March 18, 2013

Economy: By No Means Safe from Troublemakers!

Pending the publication on Tuesday 26 official estimates of the main parameters of the economy, including the growth rate for 2013 by Statistics Mauritius, data published during the past week by the Mauritius Employers Federation under the Annual Business Trends Survey came complement analyzes Monetary Policy Committee (MPC) of the Bank of Mauritius.

The general trend is that the economy is in no way immune to spoilers given the difficult economic conditions prevailing in the export markets. While economic and commercial entities want to generate a feel-good factor, the MEF could silence apprehensive level employment in the construction sector, compared to a decline in demand for exports traditional markets due to the recession in the euro zone and a slowdown in wholesale and retail.

The results of the Annual Business Survey of the MEF, affecting some 82 companies of different sizes with a staff of 26,707 employees, qualified representative sample of MEF Membership, report concerns the level of unemployment and the risk of layoffs. " Despite the recovering business mood, it would appear that recruitment intentions are in decline in the face of a still subdued and uncertain economic environment which continues to plague business activities and therefore job creation", anticipates the MEF.

In reviewing the results of the survey conducted between November last year and February, the MEF rating at least one company in five, or 18.7%, considering resorting to downsizing. The phenomenon of layoffs in 2013 is even more visible in the construction sector, which is going through a difficult since the end of last year.

The main reason behind the slump in the construction industry remains the combined effects of the end of the largest construction and fierce competition from Chinese contractors in a better position than the Mauritian companies to grab the latest construction contracts be allocated.

On the other hand, worrying signs of slowing are also seen in terms of real estate with the provision that far exceeded the demand in terms of built area in the business sector. One concrete evidence for the recent announcement from the Department of Social Security for the rental of office space to individuals in the region Ebony CyberCity, including some 4,000 square feet Building Altima and more than 16,000 feet Ebony Heights squares.

These two buildings purchased at great expense by the Ministry of Social Security are located literally in the heart of cyber or in the vicinity of the supermarket for Altima Buiding Business Zone and around the hotel for Ebony Hennessy Park Heights. Potential tenants of these buildings belonging to the Social Security have until April 12 to submit their quotations.

Another sign of difficulties in the housing bubble was confirmed with the financial difficulties faced by the developers of the ambitious Port Chambly in Le Goulet, Baie du Tombeau. Companies Clifton Clifton Properties Holdings Limited and Limited were placed into administration for debts accumulated - literally non-creditworthy - Rs 790 million and Rs 100 million losses.

The failure of the proposed CentrePoint at Trianon Park, with losses of Rs 350 million, is also added to this new chapter of disappointment estate. The administrators have approached the stage bidding of this project abandoned for nearly three years, while the main developers, Timol brothers were caught by conflict with the law for offenses alleged fraud and embezzlement funds. Stakeholders to ensure the resumption of construction activities in the heart of Plaines Wilhems are becoming increasingly rare in the economy.

Confidence down

For its part, the MEF noted that " recruitment intentions in 2013 are likely to decline further compared to previous years in light of the continuing lack of visibility facing enterprises as a consequence of the prevailing downcast and uncertain economic conditions" Compared to last year, the percentage of firms that indicated their intention to proceed with recruitment fell by eight points, from 28% to 20% from one year to another. These exercises will involve recruiting mainly in the financial services and insurance Information and Information Communications Technology (ICT).

On the other hand, the confidence level is the decline in two other key sectors of the economy or the export-oriented enterprises and the wholesale and retail. So far, the Export-Oriented Enterprises have benefited from the strength shown by the exports of Sea-Food Hub as other traditional sectors, especially textiles, recorded in the best case performance rating.

The trend for the coming months is hardly reassuring in terms of jobs for lack of a turnaround in terms of investments. " Major improvements in investment growth do not appear to be forthcoming in 2013 as respondents plan to invest more or less similar amount in buildings and plant and machinery as in previous years. The trends in other key variables should remain stable. The majority of enterprises surveyed do not foresee any notable change in their financial situation and profitability, exports and prices"notes MEF based on the survey of the business world.

Although no specific mention is not made in relation to the tourism industry in the Annual Business Survey of the MEF early this year, the outlook is not bright in this area early this year. The latest figures show tourist arrivals grew by 2.3%, with 81,485 tourists for the month of February compared with the same month last year.

But this performance was not enough to bring the situation into positive territory. Indeed, the number of tourists for the first two months of the year down 2.3%, or 174,079 in 2013 against 178,168 last year. However, the determining factor is the behavior of the European tourist market.

For the months of January and February, tourist arrivals to Europe fell by 11.7%, with a decrease of 17.4% on the French market and 33.3% in Italy. For cons, the UK market continues to grow with a growth of 10.5% for January and February of this year.

Efforts to diversify the tourism market continues to pay dividends, with an increase of 38.8% in the Asian market early this year, including a peak of 66.9% in China, some 11 000 visitors in two months.

Nevertheless, experts concede that the fundamental structural problems affecting the tourism industry remain intact, except that the situation has become even more blurred with political unrest emanating from the backyard blues after the sacking of Robert Desvaux the Presidency the Mauritius Tourism Promotion Authority (MTPA).

Tourism Seychelles pass by Maurice

To support their claim, they cite the latest ranking by the World Economic Forum with Maurice tumble five places on the international level and the rise of the Seychelles archipelago, which moved to first place in the Indian Ocean region. However, in August of this year, Bhavin Desai and Melvyn Ching Kai To Axys stockbroking Limited had warned against this risk against the efforts of other competing destinations in a study on the tourism industry.

" Both policy makers and hospitality industry operators had forgotten the lessons of the sugar boom 30 years ago : excessive spending brought Mauritius on its knees requiring IMF aid, and was followed by a massive devaluation of the rupee. In the wake of the bumper mid-noughties, government announced a two million visitor target (which begs the question : is Mauritius a mass market or niche up-market destination ?). Hoteliers, who had raised both rates and stars during the bumper years without any service upgrades, followed government's lead, ego tripped and spent borrowed money lavishly to buld new five-star hotels, "said Axys stockbroking, which draws a parallel between tourism and the sugar industry after the boom of 30 years ago.

" Both policy makers and hospitality industry operators had forgotten the lessons of the sugar boom 30 years ago : excessive spending brought Mauritius on its knees requiring IMF aid, and was followed by a massive devaluation of the rupee. In the wake of the bumper mid-noughties, government announced a two million visitor target (which begs the question : is Mauritius a mass market or niche up-market destination ?). Hoteliers, who had raised both rates and stars during the bumper years without any service upgrades, followed government's lead, ego tripped and spent borrowed money lavishly to buld new five-star hotels"added Bhavik Desai and Melvyn K. Chung Tai

The main consequence is today in the form of the spiral of debt (Debt Trap) in parallel with a slowdown in growth in tourist arrivals and a reduction in Occupancy Rates face stiff competition circuit bungalows available for tourists. "Today's heavily indebted hotel groups find MOST of Their operating profits syphoned off to repay debt leaving cash strapped 'em," highlights Axys stockbroking Limited. Not much has changed since then, as evidenced by the relevant financial statements.

In August last year, the debt of the tourism industry had doubled over a period of four years to recover up to 13.3% of GDP against 8.7% in 2007. The combined debt of the four largest hotel groups in Mauritius is approximately Rs 27 billion against Rs 7.3 billion in 2007.

In early 2013, the difficulties faced by the tourism industry are not big improvements with the first redundancies at major hotel groups or in the field of hospitality. To cope, Axys stockbroking Limited, which sees last year four options, or " the industry's ugly duckling will be the one that is fastest to slash gearing and turn its operations lean"

In authorized circles, it goes more and more evident that the tourism industry will sooner or later begin a process of re-engineering, a little in the way of reform facing the sugar industry since the advent of the elimination of the Sugar Protocol or the textile industry to survive the end of the Multi-Fibre Agreement ...


Text by Le Mauricien

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