Mauritius: African Success Story

The island nation was able to adapt [to external shocks] with business-friendly policies that allowed its economy to continue to diversify and thrive.

When it comes to success in the African region, few countries can top Mauritius. Despite its remote location, small size, and ethnic divisions, the Indian Ocean country has prospered compared with most other African nations. That this 720-square-mile island is an African success story is borne out in various rankings: first among sub-Saharan African nations in the Rule of Law index from World Governance Indicators; first in the Index of African Governance; and the highest ranking African nation in the United Nations' Human Development Index (and No. 81 out of 182 countries worldwide). Between 1970 and 2010, its gross domestic product averaged 5.4 percent annual growth, compared with the African average of about 1 percent.

In Mauritius: African Success Story (NBER Working Paper No. 16569), author Jeffrey Frankel examines the economic history of the island and pinpoints a few reasons behind its accomplishments. Frankel points out that after Mauritius, the next two African nations with the highest governance rankings, intriguingly, are also small island nations: the Seychelles and Cape Verde. That's unusual, according to development theory, because small nations typically don't have the size to gain economies of scale. These islands are also in the tropics, another attribute that is often thought to be a barrier to progress. Frankel offers a possible explanation, rooted in immigration.

"Any country can in principle adopt effective institutions and strong policies at any time." In the case of Mauritius, the deep underlying origins include a cosmopolitan population with an unusual combination of ethnicities: Franco-Mauritians and Creoles who were willing at the time of independence to trade off their past domination of political power for guarantees under the new system, Indians who were willing to take the other side of the bargain, and Chinese who had links to their country of origin. And, as with the Seychelles and Cape Verde, everyone in Mauritius came from somewhere else," Frankel writes.

The history of Mauritius is one of globalization, with ups as well as downs: The Dutch stripped it of its valuable trees in the early seventeenth century and killed off the dodo. The French settlers imported African slave labor to work on their sugar plantations. Britain took over in 1814, and slavery was abolished two decades later. This was an important turning point: without slaves, the sugar plantations had to bring in some 500,000 indentured servants from India. An 1886 constitution allowed some Creoles along with Franco-Mauritians to become national representatives, and a 1948 constitution gave all literate adults the right to vote.

When Mauritius became independent in 1968, external observers predicted that the country would experience poor economic performance because of its high population density, reliance on a single crop, and ethnic divisions. But some key decisions helped to set the country on the road to progress. In one tradeoff, the leader of the nation's majority of Indian descendants renounced nationalization and opted for property rights instead, effectively allowing them to gain political power but letting the Franco-Mauritians keep their plantation wealth.

Under a series of coalition governments, the nation moved from agriculture to manufacturing. It implemented trade policies that boosted exports: an Export Processing Zone, smart diplomacy regarding export preferences, and a competitive exchange rate. "The reforms were implemented over three successive governments; a number of observers have highlighted what this says about the stability of the political system and its ability to do what is best for the country even while simultaneously squabbling furiously over personal and factional politics," Frankel writes. When outside shocks hit, the oil price increases, loss of trade preferences, and overwhelming competition from Chinese textiles, the island nation was able to adapt with business-friendly policies that allowed its economy to continue to diversify and thrive.

The island's accomplishments suggest at least three possible lessons for the rest of Africa. First, trade is crucial to growth. Second, ethnic differences can be accommodated by a well-designed parliamentary political system. Third, democracies can reform economic systems in ways that foster economic growth.

Still, Frankel writes, some other ingredient is missing, and it may have to do with immigration. When immigrants in other countries prosper, perhaps because they are self-selected for initiative, the natives often resent them, blocking progress. (Fiji is an example.) But Mauritius, like the Seychelles and Cape Verde, was uninhabited three centuries ago. Thus everyone is an immigrant. "If everyone came from somewhere else, nobody can claim special privileges," Frankel writes. But "the ideal of an identity-blind meritocracy, however desirable in principle, is not essential. The important thing is for everyone to feel included."

-- Laurent Belsie