Financial ExpertSpeak: Mauritius set to get growth boost from financial services
Dr Yousouf Ismael, CEO of Global Finance Mauritius, spoke to AfricaMoney on how the financial services sector offers the greatest scope for growth for the island economy, highlighting that the financial services industry has linkages with all other sectors and is an important driver of overall economic growth. (Image: Company)
Dr Yousouf Ismael, CEO of Global Finance Mauritius, spoke to AfricaMoney on how the financial services sector offers the greatest scope for growth for the island economy. Highlighting that the financial services industry has linkages with all other sectors, he noted that it serves as the growth engine for the entire economy. It may be noted that Global Finance Mauritius represents a coalition of financial services providers that bring together Global Business Companies (GBCs), management companies, banks through the Mauritius Bankers Association (MBA), accounting firms (including the top four), law practitioners, institutional investors and the Stock Exchange of Mauritius.
What are some of the main reasons for the new government to focus on the development of the financial sector? What opportunities has it brought to the Mauritian economy till now?
It is a very important sector for the economy indeed, especially if you wish to make Mauritius rank among advanced and modern nations. It is a sector which is currently a major pillar of the economy, contributing over 10% of the GDP, and is still an emerging sector. For me, it is a sector that represents the greatest scope for growth in terms of its contribution to the economy, and we would like to see its contribution grow to at least 15% of the GDP. We are a service country and we want to create more employment in the service sector. It is a sector which recruits mostly for high-skilled jobs and pays well when it comes to salary. As the other objective of our government is to make Mauritius a high income nation, it is the financial services sector that will increase the net-worth of individuals and give the economy the required boost.
Most importantly however, the financial sector does not work in isolation — the financial services sector has linkages with other sectors. The entire economy needs financial services — whether banking, leasing, raising of capital or insurance, among others. It is also important to re-visit the model of our financial services sector as it does not sell a “product” but instead it sells a “solution”.
So whether you are an SME business or own a huge hospitality chain, whether you work in a well-networked ICT sector or are an independent training consultancy, whether you want to invest in Africa, or for that matter, for any business you would like to do across the globe, the financial services sector should be ready to provide the right solutions to all categories of clients. Once you get the financial services model to work out and work well with the government, the next thing that will happen is that it will create better linkages within the industry as a solution provider. We are very pleased at Global Finance Mauritius that we have a dedicated Ministry for the financial sector that will ensure that the needs of the sector are met. The model we are looking at is very simple, and as actors of the industry we know what are the opportunities we are looking for and what we can do, as well as the potential weaknesses such as challenges in compliance with new regulations such as Base Erosion and Profit Sharing (BEPS) recently adopted by the OECD to judge tax transparency of a jurisdiction. And so the government should work with us to support and facilitate the financial services sector, so that it can emerge in a sophisticated and structured manner.
How resilient and productive is Mauritius as a preferred investment gateway for Africa, and what can be its rate of expansion in terms of spreading its financial network in this continent in years to come?
Frankly speaking, the sector has no options other than to continue to add value to investors. We have been focusing on tax treaty benefits, and this model has worked so far. Since the implementation of the Banking Act in 1988, we have moved up the value chain and switched gears. We are at a cross-roads again today and we need new horizons to explore and expand our value-addition proposition. If we fail to reinvent, it becomes increasingly easy for others to copy our model. Value-addition means that we have to create more synergy among ourselves and ensure that we are not selling vanilla products but sophisticated financial solutions to our clients — clients who need to raise money from banks, stock exchange, and private equity players — and there are plenty of opportunities in this domain.
Secondly, the clients need to have other facilities to support their growth plans, in terms of banking products, leasing, legal and accounting support. This is what GFM (Global Finance Mauritius) is all about, creating greater synergy for more sophisticated product and services. The value addition will be our competitive edge. It is important to realize that there is lot of investment flowing to India for certain projects, we have learnt a lot from them and we have benefited a lot from India as much as they have benefited from us. However, for me, we have to do what Singapore and Hong-Kong did in the past for South East Asia. Years ago, South East Asia only contributed 3% to the world’s GDP and today they are significant contributors to the global GDP, with over 20% of the wealth of these countries being created by having the right platforms, in the form of financial hubs such as Singapore and Hong Kong, that have served the interests of these countries exceedingly well. Mauritius is at the heart of Africa and we can be the perfect platform for Africa, not just a gateway, and we should leverage this opportunity to make Africa more prosperous than ever before. There is a lot of interest from foreign nations — the US, France, the Gulf States and UK as well — that are now very keen to turn to Africa for business. Africa needs a lot of investments and it well meets its purpose that the world is moving towards the emerging continent for many reasons, of which the more evident ones are that it is rich in mineral, resources, and land for agricultural project development. From that global interest in Africa-bound business, Africa will rise and create a middle-income economy.
What specific sectors should the government focus for this upcoming budget?
We are very pleased to have a dedicated a Ministry for finance and it is important that the government assist us in developing the sector in partnership with all stakeholders and the main actors of the economy. Their role is to facilitate our work from different angles like reviewing our institutions, which should work in partnership with the industry, so we can jointly develop this sector, for instance with the Financial Services Commission (FSC) and Mauritius Revenue Authority (MRA) in the current context, and for the future, we are also looking forward to the support of the Financial Crime Unit.
The second thing we wish the government would do is work towards the promotion and advocacy of the financial sector. You can have a good product but you still have to market it properly. So, the marketing should be done jointly with the industry by creating a model that includes both the government and the industry to market our services and products very pro-actively. We have to be very forceful in our communication and send a coherent message to the industry. Other areas that we want the government to focus on are the all-important aspects of capacity building and business intelligence.
Recently, Mauritius found itself implicated in the international fiscal evasion scam, where it was ranked at the 94th place, according to the Swiss Leaks Report. What should be Mauritius’ standpoint on financial crimes, corruption and money laundering, in the current economic context?
There is one proactive measure that the government and the industry are following to root out tax evasion at the source, and that is called the Automatic Exchange of Information (AEOI). Transparency is of paramount importance. We must say that our success has instilled fear in our competitors as Mauritius is one of the most transparent financial jurisdictions and one that is most likely to exchange information.
Unemployment is a crucial challenge from both an economic and social perspective. As an economist, what do you suggest should be done to decrease the unemployment rate in Mauritius?
There are many areas that the government can focus on to combat unemployment in the country. In the Financial Services sector, for instance, there are two categories of jobs which will always be in demand — compliance and analysis. Moreover, we all discuss the problem of structural unemployment such that people in the workforce have certain skills that are unfortunately not being matched by the demand for corresponding skills from the industry.
Currently we demand greater financial services expertise and we would like those coming from Universities to hold MSc degrees at least. Furthermore, the government should make sure that the graduates are ready for employment. Skills such as strong communication and proactive work ethic are abilities to be acquired and honed. Within the industry, moreover, we have to re-invent ourselves.
I think the problem with the youth of Mauritius is that they do not like to re-invent themselves. So, if you have been to the University to acquire knowledge, this knowledge can help you do different things. I take my own example: I studied Mathematics, Chemistry and Physics at Secondary level but am an Economist today. I have worked in different sectors, agro-industry, transportation and health, and am now a part of the financial services sector. So we have to keep re-inventing ourselves at all levels.
Finally, you have been appointed as one of the consulting executives at the Bank of Mauritius. What goals and strategies is the Bank of Mauritius proposing to re launch the Mauritian economy overall?
The Bank of Mauritius has many things to do to ensure regulation is done to its outmost. Regulation is an important aspect for any central bank in the world and the Bank of Mauritius has to lead by example with good governance. Good governance should start at the top and flow all the way down into the system. Our central bank has the moral obligation to ensure that it abide by the rules and regulations of the country and abides by the Central Bank Act. At the end of the day we all encourage investments as we are open to business, as are our institutions as well, while maintaining the critical aspect of good governance.
- By Kashish Jadoo