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AfricaMoney | August 18, 2017

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Financial ExpertSpeak: Unemployment to rise if business confidence fails to go up

Financial ExpertSpeak: Unemployment to rise if business confidence fails to go up

The MCCI president stressed that ICT, Financial Services and the Fisheries sectors may be expected to power the growth of the island economy in 2014.

Ganesh Ramalingum, President of the Mauritius Chambers of Commerce and Industry (MCCI), spoke to AfricaMoney on the need to encourage private sector investment to reverse the trend of declining business confidence among Mauritian enterprises. Cautioning against rising unemployment in view of plummeting business confidence in Mauritius, our financial expert stressed that ICT, Financial Services and the Fisheries sectors are expected to power the growth of the island economy in 2014.

Edited excerpts from an interview:

Any comments on how Mauritius can leverage its status as the gateway to Africa to its advantage?

Mauritius is in a unique position to tap African business opportunities. We have been at the forefront of exploring business opportunities in Africa for the past few decades and are one of the first few countries which have put in place bilateral treaties with many African countries with an aim of encouraging Mauritius to be a gateway to Africa. As the aim of the MCCI is to facilitate trade and improve the ease with which business can prosper across the region, it is important for us to bring barriers down – including movement of people across the African continent. In this context, the experience with Mauritius has been an eye-opener for other African nations. Our island nation has entered into Visa-Waiver Agreements with several countries in the region. Most importantly, Mauritius is a part of Africa and we understand the African way of doing business. Some important steps taken by Mauritius to facilitate business in Africa are (a) The Mauritius-Africa Fund, which was launched by the government earlier this year and is aimed at providing Equity Participation for business investing in the African continent, (b) the various bilateral Free Trade Agreements and Preferential Trade Agreements Mauritius has entered into with countries in Africa to facilitate the movement of goods and services across the continent and (c) the flat corporate tax rate in Mauritius which is an added incentive for companies to open offices in Mauritius, thus enabling our nation to become a hub for global businesses.

With the dip in the Business Confidence index by 2.7 points from the previous quarter to reach 85.3 points for the first quarter of 2014, how does the MCCI foresee industry prospects for 2014?

The Index has been on a declining trend for the past couple of years, with the exception of the last quarter of 2013. And, what is especially worrisome for us is that the index has been below 100 for the past couple of years. This is because of the steady decline in business confidence in the commercial world. The essence of the matter is that if people driving businesses do not have confidence in the economy, they will not invest in it. We need to encourage private sector investment and spur consumption. We must remember that the level of unemployment is likely to increase if businesses do not grow. Moreover, it’s not only the private sector investment which is getting dampened but public sector investment as well has reduced over the last two years.

According to the MCCI business confidence report ‘the large majority of entrepreneurs indicated that they have continued their efforts to find new markets to continue to fuel their own expansion.’ What are some of the new markets for Mauritian entrepreneurs?

Africa is most certainly a great market for Mauritius entrepreneurs to explore. As I mentioned earlier, the African initiative taken by the government in terms of the Mauritius-Africa fund is a golden opportunity for businesses in Mauritius to reach out to the continent. The recent mission to Gabon spearheaded by the finance minister himself, continuing collaboration with Seychelles and inroads into Congo Brazzaville, are just some instances of how Mauritius is getting it right in terms of its Africa strategy. Having said this, it is clear that we have been talking about Africa for quite some time, but not much has been achieved in terms of concrete developments.

The report also indicated that lack of support from Government continues to hinder entrepreneurs. Any steps which have been taken to improve support to SMEs?

There are a slew of measures in Budget 2014 which are well intentioned, but we need to see this translate into concrete action. The government must ask itself certain critical questions: What is needed to empower SMEs to go to Africa? How can a big company be encouraged to invest in an African growth story? Our entrepreneurs, if they succeed on home ground, are clearly good at what they are doing, and should be able to replicate the success in Africa. But we know the conditions are different in Africa so the government must make it easy for SMEs by accompanying them in their initial inroads into Africa. For instance, SMEs in Mauritius are not aware of procedures for setting up a business in other African countries and this is where the government can step it. The government can smoothen the path for SMEs by taking up rules and regulations for establishment and operation of business firms in an inter-governmental forum. To illustrate, a large company from Mauritius went to Congo Brazzaville to set up business and found out the hard way how different the procedures were and how difficult it was to establish a foothold in another African economy, even though it had a huge presence in Mauritius. So, we can imagine how much harder it is for SME businesses to get even a toe-hold in Africa.

Your views on the growth of entrepreneurship in Mauritius and the potential of the SME sector.

The SME sector is growing and with this we have seen a larger number of entrepreneurs enter the business world. At MCCI, one of our key responsibilities as a trade facilitation body is to support the SME sector. But, Mauritius is limited in terms of population, and with a market of only 1.2 million people, there is naturally a relatively low consumption-led demand and hence limits to the growth of businesses catering solely to domestic consumption. This is where the need for SMEs to look outwards to Africa arises. Having said this, SMEs in Mauritius are surrounded by a wealth of supportive infrastructure in terms of both the SMEDA and the Ministry for Small and Medium Enterprises. These organizations work in partnership with SMEs for improving their welfare, providing incentives, guidance and highlighting the work undertaken by these enterprises by recognizing and rewarding their efforts. Besides, Budget 2014 has gone a step further to support the SME sector by proving free basic websites to transform the way SMEs work and bring them on the internet super highway.

Given that you have been closely associated with the computer industry in Mauritius and are heading a well-known organisation engaged in many country-wide projects, what are your views on the state of cyber development in Mauritius?

The ICT industry in Mauritius has grown very fast. When we started out a few years ago, there were only a few hardware firms, leave alone software developers. From being only 200-300 employees strong in 1995, the ICT sector in Mauritius today employs 16,000 to 17,000 individuals. And, the BPO sector is still growing strong, especially on the back of the economic downturn which has hit European countries the hardest, causing them to outsource non-core functions to low cost destinations like Mauritius. Of course, the cost of telecommunications in Mauritius is not necessarily an advantage. However, Mauritians are multi-lingual and fast learners, which is a great asset for developing the BPO sector. Taking into account the broader economic picture, mainstays of industry such as tourism are stagnating, and it is here that the ICT sector can step in and support the growth of the economy.

Do you feel that youngsters are not willing to take up a career in the BPO sector, given the odd hours and the work shift timings, as borne out by the experience under the Youth Employment Program (YEP)?

It is difficult to generalize as youngsters have aspirations at different levels. Some wish to pursue a career right out of school while others wish to go in for higher education. But the BPO/ call center space needs serious marketing efforts to create the right image to attract youngsters. The usual image of a call agent does not hold true across jobs in the BPO space. There is a possibility of career advancement from agent to supervisor to manager, and even director. Also, within the call center domain, there are different levels of specialization, such as medical and legal transcription, which involve a higher skill set.

Coming to the YEP, it is a very good program to help youngsters go out, get a job and gain experience in the process. For starters, it helps to resolve the classical chicken and egg problem – youngsters find it difficult to get jobs without experience and, without getting a job, they are in no position to gain experience! Incidentally, the dual apprenticeship program implemented under the YEP was suggested by the MCCI and based on the German model. However, it has been somewhat diluted from its original form. Under the original program, the company has the chance to employ someone, and, at the same time, to give them the opportunity to study. But, under this program, some contracts are open ended, the stipend is paid by the YEP and the study is only partly funded by the company. The government must go a step ahead and make it a must for the person to be employed by the company under a proper contract and there must be a rationale given by the company to do so. The MCCI had suggested giving an income tax rebate to the company employing the youngster and sponsoring his education, but this suggestion was not taken up. If it were to be implemented, the impact on the unemployment level would be significant.

Finally, your views on the Mauritian economy and the way forward in 2014?

The beginning of 2014 has been difficult, just like the start of 2013 was. But, I believe that towards the end of 2014, things will get better. In fact, things must get better, because we cannot continue with the negative trend of growth that our economy is currently witnessing. Regarding the way forward, ICT, fisheries and financial services are the sectors that will power the growth of the economy. The blue economy will have to be developed and the collaboration between Mauritius and Seychelles is on the right track for the Ocean Economy to be a pillar for the island nation.

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