Of fresh horizons and tariffs splurges...

Simply no doubt about it! The last 12 months were dominated by elections locally and elections abroad… and by their consequences.

Locally, a fiery mix of corruption , nepotism and incompetence got the better of an MSM- led government that had ruled the country for the past ten years. A chatty Mr Moustass added to the 'Enough is enough!' feelings of the population, in a series of audios that revealed the intimate inner workings of an increasingly dissolute government . The irony is that those audios , which revealed a worryingly interventionist ‘kitchen’ cabinet and confirmed a tentacular grab at most democratic institutions, had been recorded, seemingly on the sly, by top-of-the-range mass surveillance and eavesdropping equipment purchased by the outgoing government at the top-of-the-range price of… some Rs 5,2 billion! To this day, it is not clear which budget vote this expenditure was made out of.

When the outgoing government tried to end Mr Moustass revelations by shutting down the internet for the dubious-as-usual 'national security' reasons, some 10 days before elections; the tide which had been swelling anyway, turned into a fair-sized tsunami and the opposition simply won ALL the seats available in parliament. 60-0! As expected ahead of those general elections, both the outgoing government and a moderately more cautious opposition, had made outrageous and unsustainable electoral promises, which, in the event did not really determine election outcomes, since the more generous promises did not actually win the day. The outgoing government's populist measures during its last years, mainly aligned to partly compensate the erosion of the rupee and consequential price inflation, were all but forgotten .So were some eye catching capital works, like roads, a metro line and hospitals. Within weeks of election victory, the new government ordered a full review of the state of the economy which revealed, and in most cases confirmed, many of the feared financial and economic worries and challenges of the country that had been emphatically handed over.

Amongst them, the absolute priorities of reducing the budget deficit level of 9.8% and a Public Sector Gross Debt ratio of 90% that were actually both recorded in 2024/25, were tackled in the new government's first budget last June. To reverse a spending momentum that was leading the country into serious trouble, government had to act courageously and indeed, at long last, took the plunge by tackling the fearsome universal pensions equation. Several revenue lines and taxes were increased, but government hardly did anything meaningful to its own lifestyle, unfortunately. Neither the political leadership nor the government's civil service and parastatal 'establishments' were asked to reduce their lifestyles and expenditures, leaving a generally bitter taste for those from whom sacrifices were being requested…

The pensions challenge, which had been talked about for years with no decision taken about either postponing retirement age or targeting beneficiaries, had been looming ever larger over the country's future, as the proverbial can got repeatedly kicked down the lane. Year after year. The CSG initiative which froze the long existing NPF/NSF and shifted the whole burden to the government's (the taxpayers!) Consolidated Fund resolved zilch, fundamentally. The issue had been compounded in the face of a now rapidly ageing population and a growingly demagogic approach to the quantum of the monthly pension itself, which had increased 2 ½ times between 2000 and 2014, by another 70% between 2014 and 2019 and more than doubled again over the next 4 years until 2024! It is no wonder that, by budget year 2024/25, social benefits had grown to represent more than three times the government's capital budget, almost twice total civil service salaries and fully 52% of that year's tax receipts! Of course everyone is happy for retirees, but it must be underlined that their smiles are inevitably at the expense of some other budgetary priorities or at somebody else's expense! The recent World Bank's Poverty & Equity Brief says no different: as relative poverty in the country has gratefully declined to 8,4% of the population in 2023, the age group with the least relative poverty was that of the elderly, at 3.1%, with children under 16 hosting the highest figure of 15.7%…

A panel of experts comprising seasoned actuaries, economists and a statistician has been nominated to come up with longer term, sustainable proposals and will surely help quantify the actual choices for the country. How much can the country afford to channel to social transfers without unduly burdening future generations, or creating mountains of debt, or short selling the country's other spending needs? That is the ultimate 'juggling act' of an equation, whose one basic tenet is that no social transfer, like no lunch, is ever really free…

There were 61 different general elections in 2024, according to the Swedes of V-Dem. In only 4 of those did the vote lead to a more democratic environment. Mauritius was one of them four! Amongst the most consequential elections was the change of the guard in Botswana where the Democratic Party had dominated since independence in… 1966; the elections in South Africa where the ANC was so weakened that it was forced into a coalition; the landslide victory of Ms Sheinbaum in Mexico and the BJP's cold shower in India – BJP losing its singular majority. Besides, the Sri Lanka elections wiped out traditional parties; the snap election of Macron in France went fiasco and the landslide victory of Labour ended 14 years of Conservation rule in the UK. There was, of course, the usual smattering of 'elections' in very, very 'happy' countries, with winner votes of over 85% (Rwanda, Tunisia, El Salvador, Azerbaijan…). Of note, Sheik Hasina who won 75% of the vote in general elections in January on a 28% turn out, was ousted by street riots… by August and the president of Madagascar who just fled his country, had obtained a comfortable majority in the May 2024 parliamentary elections. Moods can change fast.

But, without contest, the most consequential election of all saw the return of Donald Trump to the US presidency. We will not delve into all that this entails for the democratic profile of the strongest nation on earth and, as proper in an economic publication, only refer to his economic policies and to tariffs in particular, for they have wide-ranging effects on the rest of the world.

Nothing like what has hit the world on 'Liberation Day' in early April last has "ever been seen before", quoting one of Trump's favorite and over-used phrases. His gamble is that the US will thus be 'made great again' by re-setting the world trade order, raising fresh federal revenue and pressuring businesses to produce more on American soil. The immediate beneficiaries of this wild policy choice are the oligarchy of multi-millionaires who financially support MAGA world and who will get a permanent tax break….

Mauritius got away lightly with a 15% tariff, since most of its competitors on the US market were taxed (sorry, tariffed…) by 15% too. However, Russia, like Australia, Argentina, Gulf states, North Korea, Saudi, Rwanda, Iran, Egypt, Cuba, the UK, Singapore; 96 countries in all, got away with… 10% for now. Go figure! World and american markets are being shaken up in a major way, especially since headline announcements are not always followed through, fuelling uncertainties which investors simply hate!

If only tariffs were decided on economic grounds, they might be more predictable, but politics play their part and so do ego bashing, friendships and chest thumping. Brazil got slapped with 50% because Trump's soul mate, Bolsonaro, got condemned for what Trump himself tried to do in the US: refusing election results in the teeth of all evidence that they were fair! India, a 'dear partner' until recently, was dished a 50% tariff too, in this case for buying Russian oil, even though China, which buys even more proportionately, was watered down to 30% in a seperate 'negotiated truce deal'.

The latter looks like it will be livened up with 100% more by November, following Chinese restrictions on sales of rare earths! At least that is the threat for now…. Canada, which did not swallow the idea of becoming the US's 51^st state, was savaged with a 35% rate, even though a trade agreement, negotiated by Trump himself during his first term, still stands! Mexico's situation is in abeyance at 25% until November.

Besides countries themselves, Trump has also taxed specific products. Aluminium and steel were early riders at 50%, and have since been joined by auto parts, copper, timber, heavy trucks and furniture amongst others.

Currently in process, are a threatened 100% tax on pharmaceuticals, foreign movies, drones, medical equipment, semi conductors, wind turbines – which he personally really hates, aircraft parts and critical minerals… What will gell out of that list is anybody's guess.

The US has also pre-empted so called 'transshipments' where goods from highly tariffed countries are rerouted to be produced in nations with lower duties. If the American administration finds any evidence of this, Mr Trump has established a steep additional tariff of 40%! May we remark that, on this basis, our free zone would never have got off the ground back in the 1970s! And that this provision may well kill off any new ventures that might have considered migrating to fairly taxed Mauritius! So much for being able to trade up, I guess?

The upshot of this intense tariff war is difficult to fathom at this stage, but we know that Trump has 3 more years ahead of him, that he is a reactive, restless type and that counter measures on American services (where the US has a materially positive trade balance) are yet to come.

Besides American investors overseas may be seriously considering uprooting themselves to go back home (at least for sales in the US), even though production costs are higher. Serious negative side effects are already visible on US exports (farm products, for example) and if things do eventually stabilise into some sort of new equilibrium of mutual tariff terror, it will surely not help growth and trade! Ultimately more money will end up in the treasury coffers of the countries playing the tariff game, at the expense of consumers world wide!

So, it is a tax after all, however disguised, since money will move from citizen pockets to government coffers!

There will surely be more to tell on this subject over the coming years!

Locally, most of the 'fever time', besides the decision to postpone the retirement age for the universal pension from 60 to 65, was spent around a State of the Economy report, published last December which crystallised many people's fears about the economy and the country's finances.

If the debate about what portion of the Global Business activity should be included in our exports or not is ongoing, the report underlined, without debate, and in truth against the back drop of the Covid calamity which cost a staggering Rs 29.6 billion budget-wise; a declining investment rate, most of which ends up in real estate; declining exports of goods; a worsening trade deficit and a worryingly negative balance of current account.

It confirmed, of course, the accelerated depreciation of the rupee which fuelled inflation; hefty enough levels of forex reserves as we borrowed forex from a very low base; a material mismatch between supply and demand in the labour market and a growing gap between productivity gains and wage compensation, increasing annual unit labour costs by 5.6% between 2019 and 2023. Besides, the CSG, introduced in 2020 as a major reform, was already bleeding Rs 3.2 billion by 2023/24 and Rs 9 billion by 2024/25. This will quite certainly get worse….

However, the major revelation of this report was about the 'hidden' and contingent liabilities. First in line is the MIC, where Rs 66.1 billion of BoM's newly printed money, were advanced. The initial disbursements to systemically important companies badly hurt by Covid lockdowns, were solidly anchored if favourably priced and will be repaid. A Rs 25 billion investment in Airport Holdings Ltd actually refunded then government advances and may eventually require some provisioning.

Some of the more recent disbursements smack of political motivations, rather than financial rationale and will, call for more provisions. The new, inexperienced Governor of the Central Bank after Rama Sithanen has surely got her work cut out for her, as this will impact the Central Bank's already weak balance sheet!

And that is even before having to tackle the Silver Bank fall out!

In addition, very many parastatals are bleeding money and will need help! The Metro is not covering its costs and will need Rs 1.2 billion per year to service its debts.

The electoral promise of free transport has been postponed accordingly…. The CEB, facing huge capex as turbines get old and need replacing, especially if IPP contracts do not get renewed, will need fresh finance and possibly new energy rates. The STC subsidy account for rice, flour and LPG was in deficit by Rs 2.15 Bn by June 2025, while the Price Stabilisation Account for Mogas and Gas oil was in deficit by over Rs 3 Bn, fortunately reducing, as petrol world market prices have gone down, with no concomittant retail price reduction. The CWA and WMA owe important arrears on outstanding loans and still sell below cost. Air Mauritius just made a profit but may owe this, in large part, to a favourable jet fuel price and a solidifying euro/dollar rate. Troubling situations exist at the National Transport Corporation, Casinos, Airport of Rodrigues, Mauritius Post, Statutory Bodies Pension Fund and the extraordinarily costly defined benefit schemes of most parastatals… which are still not getting reformed!

Against that rotten background, the country now especially needs to generate solid growth!

The TOP 100 sample of companies this year globally shows growth turnover wise, which may again have been partly pumped up by a weakening rupee, but an across the board weakening of profits, as a calamitous pre-election set of salary increases and adjustments hit bottom lines. Please take note that the 14^th month's full effect may not be fully registered until all financial reports covering up to June 2025 are finally integrated in TOP 100. Already, lower profits showed up in lower corporate taxes of Rs 4.8 Bn in 2023/24. No wonder the revised estimates of taxes on income and profits were down by Rs 11.5 Bn in 2024/25. Whether all taxes can be ramped up by some Rs 15.1 Bn in 2025/26 (+ 31%), as budgeted, remains to be seen.

Fully 10 of the 18 sectors analysed saw their profits recede. Globally net profits were reduced from 41.2 Bn to 32.5 Bn (-21%). Parastatals, true to form, lost another Rs 5.3 Bn. An uptick in the number of loss making companies to 74 may also indicate a worrying trend, if sustained.

In the Hotel industry sector, satisfactory numbers for visitors to our shores (though nowhere as satisfactory as Maldives and Seychelles progress) were not exactly matched by profits, ten of the 35 most recent hotel figures analysed showing actual losses, Holiday Villages Management Services topping that lot, albeit on December 2023 figures. New Mauritius Hotels Ltd still leads the pack turnover wise, though One & Only St Geran has the best profitability ratio wrt sales within the top 10 group.

The overall news in the agricultural sample of 33 companies was much better. Only one company, Constance La Gaieté Co Ltd registering a loss to 31/12/2024. What is noticeable and heart warming is the emergence of figures which state that local agricultural production, including of bio products, can be profitable and sometimes quite emphatically so. The lesson must be that when managed right, with the correct combination of technology and tender loving care, financial rewards are more than possible. Anthurium Floriculture and Cynologics are possibly the only two agricultural companies of our sample, besides sugar producers, that are steeped in exports and earning currency for the country, the former being a successful left over from a golden age of anthurium exporting which might give ideas for some sort of revival?

The textile industry, once a spearhead of our industrial development and exporting prowess (we were once, lest we forget, the 3^rd largest Woolmark exporting country in the world, no mean feat for a tropical country… with no sheep!) has experienced growing challenges over the years and is in regression locally. Employment in the EPZ mainly textiles operations had peaked at 81,000 in 1999, had been reduced by half by 2019 and stood at some 33,000 by 2024. The dismantling of the Multi Fibre Agreement in 2005 and the emergence of dozens of competing countries attempting free zone type textile operations off the back of their even cheaper, more abundant and sometimes more productive populations, are the main reasons explaining this evolution. Indeed, our main operators, of which CIEL and CMT, have themselves relocated many of their operations overseas, in more competitive countries like Bangla Desh, India or Madagascar. The sector has seen its rupee turnover stall at some Rs 40 Bn per year for the last 3 surveys, but although consolidated profits dropped by some 20% yoy, only 2 companies registered actual losses. Steady as they go! An unfortunate feature of our sample is that the second largest textile operation, CMT has not updated its 31/07/2023 figures, a pity indeed which leads to needless speculation!

The Construction sector was one of the eight sectors bucking the trend of falling sectorial profits, clocking almost Rs 5 billion profits on turnovers of Rs 63.7 Bn. Only 3 companies of our sample of 71 actually lost money. Amongst the top 5 most profitable companies as a percentage of turnover one finds Larsen & Toubro (37%), AFCONS (34%), DLB group (27% on a T/O which increased by 75% YoY), Hyvec (24%) and Tianli (23%). Could expat labour competitivity do at least part of the explaining here?

The oil and petrol sector sold 4.5% more in 2024, VIVO staying top of the pile.

As to the Distributive Trade sector, they seem to have done all right in a context of rising prices, only King Savers registering a loss this year and net profits remaining steady at 3% on sales, which is probably fair in view of the risks with perishable goods, pilferage and regular stock write downs. Within the top tier, some did better than others, namely with Intermart at 17.5% on sales, Lolo Supermarket at 8.0%, Family World at 6.1%, Paltoni Retail (Intermart La Croisette and Beau Bassin) at 5.7%, Sik Yuen ltd at 5.6% and Super U at just over 4.0%. Notoriously, the leader on volume by a mile, Pick n Buy (Winners), had a low yield of sales of just 1.1%. Still on a market share policy, at some cost?

A worrying feature of the figures compiled in the Insurance sector is that fully 9 of the 16 companies listed have not yet updated their figures since 2023. Besides, this coincides with a generally sizeable revision of insurance rates from motor insurance to medical covers! It is not unusual for good financial results to lead to an eagerness to publish these more diligently. Could the two phenomena be actually related? Have the earlier bouts of fierce competition and footprint expansion led to costs catching up too fast with revenues in the classic, and dreaded, scissor movement? A finer analysis will tell. Suffice it to underline here that MUA did this year sit on top of the T/O pile, not exactly seeing its share price recover from the heights of late 2022 and that SICOM had the most profitable return on its revenue line at almost 28%. A steadier, less-competed-upon customer base helping?

Courts Mammouth, consistently fuelled by insistent, wide ranging marketing and advertising campaigns easily led the line in our Commerce/Retail sample. Most companies held a profitable line in their latest available reporting, except, more meaningfully, for Laurelton Diamonds which unfortunately deals with a product that saw a 15% decline in prices in 2023, followed by another 18% drop in 2024, under increasing pressure from synthetic, lab produced diamonds. Stock write downs in such an environment can be painful.

Ahead of a sizeable increase in duties on imported vehicles this July, including on hybrid and All Electric ones, as government sought increased revenues whilst seeking to slow down the number of fresh vehicles worsening our traffic jamming island-wide; the Automotive sector did just fine. Leal & Co led the pack turnover wise and Toyota (Mtius) had the highest yield on sales at 13.4%. As most reporting figures are for 2024, there will be a last Hurrah! for the sector in next year's Top 100 figures, on 2025 reporting.

There is the usual mixed bag showing up in the Telecommunications sample, but government controlled Mauritius Telecom still towers over the sector, reporting over three times more Turnover than the next best which is Emtel and aligning respectable profits to boot. Loss makers may have to review their business model as the sector suggests better is possible. Emtel's yield on sales remains impressive.

Size does matter in the Betting and Lottery sector, as automation then better helps bring in the bacon home. Scanning the table indeed shows it is more challenging to generate profits at the tail end. Casinos again lost big to 30/06/2024: another Rs 327 m!

The Health sector sample is now 52 units strong and is topped by CIEL Healthcare both turnover and profit wise. The sector seems to be doing fine and is, accordingly, attracting new competitors, which, in their early years, are still trying to find their feet. Artemis in Curepipe and Coromandel, IBL Life, RGT (Healthcare) Ltd (Royal Green hospital), St Helene Clinic are all in this situation. The hospital being built in Cascavelle by the Artemis Group, in conjunction with their indian partners, will add to the competition in no small way. A surprising loss report by Natec Medical to 30/06/2024 coincides with a 'disruptive year' during which they moved their whole manufacturing processes to a brand new 9,700 M² state-of-the-art facility whilst expanding in the US market. Luxury Retirement Village, part of the Royal Green group benefitted from a mysterious 'Other income' of Rs 439.3 m. Property revaluation?

It was a decent year in the Freight and Logistics sector, with only three operations, DHL, Speedfreight and Hellmann, all international brands, registering sizeable losses. There was also some consolidation as Mc Easy Freight was taken over by Velogic. Our port competitivity, rated 369^th by the World Bank, out of 403 ports worldwide, CPPI based, will become a growing limiting factor for the country going forward and radical solutions will have to be sought.

The Media sector is, unsurprisingly, splashing a fair amount of red ink as traditional operations get disrupted by internet-based proposals from massive American streamers and social media. Nevertheless, the particularly bad figure reported by the MaBC of Rs 1.5 Bn (a clean up year…) and Mediacom of Rs 1.34 Bn (after an outrageous 'other expenses' item of Rs 1.376 m), thoroughly dominate the sector's results. The Printing industry looks to be in a decent shape with Caractère Ltd consolidating its lead and losses being almost inexistent. Within the Advertising/Events/Comm sector, Circus is still top dog but the events sub-sector looks more dynamic with the Javed Vayid group (The Irish, events), and Events Strategy dominating the profit generation stack. Of Real Estate agencies, Pam Golding still leads revenue and profits wise, but the chasing pack, led by Excellia, A1 Properties, Sotheby's and Barnes could give them a run over the coming years.

Banks are doing fine, thank you! The alternative, in truth, would have given us the shivers, nationally! As it is, the tax crop from this sector, which is increasingly also bringing in profits from overseas, looks solid enough for now.

What to add about Parastatals? As highlighted in the State of the Economy report of December last and, indeed, yearly by the Auditor General, it is not a pretty sight! Of the 39 units in our sample, 16 have figures dating back to 2023, 10 go back to 2022 and 5 apparently hark back to even earlier times! When using public money, this is starkly wrong and MUST be put right, upon the penalty of being permanently blotted out! Losses are the order of the day and it will of course, fall to taxpayers to bear the burden. Only the Financial Services Commission (+Rs 1,119M), the Sugar Insurance Fund Board (+Rs 859 M) show material surpluses and have up to date accounts at the same time.

Nobody can possibly say they are smitten by the unpredictable, unstable world we currently live in. Challenges will not be few! What is clear is that routine, the status quo and happy-go-lucky approaches will no longer be enough to progress. Or indeed, just to stay afloat! The world has never been this disrupted. And the climate change and AI shocks are still to be cashed in fully in the medium term!

(Completed on the 22^nd October 2025)