We reviewed the top sectors of the Mauritian economy. Read more to know the latest measures announced in the Budget 2020 and the key metrics you need to pay attention to.Financial Services Hospitality, Manufacturing & SME Agri-Business & Real-Estate Public Sector Information and Communications Technology (ICT)
The financial services sector, in particular banks, is expected to play an important role in the “relance de l’investissement et de l'économie”.
However, measures announced are rather aimed at strengthening the regulatory framework than encouraging banks to participate more in the support of the sectors severely impacted by COVID-19. There were also no specific incentives for banks to foster new investments for SMEs and start-ups, as these are considered as being riskier.
Following the recent proposition to classify Mauritius in the EU blacklist, measures have been announced to accelerate the implementation of the five remaining recommendations by the FATF, but will this be sufficient, and is it achievable in just a couple of months?
To diversify the sector’s offerings, five new financial services products have been introduced; but will these simply be added to the list of pending measures introduced in the past couple of years?
Lastly, we note the creation of the venture capital market on The Stock Exchange of Mauritius to fund the SMEs and start-ups. Given its higher risk profile, it should be accompanied by additional measures, regulatory and/or fiscal, to incentivise potential investors.
Accelerating the implementation of the five recommendations under the Financial Action Task Force (FATF) Action Plan by September 2020
Setting up a Venture Capital Market on the Stock Exchange of Mauritius for start ups and SMEs
Introduction of 5 new financial services products
The bulk of the incentives has gone to the SMEs, with Rs10bn facility through DBM Ltd. How will the government protect taxpayers from sectors which are inherently higher risk? Involving entrepreneurs and businessmen with experience will be key in protecting the interests of the taxpayer to support SMEs.
The measures in the hospitality sector are the most disappointing. The relief to government leases represents a small fraction of the fixed hospitality costs. A new branding strategy by the MTPA is welcome but there is a clear need for a new vision under one strong, competent and efficient institution as a key driver for rebranding, repositioning and promoting the sector. I am glad to see the efforts towards a more sustainable and cleaner country.
The manufacturing sector has been struggling for many years now. With the devaluation of the rupee, the sector will have a false sense of progress despite many contemplating mass layoffs because of contracted demands in their markets. The sector is in desperate need for reinvention and moving up the value chain; for this we need brains and talent with vision. Will they have enough firepower to invest with the new taxes on the top line? What are we doing to attract innovators of tomorrow? Let’s hope!
Favouring local entrepreneurship
Rental payment of state lands for hotels to be waived for the upcoming year
Tax credit of 15% over 3 years extended to all manufacturing companies
The measures announced are timid, a 'rehash' of previous measures and ultimately leave the sector players, especially the haemorrhaging sugar industry, hungry for more.
Promoting self-sufficiency is not original and is an initiative previous budgets have espoused without much success. Repurposing abandoned lands is laudable but with no direction on the new cash crops.
Waiving of land transfer taxes and registration duty on new builds will not be as potent in a recessionary environment with an expected increase in redundancies and pay freezes. Similarly, investing in an expensive cruise terminal at a time when the cruise industry is facing an existential threat may require rethinking.
Cheap loans at 0.5% interest sound promising but the devil is in the detail, which is lacking. One hopes that the loan will be used for growth or maintaining jobs - not repaying banks.
One initiative we do applaud is paying contractors faster and reducing the retention period for public contracts. We also commend restricting certain public projects to Mauritian contractors.
Enhance land under cultivation, repurposing c. 20,000 ha of abandoned lands
Shorter retention period of 6 months and faster payment cycles within 28 days
Loans at 0.5% interest to distressed companies
Privileging local expertise for projects below Rs300m
Like in precedent years, public sector investments shall continue to act as the engine of growth. We were expecting a shift towards the private sector but given the COVID-19 context, this may take more time to emerge.
Implementation of the public sector policies shall push for more Private Public Partnerships mode of operation, with a view to bringing back confidence.
With the Prime Minister taking a commitment to chair the committee on Public Sector Transformation strategy, the tone has been set to reform the public sector to make it more efficient and effective in delivery of its services.
At PwC, we believe the Budget contains the essential components to create a new model out of the COVID-19 situation. However, the key to achieving the desired outcome will depend on the continued commitment, focus and implementation of the stated measures which in the past has been a challenge.
Rs15bn to the Ministry of Education, Tertiary Education, Science and Technology
Rs12bn for the construction of 12,000 social housing units
Rs12b earmarked for our national health services
At PwC, we welcome the government's commitment to continue the digitisation journey, which will help the public services meet the needs and evolving expectations of citizens and businesses. The measures announced are focussed on the digitisation efforts on four capabilities: services, processes, decisions, and data sharing, which altogether will help accelerate the digital transformation in government.
We are also pleased to see that this budget addresses the need to attract top renowned institutions to set up campuses on the Island, a measure which has been long overdue. It will not only help attract talents but also investors, for the supply of qualified labour will henceforth be available locally.
In order to successfully implement these projects, the government will need to put into place a strong governance structure, closer partnerships with the private sector and better monitoring of implementation progress.
Improve efficiency of public services
New digital frameworks for Financial Services
Modernising current infrastructure and setting up of new campuses
Modernising current infrastructure and setting up of new campuses
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Anthony Leung Shing
Country Senior Partner, PwC Mauritius
Tel: +230 404 5071