Budget 2014 expertspeak: ‘Mauritius to become the Brussels of Africa’
AfricaMoney spoke to Paul Halpin, director, International Financial Services Ltd, Mauritius, to understand the African strategy under Budget 2014 in greater detail.
AfricaMoney spoke to Paul Halpin, director, International Financial Services Ltd, Mauritius, to understand the African strategy under Budget 2014 in greater detail. Paul oversees foreign direct investment for Africa, India and China, and showed us how Mauritius is taking the lead to become the “Brussels of Africa” where all stakeholders focused on the emerging continent meet and strategize. With more than 60% of new companies coming up in the global business sector having an Africa focus, we turn to the expert to find out if the budget does indeed address the increasing needs of growing businesses.
Edited excerpts from the interview:
What do you think of the Africa strategy of the government, as unveiled in Budget 2014?
I am in complete agreement with the strategy of the government to promote the Africa Centre of Excellence, encouraging us to seek business opportunities in Africa. Speaking about our financial services sector, which focuses on the needs of investors, we are concentrating on creating business links in Africa.
Over and above that, I would like to highlight the expertise and experience of the Board of Investment (BOI) and the overarching role in plays in promoting foreign direct investment.
From a pan-African perspective, Mauritius’ investment promotion agency, the BOI, has a premier role to play. For example, the BOI has got it right in terms of its cumulative experience and its approach to Africa. On the basis that “together we are stronger” the BOI foresees the benefits of promoting Africa collaboratively with its peers.
Can you identify one initiative of the BOI under Budget 2014 that you feel is key to generating more investments flows for Africa?
I believe that the proposal to host an annual meeting of CEOs of African Investment Promotion Agencies in Mauritius is a great move. The first conference is scheduled for June 2014 and this will promote the sharing of experience, encourage best practices and increase networking. Mauritius is therefore taking the lead to become the “Brussels of Africa” where all stakeholders meet and strategise. The Board of Investment is also looking at a plan for six high level conferences in key African cities across the continent in 2014. Again this will be an excellent opportunity to increase networking among domain experts, local businesses and Mauritian service providers and build up strong economic cooperation.
The government has commented that the ‘on-going Africa strategy, first introduced in Budget 2012, has been a commendable success.’ Can you tell us the main takeaways of the Africa strategy from your perspective?
I think that the Africa strategy is a great initiative. By focusing on Africa, we will develop our role in the economic growth of the continent. So the budget proposals to establish a Mauritius-Africa Fund, and to invite collaboration in Mauritius between African investment promotion agencies, combined with the existing Africa Centre of Excellence at the BOI, are excellent strategic steps for Mauritius.
We have a major contribution to make by giving investors access to our internationally-focused community of professional services providers and financial institutions, who comprise the International Financial Services Centre in Mauritius. I am pleased to say that our founders at IFS, Couldip Basanta Lala and Dev Joory, had the vision and the foresight to be among the first to establish operations in the financial services sector when enabling legislation was introduced in 1993.
Besides, taking our commitment to the African continent forward, our Chairman at IFS, Dr Rama Sithanen, is also the Chairman of Rwanda Development Board. Rama is a two-term Minister of Finance in the Mauritius Government; and he is well known for his success in economic reform and in introducing the enabling legislation that established Mauritius as an International Financial Services Centre. This shows our commitment to ensure that we can allow African countries to leverage on the Mauritian experience to drive development.
What do you feel are the main initiatives taken under the existing Africa strategy?
Over the 20 years of the sector, a number of initiatives have consolidated the bridge between Mauritius and the African Continent. Mauritius is an active member in two regional economic blocs SADC and COMESA. There is continued impetus to add to the already large number of double tax avoidance agreements (DTAAs) and investment promotion and protection agreements (IPPAs) which have been signed. Embassies have been opened and Consuls appointed strengthening our diplomatic ties with neighbour countries and Mauritius has fostered a closer interaction among African stakeholders. We are now entering the Africa phase of the development of our financial services centre. After 20 years’ experience of servicing international investors, we are well-placed to assist and advise African businesses and governments in seeking investors. Mauritius has not only positioned itself as the gateway for trade, investment and economic activities between Asia and Africa but more importantly as the gateway for all global investments into Africa.
Can you suggest a model for an emerging Africa, or, is there no one way but a mix and match approach that must be followed?
African countries need to market themselves to attract more investment. The challenges are obviously very different from those faced by other investment destinations such as India and China, because of the complexity that is introduced by the number of countries in Africa and by the differences in laws and regulations that arise every time one crosses a border. African businesses will need to persuade foreign investors that they have a firm handle on this aspect of managing multi-national enterprises. The Mauritius International Financial Centre has a key role to play in providing services that will be a source of comfort for investors and investees in that regard. The Africa Centre of Excellence will develop a placement programme of Mauritian talents on the continent.
Africa must also take a leaf out of Europe’s book and learn to showcase itself as a united investment destination, rather than a mosaic of difficult-to-access economies. The model is that certain locations attract the funds before they are invested across the continent. The centralisation of investor servicing and banking capabilities into locations, such as Mauritius, makes sense to professional investors who are used to this model from elsewhere.
Your views on the Mauritius-Africa Fund. Do you feel the amount committed is too small, or a start, however small, is better than no start at all?
We need to see the setting up of the Mauritius-Africa Fund, with a budget of Rs 500 million over 5 years, from a broad perspective. The Fund has two primary objectives. Firstly, the Fund will participate in equity financing of businesses investing in any African country (with a cap of 10% share capital). This will act as a catalyst to enable companies to raise significantly larger amounts in terms of equity and debt. The leverage could be very high in such ventures and it would catalyse development in a number of sectors. Secondly, the Fund is intended to provide fee paying consultancy services on the African continent to Government and Public Sector entities in fields where our country has a competitive advantage.
Most importantly the Fund is a strong statement of intent for the Mauritius-Africa relationship. And, its introduction is undoubtedly a great start, giving as it does an incentive to explore different economies in the emerging continent, with the backing of the Mauritius Government.
How many business people from the island do you think travel regularly to Africa for business?
As evidenced by the lack of direct flights, not many, and certainly not enough. However, that will change. There has been an increase of 33% in the export promotion budget of Enterprise Mauritius to step up market expansions in Africa and with the momentum that the Government is creating through its Africa strategy the signs are right to trigger even more traffic to the continent.
The budget mentions that some 60 per cent of new companies formed in the global business sector are already targeting Africa. Do you feel there is enough supportive infrastructure for such companies, or the government will need to do more to keep fresh investments coming?
I feel that the government is doing a great job at listening to the dynamically changing needs of the financial services sector. Nothing ever stands still, because we are competing on a global level. The most competitive countries have constant dialogue between the public and private sector, on the drafting of laws and regulations; and I know that Mauritius does a lot of that in the sectors with which I am familiar – to the point where public servants have a deep understanding of the challenges facing certain industry sectors. This is the way to be internationally competitive.
Beyond the regulatory framework, there are new incentives for businesses exporting to Africa. For instance, a refund of the lower of 25% of the freight cost on containers exported and $300 per container, is given to exporters operating in Africa (except for South Africa and Madagascar). Further financial support measures have also been introduced like a 50% government subsidy on the cost of credit guarantee insurance for exports to Africa.
The Investment Promotion Act and the Investment Promotion (Real Estate Development Scheme) Regulations are to be amended to incentivize global businesses. What is your opinion on these amendments, and, are there any other measures you think could be considered as well?
The current scope of qualifying business activity for Permanent Residence is being widened. Presently the criteria for Permanent Residence range from professionals to self-employed to retirees and include investments and purchase of residential property under the IRS and RES schemes.
The inclusion of IPOs as a qualifying activity will promote the capacity of the Mauritius Stock Exchange to raise funds while at the same time being consistent with the Government’s strategy of attracting high net worth individuals to settle in Mauritius. The development of that strategy is best informed by studying the extensive research that has been done on that subject by other countries. The attractiveness of a country as a place to bring up children and to provide easy access to sporting and leisure facilities are among the top-ranked criteria globally. This may need attention, because our approach to making those facilities available is currently understandably concentrated on tourists. This is just another aspect of the evolution of Mauritius, which I am confident, will come, if the demand is evident.
In addition, the acquisition of residential property under the IRS and RES schemes by GBL1 companies will add substance to the investing entities. Substance is high up on the agenda of the Mauritius IFC.
It is also worth noting that the government is coming up with a Captive Insurance Bill to make Mauritius a captive insurance jurisdiction of choice. If one looks at how Bermuda developed in that sector, the timing of this development is good, given the increasing scope for special risks coverage in Africa.
What is your opinion on Budget 2014, as a whole?
Overall, the 2014 Mauritius Budget is a significant piece of intra-continental collaboration-enabling economic positioning that sends a strong message of friendship to our peers in Africa.