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IBA Bill: Ease of doing business? by P. Neerohoo, Tax specialist

Mauritius takes great pride in being classified among the countries that are ranked high on the Ease of Doing Business (EDB) index of the World Bank. However, one proposed measure in the Independent Broadcasting Authority (IBA) Act (Amendment) Bill of November 19, 2021, goes squarely against the EDB policy.

The Bill proposes to amend section 22 of the IBA Act to reduce the duration of a license for a radio station from three years to one year. Like any private enterprise, a radio station needs stability, certainty, and predictability in its operations to attract clients, plan its budget, hire staff, and deliver cost-effective services. 

How on earth can a radio station engage in such strategic planning if its horizon is limited to one year and it must apply annually for licensing, subject to all kinds of constraints and administrative penalties? 

This anti-EDB proposal, if voted in Parliament as part of the Bill, would pose an existential threat to private radio stations. Although in theory the license may be renewed every year, subject to some conditions, the proposed measure will hamstring the licensee in the following respects:

  1. Hiring: No professional would want to work for an enterprise that offers a contract of employment of one year. Talented people are scarce in the industry, and they would work for companies that provide stable and long-term employment income.
  2. Clientele: no serious client would negotiate an advertising contract with a radio station that has no guarantee of survival beyond one year. The loss of advertising revenue would cripple the radio station.
  3. Investment: the radio station would not be able to obtain capital for long-term investment in equipment and technology as its existence as a going concern is not secure. Who would lend money to a company that might not be there after one year?
  4. Planning: strategic planning covers 3 to 5 years to prepare a business plan, set goals, identify opportunities, and mobilize resources to implement an action plan. Typically, a business runs at a loss or breaks even in the first few years.
  5. Working capital: the radio station would not obtain bank credit if its solvency (liquidity) and profitability cannot be established beyond one year. 
  6. Shareholding: no shareholder looking for a stream of regular dividends would invest in an enterprise that has no predictable business continuity. 

The anti-EDB measure is obviously intended to keep radio stations on a tight leash for political reasons. If they don’t toe the official line, their license will be canceled after one year. 

Short of outright shutdown, the proposed license of one year is a threat to the continued existence of a radio station. It is a major setback to economic freedom and business facilitation in this country.

P. Neerohoo
Tax specialist