NATIONAL

BUDGET 2020/21

SEEKING EQUILIBRIUM

04-JUN-2020

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AGENDA

EXECUTIVE SUMMARY 4

KEY MEASURES 5 – 8

STIMULUS 6

BENEFITS 8

KEY INDICATORS 9 – 16

GDP 10 – 11

GOV FINANCES & LABOUR 12 – 13

FX & RATES 14 – 16

TAXES 7

SECTORIAL 17 – 26

FINANCIAL 18

HOSPITALITY 19

PROPERTY

20

AGRI & SUSTAINABILITY 22 – 23

TECH 24

PUBLIC SECTOR & HEALTH 25 – 26

MANUFACTURING

21

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EXECUTIVE SUMMARY

The shock of the coronavirus outbreaks, irrespective, of whether we

should have locked down or not, closed borders earlier or not at all,

would have severely hurt the Mauritian economy in any case, as external

markets collapsed. We expected the most important National Budget in

a generation and in sense it fell a little short because it did not quite

answer the question: “How will Tourism and Export Manufacturers survive?”.

However, a lot has been said recently about the independence between

Government and the Central Bank and this is when the ball dropped:

The question of “How will Tourism and Export Manufacturers survive?” is

not for Government to answer, but for the Bank of Mauritius to answer.

Having been previously told, or wishfully assumed that the stimulus

would feature in the budget could explain the mismatch between

expectations and reality.

Beyond that the budget delivered along lines we expected, i.e. a focus on

encouraging domestic manufacturing via the preferential procurement for

‘Made in Moris’ and the push to be more self-sustaining in terms of

vegetables and fruits. SMEs will get their boost via cheap funding from

the Development Bank of Mauritius and Rs15bn have been earmarked to

support the unemployed during the coming months. Large amounts have

also been set aside for both new and existing major public projects.

Bhavik Desai

Head of Research

A fresh push to open up to expatriates to compensate for our declining

population was also made.

Ratios and Indicators have all deteriorated. No surprises here. It is the

same all over, and that one time we expected politicians to unite behind

a common cause did not quite materialise… A missed opportunity. But

most important of all, the Minister of Finance through his speech re-

affirmed the Government’s commitment and determination – through

changes in legislations – to ensure that Mauritius gets taken off the EU’s

high risk list.

In other news, taxes were raised for high income earners (averaging

>Rs250k per month) via the Solidarity Levy which quintupled from 5% to

25%. A levy 0.1% turnover was also introduced on companies making

over Rs500M in annual revenue and stands higher for select companies.

This extra tax revenue coupled with the one-off extraordinary injection

from the Bank of Mauritius will in principle result in a deficit-less 2021

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KEY MEASURES

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60

80

20

15

175

Central Bank Injection MIC (Large Corporates)

SMEs Unemployment

499

GDP

6

STIMULUS MEASURES23% of GDP

o Bank of Mauritius has set up the Mauritius Investment

Corporation (MIC) which will invest Rs80bn. The MIC will:

o Support important and viable companies which are

financially distressed due to the effects of the Covid-19

pandemic

o Assist the Pharmaceutical and Medical sectors alongside

the Private sector

o Invest in the Food sector to promote self-sufficiency

o Participate in joint ventures engaged in Fishing activities

and value chain

o Earmark Rs10bn to invest in African projects

o Rs20bn will be used to support SMEs and vulnerable households

o Development Bank of Mauritius will support SMEs by investing

Rs10bn at a reduced rate of 0.5% per year

o Government will inject Rs15bn to provide a minimum monthly

support of Rs5,100 for the next 6 months for the unemployed

2019 GDP [Rsbn]

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TAXES

Individuals

o Tax exemption thresholds will be raised by amounts ranging from Rs15k to

Rs80k as per number of dependants

o Solidarity Levy for high earners will be raised from 5% to 25% for

chargeable income above Rs3M instead of Rs3.5M

o ‘Sugar Tax’ levied on sweetened products doubled to 6cts/gram of sugar,

whereas Duty and VAT exemption thresholds on ‘online orders’ were

lowered from Rs3k to Rs1k.

Corporate

o Financial institutions, Service providers and Property holding companies

with gross income exceeding Rs500M will be charged 0.3% of their annual

gross income while other companies – bar companies operating in the

tourism sector – will be charged 0.1%

o 8 years of income tax holidays will be given to companies engaged in the

manufacturing of nutraceutical products as from 4th June 2020 as well as

for companies already engaged in the production of pharmaceutical

products, medical devices or high-tech equipment since 8th June 2017

o Double tax deduction for COVID-19 affected companies who invested in

Plant & Machinery during 1st Mar 2020 – 30th June 2020 will be provided

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8

BENEFITS

Social Integrationo Sustaining a universal monthly benefit of Rs9000 to beneficiaries of the

Basic Retirement Pension (BRP)

o Substituting NPF contribution system for the “Contribution Sociale

Généralisée” (CSG) whereby contributions made from both employees and

employers will be progressive

o PRB Report is being deferred yet the monthly interim PRB allowance of

Rs1k to civil servants is being maintained

o Minimum monthly support of Rs5,100 over the next 6 months to support

those faced with technical unemployment due to the pandemic

o Mauritian employees guaranteed a monthly income of Rs10,200

o Construction of 12k residential units for low- and middle-income

households over the next 3yrs

Consumer Protection

o Upkeep of subsidies on Rice and Flour to maintain their retail prices while

the price of the 12Kg of LPG to decrease from Rs210 to Rs180, i.e. a 14%

reduction

o New consumer protection framework catering for e-commerce

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DEAR COLLEAGUE AND POWERPOINT AFFICIONADO

KEY INDICATORS

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2020 GDP FORECASTS

-7

*Source: International Monetary Fund

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2020 GDP FORECASTS BY SECTOR

-7

2

-80

-5

-15

-30

3

-3

1

2

0

-11

-7

-6

-30

-35

4

2

3

Mauritius

Financial Services

Tourism

Trade

Manufacturing

o/w Textiles

Construction

Real Estate

Agriculture

Tech

Prof/Admin Svcs*Tourism not to scale

Source: Hansard May 14th 2020

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GOVERNMENT FINANCES

NATIONAL GOVERMENT

5.9

4.9

6.0 6.2

3.5

6.6

-5.6-5.0

-4.0-4.6

-5.8 -5.7

-10.1

2014 2015 2016 2017 2018 2019 2020

BoP [% of GDP]

C/A [% of GDP]

61 63 60 57 58 58

75

-3.2 -3.5 -3.5 -3.2 -3.2 -3.2

-13.6

2014 2015 2016 2017 2018 2019 2020

Debt [% of GDP]

Budget Deft [% of GDP]

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UNEMPLOYMENT RATE

8.5

7.2 7.3 7.6 7.8

8.0 8.0 7.8 7.9 7.3 7.1 6.9 6.7

16

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

*AXYS Forecast assumes 100k unemployed by year end

|

80

90

100

110

120

Cu

rren

cy I

nd

ex

Dollar Index

Rupee Index

14

RUPEE EVOLUTION

Stro

nge

rW

eak

er

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INFLATION

-2

0

2

4

6

8

10

12

Infl

ati

on

Rate

[%

]

Year-on-Year

Year-on-Year (Forecast)

Headline

Headline (Forecast)

*AXYS Forecasts

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INTEREST RATES

0

2

4

6

8

10

12

14

Inte

rest

Rate

s [%

]

Repo

T-Bills

Savings

Lending

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KEY INDICATORS

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FINANCIAL SERVICES

Capital Markets

o Government priority is to ensure compliance with recommended

international best practices and norms including recommendations from the

Financial Action Task Force to keep Mauritius off the EU's list of High Risk

Third Countries. Government will adopt additional legislation and set up a

specialised Financial Offences Court

o The Stock Exchange of Mauritius will house a dedicated Venture Capital

Market for start-ups and SMEs

Financial Services

o Bank of Mauritius will propose innovation through a digital currency,

insurance wrappers as well as Sukuk Finance. New frameworks will be put

in place for green and blue bonds, digital banking, private banking and

wealth management services

o Bank of Mauritius will be allowed to vary the capital adequacy

ratio required to a lower level if needed

o Members of a private pension scheme will be allowed to transfer

their accrued benefits to another provider

FIN

AN

CIA

L &

IN

SU

RA

NC

EG

BL

LIC

EN

SE

ES

[#

k]

9.810.3

10.811.1

11.511.9

12.1

2013 2014 2015 2016 2017 2018 2019

GBL1

10.711.0

10.710.3

10.1

8.9

7.3

0.7

1.4

2013 2014 2015 2016 2017 2018 2019

GBL2 Authorised Company

2013 2014 2015 2016 2017 2018 2019

9.6

8.7

1.42.0 0.5 2.3

7.5

4.3

0.4

2013 2014 2015 2016 2017 2018 9M2019

Gross Direct Investment [Rs bn]

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HOSPITALITY

Destination

o The Mauritius Tourism Promotion Authority (MTPA) and the Economic

Development Board (EDB) will embark on a novel branding strategy.

MTPA will host major events alongside international partners including

press and travel agents to promote Mauritius

o Government will enter into a commercial partnership with Liverpool

Football Club to promote Mauritius as a touristic destination

o Investment in a Cruise Terminal, special arrangements for Private Jets and

simplification of licences for Yachts, berthing, gaming & helicopter flights for

the luxurious end of tourism shall be implemented

Operator

o Hoteliers will be able to convert units into serviceable apartments with the

introduction of an ‘Apart Hotel Scheme’. Amendments in the Invest Hotel

Scheme will henceforth allow occupants to stay up to 90 days instead of 45

days

o State land rental discounts will be doubled from 50% to 100% until June

2022 respectively for hotels being renovated

o Tourism and Beach Authorities will waive licence fees for a 2-year period

9931,038

1,151

1,275

1,342

1,399 1,383

41

44

50

56

60

64 63

2013 2014 2015 2016 2017 2018 2019

Arr [#k]

Earnings [Rs bn]

AR

RIV

AL

S &

RE

CE

IPT

SO

CC

UP

AN

CY

RA

TE

63 65

70

73

77 75

73

2013 2014 2015 2016 2017 2018 2019

Hotels [%]

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MANUFACTURING

Export

o Port dues and terminal handling charges are waived for the period July to

December 2020 and a 50% rebate for the period January to June 2021.

Freight Rebate Scheme will be regionally expanded and Export Credit

Insurance will henceforth cover all Mauritian exports

o Government will support the first two years of operation of ‘Made in Moris’

warehouse set up in Tanzania and Mozambique

o Payment of registration duty and land transfer tax will be exempt for the

purchase of immovable property for all exporters

Domestic

o Government is introducing measures to protect the local

manufacturers with ‘Made in Moris’ brand. This includes a minimum of

10% shelf space in supermarkets, the requirement for government

entities to have a minimum of 30% of domestic purchase as well as

the introduction margin of preference on public purchases from local

manufacturers

o To encourage innovation and efficiency, Government will extend the

investment tax credit of 15% for an additional 3 years for all

manufacturers

IMP

OR

TS

EX

PO

RT

SEurope [Rs bn] Africa [Rs bn] AsiaPac [Rs bn] Americas [Rs bn]

40 38 36 37 35 30 30

15 16 18 18 18 18 18

9 18 22 14

10 10 11

8

9 10

10 9

9 8

72

81 86

78 72

67 67

2013 2014 2015 2016 2017 2018 2019

40 40 39 41 47 48 52

18 18 20 22 26 26 25

100 105 100 94 99

109 112 166 172 168 165

181 192 199

2013 2014 2015 2016 2017 2018 2019

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PROPERTY

Construction

o The Construction sector is seen as the engine of recovery and a key

component of the "Plan de Relance de L'Investissement et de L'Economie"

o The Government will construct 12k social housing units for Rs12bn to

families within certain income brackets

o Additional Government-funded projects to the tune of Rs30bn will include

bus terminals, new roads and bridges, completion of the Metro System as

well as a dam in the South of the island

o Government will continue to stimulate private investment and incentivise

the sector via simplified procedures, fee waivers, threshold increases and

VAT payment timeline modifications while promoting local expertise. The

EDB still has Rs62bn worth of project pipeline and will review the use of

land and construction

o Government will adopt online technology for registration of properties

PE

RM

ITS

GR

AN

TE

D

6.1

6.2 8.5

10.0

8.8 9.1

13.6

75

65

81 80

66

89 87

2013 2014 2015 2016 2017 2018 9M2019

Gross Direct Investment [Rs bn]

Of which property schemes [%]

RE

AL

ES

TA

TE

113

138

111 117

125

114

19

16

21

27 23

49 132

154

132

144 148

163

2013 2014 2015 2016 2017 2018

Residential. [Ha] Non-Residential [Ha]

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AGRICULTURE

SU

GA

R I

ND

US

TR

YP

RO

DU

CT

ION

405

400

366

386

355

323 331

10.6

9.9

9.1

10.2

9.6

10.3

9.7

2013 2014 2015 2016 2017 2018 2019

Production [kt] Sugar cane extraction rate [%]

47 48 46 46 4849 51

613 14

17

23

2932

2013 2014 2015 2016 2017 2018 2019

Poultry meat [kt] Fish [kt]

Sugar

o Customs duty will be increased from 80% to 100% on imported sugar

o Government will waive insurance premium and guarantee a price of Rs

25k/t for the first 60t of sugar for crop 2020

o Cane Replantation Program will be maintained to encourage planters’

interest in sugarcane cultivation

Non-Sugar

o Under the aegis of the "Plan de Relance de l’Investissement et

de L'Economie”, Government will promote investment in smart agriculture

via the setting of Food Technology Centre. Focus will also be on high-

tech farming activities to increase food self-sufficiency

o Government, supported by the Development Bank of Mauritius (DBM), will

offer multiple loan schemes to planters including a novel “Backyard

Gardening Loan Scheme” to enable housewives’ engagement in backyard

and rooftop gardening

o Agricultural Marketing Board will be able to intervene to stabilise prices

of agricultural produce while ensuring regular supply and monitor

operations of the National Wholesale Market

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SUSTAINABILITY

o A transfer of Rs2bn to the National Environmental Fund will be made, out

of which Rs1.2bn has been earmarked to construct drainage for the

prevention of flash floods

o Air Quality Index will be introduced to monitor the quality of air

in Mauritius

o Efforts will be undertaken to increase the share of local renewable energy

via the setting up of/increasing capacity of solar PV plants up to an

additional 37MW through different projects

o A Medium-Scale Distributed Generation (MSDG) Scheme for a max. of

10MW will be set up to enable beneficiaries to produce electricity and sell

excess to CEB

o A 14MW battery energy stoppage system will also be installed to

regulate energy efficiency, especially during downtimes

o A further 7k houses will be connected to the sewerage system

o Distribution of water will be improved through replacement of 100km of

pipes, setting up of a new dam and boreholes and additional treatment

plants

o 12.5k households will benefit from the Water Tank Grant Scheme EL

EC

TR

ICIT

Y P

RO

D

> 35%RENEWABLE ENERGY MIX

BY 2025

2,885

2,9372,996 3,042

3,120 3,132

2120

23

22

20

21

2013 2014 2015 2016 2017 2018

Fossil [GWh] Of which renewables [%]

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TECHNOLOGY

SU

BS

CR

IPT

ION

S

1,532

1,651

1,761 1,814 1,840

1,919 363

372 380

390 413 434

1,895

2,023

2,141 2,204

2,253 2,353

2013 2014 2015 2016 2017 2018

TELEPHONE

358 397 464

651 746

827

162 182

197

213

246 274

520 579

662

863

992 1,102

2013 2014 2015 2016 2017 2018

Mobile [k]

Fixed [k]

BROADBAND

50,000 NEW JOBS BY 2030

o Cote D’or Data Technology Park will be created and will encompass 12

specialised centres, notably additive manufacturing and artificial intelligence

o Government will set up a Technology and Innovation Fund to invest up to

Rs2M in the equity of viable projects recommended by Mauritius Research

and Innovation Council

o A business continuity plan through the public service will be setup by

implementing the electronic Document Management system

o Mobile payments systems will be integrated in Government online systems

o Blockchain technology will be used in Mauritius through the Land Use and

Valuation Information Management System (LAVIMS)

o Rs100M will be invested in the deployment of wireless local area network

for schools

o A new Technopark will be built in Rodrigues to enhance development of

information technology

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PUBLIC SECTOR

Education

o Budgetary measures for the education sector are mainly aimed at

promoting an inclusive education system that is fully adapted to the new

developmental needs to the economy and the society. Rs15 bn will be

allocated to the education sector

Law and Order

o A budget of Rs8.4bn will be allocated to law and order and will include the

expansion of the Safe City Project to combat crimes and ensure better

traffic management

Public Sector

o Government will publish the Implementation Plan for the public sector

transformation strategy. Key measures include the reduction of 10% in the

recurrent expenditure for the coming financial year and reduction in

overseas missions by 60%

NU

MB

ER

OF

SC

HO

OL

S

945 924 906 878 850 812 817

305 305 305 303 303 301 302

170 170 170 166 168 170 172

1420 1399 1381 1347 1321 1283 1291

2013 2014 2015 2016 2017 2018 2019

Pre-primary Primary Secondary

60%TERTIARY ENROLMENT

BY 2030

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HEALTH

Health

o Government will allocate Rs12 billion to the health sector and will invest

massively in order to expand, diversify and modernise the public health

infrastructure

o Government will invest heavily in the healthcare and pharmaceutical sector

via new hospitals, laboratories and storage facilities for medicines

Covid Specific

o The support to companies affected by COVID-19 will be primarily

undertaken by the newly set-up Special Purpose Vehicle (SPV), Mauritius

Investment Corporation Ltd (MIC)

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REFERENCES & ACKNOWLEDGEMENTS

Budget Speech 2020-2021

Annex to Budget Speech 2020-

2021

6th Floor, Dias Pier Building, Le Caudan

Waterfront, Caudan, Port-Louis, 11307

(230) 405 4000

research@axys-group.com

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