The Mont Choisy Golf and Beach Estate in the north of Mauritius was once a vast swathe of sugarcane, the centuries-old basis of the island’s economy. Where African slaves and Indian indentured labourers used to toil, French and South African pensioners now mull over the merits of a five-iron on the 14th hole. The estate is a symbol of a huge change since Mauritius won independence in 1968.

Back then it was as poor as the average African country. A Nobel economics laureate reckoned the “outlook for peaceful development” was “poor”, given the island’s diversity (Indo- and Sino-Mauritians mix with Creoles and people of French descent) and its reliance on a single crop. Yet today it has Africa’s second-highest GDP per person at around $12,000, eight times the African average, behind only tiny Seychelles. Democratic governments have worked with business to sell ever more lucrative things apart from sugar: textiles, tourism, offshore finance—and fancy villas. Property accounts for 80% of foreign direct investment, mostly by foreigners buying houses in estates that come with residency status. Locals have renamed Grand Baie, a village in the north, “Rand Baie”, thanks to the South African influx.

But trouble is in the air. In November Navin Ramgoolam became prime minister for the third time, trouncing Pravind Jugnauth. The new government has pledged to fix the public finances to stop credit-rating agencies downgrading sovereign bonds to junk status, jeopardising the island’s reputation as a financial hub. “We’re in a classic middle-income trap,” says Sushil Khushiram, a former minister.

Under Mr Jugnauth, Mauritius’s record of good governance took a knock. He banned social media before the election after leaked audio recordings embarrassed some in ruling circles, including his wife. In February he was charged with money laundering (he denies the charges). “Ah, now you’re a proper African country,” an official says a friend from the continent joked to him.

Under the previous government handouts became the norm: cash for new mothers; phone credit for 18- to 25-year-olds; an obligation for firms to pay an extra end-of-year bonus. The ratio of public debt to GDP this year will be 90%. The budget deficit is expected to widen to 6.6% of GDP. A local investor notes that the former finance minister was educated in France and “it was as if he was running the French state”.

The World Bank has noted that Mauritius’s traditional exports are less competitive. Annual sugar exports are under half their peak in the 1980s (preferential access to EU countries ended in 2009). Textile firms that flourished after the government gave incentives to sugar barons to go into garment-making have moved to lower-wage countries like Madagascar. Tourism, accounting for a fifth of jobs, is still crucial but visitor numbers remain below the peak of 2018. The average tourist spends 11.5% less than before covid-19. Financial services, the biggest contributor to GDP, have been hit since India renegotiated a tax treaty that had made Mauritius a big conduit of capital to that country.

Mauritians worry their country will get old before it gets rich. The median age is 38 years, a decade older than India’s and nearly twice the African average. By 2050 its population will fall from 1.3m to 1.1m, reckons the UN. Yet Mauritius still has reasons for hope. Its strategic location in the Indian Ocean should help it strike new deals with the West, China and India. Its taxes remain low; its rule of law and democratic culture are strong; its civil service and business ethos are impressive.

“We have to adapt,” argues Dhaneshwar Damry, a junior finance minister. Mauritius must attract fintech firms, large funds and family offices. He notes that JPMorgan Chase is setting up in Kenya. “But why not Mauritius?” Rama Sithanen, the central-bank governor, says Mauritius is like Queen’s Park Rangers, an English second-tier football team. It outperforms in the lower divisions of development, but finds it hard to make it to the very top.