Speech Intervention on the Budget 2015-2016 By Honourable Sunil Bholah Minister of Business, Enterprise and Cooperatives



Madam Speaker,
Our visionary budget is meant to bring us to the 21st century with a Bang. Each and every citizen of this nation is now committed to an economy that rewards hard work, generates rising income and allows everyone to share in the prosperity of a growing Mauritius.
To begin with my speech, I would like to cite Joe Biden:
I quote: “Fighting Corruption is not good governance. It’s self-defense. It’s patriotism”. End of quote.
As a good patriot, Sir Anerood Jugnauth, irrespective of his age, has STOOD UP to save our country! We are shocked by everyday saga of corruptions that are being revealed! During the last decade, when people had no food at home, their dues were being shared, through some golden handshakes, amongst a few friends!

“La grande panoplie des mesures annoncées par mon collègue, Le Ministre des Finances, ayant pour objectif l’amélioration de la qualité de la vie des gens, de tous les Mauriciens et mauriciennes, indistinctement, vient confirmer notre vision à long terme.”
Madam Speaker,
The people are the Government and the Right Hon Prime Minister has said it so well on the occasion of his 85th anniversary: “The People are the Government, they have sovereign power” and they made the right choice some three months ago and we shall live up to their expectations! I can say with confidence, that we have at present the best Government.”
Thanks to SAJ and L’alliance Lepep, “a Feel good factor” reigns in the country right now! Les Mauriciens ont retrouvé le sourire! The frustrations that Mauritians were living during the last decade have dissipated.
This Budget is all set to help working families feeling more secure. Those who want to upgrade their skills can follow the necessary courses and hence, compete for higher-paying job. Bold actions and strategies have been taken to give a serious boost to the SME sector. Our local entrepreneur is embarking on a revolutionary journey. Entrepreneurship has now to evolve from a niche mindset into a powerful, mainstream movement! We invite our people to share their business innovation because we are ready to talk business.

Madam Speaker,
Let me now come to the SME sector and the measures which have been announced in the Budget Speech. In the course of the electoral campaign we had made it clear that our intention was to make the SME sector the backbone of the economy and to use it as an engine of growth.
In the President Speech this pledge was renewed and we even committed ourselves to allocate Rs 10 billion to the sector over the next five years. The Budget Speech is testimony that it was not mere rhetoric but sincere commitment.
Let me make it clear to the House. Seeking to improve the competitiveness of SMEs is not only about understanding problems confronting businesses in this sector; it is also about a better understanding of how to overcome these barriers. This is why we maintain that we have made the correct diagnosis and applied the appropriate remedies.

Madam Speaker,

It is in the face of this ordeal that many potential and budding entrepreneurs give up after having tried hard to set up their own enterprise. I have heard and read multiple comments following the Budget Speech that “WE DO NOT HAVE AN ENTREPRENEURIAL CULTURE”.
Therefore, this being the case, we were bound to fail and it implies that one of the pillars of the budget was frail and fragile and would never yield the expected results.

Academics, consultants and other self-appointed gurus are very fond of this kind of argumentation. It makes the headlines and gives them some unexpected visibility. However, let me take a trip down memory lane and if we can scan the literature available we would find the same rhetoric popping up time and again. When we moved from an agricultural economy into an industrial one, did we have an industrial culture?

When we created the free zone, was our labour prepared for this adventure? Were our investors geared towards becoming industrialists and today we pride in calling them “CAPTAINS OF THE INDUSTRY”. The same story goes for the move from an industrial economy to a service economy and eventually to a knowledge economy.
However, despite all odds we have navigated the rough seas and today we are cited as an example around the world. This momentous change was brought about by the duo of Anerood Jugnauth and Vishnu Lutchmeenaraidoo. Today we have the same team, but with a more sophisticated vision, a committed Government and a “ lepep admirab”. Together, I am convinced that we will succeed.

Madam Speaker,
We know that there’s a lot of compliance burden confronting the SMEs. Hence, we are simplifying the business formation process by lessening the current onerous regulations, reducing the plethora of licenses and by providing mentorship.
It is common knowledge that our local entrepreneurs face all sorts of problems in their daily activities and these include among others, a poor understanding of tax, VAT, national insurance and bookkeeping, as well as difficulties in obtaining capital and the absence of a guaranteed income. They constantly have to battle against unfair bureaucratic, financial and administrative burdens. It very often looks like an obstacle course and coming out of it successfully is not given to anybody and if ever he comes out then he must be congratulated as “a Commando entrepreneur”.

Very often they also point to the shortage of working capital as the prime cause of business failure. Lack of adequate start-up funds has a ‘knock-on’ effect restricting development and growth by reducing funds available for activities such as advertising, publicity and acquisition of suitable premises. They also face issues such as the low level of demand for their products and services as well as the nature of marketplace competition. Many nascent entrepreneurs also express concern about difficulties in identifying and contacting potential customers.

Madam Speaker,
A major boost that we are giving to young entrepreneur is the possibility for them to obtain a loan from the SME Bank without personal guarantee. In the past, entrepreneurs have repeatedly drawn attention that their projects are stalled or squarely failed just because commercial banks or other financing institutions did not trust them. We, as a government, would like to demonstrate “OUR ACT OF FAITH” towards young entrepreneurs. We are aware that some might fail but they will learn from their mistakes while others have been hesitant. We have taken the bold leap ahead. The Budget 2015 is restoring the link between hard work and opportunity.

Madam Speaker,
We have adopted a bottom-up approach and listened to their sad plight and predicament.
What have we done?
1. We are creating an SME bank.
We acknowledge that this is not the easiest route but we are confident that the creation of such an institution would be beneficial not only to the SME community but to the economy as a whole. An SME bank would specialize in creating the right financial instruments and schemes to meet the demands of the SME community. It will give us the possibility for adopting novel approaches to meet unexpected challenges. In addition the SMEs will not have to compete with larger corporation to secure funding. The larger corporations have been credit rating and better standing vis a vis commercial banks and they have preferential treatment. In the case of an SME bank that form of discrimination would not arise.
I would say that it is manna falling from heaven for the SMEs.
As regards the working capital requirements we have teamed up with the State Bank of Mauritius and they will assist young entrepreneurs with some special packages.

2. Creation of a One Stop Shop
Madam Speaker,
One of the most acute problems faced by entrepreneurs in general, and SMEs in particular, is in respect of licences and clearances. The number of permits, licences or clearances required to set up a business or even to run and then later expand is mind blowing. It is a big deterrent.
If we really want to create that “Nation d’entrepreneurs” we have no other solutions to take the bull by the horn and address this thorny issue. This problem is not new and many attempts have been made in the past to solve it or at least to minimize it ill effect. However, we have met with luke warm success not to say total failure in certain situations. I must point out that no one considers that he is to be blamed because when an institution regulates it does so in the interest of the public. But over the years the pile of regulations compounded from all institutions have made it impossible to do business.

Madam speaker, we believe in SME-friendliness. The SMEDA is expected to play a major role in technical assistance and mentorship. SMEDA will have to work more efficiently in order to reduce the failure rate of business in Mauritius and equip businesses with the correct tools to grow. We have decided to use a big bang approach and extend the mandate of SMEDA so that it will henceforth operate a ONE STOP SHOP. It will act as a single window for all licenses, permits and other clearances for entrepreneurs.
SMEDA will not only assist as a single window and use a fast track mechanism to obtain approval for all licences, permits and clearances, but it will also be legally empowered to collect Trade fees and other charges and contributions on behalf of any regulatory authority.
I am also pleased to inform the House that consultations are being held with the Mauritius Posts ltd so that their network of 113 post offices could be used for the collection of dues to be paid by any entrepreneur to SMEDA which will then transmit to the regulatory authorities.
In addition to the issue of licences and other clearances, SMEs have to travel through a labyrinth of institutions to obtain Business Development Services. This is a huge hurdle which they have to overcome.
The One Stop Shop will house under one single roof all Business Development Services which an entrepreneur requires.
We are adopting a model which does not exist anywhere else and we are confident it will be a huge success.
The challenge is huge. The task is gigantic. I am fully aware of the implications because work has already started and progress is underway. However, we are bound to succeed for one single reason. There is total commitment in all respect to adhere to the decision of Government and to make it happen.

3. Cancellation of 32 licences and simplication of 38 others
Madam Speaker

In addition to the One Stop Shop we have also decided to relieve the burden of the business community by removing or simplifying around 70 permits or clearances. In this context 32 permits will be cancelled and 38 others will be simplified. This adds to our efforts and commitment to ease the task of the business community.

4. Increasing the VAT Threshold

Madam Speaker,

As I pointed out earlier, the SME community has a poor understanding of the tax administration and the VAT. Very often find themselves entangled in the process of registration and failure on their part result in payment of penalties. Many efforts have been done to ease their burden and we have now gone one step further. We have raised the threshold for VAT registration from a turnover of Rs 4 m annually to Rs 6 m annually. This measure will remove most SMEs outside the bracket of those compelled to be VAT registered.
In addition to the increase of the VAT Registration Threshold, a major policy decision is the 8 year tax holiday for enterprises that register with the One Stop Shop. A similar measure was introduced in the 1980’s and the results were beyond expectations in terms of investment. Today this measure is being tailor made for SMEs and we expect that they will realise how far Government is willing to go to facilitate their activities.
5. Industrial Parks
Madam Speaker,
Acquisition or accessing suitable premises for SMEs to carry out their activities is not within the reach of most micro and small enterprises. Many micro and small enterprises attempt to conduct business on their own premises at home. This results in multiple problems for themselves and their neighbours. At times it ends in tense relationship with their environment. In addition they have to go through a lengthy process of obtaining permits from the local authorities and other licensing institutions. Government is fully aware of these issues and we have taken the bold decision of providing for 7 additional industrial parks adding up to the three already constructed.
However, we are not going around in a haphazard way. Once we assumed office, we decided to have a Master Plan for the development of Industrial Parks around the country. The Master Plan is almost ready and once it is approved, Industrial Parks will be constructed in accordance with the demand for space by the SMEs.
We are also considering the possibility of using part of the land available for the creation of Site and services units. This measure has multiple advantages, namely:
i) It is less costly and provides a means for the entrepreneur to contribute towards the construction of his unit;
ii) It is not a standard one and can be constructed to meet the specific requirements of the entrepreneur; and
iii) It is a good means towards encouraging clustering since we are in a position to impose a precise “ Cahier des charges” to the prospective entrepreneurs.
iv) Handicraft sector
Madam Speaker,
In so far as the handicraft sector is concerned, one important measure has been proposed.
In fact, one of the major problems faced by our local artisans is the lack of visibility and access to market to showcase their products. In this budget, provision is being made for the Tourism Act to be amended so that all Tourist shops where destination products are sold, 20 % of the space is reserved for products manufactured locally. There are many such boutiques around the country. We have already inventoried the places where these boutiques are situated and amendments to the law will be proposed in the Finance Bill.
We hope this will provide sufficient space for the local artisans to prosper.
In addition we are looking into all MOUs we have with friendly countries such as India, Pakistan and others and we want to use the facilities provided to us to bring master craftsmen who may improve the skills of our local artisans, open new avenues for them in terms of quality and new lines of products.

v) Inclusive Business
Madam Speaker,

My Ministry is not only about enterprise but its mandate, as its name indicate, is about business as well. In this context, we are thinking seriously about measures to boost businesses in Mauritius.
Last year we organized, for the first time, the National Inclusive Business Award. It was a success but we could not canvass as much participation as the Ministry would have wished. I have this year requested that we start the process earlier and work hard to secure the participation of as many businesses and enterprises as possible. However, I propose to set up at the level of my Ministry an Inclusive Business Unit. I am pleased to inform the House that an amount of Rs 5 m has been included in the budget for the organization of the award and the setting up of the unit. We have also been promised the required human resources to man the unit.
In fact inclusiveness is the participation of one and all in the development of the country. Government is making considerable efforts in transforming the mindset of entrepreneurs by encouraging enterprises in adopting the inclusive business model so that they can diversify, transform, and grow their businesses in a sustainable manner.

(VI) Participation in International Fairs SME Refund Scheme
From 2012 to 2014, 318 enterprises have benefitted from the SMEs Refund Scheme for Participation in International Export Promotion Events. As from this year, the scheme will be manned by SMEDA and an amount of Rs 40M has been included in its budget.

Madam Speaker

I have elaborated on the various measures we have proposed in the budget. These measures are there for the taking. It is now up to the entrepreneurs to use them. Some of the sceptics will argue that there have always been an array of measures for enterprises and what is new.
I must concede that what they say is true. But the difference is in the approach. We have held various sessions with the entrepreneurs and the most critical assessment of government policy comes from SMEs themselves.
Over the last 20 years, it is estimated that there have been approximately 100 initiatives to support the improved competitiveness of SMEs, yet the take-up rate has been low. Even support programs such as training and business health checks have rarely achieved more than a 10 per cent take-up, and often it is much less. According to the entrepreneurs the main reasons for low take-up rates include:

1. Support providers do not understand the needs of owner-managers’ businesses and therefore offer standardised support measures.
2. SMEs are skeptical of solutions based on large-firm practices which are delivered through top-down support programmes.
3. The largely standardised top-down support may be administratively convenient but fail to recognise the heterogeneity of small firms.
The limitations of policy provision and delivery are not necessarily an indication of a lack of demand for assistance.
We have used a bottom-up approach and concentrated our efforts on providing measures that target SMEs, recognize their needs and limitations that they face.
The measures we have proposed are not magic formulae that will solve all problems. We will have teething problems on our journey to success but we are willing to take up the challenge and solve the problems as they arise.

Madam speaker,
I would like to take this opportunity to clarify an issue regarding the co-existence of the SME Bank and the DBM. My friend on the other side of the House Honourable Uteem has requested that I clarify the matter because he is confused. It would seem that the Honourable Member is always confused and therefore requires some clarification. Madam speak there is nothing in the President Speech and in the Budget Speech which indicates that the DBM is going to close. The DBM like every organization will have to re-invent itself in the new economic landscape that we are creating. Whether the DBM will continue to exist or not is a major policy decision but as previously stated, “I personally” believe that the existence of one does not exclude the other. I hope that I have not confused the honourable member more!


The Cooperative Sector

Madam Speaker,
I shall now come to the Cooperative Sector.
The Cooperative Sector is playing an important role in the economy to sustain employment, food production and democratization of the economy.
The Movement is more than 100 years old and has admirably shown its resilience over time. Moreover, cooperatives build triple bottom-line sustainability, as they enhance social, economic and environmental development.

Sectors serviced by Cooperatives
Today, more than 30 different socio-economic activities are serviced by cooperatives. Cooperatives in Mauritius and Rodrigues consist of 95,012 members grouped in 1,052 cooperative societies with a turnover of around Rs 5.5bn. The main economic activities undertaken by cooperatives societies are production and marketing of sugar cane (10% of national production), potatoes cultivation (45%), onions (70%), fresh vegetables (80%) livestock, fish, bus owners, consumer stores, handicraft, credit and savings.

Madam Speaker, the Cooperative Business Model has been found to provide a supportive environment for women and youngsters new to business as it gives them confidence and is capable of harnessing their skills and resources. It is also important to note that the movement has an important role is ensuring food security at the national level.

Madam Speaker, I salute the Honourable Minister of Finance and Economic Development who has come up with bold initiatives for the true democratization of the economy and making “Ile Maurice une Nation d’Entrepreneurs”.

With rapid globalization and the changes in the socio-economic environment, co-operatives have to operate in a very competitive context and have to face various challenges. The Cooperative Movement has stood up to this challenge and embarked on the path of economic transition towards becoming ‘cooperative entrepreneurs’.

Access to Capital
Madam Speaker, easy access to finance has far long been a major problem faced by the cooperative. Cooperatives being a component of SME will now benefit from the wide array of measures recently announced. The SME bank will indeed act as a catalyst for the development of the cooperative entrepreneurs.

The Sugar Cane Cooperatives

Madam Speaker, the small planter’s community has suffered real hardship in the past 10 years. It is only through their hard labour and painful efforts, grim energy but resolute courage that some have been able to survive. The Cooperative Sector is regrouping some 155 cooperative credit societies who are cultivating some 5,623 hectares of land and producing some 350,000 tons of sugarcane. It is worth mentioning that over 50 % of the sugar planters are from cooperatives. The reform in the sugar sector characterized by the drastic fall in the price of sugar, has affected our sugar planters. The fall in the price of sugar from Rs 17,500 to Rs 12,400 has a major impact on the small planters, who are struggling with the ups and downs of erratic economic situations.

Under the Budgetary measures 2015/2016, Government has shown its great care and concern for the sugar cane planters’ community. Thus necessary provision has been made so that small sugar planters producing up to 60 Tons of sugar will be given a one-off compensation of Rs 3,400/- per ton of sugar for crop year 2014 while the remaining categories will receive Rs 2,000/- per ton from the Sugar Insurance Fund Board (SIFB).


The Cooperative Improvement Programme

Madam Speaker, all the necessary support will be provided for the cooperative societies to grow their business and increase their revenue. The extent of market avenues will be expanded to provide a platform for the cooperative societies to sell their products. Under the Cooperative Improvement Programme, the information, education and communication campaign will be further strengthened to encourage new comers in the cooperative societies and to consolidate the existing ones. Tailor-made courses will be dispensed to cooperative members in order to upgrade and add value to their products so as to fetch a higher price on the market. Specific training on good governance, packaging, computing, online submission of accounts would be encouraged to keep abreast with recent development.

Animal breeders: Livestock Cooperative

Madam Speaker, animals breeders, grouped in cooperatives are breeding cows, pigs, poultry etc. have been facing soaring cost of production as the percentage of the total cost for animal feed had greatly increased, particularly following the closure of the Richelieu Livestock Feed Factory..

Madam Speaker, this Government has taken two bold steps to alleviate the burden of all breeders:

(a) the Development Bank of Mauritius will waive all interests and penalties on loans of up to Rs.100,000/- to planters, fishermen and breeders. However this will be subject to the condition of paying back their outstanding capital amount within a period of 90 days.

Madam Speaker, with my coming into office and following meetings and site visits I had with the Federations in the Cooperative Sector, I had the opportunity to listen to the plight of many farmers. Moreover Cooperative Federations also met the Honourable Minister of Finance who has addressed several issues. The pig farmers regrouped in the cooperative societies/federations had made several representations in the past to successive Ministers. But all the time I must say that their grievances fell into deaf ears. Madam Speaker, it is this Government that finally took the bold decision, which was not easy but still we did it, to waive arrears of interest and penalties on loans advanced under the Pig Sector Restructuring Programme to the pig farmers.

Madam Speaker, this Government has at heart the fate of the farmers and we want to improve the farmer’s livelihood in a changing world. Consequently, the second landmark measure for animal breeders is:

(b) a subsidy provided for animal feed which is doubled from Rs 2 to Rs.4 per kilo.

Madam Speaker, if everyone is moving forward together, then success takes care of itself.

Emerging Sectors in Cooperatives
Aqua-Farming

Madam Speaker, according to the Food and Agriculture Organisation of the United Nations (FAO), aquaculture is probably the fastest growing food producing sector and now accounts for nearly 50 percent of the world food fish. Mauritius therefore cannot stay behind. Fishermen grouped in cooperative societies will be encouraged to embark on aquaculture projects to sustain a living through partnership with large operators.

Bio-Farming
Madam Speaker, for years we have heard that pesticides, insecticides fungicides and other chemicals are adversely impacting on our health. But so far, we have not witnessed any bold measures. The cry of today is that our mother earth is being exploited and polluted with agro chemicals and pesticides. It is high time for us to revisit the agricultural practices which ensure sustainability. Moreover, it is known that the food we consume has an impact on our health. Indeed the bio cultivation facility will encourage cooperative planters to rethink their way of cultivation and adapt practices which are bio friendly.

The Cooperatives have been ‘avant gardiste’ and we are proud to say that concerning this problem, cooperatives have already embarked into bio fertilizer project joint ventures. The project put up in collaboration with India was launched in early February 2015 by the Right Honourable Prime Minister and is expected to grow with the announcement of the focus on bio production.

Madam Speaker, where there is no vision, there is no hope. But this government has both vision and hope. Like a soldier, we fight long and hand for a cause. We want to have a healthier population. Thus this Government took the initiative of providing assistance towards the promotion of organic agriculture with the introduction of a ‘Bio Farming Development Certificate’.

It is known to everybody that the Cooperative Sector is traditionally enshrined in primary sectors. This new certificate which include a package of incentives amongst which an 8-year tax holiday and exemption from various taxes and duties on importation of bio-food inputs acts like a light in the tunnel. This will be a priority sector under the SME scheme. The facilities provided under the bio production will also encourage cooperative planter to align their cultivation towards sustainable agricultural practices.

Madam Speaker, “The journey of a thousand miles begins with one step.” Economic transition, renovation and revamping is a long journey for cooperations. The Cooperative Sector regroups some 2,500 vegetable planters, grouped in 64 Agricultural Marketing Cooperative Societies, catering for 70% of our local fresh vegetables. These cooperatives are willing to adopt sustainable agricultural practices, new production techniques and adopt hygienic sale of market produce.

Fairtrade Certified Cooperatives

Madam Speaker, the Fairtrade certified label requires the use of practices that promote soil conservation, water conservation, reforestation, species diversity and environmental education. The standards also promote organic practices by prohibiting genetically modified organisms and certain agrochemicals. Fairtrade offers small producers and workers a better deal and improve the terms of trade. It guarantees a minimum price which covers the cost of sustainable production and a Fairtrade premium to be used for economic, environmental and social development.

Today the sugar sector is facing major problems especially with the reform in the sector and the decrease in the price of sugar. It is therefore imperative that we exploit the opportunities provided under fairtrade so that we can ensure the sustainability of the sector.

More cooperatives societies will be fairtrade certified and the products will be diversified.

Embarking Cooperatives in Green Energy

Madam Speaker as spelt out in the Government Programme 2015-2019 incentives would be provided for the emergence of cooperatives in new sectors such as Green Energy. They will be encouraged to tap the package of incentives available to smart energy producers. This will help to mitigate climate change by reducing the emission of green house gases from the use of carbon fossil fuel. It will also appeal for a change in the consumer behavior.

Technology

Not all new businesses innovate and invest in high-tech though it is of vital importance in a company. It plays an outsized role in job creation. High-tech and ICT firm formations are becoming increasingly geographically dispersed. It’s a secret to none that technological advancement enables the production of high-tech goods and services on a wider basis. High-tech companies around the world, innovate, improve operations and deliver value. Remember when you invest in technology, you keep up with industry changes; make full use of technology transfer opportunities and also explore various funding options.

The course of history, Madam Speaker, we have already altered since 10 December 2014.
31 March 2015
Sunil Bholah

Posted by on Apr 1 2015. Filed under Economie, Featured, Politique. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

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