Mauritius: African Success Story

What explains the economic success of Mauritius, a top performer among African countries? How did it develop a manufacturing sector and how has it managed to respond well to new external shocks? 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, including: 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, including property rights (particularly non-expropriation of sugar plantations), abjuration of an army, and 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 in cabinet). But from where did the good institutions come? They were chosen around the time of independence (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 in Africa just as they do worldwide. Despite those two econometric findings, the fundamental determinants are not much help in explaining relative performance within Africa. The 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.