Investment has been the subject of much debate lately. Is there some veracity in the blame game or is it a question of the glass being half full or half empty? Azad Jeetun, former Mauritius Employers’ Federation Director, sheds some light on this issue by analyzing investment trends in Mauritius.

■ Through the looking glass

An analysis of some key statistics on investment over the past forty years helps us derive a number of inferences which are revealing.

1. The share of private investment in total investment has been on the rise in the past four decades, from an average of 64.6% in the period 1976-1986 to 75.6% in the period 2007-16. During the same period, the public sector share dropped from 35.4% to 24.2%. In the past ten years, private sector share has been consistently above 70% which shows the predominant role of the private sector as the engine of growth in Mauritius.

2. Private sector investment share fell below 60% only once in 40 years, in 1988. It reached a peak of 83% in 2008 while the public sector had an abysmal share of only 16.8% in that year coinciding with the international financial crisis.

3. In terms of investment to Gross Domestic Product (GDP) ratio, public sector investment touched the rock bottom of 4.1% in 2008, never experienced even during our recessionary years between 1979 and 1983. A ratio of around 5% is clearly inadequate for our infrastructural development and modernization of vital services essential for boosting private sector investment.

4. The investment ratio has been consistently on the decline between 2009 and 2015 for both sectors; it is expected to pick up for the public sector in 2016 but will continue its decline for the private sector.

5. The investment ratio dropped from 26.4% to 17.7% between 2009 and 2015, a figure which is comparable to what was recorded in the early eighties. It fell from 25.7% in 1979 to 18% in 1983. Such an investment ratio can neither contribute to a growth of 5% nor generate employment.

6. Between 2012 and 2015, we have had four years of negative investment growth. We have to go back to the period 1979 to 1982 for a similar consecutive dip in investment.

7. The highest investment ratio was 30.6% in 1990 and last year’s rate was the lowest since 1976.

8. In nominal terms, public investment is about 6.4% higher in 2015 compared to 2010 whereas private sector investment dropped by 7.8% which bespeaks of the stagnation of investment.

9. Real investment has declined by 12.6% between 2010 and 2015 with private sector investment falling faster than public sector investment, 16 .6% and 6% respectively.

10. Real investment in many productive sectors has declined sharply between 2006 and 2016, the decline being more pronounced for manufacturing sector(64%) and accommodation and food serve activities (68.5%, followed by agriculture (43%), construction (32.7%) and wholesale and retail trade (32%).

11. There has been a shift of investment from productive sectors to service sectors like real estate activities with the latter’s share surging by 45.8% between 2007 and 2015.

12. Investment in manufacturing represents only 5% of total investment in 2016 compared to 15.1% in 2000. Similarly, the share of accommodation and food services has declined from 10.1% to 5.6% while that of real estate activities has jumped from 26.2% to 37%. While expansion of investment in service sectors is a natural consequence of economic development, the consistent decline in the volume of investment in productive sectors is alarming since we still depend on them for our growth and employment. It begs the question whether we do have the right strategies for our key sectors.

13. If we look at our investment ratios over 20 years, say 1991-2010, public sector investment averaged 7.6% and private sector investment was 17.2%, making a national average of 24.8%. Today we are far behind these figures. If we can replicate such performance in the medium term, only then we will be able to have an economic growth of 5% or more.

■ Belling the cat

The foregoing shows that the investment trends are not rosy. Most indicators blink the red signal. Growth and employment hinge crucially on investment and the continued slackness in investment does not augur well for the economy. We should identify the real causes and the reasons are multifarious, both political and economic. However, we should not look for scapegoat since we are all in the same boat.

We should realize that public and private investment are complementary and they should not be viewed in isolation. Each sector has its respective role. It is a question of harnessing their potential for the benefit of the country. Interestingly, the blame game comes at a time when public sector investment is less than 5% of GDP, a very low figure indeed. There is need for investment in both sectors to increase, perhaps a greater one for the public sector.

The public and private sector dichotomy shows that we do not have a common vision and the political and economic leadership to develop one in consultation with all stakeholders, a vision that all can share and take ownership of for the advancement of the country and the eventual well-being and prosperity of all Mauritians. Obviously, the lead role devolves on the government so that we look at issues as the national interest rather than in the public and private sector divide.

The private sector has always been dynamic and contributed significantly to investment, employment and economic growth. But today, there are many challenges for the economy in this increasingly volatile and turbulent modern era, which require a strategic approach and a dynamic business friendly environment. However, this period is characterized by procrastination, indecision and inaction where the economy has taken the back seat. We are so much bogged down with political imperatives that the economy has no priority.

The ILO identifies seventeen criteria for an enabling environment. I have singled out two criteria for some comments, namely, political stability and good governance. Political stability does not only mean a comfortable majority of government but also a cohesion within the government and concerted actions and policies, all looking in the same direction.

Real Investment by sector

Unfortunately, the government does not speak with one voice with glaring divergences among Ministers on many issues in public, besides inherent conflicts within the government itself. These send the wrong signals which breed uncertainty and instability. We have a leadership crisis.

In terms of governance as well, government does not set the right example. Month after month, we have to reckon with cases where principles of governance are not respected, where government tries to explain the inexplicable rather than taking remedial action. Good examples of bad governance are legion. In an article in The Economist of 8 October 2016, President Obama identified four structural challenges for the American economy, namely, “boosting productivity growth, combating rising inequality, ensuring that everyone who wants a job can get one and building a resilient economy that’s printed for future economic growth”. These major challenges for the most highly developed economy are equally relevant to us.

The bottom line is that we are no longer competitive globally. Do we have a strategy to sharpen our competitiveness, to boost productivity, to stimulate our key sectors of the economy, to invest heavily in human capital and improve the skills and education of the workforce in line with the evolving needs of the country? These are just some questions that should be addressed at the highest level by government and key stakeholders. The response should be to put our heads together so that we deal with the constraints to investment and develop a blueprint for the future with right policies, strategies and actions.

■ Conclusions

Ultimately, it is not a question as to who is right or wrong. It boils down to the urgency of stimulating investment in both public and private sectors. It is incumbent upon the government to create a conducive environment and to formulate a strategy of development. We did it in the early eighties. But then we had a government which took the bull by the horn; this has not been replicated so far.

I am tempted to quote Charles Dickens: “It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair….”