Our country urgently needs a particular strategy proliferating Small and Medium-scale Enterprises (SMEs) not only to enable the resolution of the problem of unemployment and underemployment of people living in rural areas but also to boost their purchasing power, so that the additional demand created could push the country?s entire economy to grow at a faster pace.

SMEs can be enterprises in the agriculture, industry or service sectors with a possible investment of less than a billion rupees on fixed assets and employing less than 500 persons.

The authorities are rightly worried about the backlog of the unemployed of nearly 54,000 and the few thousands or so entering the labour force every year who are underemployed. There is also the case of 3,000 unemployed university graduates who are used as cats-paws in the hands of scheming politicians.

One of the present approaches solving this gravest of problems is to offer incentives for to the setting up of enterprises for the production of goods and services and the removal of disincentives faced by existing ones. A new legislation may be required for SMEs

The rural/peasant farming areas of this country are often neglected areas, where high unemployment and underemployment are endemic. It is about time that the government finds a way for new enterprise developments whether small or medium to be brought to these deprived areas as part of our industrial revolution. It would give incentives to people of rural areas to show their hidden talents by creating their own designs and inventions.

On the other hand, most of the farms in Mauritius are uneconomic units as fragmentation has been acute. The farmer is compelled to sell whatever he produces to the local trader, as the inputs may have been obtained from him on credit, usually granted on usurious terms. Since the farmer is just one among numerous similar price takers, as there is very little secondary processing/differentiation and the quantum produced is invariably low, the return is rarely sufficient for the upkeep of his family.

Therefore there are no savings to be ?ploughed? back. Even if some saving is possible, it is not substantial enough to replace depreciated assets, leave alone procuring any machinery or expertise to increase yields.

As returns are low, the farmer has to resort to off farm work, available, if a few medium or large- scale enterprises happen to be located in the area or depend on the natural environment for survival. The village craftsmen also eke out a miserable existence, as the demand for their goods and services is quite low due to the low purchasing power of the farmers.

The government too is not in a position to increase its expenditure in these areas on physical infrastructure and services such as education and health and transfer payments such as subsidies, as it is in debt due to fiscal profligacy.

Even if it were possible, very little trickles down due to rampant in efficiency and corruption on the part of the public service. Thus the total rural output does not appear to increase in real terms, while the population keeps on increasing, albeit at a low rate. This is a general picture of the rural economy of Mauritius.

The frightening thing about this is the fact, that nearly 40% the labour force and 70% of the people of the country or is locked into it. It is no wonder then that most of Mauritius? poor, amounting to some 42% of the total population, earning around Rs 3,000 per person per month, live in rural areas. Hence the exodus of young people to towns, especially to Port-Louis, (and to affluent countries) in search of jobs, creates serious social problems.

What this brief analysis reveals is that a different approach is required to tackle the challenge of creating job opportunities in rural areas.

Since agriculture (including animal husbandry and fishing), which is the main source of livelihood in rural areas, is subsistence in nature, what is required is to enable farmers to create a substantial surplus, which if sold and converted to purchasing power, may have a multiplier effect through higher incomes and consumption for attracting supporting industries and services.

In other words, productivity in agriculture has to be proved to set the stage for progress. The main approach of achieving this is investment and there is no substitute for it. Either investment in industries and services in rural areas have to take place or there should be investment in agriculture itself to improve its productivity, or both. Prospects for the first alternative in the short term do not appear to be bright mainly due to the underdeveloped state of infrastructure in rural areas; larger investors will avoid such areas.

Therefore, there is no other option but to pursue the second alternative, if results are desired in the short term. But as stated earlier, in rural areas, the demand for goods and services is low, savings available are meagre, the infrastructure is in a run down state and skills are scarce. How can investment take place in such an environment? The development of SMEs, which do not require much by way of such resources, may fit the bill, provided certain changes are effected.

The main resources available in the rural areas are land and labour. But the land is mainly owned by the State. Holdings are fragmented. Titles are not clear. So the first step of the process of establishing viable SMEs in rural areas is consolidation of the fragmented units of land to economic units, after grant of free hold possession and clearance of titles.

When ownership of land is granted, those who are not inclined to continue with agriculture would sell their land to entrepreneurs, who wish to invest in farming for profit. Exit they must, as demonstrated in the case of developed economies, for productivity to improve, due to the fact that too many people (nearly 40% of the labour force) are dependent on land at present.

Those who stay in agriculture will be able to borrow extra capital for investment from banks by offering land they own as collateral. (So far, banks have been reluctant to extend credit against lease permits issued by the government). Conditions will then be conducive for improvement of productivity or the production of a substantial marketable surplus for a higher return at a lower cost, especially by the use of better inputs, modern machinery/equipment and expertise.

What happens to those who leave agriculture? A deliberate effort has to be made to accommodate them in the processing of the surpluses and in the services, which will be attracted by the expanded production. The State has to play the role of planning and managing this process, since the desired outcomes may or may not be realized, if it is left to evolve on its own.

<B>Ahmad MACKY</B>