Digested week

Inconsistencies and short-sightedness

17 juin 2024, 22:09


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Inconsistencies and short-sightedness

«The death of our coral reefs and the degradation of our lagoons are the causes of coastal erosion”, avers Stefan Gua.

“Let us never forget that the state has no source of money other than the money people earn themselves. If the state wishes to spend more, it can do so only by borrowing your savings or by taxing you more. There is no such thing as public money, there is only taxpayers’ money.”

Margaret Thatcher (1983) WhatsApp Image 2024-06-18 at 13.14.23.jpeg

The money illusion

The whole week was devoted to debates in Parliament with MPs – depending on their sides of the National Assembly – praising or criticising finance minister Renganaden Padayachy’ budgetary measures. That’s only fair game as the government and the opposition have to outbid one another in a context where they will soon solicit the people’s votes in the forthcoming elections. However, the main contention is that the CSG allowances granted to 320,000 employees and self-employed, 310,000 seniors and 110,000 workers eligible for a guaranteed minimum income and meant to boost their purchasing power will end up in the economic circuit. The State will be the main beneficiary with a VAT increase of Rs 10 billion, reaching Rs 65 billion in June 2025. This tax hits rich and poor alike. Hence the term “money illusion” because the reality of prices in supermarkets, with a rupee in free fall since 2020, will leave lower and middle class consumers with a very bitter taste. Some comments from economists…

Sameer Sharma, former BOM senior executive, now in a US global bank

"The finance minister has given the economy a lot of steroids that can do more harm than good” (…) “We make the poor and middle class pay much more than their fair share versus the rich to fund the poor and lower middle class.”

Sushil Khushiram, former minister of economic development

“The 24-25 budget fails dismally to reduce fiscal pressure on the external deficit, which is depreciating the rupee and driving up inflation; lower the high and unsustainable level of public debt; and create fiscal space to meet any future adverse shocks and contingencies. Government has abandoned all notions of fiscal responsibility by engaging in prodigal social spending.”

Pierre Dinan, economic consultant

“The Social Protection Budget estimated at Rs 67,58 billion, of which Rs 47.6 billion are earmarked for old age pension and Rs 55 billion thereafter, gives us an idea of how expensive seniors are for our budgets. We are about to spend a lot of money on retirees, which is why, I dare say, we have a demographic bomb ahead of us.”

Rama Sithanen, former finance minister

“The population will have to pay the price for the social largesse of Renganaden Padayachy who has nothing planned for the long term. The population is already paying the price with the absence of currencies on the market. There is a poor monetary and fiscal policy with a consumption model focused on imports, devaluation of the rupee and inflation.”

Kugan Parapen, member of ReA

“All the largesse announced by minister Padayachy as pension increases and other social benefits will be indirectly financed by members of the same family living under the same roof through VAT and heavily taxed petroleum products. He seems to have undressed Paul to pay Peter, except that Paul and Peter live in the same household."

WhatsApp Image 2024-06-18 at 13.14.24.jpeg Stefan Gua (L1), Ashok Subron (L2) and Kugan Parapen (R) of Resistans & Alternativ, dissected the environment, labour and economic measures of the 2024-25 budget on Saturday June 8.

The fate of local and migrant workers

Trade union negotiator and political activist from Resistans and Alternativ (ReA), Ashok Subron, has taken a stand to address the rights of Mauritian workers, which he claims will be severely impaired by the anticipated influx of foreign workers through the excessive liberalization of the labour market. He describes the 2024-25 Budget as a "dangerous one that will go down in the country's history as a golden dagger in the backs of the youth and local workers." The eligibility for foreign employment, reduced from Rs 60,000 to Rs 30,000 and now to Rs 22,500, he says, will push more Mauritian workers and young professionals to look for opportunities elsewhere. "It will subject them to a new form of servitude by putting them in direct competition with foreign professionals whose recruitment has been eased."

The quota for migrants has already been abolished in the free port, ICT-BPO, and jewellery sectors. Foreign retirees settled in Mauritius and the 10-year work permit for foreign experts in wealth management, family office, virtual assets and virtual tokens will put the latter in direct competition with Mauritians. According to Subron, the finance minister "has crossed a red line bringing us back to the times of coolies," as these measures will increase the exploitation of foreign labour while endangering the local working class and young professionals. "Anything a Mauritian worker is not supposed to do or finds unacceptable, the employer will force him to do under the threat of hiring foreign workers instead."

Exemptions for migrant workers in the Worker's Rights Act will lead "the private sector to favour the less demanding employment of foreigners who will not enjoy the same rights and can be hired and fired at will,” says Subron, while adding: "Our stance is not xenophobic but calls for the protection of both Mauritian and foreign workers." Furthermore, he blames the finance minister for not introducing the promised salary realignment but offering instead temporary CSG allowances, "as an electoral bribe, whereas decent livelihoods for workers should have nothing to do with their freedom to vote."

Rising nationalism vs liberalised migration

In the podcast Décryptage and an editorial published in l’express Saturday’s edition, the director of publications, Nad Sivaramen, discusses the dangers of rising nationalism in response to liberalised employment of migrant workers to address our labour shortages. While some acclaim the economic benefits and innovation the latter could bring, others fear that their presence might threaten the welfare state and strengthen nationalist, even xenophobic, sentiments. One major argument is the perceived threat to the welfare state, when limited resources become even more precious and competition for low-skilled jobs intensifies. “The lack of clear strategies for integrating immigrants, as is the case in Mauritius, could exacerbate social tensions and negative perceptions.”

He thus recalls the rise of nationalism in Europe as the number of immigrants over the last five decades increased much faster than the native population. “The labour market is under pressure, and debates on immigration have become catalysts for the rise of nationalism and xenophobia.” Is the Mauritian diaspora a potential solution? With their diverse skills and perspectives, they could play a crucial role in the economic development of their home country. Sivaramen thus avers that “a well-thought-out strategy could turn this emigration into an asset, but significant challenges remain. Moderate and informed perceptions must prevail to prevent fear and misinformation from fuelling nationalism. Balanced policies that recognize both the challenges and opportunities of immigration are essential for a harmonious and prosperous future.”

Climate resilience

In the context of environmental risks for small island states like Mauritius, extreme weather events have shown that resilience is an essential component of any comprehensive climate action program. An issue that the budget seems to have failed to address. ReA activist Stefan Gua expresses his concerns about the sand extraction project aimed at rehabilitating eroded beaches. "The death of our coral reefs and the degradation of our lagoons are the causes of coastal erosion. However, with the announced measures, the degradation will be even more severe. The government is only interested in creating pretty beaches in front of hotels without considering the long term." He believes that protecting those dunes and coastal vegetation, which prevent erosion, is more crucial. "It’s these hotel and real estate projects on our coastline, such as the one at La Cambuse, that destroy these dunes and vegetation." Moreover, the restoration of damaged coral reefs by implanting 25,000 coral farms seems in contradiction with this new sand extraction policy.

Gua also raises questions about the Rs 300 billion Climate and Sustainability Fund. "The private sector will contribute 35% (Rs 3.2 billion by 2030 through a 2% levy on companies making more than Rs 50 million in profit), with the rest coming from international donations. But it will be a public-private committee, that will manage this enormous sum without any say from parliamentarians and civil society. Yet, it’s the same private sector that degrades our environment with concrete and privatizes our beaches." He wonders if this fund will be managed like the NEOC, which failed to protect the population during the passage of Belal, resulting in worker fatalities. "There were no worker representatives in the NEOC, and even after the disasters of Belal and other floods, the finance minister has made no provision for future calamities and their victims, despite promptly allocating Rs 1 billion after Belal, notably to compensate motorists."

Moreover, our marine biodiversity is on the brink of collapse. Another measure that shocks environmentalists is the decision to allow the use of large-scale drift nets and demersal trawl nets, which destroy marine fauna and flora, biodiversity and ecosystems by catching marine animals, including turtles, sharks, dolphins, young whales and endangered fish species.