16.10.2006
Who is responsible for the terrible price rises that lower the real wages of all of us who work for a living? Importers blame rupee depreciation. Who, then, is responsible for the accelerated rupee depreciation? It is important because it makes the price of the barest necessities (including much of the food we eat, which is imported) rise rocket-high?
Minister Sithanen gives us a clue when he is reduced to begging those who own, hoard amd speculate against foreign currency to make some of it available to banks so that the country's end-of-year supplies can be imported. And who are those who own foreign currency? Those who own and control sectors that produce goods for export, largely capitalists in the sugar industry, textiles, and hotels.
RUPEE DELIBERATELY DEPRECIATED
In 1999, the ex-COMESA bank had already laid the blame of accelerated rupee depreciation on the shoulders of exporters. The report reads: "Amid steady depreciation, exporters are retaining hard currency earnings, thereby depriving commercial banks of foreign exchange, in turn accelerating the depreciation of the rupee". The ex-COMESA bank in their report accused exporters of doing so deliberately. (1)
CONTROL ON THE RUPEE TRANSFERRED TO EXPORTERS
How did this capitalist control on the value of the rupee happen? It happened in a series of measures taken by Berenger, Sithanen, Bheenick and Bunwaree in successive Jugnauth and Ramgoolam governments.
BERENGER'S ROLE
First, there was the 1982-83 Finance Minister Berenger's infamous measure of pegging the rupee to a basket of currencies (2) (the contents of which remain a State secret, thus open to manipulation by the government).
SITHANEN'S ROLE
Secondly, there was the 1994 Finance Minister Sithanen's dangerous measure of liberalising exchange control. This gave capitalists in the financial sector, in textiles, in tourism, the means to control the value of the rupee.
BHEENICK AND BUNWAREE'S ROLES
Thirdly, the 1996-97 Bheenick and Bunwaree budgets horrifically allowed sugar exporters to retain foreign currency for the government-negotiated EEC sugar quota instead of the Central Bank maintaining control of it.
These series of measures abolished the little transparency on the exchange rate for the rupee. They effectively transferred control over foreign currency and over rupee value from the Central Bank to private sector exporters. And capitalists in export (mainly in the sugar and textiles sectors) have, over the years, been deliberately depreciating the rupee, getting more rupees out of each Euro or dollar, making huge windfall gains.
This explains why now, Minister Sithanen is reduced to making a public spectacle of himself as he begs exporters for foreign currency. And it explains why the Governor Basant Roi of the Central Bank is reduced to pleading with commercial banks not to let "market forces" determine the exchange rate.
WHAT IS TO BE DONE?
CENTRAL BANK MUST RE-CONTROL FOREIGN CURRENCY
The Central Bank must re-appropriate control over foreign currency for EEC sugar export as was the case before 1996. After all, the sugar quota and price is negotiated by the State. There must be appropriate measures taken to control exchange rates and slow down imported inflation.
SITHANEN ADMITS TO ECONOMIC CRISIS
But this, in itself, is not enough. The sugar price will already have been lowered by 36% by 2009, and is due to get even lower after that, once the "guaranteed price" is replaced by a "reference price". Even so, the sugar/cane industry has embarked on a centralisation and restructuration plan that will soak up gargantuan amounts of money even though the protected market and price it depended on, is on the way out. It started doing it with the support of the Berenger-Jugnauth government, and is being backed by the Labour government today. The Labour government has pledged to look for the Rs 24.5 billion the sugar/cane industry says it needs, and is taking as a given that EEC compensation will go straight into the sugar/cane bosses pockets. (3) The textile industry is also in crisis. Minister Sithanen has come to admit it himself: everywhere he goes, he talks of the "triple shock" (sugar, textile and oil crisis) the Mauritian economy is going through.
LABOUR GOVERNMENT NOT ADDRESSING THE CRISIS
Yet the proposed solutions laid out in his last budget, does not address this structural crisis at all. In his budget, Minister Sithanen did not tell us what exactly would the sugar and textile sectors be replaced with. What kind of production does he propose in order to replace sugar and cane production? What should be planted on a large scale for export to provide jobs by the tens of thousands? What measures are being taken to make those who own and control the sugar/cane sector to diversify into agro-industrial production? What exactly are the thousands of small and medium enterprises that have mushroomed these last weeks supposed to produce? What sector is Government proposing that will create jobs and bring in foreign currency? These are all questions that Minister Sithanen has not answered up to now.
DEBATE OPENING UP ON ALTERNATIVES
These questions are at long last generating some debate, and this despite defenders of sugar and exporters' refusal to explore alternatives to sugar/cane and textile production. In the debate on rupee depreciation, there are more and more people questioning why so much support is being given to the sugar/cane industry and to textiles when these sectors do not seem to have a future. There are some academics like Professor S. Juggessur who has proposed a most interesting plan of co-operative-based agricultural diversification on a large scale.(4) There are others who are proposing similar ideas.
For instance, in his recent editorial entitled "Autre projet IRS", Gilbert Ahnee proposes a new form of "Integrated" village projects where land and housing is given to the unemployed for agricultural production for subsistence and eventually, for trade. (5) We, in Lalit would agree with him if such production forms part of a national strategy for large-scale agro-industrial diversification. (We have been campaigning for such a strategy for years now). We share Gilbert Ahnee's concern that many of the burgeoning small and medium enterprises will end up bankrupt, and believe that without such a national strategy, the kind of "integrated" village projects risk going bust too, hurling people into debt. The president of the (SMEF) Small and Medium Enterprises Federation, Mr. S. Mulloo has stated in a press interview that 8 out of 10 of small enterprises disappear after 3 to 4 years.(6)
LALIT'S PROPOSALS
Lalit is mobilising people to put forward formal demands for massive agricultural diversification, animal as well as fish farming and industrial fishing on a large scale. We argue that agricultural diversification can be done, in the immediate instance, by interline cropping in all existing sugar cane, for export. This demands immediate re-organising the way rows of sugar cane are planted, in close rows of two, and then leaving a wider space for other produce. Agricultural production of maize, groundnuts, peas, beans, potatoes, tomatoes, to mention a few have already proved successful. This agricultural production will go hand-in-hand with massive agro-industries, for transforming and preserving the produce, for export. This would mean using existing infrastructure around old sugar mills, for example, for canning, freeze-drying, pickling, making further produce (soups, juices, canned meals).
People who own land and capital cannot get away with starving the rest of the population by not planting the land, and not investing the capital in integrated industries that produce dignified employment.
URGENCY
Much as the Prime Minister and Minister Sithanen would like us believe, the crisis is not an ordinary conjunctural one. It is not a "one or two years of sacrifice and light at the end of the tunnel" crisis. It is a structural crisis. The whole of society will be shaken to its roots. It will provoke even deeper social crisis. Even Mr. Jacques de Navacelle, chief of the Joint Economic Council, far removed from the realities of ordinary people who need to work for a living, is beginning to realise that "social peace" is threatened.(7) The economic crisis needs to be addressed now. Urgently.
Rajni Lallah
For LALIT
(1) L'Express 14 July, 1999
(2) Referred to in a letter to the head of the International Monetary Fund signed by Minister Paul Berenger and Bank of Mauritius Governor Ramphul dated 23 March 1983.
(3) See Government of Mauritius document "A Roadmap for the Mauritius Sugar Cane Industry for the 21st Century", September 2005 and L'Express article "Mesures d'Accompagnement: Aide sucriere europeenne premier decaissement au plus tot en decembre"
(4) See article entitled "Post-Sugar protocol - What future for small planters and farmers" by Prof S. Juggessur in Mauritius Times 19-25 August, 2005.
(5) See Gilbert Ahnee's editorial in Le Mauricien, 10 October, 2006
(6) From an interview entitled "Questions a Sanjiv Mulloo, president de la Small and Medium Enterprises Federation (SMEF) : Le taux de mortalite des start-up est tres eleve" L'Express 6 September, 2006.
(7) See interview with Joint Economic Council president Jacques de Navacelle, Week-End 1 October, 2006.