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National Budget

2016
A Preliminary Overview

Macro View

The national budget was mostly made up


of themes weve seen before.

The new measures were mainly


enhancements to regulatory framework of

Diversified nature of the Mauritian economy


+2.8%
Trade
12%

the financial sector as well as the creation


of new segments which included tax
holidays

OTH
COND
UT

The property sector received a fresh

boost with a reduction in restriction with


regards to foreigners.

14%

+1.3%

21%

3%

+3.9% HLTH

Manftg
9%

4%
GOV

7%

9%

Manftg
5%

CONS

4%

Major infrastructure projects include a


Metro line, and revamping of the utilities
network

+7% COMM

10%

6%
10%

PROP

We also received the expected tax


increases on sugar, alcohol and cigarettes
but none on VAT, Income or Corporate
taxation.

IND

12%

+3.8%
T&L

Agri
3%

+6.9%
2%

+1.6%

Logistics
6%

FIN

Ins
3%

Constn
4%

+4.5%

Banking
7%

+3.7%

+5.4%

30-Jul-16

Key Ratios

Budget Deficit [%]

Current A/C Deficit [%]

GDP Growth [%]

5.3
4.2
4.1

4.0

4.0

4.1

3.8

4.6

been stagnant over the last five years. With focus on reigniting growth, GDP is expected to cross the 4% mark in
coming years boosted by budgetary measures.

3.7
3.5

3.5

3.4

GDP Growth which has hovered in the mid-3% range has

The current account deficit which peaked at 10% of GDP


-5.2

-5.7

-8.0
-10.4

in 2012 has been significantly lowered and is expected to


drop below the 5% mark in the upcoming years.
-4.5

-4.8

-10.3

-8.8

-9.1
-11.1

-9.6

-11.6

The budget deficit has exceeded 3% in recent years and is


expected to continue to do so except for a brief dip to 2%
in 2012. Government expects to also bring down its debt
levels to 50% in coming years.

-1.8
-3.2
-3.8

-2.5

-2.2
-3.5

-3.2
-3.2

-2.4
-3.5

-3.3

Forecast

30-Jul-16

Capital Markets
1,050

ALEX 20

975
900
825
750

1,500

ALCAPEX 12

1,400

1,300

As we have said our recent reports, the market has been


highly effervescent since last weeks unexpected Repo
Rate trim to a record low 4%. In fact, we have not seen the
market this bullish ahead of a National Budget as investors
retreat into wait-and-see mode.

With regards to the market, GBL2s who were previously


barred from investing on the SEM are now permitted to do
so which should enhance liquidity.

1,200
1,100
1,000

In an unexpected move, listed companies will be required


to have at least one female board member to bridge the
gender gap

2,200

SEMDEX

2,050
1,900

FSC is poised to host a digital KYC database which could


enhance the ability to conduct business and also to
regulate certain private placements.

1,750
1,600

The creation of a derivatives and commodities exchange


has also been announced.
30-Jul-16

Financial Sector
The financial sector is one of the main pillars of the

12.0
5.7

5.7

Financials

11.9

11.9
11.9
5.5

5.5

11.7

5.4

11.7

The creation of several new segments to be licensed by

5.3

2011

2012

6.3

2013

2014

2015

2016E

6.3

Banking

6.8

6.8
6.6

6.7
5.5

2013

2014

5.6

2012

the FSC have been offered tax holidays ranging from 5-8Yrs
and extends to the legal profession with a view to develop
legal advisory & arbitration. Should these attract new
players, it can only bode well for the sector.

There were several regulatory measures announced which

6.9

2011

Mauritian economy whose growth has hovered ~5%.


Following the renegotiation of the DTA with India this
industry is in need of new avenues for the development of
Mauritius as an IFC.

GDP Growth [%]

6.8
5.5

5.4

2015

appear to have on-boarded learnings from the aftermath


of the BAI Group which includes greater authority by the
Bank of Mauritius in liaising with holdings of banks as well
as a mandatory rotation of audit firms rather than
partners.

2016E

Share of GDP [%]

30-Jul-16

Travel & Leisure


The tourism sector has emerged from a prolonged rough spell
8.1

7.2

8.0

Tourism

operators has nonetheless been uneven.


7.5

7.5

Budgetary measures for the sector were mainly focused on

7.1
3.2

boosted by improved connectivity. The recovery for industry

6.6

6.3

6.8

improving the heritage and history of the Mauritian

1.9

destination. Creation of an events calendar, rehabilitation of


landmarks, beaches, as well as the upgrading of museums and

0.7
2011

2012
2013
GDP Growth [%]

2014

2015
2016E
Share of GDP [%]
55

the aquarium are all aimed at a more rounded offering.


The streamlining of licenses for industry operators should
enhance the ease of doing business.

Tourist Arrivals & Receipts

1,233 1,240

50
1,186

Having been hit hard in the last budget, the gambling industry

1,152
1,134

44
43

1,087

41

1,035
996

was expected to be spared but it was not.

44

A 2% levy has been imposed on the net income of bookmakers

1,039

993
965

and casinos excluding the operator of the National Lottery.


Also, per race-day duty for bookmakers operating outside the

965

racecourse has almost doubled.


2011

2012

World [M]

2013

2014

Mtius [k]

2015

2016E

Share of GDP [%]

30-Jul-16

Consumer Staples
Mauritius, once coined a monocrop economy has seen the

Agriculture

4.2

4.5
4.2

3.7

3.5

3.9

3.8
3.7

farmers and bee-keepers among others to stimulate these


segments. But also introduced a levy on pesticides with the

0.5
-0.3
2011

2012

2013

2014

2015

2016E

Seafood

on dairy products and juices has been announced. Unsurprisingly,


duties on alcoholic beverages were also increased. Overall we

6.6

expect slim changes, if any, on consumption of these items.

1.0

1.0
1.0

1.0

1.0

0.3

-1.6

2012

2013

GDP Growth [%]

Seafood exports has exceeded sugar in recent years and the


budget announced measures at boosting capacity of the seafood
hub which include the training of seafarers, tax holidays for

-2.8
2011

intent to curb their usage. We expect the increased cost to be


passed on to the consumer.

A 15% duty on imported sugar and extension of the sugar tax

9.8
1.1

6.4

GDP. This years budget continues to focus on self-sufficiency and


going organic.

The Budget announces support for sugar/tea farmers, dairy

3.5

1.1

share of Agriculture drop significantly since the 1960s to ~ 3% of

2014

2015

2016E

fishing companies setting base locally, and breakwaters to


accommodate 120 boats.

Share of GDP [%]

30-Jul-16

Consumer Discretionary
Manufacturing is one of the largest segments of the local

15.8
15.7

4.7

economy for which Vision 2030 targets a 20-25% share of GDP.

Manufacturing

15.5
15.4
15.4

The Budget has announced an extension of tax credit against

2.1
1.8
14.8
0.7
2011

1.3

0.0
2012

At current growth rates, the target will be difficult to achieve


and required support to expand at reasonable cost.

2013

4.9

2014

2015

investments as well as a announced the lowering of the


interest rate to 6% for SMEs which should help incentivise
investment and/or enhance cash flow.

2016E

The Budget also mentions foreign investors wishing to develop

4.2

motorcycle manufacturing, development of a gold-hub, and


3.0
2.6

Textile

4.7

4.7

4.7
0.2

4.6
4.6

-1.1

pharmaceutical village. Should these developments


materialise, the Vision 2030 target could be achievable.

The National Airline is also set to offer a 40% rebate on airfreight to Europe which would enhance the competiveness of
Mauritian products.

-2.8
2011

2012

2013

GDP Growth [%]

2014

2015

2016E

Share of GDP [%]

30-Jul-16

Property
Following 5 consecutive years of contraction, the
Real Estate

7.1

construction sector has been estimated to grow in 2016.


As expected, the Budget offered fresh boosts for Real
Estate.

6.9
6.1

5.9

5.3

Government announced further infrastructure


4.4
5.7

5.7

5.7
5.7

2011
6.5

2012

2013

2014

2015

6.2

5.7
3.8
2016E

1.6
5.5

5.5
4.8

-2.0

The surprise announcement was that of the development

4.4

-3.0

Construction

development focusing on roads (A1-M1bridge & Phoenix


flyover), drainage, community enhancements, more social
housing, as well as the kick-starting of construction of
three Smart Cities including Heritage City at the cost of
2.7bn.

of a Metro line to enhance transportation.


-4.9

Government provided additional support to foreigners,


-8.2
2011

2012

2013

GDP Growth [%]

-8.5
2014

2015

2016E

Share of GDP [%]

locals, and promoters through a series of measures by


eliminating certain restrictions on developments aimed at
foreigners, and extending tax breaks for locals.

30-Jul-16

Technology & Logistics


The Technology cluster has gained prominence as a pillar
5.7

to the local economy with the budget yet again declaring


governments intent of going digital.

9.4
8.9
5.6

ICT

5.6

5.6

5.6
7.0

6.9
6.6

2011

2012

2013

5.6

2014

6.6

2015

The Budget has announced that several public sector


services would move online to enhance the overall ease of
doing business as well as complete coverage of the island
with optical fibre by Dec-17.

2016E

In our opinion, digital literacy in the current era is a


3.7
6.2

3.7
6.2
3.4
6.1

Logistics

6.1
6.1

6.0

In terms of logistics, the budget reiterated Governments

2.8
2.6
2.4

2011

2012

2013

GDP Growth [%]

2014

requirement and the budget announced a enhanced


teaching at primary (tablets for Grade 1 &2), secondary
(new modules) and tertiary (new faculty) levels.

2015

2016E

intent to modernise port infrastructure, development of a


petroleum port, as well as reduction on African export
requirement for Freeport operators.

Share of GDP [%]

30-Jul-16

10

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Contributors
Bhavik Desai
Head of Research
AXYS Stockbroking

Prerna Cheekhooree
Research Analyst
AXYS Stockbroking

Alexis Corson
Investment Analyst
AXYS Stockbroking

Kugan Parapen
Portfolio Manager
AXYS Investment Partners

30-Jul-16

11

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