Budget 2020-2021: Budgetary measures for a new normal for the society and the business community
At the very outset, the Honourable Minister of Finance, Economic Planning and Development set the scene for his maiden Budget Speech: a budget at 'a time of unprecedented crisis', a 'deep contraction globally and locally' and a 'GDP contraction of up to 11 percent this year' for Mauritius – the worst GDP contraction for the country. The Honourable Minister had the daunting challenge to secure sustainable and inclusive development whilst at the same time ensuring that the standard of living of the population does not become worse.
In this document, we highlight the salient measures the Honourable Minister has announced.
Investment and relaunch programme
The Minister announced measures and strategies in multiple sectors with the objective of giving a fresh start to the Mauritian economy severely impacted from the fall-out of the Covid-19 pandemic.
The construction industry being described as the engine of recovery, the Minister announced vast public sector programmes including Rs 12 billion for the construction of social housing units, Rs 7.5 billion for the construction of a dam, Rs 9.2 billion to modernise main bus terminals, Rs 5.2 billion to construct new roads and bridges, Rs 5 billion to complete the Metro system and Rs 2.2 billion to be invested in a breakwater, fishing port and cruise terminal. As regards the private sector, a high-level committee chaired by the Honourable Prime Minister will be set up to expedite projects pending at the Economic Development Board worth Rs 62 billion. Building and land use fees for the construction of pharmaceutical manufacturing factories, food processing plants and warehouses will be waived, and foreign buyers will be able to purchase immovable property through digital powers of attorney.
In agro-industry, the Minister announced the creation of a National Agri-Food Development Programme to ensure food security and reduce dependence on imports. With 20,000 acres of abandoned land, a digital land bank of State and private agricultural land under Landscope Mauritius will be created to operate as a platform to match demand and supply for land that can be used for food production. The Agricultural Marketing Board will also be given broader responsibilities in preparing and implementing a food production plan, investing in storage facilities and establishing a price guarantee mechanism. To boost the local sugar industry, the Government will guarantee a price of Rs 25,000 per ton for the first 60 tons of sugar, planters producing up to 60 tons will not have to pay the insurance premium to the Sugar Insurance Fund Board for 2020, and customs duty on imported sugar will increase from 80% to 100%.
In order to promote local manufacturing, the Minister announced future legislation imposing quotas in favour of locally manufactured products, a requirement of at least 10% of shelf space for local products in supermarkets, a requirement for Government bodies to have at least 30% of domestic content in their purchases of goods, an extension of investment tax credit on all manufacturing companies and margin of preference on public purchases (20% to all local manufacturing companies and 30% to manufacturing SMEs).
Export-oriented enterprises will benefit from a waiver of 100% of port dues and terminal charges for June to December 2020 and of 50% for January to June 2021. Export facilitation schemes have been extended and the enterprises will be exempted from registration duty for the purchase of immovable property. An international firm will also be consulted to review the export model of the textile industry.
The tourism sector has ground to a halt with the recent closure of Mauritius' borders and subsequent 2-month national confinement. To revive the industry, the Minister announced that sanitary protocols would be put in place from arrival to departure, support would be provided to the national carrier, the Economic Development Board and Mauritius Tourism Promotion Authority would develop a new branding strategy and a commercial partnership would be entered into with Liverpool Football Club to promote the Mauritius destination as from September 2020. An aparthotel scheme will be established whereby existing hotels may convert and sell part of their units as serviced apartments. Financial relief will come in the form of waiver of licence fees to the Tourism Authority and Beach Authority for 2 years, waiver of rental payment on State land for the upcoming financial year and an extension of the Hotel Reconstruction and Renovation Scheme rebate from 50% to 100% until 30 June 2022.
Technology and innovation
As part of a vision to propel Mauritius into the era of new technologies and innovation, a new data technology park will be created in Cote D'Or.
Pharmaceutical and medical sectors
The Government intends to make inroads in pharmaceutical and medical industries. As such, the newly incorporated Mauritius Investment Corporation (MIC), capitalised by Bank of Mauritius (BOM), will invest in the manufacture of pharmaceutical products, medical devices and protective equipment through a public-private enterprise. New regulatory frameworks will be introduced in the form of a Medical Products Regulatory Authority Act, a Human Tissue Act, as well as legislation to govern telemedicine platforms. Research and development centres will be exempt from registration duty when purchasing immovable property in the life sciences sector and from VAT on construction materials and specialized equipment. They will also benefit from double deduction on R&D expenditures.
The MIC will, in order to develop the fishing industry, invest in joint ventures engaged in fishing activities and its value chain. An inland aquaculture scheme will be introduced that will carry an 8-year tax holiday and duty and VAT exemption on equipment as incentives.
Regional economic integration
In order to reinforce Mauritius' partnerships with the rest of Africa, the MIC has earmarked Rs 10 billion to invest in African projects, including special economic zone projects under a government to government framework.
Regulatory and Compliance
The financial services sector, being a key pillar of the economy, formed part of the 'Plan de Relance de L'Investissement et de L'Economie' which was one of the tryptic of the budget. In view of its nature, the sector continues to face challenges and calls for reforms to be made to ensure compliance with international practices and norms.
The Minister put forward the commitment of the Government of Mauritius to address the 5 recommendations of the Financial Action Task Force [FATF] by September 2020 and announced measures to implement risk-based supervisions, targeted outreach programmes to promote clear understanding of money-laundering and terrorist financing risks, increased reporting of suspicious transactions, targeted financial sanctions in cases of terrorist financing, and timely access to beneficial ownership information. Moreover, a new AML/CFT (Miscellaneous) Bill will be introduced to complement the existing legal framework, and a dedicated and specialized Financial Offences Court will be set up.
Banking and Financial Services
If on one hand the Minister presented measures to safeguard the image of the sector, on the other hand he also alluded to the diversification of the sector to enhance its competitiveness. In line with the 10-year Blueprint project envisioned for Mauritius as an International Financial Centre of repute and substance, new products will be introduced encompassing a Central Bank digital currency, an insurance wrapper, variable capital companies, inaugural sukuk issuance by the BOM, and Green and Blue Bond Frameworks by the BOM.
The BOM will also develop new frameworks for digital banking, private banking and wealth management by banks. In view of sustaining start-ups and SMEs, a dedicated Venture Capital Market will be set up at the Stock of Exchange of Mauritius.
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Originally published August 3, 2020.
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