By Rajnish Aubeeluck, head of client coverage – commercial, corporate and institutional banking at Standard Chartered Bank Mauritius
Various propositions have been recommended to tap into the ocean economy for more than a decade with a view to unleash the next phase of Mauritius’ economic development. Indeed, one may say that the blue economy in Mauritius is not fully utilised yet, therefore there is no reason to look for new shores.
Undoubtedly, the country should continue to tap into its blue economic resources – after all, Mauritius is truly blessed on this front with a vast ocean territory comprising an Exclusive Economic Zone of 2.3 million square kilometres and a continental shelf of 396,000 square kilometres co-managed with the Republic of Seychelles. However, it is also an opportune time for the country to consider regional scaling through transferring its knowledge and experience of the sector while leveraging on partnerships for mutually beneficial expansion programmes across Africa, thereby leading the way in weaving a strong and sustainable growth story on the back of the blue economy.
Accordingly, this article aims to focus on the blue economy by exploring how Mauritius can enhance its current value proposition across the African continent.
Why Mauritius must work with Africa to shore up the ocean economy
The ocean matters. It makes up 70% of the planet, generates half of the oxygen we breathe and absorbs 25% of the world’s CO2. As an industry, our ocean is the world’s seventh largest contributor and generates at least $2.5 trillion with over 3 billion people relying on fish from the ocean for income or food.
Mauritius has a strong and thriving blue economy, albeit, some sectors still need investment, execution and focus to realise their full potential. The pillars of our local blue economy are fishing and aquaculture, port infrastructure and maritime transport, shipbuilding and repairs, marine salt harvesting as well as tourism and recreation. Operators of these sectors have developed a world class offering and established efficiencies and the government aspires to increase their contribution to GDP by deepening and diversifying the value chain in a sustainable manner.
Can this knowledge and skillset be transferred? If an operator has hit the ceiling of its business growth locally, further growth can only be achieved through expansion outside of Mauritius and a natural direction of travel is Africa. We have long aspired to be a regional player on mainland Africa and we have not been fully successful yet.
Meanwhile, the African Union Agenda 2063 describes the blue economy as a major contributor to the continental transformation and growth and Mauritius has the potential to spearhead such transformation and growth. As many as 38 out of Africa’s 54 countries have borders surrounded by the ocean and the continent has a total coastline of 30,500 kms, most of which is unexploited. In the next 50 years, Africa will need to increase its food production against a backdrop of chronic water scarcity and increase in the cost of living.
Against this sobering backdrop, Africa is underutilising and arguably wasting its blue economy’s potential to date. However, the situation can be rectified, and Mauritius can be a catalyst for the aspired transformation.
Challenges and opportunities in leveraging Africa’s ocean economy
Mauritian players have invested in the seafood sector on the African continent in the past and have faced a number of challenges. Doing business on the African continent comes with its own set of challenges including inadequate port infrastructure; prohibitive cost of imports and exports; high cost of intra-Africa transportation; maritime insecurity and piracy; illegal, unreported and unregulated fishing and a relatively small fleet of African vessels; as well as the lack of an internal framework to support investment.
One of the main assets of Africa is its youth. Africa has the largest number of young people on any continent which is currently estimated at 200 million and young people will influence the economic revival of the continent over the next 15 years. The ocean represents an abundance of business opportunities and the youth needs a set of support frameworks to tap into these opportunities. When the potential of Africa’s youth and its ocean opportunities are harnessed positively, the outcome can resolve issues of unemployment and lead to creation of wealth while consolidating Africa’s position in the blue industry in the long term.
Needless to say, the blue economy should be developed in a sustainable way. If the continent’s current trend in the unsustainable use of marine resources is not curbed, the potential of the ocean’s resources will be severely compromised. The blue economy is directly linked to the United Nation’s Sustainable Development Goal 14. It can improve livelihoods and provide employment, enhance sustainable food production, increase water quality and improve funding of health services, amongst others. It also has the potential to enhance knowledge infrastructure and channel funds to improve education levels, increase equal rights to economic resources, improve access to clean water and sanitation, and enhance access to renewable energies.
In the longer term, the development of a blue economy can provide for economic diversification, improve local infrastructure, promote equitable trade of goods and services, and create resilience to an uncertain climate future. On a larger scale, these benefits can result in promoting continental peace and security, improving partnerships between public, private and civil society actors, as well as strengthening continental cooperation. The benefits are non-exhaustive and they emphasise the potential of creating a virtuous circle through the development of a sustainable blue economy.
Tapping into key enablers for the ocean economy
Undoubtedly, the time to act is now, and two enablers are fundamental – policy changes and capital.
The governance structure needs to be enhanced to include a blue economy regional framework. Mauritius needs to look beyond its territorial waters and leverage on its membership in the two regional communities and its strong diplomatic ties with African countries to influence policy change and advocate for a strong governance framework towards the sustainable development of the blue economy.
In terms of capital, sustainable finance can help turn the tide. The issuance of blue bonds is fairly new, but it is a valuable instrument for raising capital from investors to finance marine and ocean-based projects that have positive environmental, economic and climate benefits. Indeed, blue bonds have the potential to be as impactful as green bonds, of which $1 trillion have been issued since the first issuance in 2007.
Incidentally, the first sovereign blue bond in the world was issued by the Republic of Seychelles in October 2018. The proceeds were used to finance ocean-based projects and enhance the protection of marine resources, while further developing the Seychelles’ blue economy as it transitioned to a more sustainable fisheries industry.
Establishing a robust sustainable finance proposition
Global trends show that investors have the appetite to invest in sustainable projects and the blue economy will invariably attract a fair share of this capital considering the benefits of investing in blue economies and compliance with the 17 SDGs of the United Nations. While capital markets have been active in supporting sustainable finance, banks have also rolled out sustainable finance products to support client debt requirements. Market players continue to demonstrate an understanding of the need to move to sustainable financing.
In Mauritius, there is a need for the establishment of a framework by regulators to incentivise sustainable financing, both for the provider of sustainable financing and the recipient. For example, a reduction in the regulatory cost of sustainable banking products has a direct impact on the pricing benefit for a sustainable finance product which is a win-win for both the provider and the recipient of this type of financing.
With the economic contraction globally, banks must remain competitive and support their clients in weathering this crisis by focusing on long-term sustainable solutions. If Mauritius establishes a robust sustainable finance proposition, banks will be able to expand their horizon and support Africa’s sustainable finance needs.
Mauritius at the heart of unlocking the African ocean economy’s potential
Ultimately, Mauritius has the ambition to become for mainland Africa what Singapore is to South East Asia. And, to help the economy realise its potential as a gateway to Africa, Mauritian corporates have been early movers in supporting Africa in the agricultural and financial services sector.
However, the fact remains that Mauritius can do much more to support the economic growth of Africa – transfer more knowledge and skills to Africa, influence policy changes and leverage its financial services industry to fund projects as well as support capital flows to develop a thriving blue economy. This is our chance to lead the way in a sustainable manner, and we must rise to the occasion with all the resources at our command.