Financial ExpertSpeak: Mauritius sees Africa as partner to attract investments
Shamima Mallam Hassam, Senior Director, Board of Investment, spoke to AfricaMoney on how Mauritius cannot put all its eggs in one basket and must diversify investment destinations. (Image: BOI)
AfricaMoney spoke to Shamima Mallam Hassam, Senior Director, Board of Investment, on how Mauritius can help the African continent realize its destiny. Our financial expert noted that the island economy does not see other African countries as competitors but as partners to attract investments into the continent. Just back from the Partnership Summit hosted by the Confederation of Indian Industry (CII), the senior director noted that Mauritius cannot put all its eggs in one basket and must diversify investment destinations, especially in context of the tax treaty uncertainty with India.
Edited excerpts from an interview:
Mauritius is poised to become the main gateway to Africa. What makes it the ideal route for investments into the continent?
The strategic location of the island at the crossroads of Asia and Africa makes it an ideal destination to channel investments into both continents, and lately, with Africa being opened up, many people talk about the continent as the next frontier. Even though Mauritius is a small country in terms of size and scope, we do have the right expertise and technical knowhow to assist our companies to go to African countries, and more than that, to help global investors.
Apart from the natural advantage of a strategic location, Mauritius is also actively involved in in Africa, as it is not only part of the AU on a pan-Africa basis but also the 2 largest trading blocs – the SADC and the COMESA.
Also, Mauritius has been made even more attractive as a gateway to Africa with the removal of visas for many African countries. There are today around 48 countries in Africa where you can obtain visas on arrival, easing the way greatly for businessmen travelling around the continent for business.
Besides, from a pure trading point of view, the Mauritian Freeport can act as an important logistics platform for Asian companies, let us say, to transport goods into the rest of Africa. They can use the island as a base for bringing in their goods, undertake bulk breaking and light transformation of their products in Mauritius, and then export the finished product to other African countries.
Further, Mauritius offers investors the benefit of a vibrant stock exchange that companies can do their listing on and raise capital for their African endeavours. Also, the SEM has now been enhanced to provide greater flexibility and has made its listing rules easier for companies that are interested in emerging sectors such as early exploration mining, for instance.
Could you tell us about the key initiatives the BOI is taking, in line with the Africa focus?
For the last 3 years, the Board of Investment has taken focused actions on how to position Mauritius as the gateway to Africa.
In keeping with the Africa focus, our government has put up an Africa strategy and to make that more credible, the Government has appointed roving ambassadors for Africa so that we can cement our links with other African countries and build a network with their business community.
The BOI has signed a number of MoUs with other investment promotion agencies – the BOI’s counterparts – in Africa. We have extended our network of agreements on double taxation in Africa with as many as 19 DTAAs having been signed in the continent, most recently with Kenya and Nigeria. Also, we have 19 Investment Promotion and Protection Agreements (IPPAs) with various countries across Africa. Besides the agreements to formalize our intent to attract investments into Africa, our economic cooperation with Africa also covers sharing our experience with other African countries in diverse fields. We started out as a manufacturing major, then delved into tourism and then into services – so we have all-round experience that we can assist other African countries with.
To reiterate the BOI’s stand, we don’t see other African countries as competitors but as partners to attract investments into the continent. Global investors have the capital and we bring to them our in-depth understanding of the investment climate across countries in Africa. Apart from global investors, we constantly support local firms that want to go into Africa. More than 70 companies in Mauritius have a presence in Africa and that ranges from countries in the region to countries in the West and East Africa.
We have also positioned Mauritius as a country which global businesses can utilize to structure their holding companies and use it as a base to invest into African countries across sectors such as petrol, gas, infrastructure and power. Starting a company in Mauritius carries with it security of investment because of the number of IPPAs signed by Mauritius with other African nations and enables the global businesses to better mitigate and manage the risks in Africa. Finally, it also brings to them benefits of tax planning.
We also recommend to businesses to use Mauritius as a back office and shared services support, so they can take advantage of our superior business delivery platforms. Let us say there is a Chinese company investing across several African countries in the field of mining. We can provide a shared service and back office operations for all its administration, payroll and other finance functions for its investment activity across Africa. Regarding the companies that are already using Mauritius for back office support, most are currently European companies, and we would certainly gain by extending the same concept to Asian companies, and increase the scope and depth of our business delivery platforms in the process.
Finally, the BOI has come up with the Africa Centre of Excellence to demonstrate its focus on the African continent.
Could you tell us more about the Africa Centre of Excellence?
The Africa Centre of Excellence (ACE) was officially launched in October 2012 to reinforce the Africa Strategy of the Government of Mauritius to fast track regional integration, enlarge opportunities for local citizens and act as a catalyst for investment. The Africa Centre of Excellence is a repository of all information and data on Africa. It has a mandate to assist companies expanding into the continent and going into Africa. It develops links in Africa with both the business community and the governments, to take on challenging elements of setting up a business such as the regulatory aspect, the business climate, the tax system, among others. Apart from these high-level perspectives on business, the Africa Centre of Excellence also goes into its nitty-gritties, such as assisting businessmen to schedule meetings with their counterparts in Africa. The Africa Centre of Excellence also allows businesses in Mauritius to monitor the business environment in African countries in terms of following up on tenders and projects releasing in different parts of the continent. All that information is readily available on the website, so, for a user of the Africa Centre of Excellence, it is just about scanning the website for the right tender, bidding for it and then sending it across.
BOI will organise 6 high level conferences across Africa in 2014 to showcase Mauritius as a trusted partner. Can you mention the main highlights of this initiative?
So far, most initiatives of the BOI have been about bringing the business and investment community of important African economies to Mauritius, but we have now realized that it is important that we actively go out to these markets in Africa and showcase how partnering with Mauritian companies and professional can bring them benefits. Regarding the main venues for the conferences, we have selected four countries already – Nigeria, Kenya, Mozambique and South Africa. These countries have been selected as they have an important regional presence and act as decision making centers.
“Business success in Africa” is the theme of the first regional conference to be held in Nigeria on 10th of April. The conference in Kenya will be held end of May, while Mozambique will be targeted in July and South Africa in September.
Besides, Ethiopia and Ivory Coast are the other two regions that are actively under contemplation for the remaining 2 conferences. Also, our initiative to reach out to the African continent will not be limited to the countries that the regional conference is centered in, but also surrounding power centres. For instance, Ghana will be targeted from Nigeria while Tanzania and Uganda will be other areas of focus when we visit Kenya. Finally, Gabon and Congo are other countries that we have already made plans to visit in the course of convening the regional conferences in nearby countries.
Under Budget 2014, the setting up of a Fast Track Committee for major investment projects was announced. What are the key features of this initiative in terms of expected time reduction and cost savings?
As mentioned in the budget speech, there are projects worth at least Rs 20 billion that can boost investments into Mauritius but are stuck either at the level of permit issuance or authority approvals. The fast track committee, chaired by the financial secretary, seeks to unlock these investments in big-ticket projects. Early this week, the first meeting of the committee was held and a monthly meeting is planned from now on.
Could you outline some important incentives that Mauritius offers to investors?
Since 2006, the government has streamlined procedures for investors to start businesses in Mauritius to the extent that no prior approvals from the government or BoI are required to start a project in the island. There are only 4 categories of projects where you still require prior approval to start a business. Of this, 3 are in the real estate segment – the Integrated Resort Scheme (IRS), the Real Estate Scheme (RES) and the Invest Hotel projects – and, the fourth segment is the Freeport, which is under the direct regulation of the BOI. Of course, banking activities are separately regulated by the Bank of Mauritius while non-banking financial services lie under the purview of the Financial Services Commission (FSC). Other than the above, if there are any other sectors in which projects need to be started, ICT for instance, the company can start its business within 3 working days from incorporation to operation. No prior approvals from an Environment Impact Assessment (EIA) or health perspective are required.
Further, there are no minimum capital requirements for starting a business in Mauritius. A 100% foreign owned business can also be set up in Mauritius. With tax rates of 15% for corporates and individuals, Mauritius offers a very competitive platform. Companies operating in the Global Business sector can avail of 80% of deemed tax credit, therefore bringing the effective corporate tax rate to 3%. Also, being located in the Freeport allows businesses to avail 0% corporate tax rate besides access to preferential port charges and the capacity to import raw material duty free. Further, Mauritius has no exchange control, no tax on capital gains or dividends, and profits made by a business can be fully repatriated. There are also no inheritance tax or state duties that need to be paid.
Finally, Mauritius offers unparalleled access to property to investors. Today, foreign nationals can now also acquire property in ground + 2 apartments under specific conditions, apart from IRS and RES projects as they could earlier, offering them greater flexibility than ever before in the realm of real estate investments.
Could you elaborate on how potential investors can avail the services that BOI offers?
As the premier investment promotion authority of Mauritius, we are the first point of contact for any investor who wants to set up base in Mauritius. The services provided by BOI to global businesses in this capacity are free of charge. Also, the BOI act as facilitator to businesses in case of any issues faced with the labour ministry, environment ministry, health ministry, among others, for entering Mauritius. Besides providing consultancy services and expert investment advice to companies on setting up office in Mauritius, the BOI facilitates the entry of foreign talent for companies by easing the process of getting occupation permits. Global investors or professionals can contact the BOI by email and phone for any queries they may have. For Freeport and Occupation Permit, online applications are also available, so wherever possible, online support is also provided.
Can you comment on your experience at the CII Partnership Summit held at Bangalore, India recently?
We have been attending the CII Partnership Summit for many years now, although not regularly. We have enjoyed healthy collaboration with the CII, and the Partnership Summit provided us with a good platform in terms of meeting investors and mulling projects. Also, with our industry minister there to present our case, it was a good opportunity to keep a presence. We also took the initiative to meet investors on the sidelines and provide them with an understanding of what Mauritius can offer, especially for manufacturing companies exporting to the African continent to benefit from the Freeport facility, administrative services and the low tax regime.
Has the tax uncertainty with India affected investments being routed through Mauritius?
Uncertainty is not good for any business and investors do not like to take a decision in an atmosphere of uncertainty. Therefore the uncertainty around the treaty will certainly have an impact on investment. However, we must respect the fact that our government has also got a strategy for financial services and we need to reposition ourselves in terms of being a gateway to Africa. And, given the interest that is increasing coming up in Africa, Mauritius is coming into the limelight for multiple reasons – wages, tax regime and Freeport. When it comes to India I would like to point out that we cannot put all our eggs in one basket and must diversify in terms of investment destinations. We have seen that happening in tourism where Mauritius has diversified its source for tourists from Europe to Asia. Overall, 2012 has been a very good year for investments into Mauritius, which have registered the highest growth in investments over the last 3 years with Rs 10 to Rs 11 billion on an annual average. For 2013, since figures are not officially released, I can only state that our performance has been good, keeping in mind that economic conditions have been difficult.
Finally, your views on the emerging sectors of Mauritius that have seen the most investor interest.
Real estate has been traditionally strong, but what is more important is to ensure sustainable investments, and that implies that we grow the other sectors too. Accordingly, we are pleased to note that seafood did very well last year. The roadmap for the Ocean Economy was unfolded last year, with focus on seafood, aquaculture, fish processing and exploration of hydrocarbons. We must also not forget the film rebate scheme launched in 2012, which gave a great impetus to the shooting of films in Mauritius. A total of 15 projects have been applied for under the film rebate scheme, of which 10 stand approved, of which in turn 5-6 projects stand completed. Manufacturing projects, such as the Sun Packaging project, also took off last year, giving an impetus to manufacturing investments as well.