What are the key trends and performance you have witnessed within Mauritius financial and global business service industry?
Mauritius began on its global business journey (then termed offshore) with the amendments to the banking legislation in 1989 to allow the setting-up of offshore banks and quickly after with the establishment of the legal and regulatory framework for offshore business in 1992. At the time, it was thought that the thrust of the business would have come from South Africans HNWI and UHNWIs who would view Mauritius as an alternative jurisdiction to the Channel Islands for estate planning. However, we took a very different tangent. The establishment of our international financial centre fortuitously coincided with the liberalization of the Indian economy and Mauritius became a preferred foreign investment route into India by virtue of the highly beneficial tax treaty between the two countries. Much water has flown under the bridges since then. From humble beginnings, Mauritius is today home to more than 20,000 global business companies and over 900 funds promoted by multinational corporations, blue chip companies, institutional investors and high net worth individuals engaged in business activities around the world. Over the years Mauritius has been able to successfully diversity its global product offering and target markets and all eyes are now on the opportunities that the African continent can provide to our International Financial Centre.
How do you see Mauritius take off as Africa’s financial services hub? How can the country further improve its investment climate?
Cross border investments, especially in emerging economies, come with the potential of high returns but also with many challenges. When it comes to Africa, this is exemplified by the fact that Africa is not a country but comprises of 54 sovereign states, each having its own specificity. The challenges are wide-ranging and include the diversity and complexity of the legal & regulatory framework, governance, investment protection & repatriation, ease of doing business amongst others. This is where Mauritius comes in. It provides international investors with the right ecosystem to undertake their investment in Africa whilst managing their risks. A number of factors work in our favour; we have a modern hybrid legislative framework, we are a well-regulated yet business friendly jurisdiction, we are a democratic state where the rule of law prevails, we have an excellent track record with many accolades including the World Bank, Mo Ibrahim Governance Index, the Heritage Foundation etc., a multilingual professional workforce operating in all segments of the financial services industry (banks, audit firms, law firms, asset management firms etc.), excellent internal and external communications infrastructure, a network of bilateral investment protection and tax treaties amongst others. Most importantly, Mauritius is a member of several African regional groups such as SADC, COMESA and the African Union and enjoys both cultural and geographical proximity with Africa. The one area which requires improvement in my view is the air connectivity with the continent. Whilst Durban, Johannesburg and Nairobi benefit from direct air services with Mauritius, there are a lot of other major regional business destinations which do not. Addressing this issue would in my opinion further boost Mauritius’ ambition to become a regional platform for trade, investment and services.
Are there any specific areas where you consider that Mauritius has a particular advantage over the international financial centres such as South Africa or Kenya?
Over and above the reasons provided above, I believe that international Investors tend to prefer the use of a neutral jurisdiction from which to operate and Mauritius has the benefit of being in Africa without being in mainland. Johannesburg is certainly a prominent financial centre in Africa and the financial services industry is mature and well diversified. However, there are also a number of impediments to international business such as the business environment, exchange control, high tax base and political uncertainty. Nairobi International Financial Centre featured in the prestigious Global Financial Centre Index list in 2017 joining Johannesburg, Casablanca and Mauritius. However there is still work to be done for the NIFC to become fully operational. Kenya too faces a number of challenges associated with governance, ease of doing business, insecurity, and tax base. Nevertheless, Mauritius should not be complacent as the competition to be Africa’s preferred financial services hub is expected to be fierce with Johannesburg, Nairobi and Casablanca all in the race!
How have investors’ appetites for exposure to Africa changed over the last few years?
Generally, as compared to 15 years ago, there has been a paradigm shift in the way investors view Africa and a totally new perception of the continent. Once described as the ‘hopeless continent’ and generally overlooked by international investors, Africa has become an attractive destination for foreign direct investment. It is true to say that after witnessing an exhilarating GDP growth, between 2010 and 2014, largely driven by the consumer-facing sector, the oil slump in 2014 and the slowdown in real GDP growth between 2015 and 2016 led to the questioning of the Africa Rising narrative. At the time, a lot of people were saying that the over-inflated bubble had burst. However, the end of 2017 saw investor sentiment and confidence returning and is largely positive. Although the economic and political situation in some countries remains challenging, generally the outlook is positive. The positive changes in political leadership in several countries in Africa have brought renewed investor confidence and there is significant deal appetite. Overall, I would be optimistic about the investments prospects in Africa in the coming years.
What is your view on China’s increasing role in Africa?
First of all, it is worth noting that China explorers reached the east African coast more than 500 years ago and there is a long history of contact between China and Africa albeit not to the scale that we have known in the last 10-15 years. Indeed, over a relatively short span of time, China has moved from being a relatively small investor in Africa to becoming its largest economic partner. It is expected that this will continue to grow year on year as China shifts its attention to other economic sectors. Can we blame China when it saw opportunity when others were viewing Africa as a troubling Continent? It has to be recognised that China’s investment has largely benefited Africa, namely in respect of infrastructure. Critics to China’s increasing role in Africa have alluded that Chinese aid to Africa is a form of economic colonization; expressed concern about the building up of huge national debt; that Chinese companies don’t contribute enough to the local economy; that there is no knowledge transfer; and that corruption has rife. I suppose that the challenge for Africa in future will be to ensure that the China-Africa relationship is mutually beneficial as opposed to one-sided and that the benefits arising from the growth in China-Africa trade actually trickles down to the African people.