Gateway to the African Opportunity

Many Mauritian sector leaders and businessmen and women have, likewise, highlighted the augmentation of ties to the continent as vital.

According to the Southern African Development Community (SADC), Mauritius offers a very conducive business environment to investors and is ranked first in Africa on the World Bank Ease of Doing Business Index. Mauritius also tops the African continent on key international benchmarks such as the Heritage Foundation Index of Economic Freedom, the Forbes Survey of Best Countries for Business, the Democracy Index, the Mo Ibrahim Index of African Governance and the Environmental Performance Indices.

“Mauritius is a leading financial centre in the region and for Africa,” says Ramesh Basant Roi, Governor of the Bank of Mauritius, “There are significant investment opportunities in Africa and with investors choosing Mauritius to set up investment vehicles and headquarters, our financial centre has the potential to expand further. The ocean economy also offers significant prospects. Our second largest export is fish and fish products. These are two sectors that can propel the economy in the medium term to a high-income country.”

According to a study by the Financial Services Commission (FSC) in Mauritius, 58% of investments made by global business companies registered in Mauritius was destined for Africa. This means that Mauritius is using its 25 years of experience in supporting investment into India and shifting focus to Africa.

“To expand our product offering, we will, amongst other things, explore the possibility of offering a range of African currency derivatives against the USD, Euro and GBP to provide international investors with hedging tools against volatile African currencies,” says Sunil Benimadhu, Chief Executive of the Stock Exchange of Mauritius.

PK Kuriachen, Acting Chief Executive of the Financial Services Commission (FSC) shares the view that Africa is a valuable region for Mauritius as a hub and believes that the country has to keep the current momentum if they do not want other African nations to take their place. One way in which the FSC has aligned itself with the African view is creating a new category of license for investment bankers.

“The Government has announced its objective of making Mauritius a valuable hub for Renminbi for the African region to capture trade, investment and financial flows between Africa and China,” says Kuriachen. “Even though Islamic finance is mostly to do with banking, the Commission can authorise funds operating under Sharia principles.”

According to The Making Finance Work for Africa Partnership, Mauritius’ss economy is in great part fuelled by a vibrant financial services industry.

Some of the measures outlined by the Government in Mauritius include allowing GBC2 companies to invest in listed securities in an effort to increase liquidity on the Stock Exchange and giving companies with an ‘Investment Banking and Corporate Advisory License’, ‘Overseas Family Corporation’ licence and foreign Ultra High Net Worth Individuals investing a minimum of USD 25 million in Mauritius a 5 year tax holiday.

Through the introduction of the Overseas Family Corporations (OFCs) licence, international high net-worth families will be able to manage their wealth from Mauritius by setting up their family offices in the Mauritius IFC. The new family office regime will equally allow the Mauritius IFC to tap into the growing regional and global movement of wealth and capital in search of a stable and secure wealth management centre.

The country is also attempting to become a gateway into Africa by providing advanced financial and telecommunications infrastructure, while maintaining the most accommodative business environment on the continent.

According to Benimadhu Mauritius has, since as far back as 2009, had 96 new listings on the markets, 61 of which were international products. In that year the Exchange embarked on a fundamental reorientation of its development strategy to move away from its historical equity-centric domestic exchange focus to a multi-asset class international Securities Exchange status. Several initiatives came to life, including the introduction of a multicurrency listing, trading and settlement platform. Another initiative were new rules for the listing of a variety of different products such as Global funds, Global business companies, specialist‑debt products, Exchange Traded Funds, Exchange Traded Notes, Depositary Receipts and Structured Products.

Moreover, Mauritius certainly benefits from a positive international image. The World Economic Forum’s Global Competitiveness Report, published in September 2016, ranks Mauritius as the most competitive economy in Africa. Whilst in the World Economic Forum’s Global Competitiveness Report, Mauritius also scores highly in terms of setting up a business and employing workers, investment protection property rights, legal security and access to electricity.

According to the New World Wealth Investment Review, the number of US dollar millionaires in Mauritius will rise to 7,400 in 2025, putting the country amongst the top five economies in the world.

The island does, however, have some challenges to overcome not only to move forward but to become a true gateway into Africa. Its banking and financial services sectors face some key challenges, such as the need for a strategy that will encourage Indian and multinational firms to establish headquarters for Africa. The strategy also needs to enable these firms to reach out to Indian, African and European financial institutions and leverage off of the Stock Exchange of Mauritius as a unique multi-currency platform in a targeted manner. The “SEM” also needs to be seen as an attractive capital raising and dual-listing platform for Africa-focused ventures and international products, while Mauritian firms themselves must tackle several further operational challenges facing the sector, such as the pressing need to diversify products, to ensure continuous growth and to promote higher value-added services.

Their biggest challenge is, arguably, improving the quality of their human capital stock. The main areas holding back Mauritius’s potential to fast-track their economic growth are limited and insufficient skills, limitations for technology absorption and insufficient trade facilitation. Even with a current population of only 1.3 million, Mauritius does not make it easy for expats with work visas to renew it after two years.

However, Mauritian companies have already planned and outlined their strategies going forward for the African continent.
“I think there will be a lot more private investors pouring into Africa and who never before considered Africa as an investment opportunity,” says Christian Li Kwet Liit Managing Director and Group CEO of CKLB Financial Services Group. “However, many people still think of Africa as only a third world place with risks that are difficult to manage. We find ourselves doing more private client work and providing family office support services to family offices and developing single family offices from our existing client base and sometimes extending our services to what is referred to as ‘concierge services’,” says Li. “Our client base has remained European and Far East in focus, although the destination of projects using Mauritius structures is almost 50 per cent towards the African continent.”

According to Sridhar Nagarajan, CEO of MauBank, Africa is a very fragmented market today and that a consolidation point for it must be found. “The options are limited as mainland Africa invites all the politics and issues happening on land,” he says. “Dubai is a good consolidation point for the Middle East, however it is too far to be the main access point for Africa. Rwanda, another good option that could handle becoming an international financial transfer centre, has too many border issues. Therefore Mauritius is the obvious choice.”

Harry Sutherland, Chairman of CrossInvest Global Management Services, is familiar with working in Africa and believes that even though Mauritius lacks the cut and thrust and competition of a larger economy, all it needs is training and exposure to more external business practices. “Mauritius has one of the highest GDP per capita in Africa, but there is not much exposure to the hardships of the mainland,” he says. “At CrossInvest we will change that over time by sending our staff out to work with clients on the ground and gradually this knowledge gap and ability to empathise will improve. Our team will become more knowledgeable regarding the hardships and complexities of doing business in Africa and our clients will learn more about what we do. ‘Seek to understand not just to be understood’ is one of our mantras.”

Sutherland also sees Mauritius as “conduit for inward investment into Africa. “Mauritius is quite simply the ‘jurisdiction of choice’ for that role.”