48 Mauritius
48 Mauritius
48 Mauritius
Mauritius*
Reshma Peerun, Sunil Bundoo and Dr. Kheswar Jankee
Mauritius 255
and in the supply of some intermediate goods for business. and to meet capital expenditure and the over-manning of
Greater openness to new entrants in highly concentrated many SoEs. It must be pointed out however, that these
industries could attract new FDI that will be beneficial for criticisms do not really apply to SoEs operating in a
the competitiveness of the economy (Investment Policy competitive business environment (for instance, the State
Review 2001). Bank of Mauritius) or those exposed to international
competition (such as, Air Mauritius) which, generally, have
State owned Enterprises (SoEs) in Mauritius been profitable.
SoEs accounts for about 13 percent of the GDP in
Mauritius. SoEs have been set up for a number of reasons. Box 48.1: Backdoor Commercial Activities
Many of these SoEs have been set up due to the failure of
the private sector to provide for certain basic goods and During the last ten years or so, Mauritius has witnessed
services; for strategic and reasons of national interest; to major changes in the retail market of food and non-
alleviate the problem of unemployment or to create more food products. Giants from France (Score, Continent,
competition in some sectors of the economy. They are Jumbo, Super U) and South Africa (Spar, Shoprite) have
briefly illustrated below: invested in huge departmental stores, where everything
To meet supply deficiencies of certain essential goods is available. This is a cause of great concern to local
led to the establishment of SoEs, like the Agricultural traditional shops, mainly family businesses.
Marketing Board1 and the State Trading Corporation2 ;
The Development Works Corporation (a government- These foreign companies have brought with them
owned contactor of public works) was initially set up to anticompetitive practices, in particular backdoor
create jobs; and the National Transport Corporation commercial practices that allow them to sell some
was set up to provide bus transport service, as well as to products, fast movers, below cost price.
give employment to the employees of the former Vacoas
Transport Corporation; These backdoor practices consist mainly of activities
To promote more competition in the financial system, not pertaining to commerce as such. It involves the sale
the State Bank of Mauritius3 was set up; and of specific places on the shelves, the sale of advertising
Services, which are considered vital to the national space on trolleys, the sale of advertising space on
interest, such as electricity and water, health care, brochures, the printing of coloured brochures on a
education, air transport and sea-port operations. monthly basis.
[Aubeeluck, (1997)].
Such activities bring in a lot of money, which allow the
The share of the entire public sector, that is, SoEs and departmental store to offer some fast moving products
Central and Local Government services, in terms of GDP, below cost price. These practices are known in France
is around 24 percent. SoEs contribute almost 100 percent as, les marges arrie?res and are illegal in that country.
of the water output, around 60 percent of electricity The sale at below cost price is not illegal here. It is a
production and, about half of the total production in market strategy to attract buyers into the stores, in the
transport and communications; and about a fifth in finance expectation that they would be incited to buy the other
and related activities. SoEs account for some 23 percent products. Impulsive buyers are their targets.
of gross domestic investment. They employ about 4.5
percent of the total labour force and around 16.8 percent Low price sales, presented as promotional events almost
for the entire public sector. As regards efficiency, basic every month, are a threat to traditional shops. The aim
estimates (output per worker) show that productivity in is to eliminate these shops and, hence, impose their writ
the private sector is on average higher than that in the public on the retail market. In a large village in the North,
sector (White Paper on Privatisation, Ministry of Finance, Triole, some twelve shops have had to close down
Mauritius, 1997). following the opening of Winners self-service
supermarket. Winners, is one of eleven stores operating
A number of reasons have been advanced for the under the same name. Their huge turnover allows them
performance gap of some SoEs. They include mainly a to offer promotional sales every month. The country
lack of clarity between financial and social objectives, poor has some fifty such stores over the island, against some
monitoring systems and weak accountability mechanisms, 3,000 retail shops battling for their survival.
a lack of good management and financial practice, constant
bailing-out by the Government to cover operational deficits Source: Institute for Consumer Protection, Mauritius
1 It holds monopoly over or still monitors the importation and/or marketing of main agricultural products, such as table potatoes, onions,
garlic, maize, tumeric and cardamon.
2 It imports the totality of Mauritian requirements for petroleum products, flour, ration rice and 50 percent of cement requirement. These
products are considered as essential goods for which an assured supply is required.
3 It must be pointed out however, that nowadays the State Bank of Mauritius and the Mauritius Commercial Bank account over 70 per cent of
the market and are the duopoly-firms in the banking business.
One of the backdoor practices of department stores, Moreover, new firms entering the market will most
as mentioned earlier, consists of imposing, on probably, in the short term, use the existing network
distributors, charges to occupy a prominent spot on established by Mauritius Telecom and, as a result, they
the gondola. This may amount to as much as Rs 25,000 will have to pay a connection rate to MT, which will directly
per month in order to keep a product at a strategic influence their tariffs. The Information and Communication
point where consumers move from counter to counter. Technology Authority (ICTA) has the important task of
These charges may be damaging to some products. ensuring that the connection rate set by MT does not affect
the level playing field and, as a result, keep competitors
One importer, Dabydoyal Brothers tried to launch a out of the market.
new brand of table oil, Meizan. They sought to be
present in one of the major stores, Jumbo, at that time Central Electricity Board
known as Continent. They succeeded to occupy the Electricity in Mauritius is generated from three main
strategic spot on the gondola for less than two months, sources: from hydropower, from diesel/gas turbines and
after which they found out that it was too costly. from coal/bagasse generators. The Central Electricity
Afterwards, they made efforts to occupy the shelf of Board (CEB) currently accounts for around 58 percent of
the counter that is at consumers eye level. They were the total production. The balance is produced by the
surprised to learn that they had to pay other charges independent power producers (IPPs), from bagasse of the
for this. They did so for one or two weeks. As time sugar factories.
went by, Meizan gradually descended to the last shelf
until it disappeared completely. Nonetheless, the CEB has a monopoly position with respect
to transmission and distribution. The first step towards the
This is one of the anticompetitive practices that have privatisation of CEB will be corporatisation, that is,
caused the loss of one operator, and reduced ensuring that CEB becomes a private company under
consumers choice. company law. This will increase management autonomy
and speed up decision-making at different levels. To that
Source: ICP-Mauritius
effect, the CEB Transfer Bill will soon be passed in the
Parliament, together with a Utility Regulatory Bill and a
Sectoral Regulation New Electricity Bill. The next stage, based on information
gathered, will be to open the market, with respect to
Telecommunications Sector electricity generation, to competition.
Mauritius brought forward the commitment it took with
the WTO, to open up its telecommunications market, to A new regulatory body will be set up to regulate tariffs
January 2003. This includes the ending of all monopoly and to invite tenders (both local and overseas) for the
rights in domestic and international telecommunications generation of electricity (hence the two new bills).
services, as of 2003. Therefore, the market for electricity generation will be
opened to more competition.
Since 1988, the Government has been an active major
shareholder in the telecommunications sector and, as such, However, there has been no mention of the lead-time that
was indirectly involved in the operations of the sector. will be granted to the CEB so that it can sufficiently prepare
However, in June 2000,4 the Government disposed of 40 itself to face competition from other producers. The CEB
percent of its shareholdings in Mauritius Telecom (MT) will still have a monopoly with respect to transmission
to a strategic partner, namely France Telecom, for and distribution given its existing network and the size of
US$265mn. Apart from bringing in capital, strategic the market. The other producers of electricity will sell their
partners also bring in managerial expertise, technology, as output to the CEB, as is currently the case with respect to
well as international marketing experience. the independent power producers. The CEB has power
purchase agreements with the IPPs. The purchase
With liberalisation, MT will have to be more competitive agreements will be monitored and approved by the new
in the international market, hence, the need to align regulatory body, the Utility Regulatory Authority.
international tariffs. However, it will still continue to enjoy
a substantial monopoly position in the local market, for Construction and the Cement Industry
conventional lines, as the latter, at a first stage, may not Three of the leading enterprise groups in Mauritius (The
really interest international players. As a result, local tariffs Rogers Group, the Espitalier Noel Group and the Hand
will tend to increase, which to a certain extent, would be Group) are shareholders in a major construction company
4 Stakeholders in MT after June 2000 was as follows: Government 10 percent, Other Public Institutions 30 percent, France Telecom 40
percent, State Bank of Mauritius 19 percent and MT employees 1 percent
Mauritius 257
REHMGrinaker Construction. Whilst considerable to monitor the prices of non-controlled commodities,
capital is required to establish a successful construction and to report cases of significant increase in prices.
company capable of tendering for very large projects, to conduct surveys and collect data on the costing, supply
regulatory barriers to the entry of new firms seem relatively and distribution of both controlled and non-controlled
low. Although the market structure may be conducive to commodities.
competition, the possible existence of RBPs in the industry to conduct enquiries on consumer trade practices.
may inhibit it, leading perhaps to higher tender prices and to prepare case files in view of prosecution, to be referred
reduced efficiency in some individual firms. There is a to the Director of Public Prosecution for advice and to
probability of bid rigging in this sector. stand as witness in Court, in cases of prosecution on
profiteering.
A monopoly to import and distribute cement was in the to deal with complaints from consumers and from
hands of the privately owned Mauritius Portland Cement consumer organisations.
Co. Ltd from 1957. However, in 1984, the Government preparing/delivering talks to different groups of people
decided that the State Trading Corporation (STC) should throughout the island. E.g. primary school children;
later take over the importation of 25 percent of the countrys secondary school students; Womens Associations; Old
cement requirement and, in the following year, the STC people associations; and youth clubs/centres in urban
share of import was raised to 50 percent. At present, the as well as in rural areas; preparation and delivery of
STC remains responsible for 50 percent of cement imports, talks on TV and radio; and preparing simple information
which it obtains through annual tenders. These imports pamphlets to disseminate information to the general
are then sold back to the Mauritius Portland Cement public.
Company (MPCC) for distribution. The Ministry of
Commerce fixes the maximum prices for cement (Radha, The Unit ensures the strict compliance of the following
2003). legislations now in force:
(a) The Consumer Protection (Price & Supplies Control)
Financial Sector Act, 12 of 1998.
The overall strategy of financial liberalisation pursued in (b) The Hire Purchase and Credit Sales (Amendment) Act,
the economy since the late 1980s is based on the premise 2000.
that market forces lead to more efficient pricing, (c) The Fair Trading Act, 1979.
mobilisation and allocation of financial resources. (d) The Consumer Protection Act, 1991.
Diversification and internationalisation of the financial (e) The Essential Commodities Act, 1991.
sector are the major objectives of policy makers. The
development of the financial sector is a continuous process Concluding Observations and Future Scenario
of institutional changes and policy shifts in order to The importance of a competition regime is increasingly
promote business activities in the financial services being recognised in developing countries. Markets need
industry, maintain public and international reputation to be regulated, and efficiency promoted, through
confidence. The use of information technology in the appropriate competition law and policy. Moreover, the
financial services industry has significantly improved the deregulation movement and opening up of sectors of the
competitiveness of financial services organisations. economy, to private initiatives need appropriate
governance to prevent abuses of market power.
Consumer Protection5
The Consumer Protection Unit operates under the Privatisation of public monopolies in the utilities sector
Commerce Division of the Ministry of Commerce & Co- has already begun in Mauritius, such as in
operatives. It is a technical cadre, formed in 1996, when telecommunications; and the Government has expressed
the former Enforcement Branch and the former the willingness to privatise other sectors, such as electricity
Consumer Education Unit were merged. The two very and water. Although this can lead to increased competition,
important responsibilities, of the consumer protection unit, it also implies a transfer of public monopoly into private
are consumer education and enforcement of consumer hands. The case becomes more complex, especially when
laws. the private sector involves foreign-based companies as has
been happening in Mauritius.
The Unit caters for the education of consumers on their
consumer rights and, responsibilities. The duties falling All the more, Mauritius is an open economy where imports
under the responsibility of the unit are as follows: and exports form a major share of its national income.
to check trade premises and ensure the enforcement of With the dismantling of trade barriers and opening of
and compliance with laws and regulations relating to markets to foreign trade, Mauritius further increases its
consumer protection (profiteering by traders). exposure to the world market. The impact of TNCs
5 http://cooperatives.gov.mu/commerce/cpu.htm
Reshma Peerun is an Associate Economics Officer, UNCTAD, Geneva April-Aug 1999. Lecturer in Economics and
International Trade at the University of Mauritius since October 1999. Research areas: WTO issues and Regional
Integration. Convenor for the CUTS 7Up3 project
Sunil Bundoo is a Senior Lecturer in Economics & Finance. Been at the University of Mauritius since 1992. Published
papers and undertaken projects in the following areas: Financial liberalisation, Privatisation, Stock Market, Micro-Finance
and Pro-poor Macroeconomics.
Dr Kheswar Jankee holds Ph D in Monetary Economics and a Senior Lecturer in Banking and Finance, University of
Mauritius.
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