Why Implementing Lalit's Advice Makes A Lot of Sense

You know, the one that recommends bizin plant manze lor later tablisman. This is good advice any which way you look at it. Let's start with a historical perspective. As Chart 1 shows you don't need to be the best thing since sliced bread to understand that the sugar industry has been in an irreversible sunset phase for a long time. It accounted for close to a quarter of GDP forty years ago. Now at less than 1% it's about twenty-five times smaller. That too despite the silly policy of 'competitive depreciation' aka politik rupi mari feb. We can even calculate the approximate time it will hit the zero mark. That should definitely inform our national strategic decisions. Keeping a corpse on costly artificial respiration many years after the soul has departed ain't exactly a smart decision especially when at the same time you cut the oxygen supply of incubators. We can keep a 100 hectares as a souvenir. At most.

Bean-counter Creates 

A Structural Problem

As Lindsey Collen reminded us a few days ago it was a most stupid move by the then Finance Minister, Dr. TINAnen, to gift billions of rupees to the sugar industry – shown as the red square in Chart 1. We know it was not the only one: he also cancelled the school feeding program and the rice/flour subsidy before it mysteriously reappeared on the books of the STC, killed the savings culture of Mauritians and even played Russian roulette with the SC/HSC subsidy. As if this was not enough his flat tax has already generated a trillion-rupee toohrooh. Anyway let's return to our main topic as we'll have plenty of opportunities to have a good look at this very dark period of our history. So yeah, a multi-billion rupee grant was given to an industry which already had one and three-quarters feet in the grave and this of course does two things: it throws good money after bad and it leaves national priorities unattended. The former is what is known as a structural problem and it will slow your economy down. Which is what has been happening. Chart 2 zooms in on that period.

Dr. Calamity Lor Baz

So sugar represented about 4% of our economy when Labour took power in 2005. And 3% or less when billions of rupees of the fruits of our economic diplomacy were wasted on it. A basic simulation – of the genuine type – would have hinted of the time its contribution would have reached 0% and supported the common sense recommendation that it ought not get even one rupee. Unsurprisingly sugar now accounts for less than 1%. So it's been a total disaster. Couldn't we have used these funds to quickly solve national priorities like traffic congestion with a Bus Rapid Transit (BRT) system? Or replace leaking pipes? Of course the problem with sugar cane doesn't stop at its tiny contribution to our economy. Nope, the sugar sector poses a big problem to Mauritius because of the amount of space it takes.

Land Use Confirms

Sugar is a Sunset Industry

As Chart 3 shows sugar cane in terms of area – represented by B – is roughly half as big as the non-sugar sector shown as A. The squares in the bottom half of the chart illustrates their relative contributions to GDP as they were back in 2012. S shows the land area of Singapore but we cannot show the size of its GDP in this chart. In 2015 the economy of the Tiger was more than twenty times bigger than ours. It has only four times more people than us which explains why its GDP per capita is one of the ten highest in the world. Having so much of our land under sugar cane has obviously contributed to put us on a low growth trajectory for so many years. And out of the high-income country group. Let's see how.

Trapped in the Middle-
Income Country Group

Our GDP per capita at the end of 2016 was $9,424 with about one third of our land under sugar cane contributing barely 1% of GDP. As shown in Chart 4 this means that if we removed all the sugar cane and replaced it with food and the other stuff we have in the non-sugar sector – A in Chart 3 above – our GDP per capita would increase by about 49% to $13,995. This would have given us our ticket to the high-income country group. We can also do another calculation to show why our sugar sector should not be bailed out. Assume everything we had in the non-sugar sector was razed and replaced with the green stuff because we believed that it's been such an innovative industry. If we did that our GDP per capita would collapse by 97% to $283 or a drop of 122 spots in the world ranking. That would put us just $50 above South Sudan a country which has been in Civil War since 2013. It's that ridiculous for Mauritius to have that much sugar cane. Or to try to save it.

A Few More Points

Chart 4 implies that every acre in the non-sugar sector generates close to fifty times more value than one acre under sugar cane. And if you do the relevant math you'll find out that every acre in Singapore produces about 2,500 more wealth than each acre we have under sugar. As we said above they have four times more people. That would only reduce the difference to a still unbelievable 625 times. We shouldn't also forget that our rupee lost plenty of ground against the USD over the past 30 years: one dollar in 2015 was worth 2.25 more than it did in 1985. Something which is not exactly compatible with our feline aspirations. A more reasonable path for our exchange rate over the past three decades would have accelerated the demise of the sugar industry by quite a bit. Which gives you a further indication of how unreasonable it is to keep it afloat. And how retrograde the fossilised positions of Boolell, Berenger, Sithanen and Subron are.

A 100% non-sugar land use in 2016 would have added more than Rs200bn to our GDP in that year. That's an extra Rs40bn of revenue government could have put to good use. A better land use would also have improved our trade relationships and make it more sustainable. I had a conversation about Lalit with a friend in the week-end and this what he said to me: "omwin zot reflesi". Who can disagree? And what does this imply?