Union Leaders Say Mauritian Workers Discriminated Against

Government To Destroy Biometric Database

This piece of good news was announced yesterday in the 2015-2019 Programme Speech. Along with a number of laudable intentions like

• making SC/HSC exams free;
• an SME bank which will invest Rs10 billion over the next five years;
• a minimum wage bill;
• focus on job creation for Mauritians: 15,000 will be created every year with many in the public sector;
• a football academy will be set up;
• ensuring competitive energy prices;
• setting up a vascular surgery unit to reduce the number of amputations;
• and organising referendums on crucial national issues. 

There are also some very vague promises such as 'inflation will be kept under control'. Hmm. An inflation target is a must for two reasons: one to preserve the hard-won anti-inflation capital and two to keep depreciation-happy Basant Roi on a tight leash. Government also wants to include a dose of PR in our electoral system. That's a dangerous proposition that needs extensive debate and a referendum.

Let's see how well this plan is implemented.

Suddenly, Labour/MMM Alliance Promises 60,000 Jobs

Because a few weeks ago when Rama Sithanen was asked (scroll to 31m30s) how many jobs he would create in the first twelve months if he was to become the next finance minister -- God forbid -- he said he could not forecast that. He couldn't even give a rough estimation. Of course we can come up with a ballpark of how many jobs he might create because he's been FM for several years and we just have to look at his stats. Turns out we should expect around 7,200 jobs or 2.5X less than what Vishnu Lutchmeenaraidoo could create.

He also said that he would not be able to create jobs immediately. Hmm. We can estimate that too by looking at how many jobs were created in the first full calendar year -- we could look at monthly figures too -- he was in office in each one of his two terms. That number is around 8,300 jobs. But given that he messed up the economy so badly and that he increased unemployment every single year in his first mandate and in every full calendar year of his second that could be really hard to achieve.

Mr. Sithanen also says he will eradicate poverty. He said that before. I'm sure you remember he said he could do that in 7 years. The snag is that it's almost ten years since his bogus reforms have started. And far from eliminating poverty he has thrown an additional 22,000 Mauritians into it during his second term. That's about 350 people every four weeks. And his inflation record doesn't look too good.

So I guess they've thrown this number to look a lot less silly. And to try to be a bit less on the defensive. After lalyans lepep announced their 12 measures.

How Many Jobs Might Vishnu Create in a Year?

We cannot know precisely but given that he's been finance minister long enough we can look at his jobs record and compute an average. This turns out to be 18,243 per year if we use data between 1984 and 1990. We can look at Sithanen's data too. As the chart illustrates it's 7,200 a year on average. That's 2.5X slower. Now if you'll please excuse me I've got something to pick up in Stockholm.

One Reason Rama Chickens Out of a Debate With Vishnu

And deprives us of a historic crossfire between two of our Finance Ministers who've been in the job for roughly the same amount of time. I would have seriously considered moderating this landmark event but only if Rama insisted. What a shame!

But this setback shouldn't prevent us from getting our facts right. Job creation for instance has been more robust when Lutchmeenaraidoo was in the driver's seat.* Yep. The economy churned out 127,700 jobs between 1984 and 1990 compared to 72,600 during Sithanen's two-part tenure. That's 55,000 more jobs in case you're wondering.

*Data for 1983 excluded because I didn't find them.

FDI, Job Creation and Our Last 4 Governments

About Rs1.3 billion of FDI poured into Mauritius the first time Sithanen was Minister of Finance. During that period some 33,000 jobs were created by our economy. Then Navin became PM and we received Rs3.4 billion. That, along with whatever local investment was undertaken, helped to create 21,500 jobs. 

Interestingly Federation 2 created roughly the same number of jobs although FDI more than doubled to Rs8.9 billion. But we have to remember that in 2000 France Telecom paid Rs7.2 billion for a 40% equity stake in Mauritius Telecom. Given that this equity sale didn't create any jobs overnight then it's only a maximum of Rs1.7 billion that was put to work for job creation.

And when we brought Navin back to power in July 2005 some Rs39.1 billion of FDI got into Mauritius till the end of 2009. The snag is only 40,000 jobs have been created with so much FDI. And the ratio FDI/Jobs stays surprisingly high even after considering the effect of inflation.

So it appears that a lot of it has not created enough good jobs and is probably of a speculative nature. And we know that the unemployment rate has stayed in double digits since July 2005 while the savings rate has hit a 30-year low.

Bumper crop, quand tu nous tiens...

What Ramgoolam Achieved Without Sithanen

A higher average growth rate -- in fact the highest of the last 20 years and about 22,000 jobs (yes, our economy creates jobs even when Sithanen is not the Finance Minister!). All of this with a savings rate that stayed above 25.6%. Compare this with the last 4.5 years: worst growth rate in decades but 18,000 jobs more.

Of course there are all kinds of jobs that are created in the economy. Those that have been created since July 2005 couldn't prevent a collapse in the savings rate which is an indication that too many of them may be of the poverty-level variety.

Does it Take Rs39 Billion to Create 7,000 Jobs?

What am I talking about?

Did you know that our economy created some 33,000 jobs the first time Sithanen was around as Finance Minister -- i.e. between September 1991 and December 1995? And that happened with Mauritius receiving about Rs1 billion of FDI over that 4.25-year period.

Now, given that we apparently received Rs40 billion over the last 4.5 years and that the economy created 40,000 jobs this means that the extra 7,000 jobs seemed to have been created with the additional Rs39 billion. That's a lot of billions for only 7,000 jobs if you ask me.

Why The Stimulus Package Didn't Save 4,700 Jobs

First of all Sithanen claims that the economy has created some 40,000 jobs since July 2005. That's roughly 8,000 jobs per year. If our economy is creating jobs this fast then we didn't need to save any because it would have created 4,700 jobs in 7 short months -- about 700 jobs every month.

Secondly, did these companies need to be saved? Does not paying your rent for several years although you operate in a booming industry related to the global financial meltdown?

Thirdly, didn't we hear a few greedy bosses wanting stimulus money but indecently saying at the same time that they didn't guarantee they could save any job. We've also heard worse than that.

So for all of this I am not buying into the argument that the stimulus package saved nearly 5,000 jobs. You shouldn't either.

Beyond The Smokescreen

Financial Analysis 101 teaches us to take turnover and net income figures of companies with a grain of salt. That's because these numbers are based on items that have been manipulated by management in the not-so-distant past. Hence the recommendation to at least cross check them with the company's cash flows to evaluate their quality. For example cash-trapped Infinity BPO shows a big turnover but hasn't been paying its rent for ages. Granted that hubris and bad management may also be at play here.

Similarly, Sithanen claims that his economic policies have worked as they've created 40,000 jobs. I think we need to cross validate this statement with the savings rate to get a clue about the kind of jobs that have been created. The idea is that if the economy is creating good jobs the savings rate should improve quite a bit -- people should have something to set aside once they've attended to their living expenses. At a minimum it should stay flat.

But as you may now know, the savings rate has plunged to a 30-year low of 12% or if you prefer to less than half its average level over the 15 years preceding the Sithanen screw-up. It looks like a lot of the jobs that have been created haven't pulled people out of subsistence.

Not So Sure About That

One of the many many lies that Sithanen keeps on repeating (or maybe he's trying hard to convince himself that it's not a lie) is that the best antidote to poverty is job creation. That's untrue because it depends on how much the jobs that are being created actually pay. If the jobs you are creating are very low-paying although some people would indeed start to work -- and make the unemployment numbers look better than what they really are -- they would still not have gotten out of the poverty trap.

Income is also not everything. How fast prices of everything increase will also determine whether the income you are earning makes you a poor person. That is why inflation is considered the worst enemy of the poor and politicians in many countries, mostly out of self-interest, have passed laws to announce specific inflation targets -- between 1% and 3% per year -- and have adhered to them. The UK, Canada and Germany are good examples.

Another lie is the fact that he's improved the lot of many people because they've been removed from the tax nets. We've called that one too (see here).

Jobs Turns 54 Today