Mauritius: African Success Story Jeffrey Frankel



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Nov. 10, 2010 + 2012+Apr
Mauritius: African Success Story
Jeffrey Frankel, Harvard University

NBER Project on African Successes


This paper was presented at the NBER Conference on African Successes, Accra, Ghana, July 18-20, 2010. The author would like to thank for research assistance Oyebola Olabisi, Jesse Schreger, Diva Singh and Cristobal Marshall. He benefited from numerous discussions with the people of Mauritius, but is especially indebted to Ali Mansoor.

Among many others from whom he absorbed ideas are Vinaye dey Ancharaz, Abhijit Banerjee, Arvind Subramanian in academia; Central Bank Governor Rundheersing Bheenik, Prime Minister Navin Ramgoolam, and Finance Minister Ramakrishna Sithanen in the government; and others in Mauritius including Nando Bodha and Anubhava Katiyar.
The author also thanks for comments on an earlier draft Jorge de Macedo, other participants at the Accra conference, and Avnish Gungadurdoss. This study was part of a NBER project on African Successes, organized by Sebastian Edwards, Simon Johnson and David Weil.

Abstract

Mauritius is a top performer among African countries. It developed a manufacturing sector soon after independence and has managed to respond well to new external shocks. What explains this success? This paper draws on the history of the island, the writings of foreign economists, the ideas of locals, and the results of econometric tests. Mauritius has mostly followed good policies. They include: creating a well-managed Export Processing Zone, conducting diplomacy regarding trade preferences, spending on education, avoiding currency overvaluation, and facilitating business. The good policies can in turn be traced back to good institutions. They include: forswearing an army, protecting property rights (particularly non-expropriation of sugar plantations), and creating a parliamentary structure with comprehensive participation (in the form of representation for rural districts and ethnic minorities, the “best loser system,” ever-changing coalition governments, and cabinet power-sharing). But from where did the good institutions come? They were chosen around the time of independence in 1968. Why in Mauritius and not elsewhere? Luck?

Some fundamental geographic and historical determinants of trade and rule of law help explain why average income is lower in Africa than elsewhere, and trade and rule of law help explain performance within Africa just as they do worldwide. Despite these two econometric findings, the more fundamental determinants are not much help in explaining relative performance within Africa. Fundamental determinants that work worldwide but not within Africa are remoteness, tropics, size and fragmentation. (Access to the sea is the one fundamental geographic determinant of trade and income that is always important.) A case in point is the high level of ethnic diversity in Mauritius, which in many places would make for dysfunctional politics. Here, however, it brings cosmopolitan benefits. The institutions manage to balance the ethnic groups; none is excluded from the system. It is intriguing that the three African countries with the highest governance rankings (Mauritius, Seychelles and Cape Verde) are all islands that had no indigenous population. It helps that everyone came from somewhere else.



Mauritius: African Success Story
Some might be tempted to put a question mark after a title like “Mauritius: African Success Story.” But this would only be because some ask if the country off the eastern coast of Madagascar is truly African, in light of its unusual ethnic composition.1

There cannot be much doubt about the word “story.” The country’s story is a fascinating one.

Nor can there by much doubt that it is a “success”: of all countries identified as being in the geographical region of Africa, Mauritius appears at the top of the governance rankings, as Table 1 shows. The Rule of Law index from World Governance Indicators puts Mauritius first in sub-Saharan Africa, followed by Botswana and Cape Verde. The Index of African Governance compiled by Rotberg and Gisselquist (2009), which attempts to rely less on subjective measures, again puts Mauritius in the number one spot, followed by Seychelles, Cape Verde and Botswana.2 Mauritian growth in GDP per capita rate averaged 5.4% over the period 1970-2010, during which the growth rate in the rest of Africa was only about 1%. By 2010 Mauritius had achieved a per capita income of about $7,000 at current exchange rates. (The number is higher, of course, in PPP terms: $11,000.) An oil-rich country such as Equatorial Guinea has higher income; but as a result of poor governance few people outside the elite enjoy improved quality of life. The Human Development Index from the United Nations Development Program, a more comprehensive measure, classifies Mauritius in the “High Human Development” quartile globally: It ranks number 81 out of 182 countries, well ahead of other African countries.3 Life expectancy is 72.8 years, for example.4

Others may wonder if the country is too small to hold important lessons for typical-sized countries. The land area is only 1,865 square kilometers, or 720 square miles. But given the population of 1 ¼ million and the current relatively high level of income per capita, GDP puts the country at the median among African countries in economic size, ahead of Namibia.5


Table 1: Sub-Saharan Countries Ranked by Governance, with other indicators

Index of African Governance Ranking (2007)

Country

GDP per capita, PPP in constant 2005 Interntl. $ (2008)

UN Human Development Ranking (2007)

World Governance Indicators, Rule of Law Index Ranking (2008)

1

Mauritius

11412

2

1

2

Seychelles

19758

1

5

3

Cape Verde

2957

5

3

4

Botswana

12537

6

2

5

Ghana

1351

18

7

6


Namibia

5909

7

4

7

South Africa

9343

8

6

8

Sao Tome & Principe

1615

9

18

9

Gabon

13461

3

24

10

Benin

1361

27

22

11

Malawi

744

26

10

12

Gambia

1259

33

8

13

Senegal

1656

31

12

14

Madagascar


974

14

15

15

Burkina Faso

1072

41

14

16

Tanzania

1201

17

9

17

Mauritania

18101

20

30

18

Lesotho

1444

23

11

19

Zambia

1253

29

16

20

Comoros

1081

11

31

21

Rwanda

949

32

17

22

Kenya


1432

15

28

23

Uganda

1077

22

19

24

Niger

631

46

27

25

Mali

1043

43

13

26

Mozambique

774

37

25

27

Djibouti

1975

21

21

28

Cameroon

2027

19

29

29

Togo

767

25

26

30

Sierra Leone

723


45

32

31

Guinea-Bissau

496

38

40

32

Ethiopia

802

36

23

33

Nigeria

1939

24

34

34

Burundi

354

39

33

35

Liberia

358

34

36

36

Equatorial Guinea

31309

4

39

37

Swaziland

4551

12

20

38

Congo (Brazzaville)

3647


10

35

39

Guinea

975

35

45

40

Zimbabwe

1852

N/A

47

41

Angola

5375

13

38

42

Eritrea

592

30

37

43

C.A.R.

685

44

41

44

Cote d'Ivoire

1526

28

43

45

Congo (DR)

290

42

46

46

Chad

1234


40

44

47

Sudan

1990

16

42

48

Somalia




N/A

48

Notes: Ranking is among African countries excluding North Africa. 1Data from 2007 2 Data from 2005

Still others may wonder if the uniqueness of the story of Mauritius prevents generalizing to lessons that can be useful elsewhere. Of course every country is unique. If econometricians have run “two million cross section regressions” looking for the determinants of countries’ economic performance6, it sometimes seems that others have complained two million times that the institutional, cultural and historical particularities of individual countries can never be captured by the data fed into a computer. This paper uses cross-country regressions as one input into the analysis – but only one. Two other kinds of inputs enter as well. One is the relevant economic, political and historical literature. Another kind of input is what the author -- with no previous background in Mauritius -- learned from exploring the country.

The many global econometric cross-country studies have produced a variety of important conclusions, notwithstanding their limitations and ambiguities. Some of the more robust findings include that remoteness, landlockedness, tropical location, and small population size7, are bad for economic performance, other things equal. These variables help explain why incomes are lower in Africa than in other parts of the world. Access to the sea, education, and national saving tend to be good for economic performance. High population density is often bad. Two of the most consequential findings are that openness to trade and the quality of institutions are major determinants of economic performance, but there are valid questions regarding the measurement of those two variables, and about the exogeneity of the relationships. Clearly a major reason that remoteness and landlockedness hurt economies is that they impede international trade. A common finding is a negative dummy variable for Africa. It often can be attributed to some of the other variables, however, especially tropical location,8 as becomes evident when the econometrician controls for them and the apparent Africa effect disappears.

While some of these variables may help explain the negative dummy for Africa, they do not necessarily help explain variation within Africa. Indeed, when using regression analysis to learn about differences in growth performance among African countries, one major finding below is that many of the variables that are most significant on global data sets do nothing for us within this continent.
The reader who has looked at Table 1 may have noticed a striking fact: not only is the highest performer in Africa reported to be a small island country (Mauritius), but so are numbers 2 and 3 (Seychelles and Cape Verde, respectively). Not until we get to fourth place do we see a country on the mainland (Botswana) and not until fifth place a country of substantial size (Ghana, in 2008). Is it just a coincidence that the top performers are island countries? There exists at least one small African island country with poor performance: the Comoros. What explains the difference?9

Island countries provide an intriguing sub-set of self-contained data points. There is less likely to be an issue of endogenous borders, for example. The econometric analysis of the determinants of economic performance in this paper includes a cross section of island countries, before we turn to a within-Africa data set.

We begin with a short history of Mauritius, however. Next comes an overview of the competing hypotheses that others have put forward to explain Mauritian success. Then the econometrics, followed by an attempt to put everything together. When we are done, we will not be able to claim a definitive answer as to the single reason for the island’s success, nor will we ever attempt to answer whether it is African. But the story will be of interest, or so the author hopes. Most importantly, notwithstanding the uniqueness of the country, there are potentially valuable lessons for others seeking to achieve economic development in Africa.



  1. A Brief History of the Island

Our account will just briefly hit the highlights, but will slow down a bit when we get to the post-independence history.




  1. Globalization at its Worst

The first two centuries of Mauritius’ history could be described as “globalization at its worst.”10 The Dutch arrived in 1598 and the Dutch East India Company left a settlement in 1638. They immediately stripped the island of its ebony trees, using slaves imported from Madagascar for the work, and famously killed off the dodo birds. Today, less than 1% of the indigenous forests are left. When the Dutch decamped for the Cape Colony in 1710, they left the island nothing useful but its name.


In 1721 the French landed. A competent governor Bertrand Mahe de Labourdonnais built a port/capital at Port Louis on the western coast and made many improvements in the land that the colonizers called Ile de France. They began to grow sugar for export – the first factory was built in 1744 -- and other crops. But the expanding sugar economy depended on slavery, the ultimate evil of the age. As if to complete a list of evils of globalization, passing ships occasionally brought either pirates or cholera, wreaking havoc on the population.

The island officially passed from France to Britain with the defeat of Napoleon in 1814.11 The British valued their new possession, but as a coveted way station on the route to India and the Far East. They had no particular desire to settle the island, and were happy to leave the Franco-Mauriciens in place as the land-owning elite. The French Napoleonic code was retained, and still constitutes an important component of the legal system.


Slavery had already been abolished in the British Empire in 1807. The French landowners were reluctant to comply, however, and it wasn’t until 1835 that slavery was finally ended on the island. The abolition of slavery marks the end of what I am calling the period of globalization at its worst.12
2. Globalization at Its Best
The next phase of Mauritian history began with a problem for the sugar-based economy. The abolition of slavery had left a shortage of labor. The freed slaves were understandably reluctant to go to work for their former masters. Who would work the plantations? The solution was a “Great Experiment”: indentured workers were brought from India. From 1849 to 1923, a half million indentured Indian laborers passed through the immigration depot at the dock called Aaprivasi Ghat, the Ellis Island of Mauritius. Although their lot was hard, most of them chose it voluntarily because the conditions were better than what they were leaving behind.13 Production and exports from the plantations grew rapidly. The experiment was sufficiently successful that it was copied in other sugar-growing parts of the world such as Fiji and the Caribbean.

Eventually locals and even non-whites gained some political rights. Under the 1886 Constitution, which lasted 60 years, the British governor allowed a Creole elite to join the Franco-Mauritians among the national representatives. When a new constitution extended the franchise to all adults who could write in 1948, the Indian-dominated Labour Party suddenly won a majority in the Legislative Council seats. Its members were mainly rural workers and its platform was mainly Socialist. It was opposed by the Franco-Mauriciens, who accurately described themselves as “oligarchs,” and who feared “Hindu hegemony.” This phrase referred to what the majority ethnic group were expected to do if and when the country became independent, which the Franco-Mauriciens opposed.


The Labour Party became more moderate under the leadership of Seewoosagur Ramgoolam. By 1960 it had renounced its previous position that the sugar plantations should be nationalized.14 This decision was to prove a key turning point in several respects. First, it helped establish the important precedent of safeguarding property rights. Second, it contrasted with other African countries that have either expropriated natural resources, taxed them away, or discouraged production through other devices such as marketing boards. Third, it eventually helped reconcile the Franco-Mauritians to independence.
3. Independence


In the early 1960s the British prepared for independence.15 But communal or sectarian tensions were strong. Creoles, the descendants of the original slaves, many of whom had acquired positions in the civil service and in the growing private sector, aligned with Franco-Mauritians in their fears regarding independence, adding to the voting strength of the latter. Chinese, Muslim and Tamil minorities too were afraid that those Hindus descended of immigrants from the Ganges Plain would dominate an independent country. The Mauritian Social Democratic Party (PMSD), composed of Franco-Mauritians and Creoles, lost elections to the Hindu-dominated Labour Party in 1967. This election confirmed the narrowly drawn fault lines regarding the independence issue: only 55% voted for the independence platform. Riots along ethnic lines took place periodically in the 1960s, especially as the date of independence drew near. The Labour Party government had to call in British troops to restore order in January 1968.



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