Drilling deep: Mauritius may overthrow South Africa as mining deals’ regional hub
The island country, whose economy is non resource-based, has reportedly made strides in setting up its capital city as the finance hub for mining sector financial deal structuring (Image: Paradise in the World)
Despite leading the Southern Africa regional foreign direct investment inflow charge, South Africa could be overtaken by Mauritius as the African hub for financial structuring of mining deals, unless it improves its finance regulatory framework and taxation competitiveness.
After being dislodged by Nigeria as the top economy in Africa this year after the West African economy’s GDP revaluation exercise, it now faces the risk of Mauritius pushing it off its status as the centre for mining sector financial deals for Africa.
The Mines and Money Access Africa Summit, held in Mauritius from 23-25 June 2014, served to consolidate the island economy’s position as a financial hub of choice.
Speaking at the event, Ken Poonoosamy, Managing Director of the Mauritius Board of Investment (BOI), heralded Mauritius as an International Financial Centre with preferential market access to 26% of the world population.
“Our ambition is to become the definitive gateway for cross border investments between Asia, Europe and Africa,” he stressed.
Also, just to give an idea of mining potential in the African continent, Sacha Backes, senior investment officer at the Mining Investment Division – Africa, IFC, indicated that Africa is the largest producer of several metals world-wide with 30% of global reserves and the World Bank estimates USD 90 billion for African mining in five years.
So does Mauritius stand a chance to capture a large chunk of this huge pie? It certainly seems so, with experts saying Mauritius has an attractive tax regime and double taxation agreements (DTAs) with 14 other African countries.
The expected boom in investments focused on Africa, especially Southern Africa, is driving regional countries to set up finance engineering centres and companies aimed at offering advisory services to such deals.
The island country, whose economy is non resource-based, has reportedly made strides in setting up its capital city as the finance hub for mining sector financial deal structuring.
This has put it in a strong position to compete for the dominant position that South Africa currently enjoys because of its connectedness to the rest of the continent and because of the size of its economy.
Furthermore, the island’s trade balance is increasingly strengthening. Statistics Mauritius has reported last week that the country’s trade deficit had narrowed by about 8.7 percent to $193.24 million in April compared to a year-ago.
The value of the country’s export sector has increased by 17.1 percent, largely lifted by increased manufacturing sector sales volumes whereas imports have marginally risen by 4.4 percent, owing to steady increases in machinery and transport equipment costs.
From an investor perspective, many companies in South Africa want to base themselves in Mauritius to benefit from the 15 percent corporate tax rate, which is among the lowest in the world.
Moreover, Mauritius now serves as the base for the Africa Training Institute (ATI) which was unveiled by the IMF last week and is the first such center in Africa. It will impart a variety of courses in fiscal management, including management of natural resource revenue.
Besides, Mauritius offers great tax benefits, a good education system and a low crime rate added to a well-developed healthcare system, and was recently adjudged the most peaceful country in Africa according to the 2014 Global Peace Index, adding to the attractiveness of the idyllic island as a permanent residential base, well-suited to families.
This makes it easy for the island economy to attract the necessary talent to develop itself as an advisory centre for mining deals.
However, despite so much in its favour, it may prove difficult for Mauritius to displace South Africa as a regional mining deals hub the Southern African economic powerhouse boasts a sizeable mining industry and remains a major provider of capital for mining projects across the continent.