In 2020, the World Bank classified Mauritius as a “high-income country” after its per capita annual income reached US$12,500 – for a man who had been a single-crop sugar producer at independence in 1968, earning around US$200 per capita.

For half a century, Mauritius’ approach to economic diversification and value chain climbs through entry into textiles, manufacturing, tourism, banking and financial services has been textbook development.

But if Mauritius, a pragmatic democracy with a minimum wage, free education and healthcare, has become the closest thing to an economic miracle in Africa, it has been brutally interrupted.

When the World Bank announced that Mauritius had joined the high-income club – according to 2019 figures – the island was grappling with its worst crisis since independence.

$12,500

Income per capita in the year before the pandemic

For an economy that depends on the free flow of tourists, goods and capital, the Covid-19 pandemic has proved devastating. The economy shrank by 15% in 2020. Per capita income plummeted to about $8,600. “We have been a high-income country for eight months,” said Rama Sithanen, a former finance minister. “Now, we’re back where we were 10 years ago.”

With the outbreak of the pandemic, the government has adopted what amounts to a zero-coronavirus policy. This is partly due to the high incidence of diabetes and cardiovascular disease in a population of 1.3 million – byproducts of growing affluence – which makes Mauritians particularly vulnerable to comorbidities of the new coronavirus. The official death toll is limited to 786.

Authorities began screening people from China in January 2020. In March, after the government announced the first three cases of Covid-19, the government took measures such as repatriating tourists to the country and severely restricting the movement of its people.

“By July, there was no Covid-19, but no tourists,” said Azim Currimjee, managing director of Currimjee Telecom-to-Beverages Group. Arrivals fell from 1.4 million a year to almost zero as tourism – the island’s largest employer, providing more than 100,000 jobs and at least a fifth of gross domestic product – was paralyzed.

Then, in July 2020, the Japanese bulk carrier MV Wakashio ran aground on a coral reef close to an ecologically sensitive area off the island’s southeastern coast – albeit away from major tourist attractions.It spilled about 1,000 tons of oil, some call it The worst environmental disaster on the island. Tens of thousands of people demonstrated in the capital, Port Louis, accusing the government of incompetence.

As for efforts to support an economy battered by the Covid-19 pandemic, the government has undertaken one of the most ambitious stimulus packages on the continent, including generous wage support. With the help of Rs 8,000 crore from the central bank, it set up the Mauritius Investment Corporation (MIC) to provide loans to some of the biggest companies in troubled industries such as tourism. In return, employers are prohibited from laying off workers.

“We threw our textbooks out the window,” Currimjee said. “The policy is first to make sure we are alive and second to make sure there is no financial loss.”

Tourists have returned since October. The International Monetary Fund is projecting growth of 6.7 percent in 2022, which some private sector economists have trimmed slightly. But government opponents have criticized the way emergency funds are allocated. “The lack of transparency raises a lot of suspicion,” said former president Amina Gurib-Fakim, who herself was ousted in 2018 over a financial scandal.

“We’re spending a lot, and today we’re facing the consequences of a giveaway,” said Arvin Boolell, a former leader of the opposition Labour Party. He added that the central bank had lost credibility because he believed it was creating money There are accounting skills in the process to provide to MIC.

“The adjustment is done through the rupee at the expense of the poor,” Boolell said of the central bank’s tolerance for currency devaluation and the resulting imported inflation.

Finance Minister Renganaden Padayachy and Central Bank Governor Harvesh Kumar Seegolam declined to be interviewed for this report. However, the government argues its extraordinary measures are prudent.

$8,600

Annual per capita income post-pandemic

It pointed to the appointment of an outsider – Lord Megnard Desai, Emeritus Professor at the London School of Economics – as the first chairman of the MIC as evidence of good governance. “As long as the money is used wisely for the primary purpose for which it was designed – to save jobs, to save affected companies, to give them some breathing room – I’m not particularly concerned,” Desai said.

“The fact that Mauritius is a prosperous middle-income country and is generally doing well will help it weather the pandemic relatively well,” he added.

Mauritius’ long-term task is to continue its upward trajectory. Pravind Jugnauth, who was re-elected to a second term as prime minister at the end of 2019, has set his sights on the island to emulate Singapore, despite the Asian city-state’s GDP per capita about six times that of Mauritius.

Government supporters point to Mauritius’ maturity as an offshore financial centre – including as a conduit for investment in Africa and India – as evidence that it can continue to move up the value chain.

The intergovernmental Financial Action Task Force (FATF) decision last year to remove Mauritius from its “grey list” should also alleviate some concerns about the island’s reputation as a secretive tax haven. “There were some cases that made the headlines,” said Sithanen, who is now chairman of the Mauritius-based Sanne Group, a UK-listed asset manager. “We sat down with the FATF to address the deficiencies.”

In addition to financial services, officials also highlighted the completion of infrastructure projects — notably the light rail link connecting Port Louis to the inland town of Curepipe — and the development of high-value-added niche businesses in medical devices and pharmaceuticals.

In addition, they foresee the expansion of education and the so-called blue economy – the sustainable use of marine resources from rare earth mining to tuna processing. Meanwhile, politicians say the country should do more to protect and sustainably use its 2.3 million-square-kilometer exclusive economic zone.

Indranarain Ramlall, associate professor of economics at the University of Mauritius, believes that the island’s success lies in constantly reinventing itself, but it has recently failed to embrace new industries such as IT and robotics. “We urgently need to develop another area,” he said. “Things are changing rapidly, so we need to adapt to survive.”

The author is the FT’s Africa editor and author of The Growth Delusion: Wealth, Poverty and National Well-Being (Bloomsbury, 2018)