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AfricaMoney | March 8, 2017

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Budget 2015 Sector Scan: Mauritius’ financial services sector shows promise

Budget 2015 Sector Scan: Mauritius’ financial services sector shows promise

The financial services sector has shown rapid growth in the last two decades and contributed 10.3% to the island economy’s Gross Domestic Product in 2014, with an annual growth rate of over 5%. (Image:

As a prelude to Budget 2015, AfricaMoney will be bringing you expert reviews of the key sectors in Mauritius over the next 3 weeks. The sector of focus this week is financial services, one of the pillars of the island economy, for which reputed research organisation Global Finance Mauritius (GFM) has come forward with relevant analysis and research in a white paper, the key takeaways from which are given below:

Historical Overview

From a banking focused economic strategy in the 1970’s, Mauritius has successfully managed to orient its focus in three decades to undertake a fundamental development of its financial services with the introduction of new legislation and the setting up of new institutions like MOBBA, Financial Services Commission, the Stock Exchange of Mauritius and the newly created Ministry of Financial Services and Good Governance.

Mauritius’s financial sector has shown resilience in the face of recent global economic setbacks and has been able to position itself as a promising sector with expansion of its activities across a relatively wide range of value-added services including international banking, international fiscal management, international capital raising and regional treasury management.

However, in spite of the constant growth in financial services, Mauritius still faces a number of challenges in taking the financial services sector to the next level of development and in adequately responding to numerous demands from international investors.

Financial industry’s contribution to the Mauritian economy:
The financial services sector has shown rapid growth in the last two decades and contributed 10.3% to the island economy’s Gross Domestic Product in 2014, with an annual growth rate of over 5%.

As an important contributor to the economy, the financial services sector has succeeded in generating high value-added employment as well as contributing to government revenues and foreign exchange earnings. On the employment generation front, it may be noted that the Financial Services sector has given rise to 15,000 high skills jobs.

From a government revenue perspective, direct corporate tax is levied in the financial sector for 30% direct tax receipts. Moreover, significant increase in licence fees and registration fees following last year’s budget has contributed positively to the state economy.

As for Foreign Exchange Earnings, as very few inputs are imported, net foreign exchange earnings are again substantial.

Key challenges facing Mauritius Financial Services:

Several challenges are facing the financial services sector as the industry is at the crossroads after years of sustained success. From a short-term outlook, the industry will grow depending on the ability to embrace and leverage on the Base Erosion and Profit Shifting (BEPS) regulations being adopted by the key OECD members aimed at Tax specialist jurisdictions, building on new brands that focus on higher value-added services and develop as the financial hinterland in Africa and emerging regions in the world.

Mauritian Financial Services firms must ponder on challenges facing the sector like the need to diversify products and markets to ensure continuous growth, need to set up and scale up activities within the Financial Services industry to promote higher value-add services. For the wider sector, there is also a need to attract international players to the jurisdiction to move up the value-chain of services.

Propositions to the government for improving the value-add of FSI to Mauritius:

Development: Contribute to the scaling up of activities within the Financial Services Industry to promote higher value-added services and to attract more international players to our jurisdiction.

Relevance: Establishing Mauritius International Financial Centre as a key intermediation centre for Africa to increase relevance of the jurisdiction by taking advantage of the Africa opportunity.

Synergy: Establish synergistic links among the sub sectors of the Financial Services Industry and with other sectors of the economy and to adopt an integrated approach to the development of the financial sector in Mauritius.

Promotion-Advocacy: Promote and proactively advocate the Financial Services Industry with a consistent, coordinated and coherent approach.

Capacity building: Contribute to the development of skills and competences required for the financial service industry.

Potential areas of focus for the development of Mauritius Financial Services:

The white paper identifies the following near-term focus areas for development of substance in Mauritius such as:

Value addition, product development and market diversification: Develop a strategy that will encourage Indian and multinational firms to establish headquarters for Africa in Mauritius, to reach out in a targeted manner to South African, Indian, African and European financial institutions, and finally, to leverage the Stock Exchange of Mauritius as a unique multi-currency platform to position the SEM as an attractive capital raising and dual-listing platform for Africa-focused ventures and international products.

Moreover, the government must focus on synergy and integration among sub-sectors of the financial services industry. The financial service sector is currently composed of subsectors such as Global Business, Stock Exchange and Capital Markets, Banking Insurance, domestic Asset Management, among others.

Research: The need for active market intelligence to advise on policy and ensure better synergy with academia.

Capacity Building: The need for expertise and know-how to provide a high quality, comprehensive service package, and well developed infrastructure for technology and HR development. More industry lead research, expertise in African Market, expertise in specialized sectors, private equity, legal and contracts for financial service, commodity, trading, improved IT connectivity and open immigration for scarce labor and skills.

Marketing: Marketing should be more proactive and aggressive, ambassadors have a key role to play and public relation personnel must get together with industry leaders to communicate what Mauritius does and how successful the country is in the financial services domain.

Moreover, Mauritius and Africa Strategy, Treaty negotiation/ Renegotiation, OECD Base Erosion and Profit Shifting (BEPS) initiative and Automatic Exchange of Information (AEOI) must serve as the other areas of focus, for the Mauritius financial services sector to make its mark globally.

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