CEO of Barclays Bank
Mauritius has a strengthening economy and financial services sector leading the world's view of Mauritius as the next global investment hub. Ravin Dajee, CEO of Barclays Bank, talk shares his view on why the island is a world-class regional financial centre for Eastern and Southern Africa.
"We want to find the niche in Mauritius and be good at it, develop our staff and build the people we have and our capabilities. It’s in our DNA to give bank to the community and we want to grow with others. Others should benefit from our growth."
FDI Spotlight: What are Barclays’ Future strategic developments?
Our key focus remains to achieve business growth by delivering value to our customers, colleagues and shareholders while also making a difference in the community we operate in. Despite the decision of Barclays PLC to reduce its shareholding in Barclays Africa, our strategic ambition to be a leading financial services group in Africa remains unchanged. As Barclays Africa Group Ltd (BAGL) we remain committed to the continent, we continue to invest in both our businesses and in the communities.
As a 100% owned entity of BAGL, Barclays Mauritius’ strategy is fully aligned with that of the group. Being part of a group which operates and leads in more than 10 markets across the continent, with around 42,000 colleagues, 12 million customers, 1,251 branches and 10,378 ATMs we have access to a network of resources (knowledge, skills, systems and human capital), which we can leverage on to bring value added and relevant solutions to our customers on the local market. With the benefits offered by Mauritius as a country, we are also able to aspire to becoming a platform/hub to support the growth of our Group in Africa.
To better understand our strategic intent one has to understand our business model. Barclays Mauritius operates in two distinct markets, namely, the local market (via our Retail, Business Banking and Domestic Corporate and Investment Banking) and, international and regional markets (via our International Banking and Investment Banking businesses). Both these segments are also supported by our experts in Sales and Markets who excel mainly in FI Sales, Derivatives and Rates and Bond trading products.
Barclays Mauritius has always leveraged on its international and regional reach to bring pioneering banking solutions to Mauritius. Barclays Mauritius was established in 1919 and was the first bank to obtain an international banking licence. As the pioneer of International Banking in Mauritius, Barclays is strategically positioned for a new world of emerging business opportunities between Africa, Asia and the rest of the world. In addition, while upholding our innovative nature, we continue to bring promising banking products and services to support the growth of the Mauritius Financial Industry.
Our strategic focus continues to accentuate on Business Banking clients where we want to support the scaling up of meaningful entrepreneurial endeavours and, the Corporate and Investment Banking (CIB) segments where we are accompanying local conglomerates into Africa. More so, the bank’s main differentiator in the CIB space is the ability to partner with our Africa Syndication desk and Project Finance teams to support funding and trade flows into and intra Africa.
Barclays Mauritius is a well-established and capitalised bank and we operate in one of the most promising regions of the global economy. We are set to make the most of the opportunities which Africa has to offer.
FDI Spotlight: What are your insights on the banking sector and long-term impact on the country’s economic growth?
The banking sector contributes directly to the economic growth of a country and indirectly, by playing an important role through the provision of banking services to individuals and corporates. Contribution to the local economy is directly through the sector’s contribution to the GDP which is around 6% annually with an average yearly growth of 10% over the last 5 years. This growth has been mainly observed in the international/cross boarder banking segment; which to some extent explains the dichotomy of the sector’s growth against the country’s and other industry and firms. The percentage of GDP accounted for by credit to corporates and households during 2015 was broadly in line with preceding years. Tourism and Housing continued to occupy the lion’s share of corporate and household credit, respectively. Notwithstanding positive annual growth figures, credit to manufacturing and to trade witnessed a mild decline as a share of GDP during 2015 due to de-leveraging following restructuring exercises in these sectors.
In addition the banking sector employs circa 5,500 people in stable and prosperous jobs. The sector offers attractive career development potential for the young generation both for local and regional roles.
More so, the sector’s indirect contribution to the local economy has been key to its success. Banks have played an important role in channelling funds to the right development projects and have also played ‘advisory’ roles for both local corporates and the government. Understandably, banks have contributed to improving the quality of life of the local citizens. These contributions can only increase in the future as the sector prepares itself to further play a pivotal role in the region.
The country’s average economic growth over the last 3 years was 3.5%. There is an ambition to push this growth to the 7% mark in the near future. This may be a very ambitious target. However, the banking sector is likely to contribute towards achieving this growth.
Quoting the latest Bank of Mauritius’ Monetary Policy and Financial Stability Report, “the banking sector remained profitable and the majority of banks maintained strong capital positions over the year ended December 2015. Growth in total banking assets mainly reflected further consolidation of the foreign assets portfolio held by both domestic-owned banks and subsidiaries of foreign-owned banks. The financial system is assessed to be sound and stable. The banking sector remained resilient during 2015 despite negative spill over effects that have emanated from the collapse of a large financial conglomerate, the BAI group. As at end-December 2015, the sector was supported by strong capital positions, despite a weakening of some financial soundness indicators, including rising non-performing loans ratios. Indebtedness of households has remained broadly constant in 2015 in terms of ratio to disposable income. Similarly, corporate indebtedness remained range-bound as a ratio to GDP.”
One known challenge is the changes to Mauritius Double Taxation Avoidance Agreement (DTAA) with India which is due to come into effect in April 2017 and might be a new challenge for the future growth of the financial services industry. However, on a more positive note, these amendments to the protocol bring stability and certainty which is good for business.
FDI Spotlight: What are some opportunities to further attract more regional and international banks?
As it stands, the banking industry in Mauritius comprises of 22 banks out of which only 6 are local banks. There is strong competition to increase or maintain market share domestically. The Mauritian banking industry is therefore expected to face challenges in domestic growth with an increasing number of players in an already highly competitive market. In March 2016, the Bank of Mauritius granted a banking licence to BANK OF CHINA (MAURITIUS) LIMITED to offer business banking and private banking in Mauritius.
There are actually 2 banks that have 70% of the market share in the domestic business. From a financial stability viewpoint, this is not a good position to be in. The systemic risk it causes in case of failure would be difficult for the economy to sustain. Hence, having a few more sizable banks would help in that direction. There may therefore be a need for consolidation in the industry.
Newcomers and players from the non-banking sector are also making competition more aggressive and with the increasing popularity of FinTech companies disrupting the way banking has been traditionally done, banks have to continually review the way they bring their offerings to the markets (channels used and the proposition made to our customers).
More opportunity exists for the international/cross boarder banking. The country will benefit from the presence of reputable regional and international banks to enhance its image and reputation. This will also raise the standard of governance within the market.
Mauritius is the gateway to Africa. Over the last few decades, Mauritius has also grown into an attractive, secure and competitive platform for cross-border investments into Africa. Mauritius is set to further strengthen its position as an investment platform for Africa. In fact, the geographical position and political stability of Mauritius allows it to play a strategic role in attracting and channelling investment across Africa.
FDI Spotlight: How do you think banking services and products in the country can diversify and how sophisticated are they in Mauritius?
The banking sector is evolving into a more sophisticated one and offering new banking services like Regional Treasury Management, Regional Cash Management, innovative Payment Solutions and also supporting the Capital Markets.
The Capital Markets in Mauritius is a vibrant contributor to the economy and the country provides a dynamic debt and equity market. It is the second largest market in the African region. In pursuit of its internationalisation strategy, the Mauritian Capital Markets is embracing multi-product and commodities platforms in addition to its equity-based platform. In addition, Capital Markets will eventually graduate to secondary market trading.
Further developing Mauritius as a Renminbi hub for Africa would further strengthen the positioning of Mauritius as an international financial centre, especially in capturing the trade, investment and financial flows between Africa and Asia.
A Deposit Insurance Legislation is being introduced to protect depositors and guarantee the repayment of their deposits to such extent as may be feasible, in case of failure of a bank or non-bank deposit taking institution licensed by the Bank of Mauritius.
FDI Spotlight: What would you say about Mauritius’ potential to become a world-class regional financial centre for Eastern and Southern Africa?
Referring to the latest Global Financial Centre Index, the Mauritius IFSC has grown into a more sophisticated financial centre which is explained by the change in its classification from a Local/Evolving Centre to a Transnational/Transnational Specialist.
Increasingly the island is being recognised as a platform for investment into African countries. The location of Mauritius gives the island a significant advantage in servicing African markets and official statistics show that a significant portion of foreign direct investment into Africa has been structured through Mauritian investment vehicles. Mauritius is a member of a number of regional trade blocks, including the Common Market for Eastern and Southern Africa (COMESA) and the Southern Africa Development Community (SADC), and has signed a wide network of Double Tax Agreements (DTAs) and Investment Promotion and Protection Agreements (IPPAs).
The island has close historical, political, economic and cultural ties with countries including India, China, and European nations such as France and the UK. It has a hybrid legal system based on English common law and French Napoleonic civil code. The attraction of Mauritius today as an international financial centre goes beyond tax planning considerations.
Investors choose Mauritius as a favourable holding company jurisdiction for commercial reasons, including the high quality of service, the legal and regulatory frameworks and the excellent reputation of the jurisdiction. The island also has a track record of political, economic and social stability.
FDI Spotlight: What is your personal message of confidence to why investors should choose Mauritius as a stepping stone platform for global investment?
Over the years Mauritius has built a strong reputation as a safe, reliable and secure jurisdiction with best practices in terms of transparency, good governance and ethics. It is rated among the first in Africa for its ease of doing business, economic freedom and good governance.
Among other sectors, the Financial Services sector is increasingly being viewed as one of the major contributors to the Mauritian economy and to sustain its development as an International Financial Centre of Substance, Mauritius is continuously enhancing its range of financial products and moving towards the provision of higher end and value added services.