Mauritius takes on South Africa for continent’s financial services hub
Mauritius offers one of the most favourable tax structures in Africa and is growing its tax treaty network steadily on the strength of its superior proposition. (Image: Board of Investment)
Mauritius’s bid to be Africa’s preferred financial services hub is not going unnoticed.
As South Africa, forever in the limelight as the continent’s largest economy, took a sizeable delegation to Davos to defend Brand South Africa amid slowing growth, the island nation is taking a quieter but surer route to success.
Mauritius counts 26,096 global business companies and 905 global funds in a competitive financial services sector that contributes 10.3% to its GDP and employs 13,000 people.
More importantly, the financial service sector boasts sizeable foreign talent with the third highest number of active occupation permits held by foreign nationals (12%), after ICT (18%) and aviation (16%).
At a wider economic level, Mauritius ranks 20th overall on ease of doing business and is 19th out of 189 global economies for starting a business, in the World Bank’s ‘Doing Business 2014’ report.
Contrast this with South Africa, which comes 41st overall and is ranked a distant 64th on ease of starting a business and one begins to see why the island economy is increasingly attracting global businesses to its shores.
On the flip side, the island economy’s tax treaty network is far more limited than South Africa’s as Africa’s largest economy holds treaties with 70, while Mauritius holds treaties with 36.
However, Mauritius offers one of the most favourable tax structures in Africa and is growing its tax treaty network steadily on the strength of its superior proposition.
Dr Percy Mistry, speaking at a Financial Services Commission (FSC) event earlier this month, noted that the financial sector regulation avoids either extreme of being too heavy-handed or too light-handed and, at the same time, provides reasonably firm guidance on what firms can and cannot do.
A former economic adviser to the World Bank and currently CEO of Oxford International Group, Dr Mistry was presenting his report titled, ‘Building Mauritius as a Competitive International Finance Centre – A roadmap for the Mauritian Financial Services Industry’.
However, he also stressed the importance of institutional structures for Mauritius to develop its financial center further, noting the absence of big names in investment banking, which would have given a boost to the capital market.
On the other hand, he highlighted that the investment banking space in South Africa is well developed and the investments banks there are heavily involved in the financing of projects on the African continent.
Where Mauritius does have an edge though is the commitment of the government to making the financial services sector one of the pillars of the economy. Amendments made in September 2013 to the Guide to Global Business show that Mauritius indeed is on the path to developing itself as a financial services hub, with economic substance.
New norms for companies holding a Category 1 Global Business Licence in Mauritius that come into effect from January 1 2015 cover stringent criteria such as office premises in Mauritius, holding assets of at least $100,000 and listing of shares on a securities exchange licensed by the FSC, among others.
The government’s commitment to attract more business to Mauritius is further reflected in the renovation of the SSR airport, which opened in September last year, and the recent Mon Trésor Business Cluster development. Located at the airport’s doorstep, the cluster is replete with a contemporary office park, warehousing and distribution facilities, as well as a Holiday Inn Airport Mauritius Hotel.
Accordingly, if the business and regulatory environment becomes too difficult for global business firms in South African, Mauritius may win the crown of Africa’s premier financial services hub.