Mauritius – A compelling platform to do business with Africa20th Nov 2018
As Mauritius joins the league of the 20 top business-friendly places in the world, it is indeed a good time to highlight the main reasons why this tiny African island in the middle of the Indian Ocean should be on the priority list of investors looking to do business with mainland Africa. Live Smart / Global Assets
Of late, Mauritius has emerged as a secure, competitive and efficient platform for channelling investments into Africa’s most promising industries. After decades of being the number one investor into India, Mauritius is turning its attention resolutely to the ‘rising continent’, with outward investments from Mauritius to Africa surging to nearly US$32 billion in 2017 – twice as much as in 2012.
Investor confidence in Mauritius as a platform for doing business with Africa is underpinned by several factors. First, its business environment is served by a bilingual (English and French) and highly educated workforce with a large supply of nationals and expatriates trained in business-related fields. Second, a convenient time zone, modern infrastructure and developed connectivity make it easy to stay in touch with Africa and the rest of the world. And of course, third, the island’s integration within the continent’s economic space, via its membership of trade blocs such as SADC and COMESA, is reinforced by an extensive network of tax treaties and investment protection agreements with its African neighbours.
For over 20 years now, Mauritius has developed a global business sector attuned to the needs of companies, institutional investors, entrepreneurs and high-net-worth individuals looking to avail themselves of business opportunities in emerging markets. On the back of its sturdy growth, the Mauritius global business sector has been a key ingredient in propelling the island to the status of an international financial centre (IFC) with all the attributes of an attractive platform for crossborder investment and trade, especially with Africa as a focus.
Currently undergoing a structural reform to align with new international norms under the Base Erosion and Profit Shifting (BEPS) project initiated by the Organisation for Economic Co-operation and Development (OECD), Mauritius is keen to remain a forwardlooking, well-regulated and secure location for conducting international business.
In a post-BEPS environment that has seen Mauritius revisit its framework for the conduct of global business, three specific areas emerge in which Mauritius retains its competitive edge for cross-border trade and investment, especially in relation to Africa.
Pooling of funds
In the pre-BEPS era, funds would be domiciled off shore so that they could escape the burden of onshore regulations and tax.
Today, development finance institutions increasingly choose to channel their investments in Africa through Mauritian vehicles, because of the trustworthiness of the country’s legal framework for the pooling of funds, good governance and reputation.
While Mauritius is working towards compliance with the OECD’s best practices, its resulting tax regime for investment-holding activities remains competitive, with foreign dividends and interest qualifying for a maximum income tax of three per cent, and capital gains on sale of shares qualifying as exempt income – subject to prescribed substance requirements and relevant licencing conditions being met.
The Finance (Miscellaneous Provisions) Act of 2018 has expanded the definition of ‘export of goods’ to include international buying and selling of goods, whereby the shipment of goods is made directly by the shipper in the original exporting country to the final importer in the importing country, without the goods being physically landed in Mauritius. Such international trading of goods will be taxed at the rate of three per cent – an incentive to be compounded with such other factors as an adequate infrastructure and a skilled workforce, thus turning the country into a competitive procurement platform for Africa.
A conservative estimate drawn from research undertaken by the African Development Bank estimated the value of unmet demand for bank intermediated trade finance in 2014 to be in excess of US$90 billion. Mauritius is seeking to capitalise on this huge financing gap on the back of its mature banking system, stable economy, and absence of foreign exchange control. Financing from Mauritius in support of growing African trade is a major business opportunity, as recently highlighted in the blueprint for the development of financial services published by the Financial Services Commission of Mauritius. Likewise, Mauritius is attracting growing recognition as an effective and trusted regional treasury centre used by large corporates and trading houses for their Africa-led business.
As the new ‘scramble for Africa’ sees foreign investment pouring in from around the world, including from the continent itself, the Mauritius IFC, which has been built on trust and effectiveness, has become a compelling component of this dynamic.
At Ocorian Africa, Middle East and Asia (formerly known as ABAX), we provide private client, corporate and fiduciary services, including the establishment and ongoing administration of Mauritian global businesses, trusts, funds, limited partnership structures and foundations.
With over 300 local ‘feet on the ground’ in Mauritius, our flexible and commercial service provides an exciting platform for our clients to invest in the burgeoning markets of Africa, the Middle East and Asia.