer imported goods to local products. This is happening in China, India and Brazil, among other emerging countries. For the upwardly mobile locals, clothes made in their country do not have the same aspirational value as clothes which boast an international tag.
Next year, we hope to target Scandinavia, BENELUX, the Russian speaking nations, East European countries such as Turkey and Czechoslovakia, Brazil, Canada, Australia, Japan and China.
You also said that suppliers must adapt to global market changes. Can you please elaborate?
Simply stated, Mauritius must move up the value chain. To illustrate, in Mauritius’ traditional space of textiles, the raw material, design, concepts, colours and components of clothing were coming in from the international buyer. However, this approach puts Mauritius in a subservient position as it cannot demonstrate a value add other than labour and factory overheads. The right way to approach the supply chain is to be an indispensable part of the process, right from design to execution. Also, this opens up broader avenues for local firms as they are not tied down to one international buyer.
I wish to see Mauritius turn into the fashion capital of Africa. It will not do for us to copy the designs of the markets we approach, but we must develop our own uniquely African blend and promote the ‘Made in Mauritius’ brand all over the world.
Can you comment on the Africa focus of Enterprise Mauritius?
Africa remains a market of focus for EM. We have 14 marketing missions planned to Africa in 2014. We are very active in the Cape to Cairo marketing route, covering the SADC and COMESA countries. In a first for any institution from Mauritius, we are opening our third regional office, next year: – in Uganda, apart from the existing offices in South Africa and Kenya. Also, we will be appointing at least 10 friends of EM, to have our finger in the pie and our ears to the ground in most African countries. Finally, we will be inviting 300 selected buyers to Mauritius in August for MAITEX, our flagship Trade Fair.
Currently, our non-traditional export market comprises largely of South Africa and then, a bloc of several smaller African countries. In all, EM today looks after export relations with 27 African countries covering practically half of Africa. The new markets we are looking at in Africa for 2014 are in countries like Angola, Burundi, in the first phase and explore opportunities in West African states of Ivory Coast, Nigeria, Gaborone and Congo-Brazzaville.
Are Mauritian enterprises eying Asia? If so, which are the main markets they are seeking to tap into?
In Asia, we are looking at China, for which we have three events planned for 2014; Japan, for which we have two events planned in the coming year as well; while we will be completing a market survey of South Korea, already underway, in early 2014.
Besides, India is also an important market, where we will attend one of the country’s biggest textile events, Tex-Trends, in the capital of New Delhi in January 2014.
We are also looking at conducting Desk Research, one for Malaysia and Singapore.
Finally, how can EM help SMEs to boost their competitiveness?
For SMEs, Enterprise Mauritius is working the whole value chain. In the first quarter of 2014, we will be conducting a survey of all the products manufactured in Mauritius. The second stage is to identify which of these products have export potential. Third, under our ‘Go export’ program, we prepare the SMEs we have identified with export eligible products for the export market. Those companies we have identified and trained will sell to the B2C (business to consumer) market in Reunion, Madagascar and Seychelles, as a training ground for B2B (business to business) sales. Then, they will be taken to a buyer-seller meet, where they will be trained, their products will be designed, placed on display and they will get the opportunity to interact with institutional buyers. If they pass that test, then they will be included in 2015-16 to participate in our trade fairs. Even after they have gone to a trade fair, there is a still higher promotion event that they can become eligible for – the Contact Promotion Program. Under this, they are taken directly to the office of the buyer – opening the doors of the corporate universe to them and telling them to take on the world.
EM has a mandate to promote exports of whatever it is that can be exported from Mauritius and TeamEM will deliver on that promise.