PARALLEL ECONOMY: The elephant hiding behind the mouse. For many years, Mauritians were used to the psychological return on their savings of around 10% per annum and the recent scandals of 10% return per month made it even more mouth watery for our parallel economy that not many dare to speak. We are used to pointing fingers at the high level of corruption and parallel economy of India and Pakistan, going up to 50% of the GDP. However, when our experts are asked as to what is the size of the parallel economy of our country, ignorance seems to be the norm. Gargantuan appetite of many has added up to the sum of many millions and yet the count remains uncounted. The main question is not how many or how much has been stuck in the recent scams à la mauricienne, but what provokes such irrational behaviour of our fellow citizens, all class included.

THE AFFINITY FRAUD: The titanic on top of a tsunami The first behaviour through which most of the so-called illiterate investors were duped was what I call the ‘affinity fraud’ or let us call the trust that the titanic carried with it until sinking.

Criminals of all backgrounds and faiths have exploited colleagues and relatives and acquaintances who trust one of their own, and have done so from time immemorial. Fewer probative questions are asked of people who prey on members of their own group, and when such questions are asked, the answers are often insufficient, as is the case when people of public standing vouch their own words for such schemes. We let the police probe further. The witch hunting exercise has started and many potential complainants are retracting on the wave of themselves being questioned under Sec (5) of FIAMLA for money laundering. Perhaps it occurred to some of them that emphasizing their victimhood had the unfortunate side effect of making them look more foolish, and, perhaps, unworthy of being the recipients of further trust. The affinity fraud phenomenon seems to have taken a halt, at least for the moment.

RATIONAL IGNORANCE: Poor not due to lack of funds but due to lack of opportunities

This is a crisis that politicians do not have to understand, either, but that allows them to make thoughtful, caring and statesmanlike noises. We have seen many comments from the politicians and yet we ask ourselves how many are really literate enough in the matter to ponder on it. If we begin to investigate what are the opportunities available to our fellow citizens in investing and getting a decent return, we can become irrationally knowledgeable. Our heads might explode. There’s nothing inside. Even the risk-return concept does not exist here.

Mauritians have long been made to believe that only savings at bank can give them a guaranteed return with a guaranteed capital. This is only a perception and there is nothing per se that is guaranteed under our laws. Investment in life policies and pension schemes have made their own routes but yet remain unrewarding to the eyes of the general public. Investment in shares remain the territory of a little few and that is further plagued with the transaction costs that sit over and above the risk of initial investment erosion. The singular Mauritian is thus left poor by the opportunities offered for its savings/investment options. Therefore, whosoever coming with some credentials of higher returns will easily get access to our market, whether they have the legal and institutional powers to do so or not.

INVESTMENT SUPERHIGHWAY: It is not there, it is not theirs; everybody wants to retire!

It is no doubt that Mauritians have emerged from the saving culture to consuming culture and thus the need for everything to be fast, even returns on investments. Victims of the financial scam had the trait of working hard elsewhere and yet having the unflinching desire to get rich and richer. These victims never asked questions as to what might be bringing such high returns, not their problem; their only concern was that of being paid, at least on paper. Let us call it the need for instant gratification by embarking into an investment superhighway.

Other investment firms, coupled with insurance companies and mutual funds, have long locking periods and this has further exacerbated the need for quick returns on very short periods. The recent fraudulent packages offered meant that one could easily retire with handsome monthly returns, not even bothering to reflect on the essence of the source of income.