At the inaugural GTR Mauritius Trade Finance Conference in October, Shannon Manders moderated a panel that discussed the opportunities that Mauritius presents for companies setting up in the country. The topic engaged the interest of companies in the audience, who felt compelled to provide accounts of their own experience. What follows is an extract from that conversation.


Yousouf Ismael, board director, Mauritius Chamber of Commerce & Industry, & CEO, Global Finance Mauritius
Arvind Radhakrishna, CEO, Enterprise Mauritius
Malcolm Moller, managing partner, Mauritius, Seychelles & Shanghai, Corporate, Appleby
Richard Arlove, CEO, Abax Corporate Services
Shannon Manders, editor, GTR (chair)

Audience contributors

Ashok Dhar, senior vice-president, Essar
Antony Withers, chief executive, MCB
Bikash Prasad, chief financial officer, Southern & Eastern Africa, Olam International

Manders: How is Mauritius’ financial industry faring today?

Ismael: Financial services is a very important sector to the industry and one that brings a lot of added value. If you look at the value added per employee in the industry, financial services brings about Rs2mn (US$56,000) per employee, compared to about Rs790,000 in textiles. Financial services have a lot of added value, then, and Mauritius is very good at being ranked highly in many lists.

Fundamentally, what is important is that the industry is coming to a very interesting juncture by the fact that we have been successful. The Indian Double Tax Agreement (DTA), for example, started in 1983 but was not used until 1992, and it has been of prime importance in developing this sector. The sector still has, however, a long way to go. At the end of the day, Mauritius has to be a financial solutions provider to investors.

This brings a lot of potential. There is space for banking: there is space for more banks to come to Mauritius. I am glad to hear that banks from China are interested in coming here. We would also like to attract banks from the US. The more banks we have and the more products we can offer, the better the solution will be for our investors.

Global business is being skewed towards India, which is a very important market for us, but we need time to adjust to other markets. Africa remains at 4%, but it will take time for it to reach the level at which we are with India.

Our destiny is in our hands. I think we need to move up the value chain in terms of greater sophistication of products. This is the strategy that we are trying to work on at Global Finance Mauritius. The private sector is trying to work together to create a strategy for the industry, and is encouraging the government to facilitate for us.

Promotion is also something which is key. We are not a tax haven – we are a low-tax jurisdiction. This is not the only key success factor.

Arlove: There are lots of opportunities for international businesses to use the Mauritius financial centre. A lot of this is due to the ecosystem – geopolitical, economic and cultural – that Mauritius has built over the years. That ecosystem is such that today Mauritius comes forward as the financial centre in Africa which is mostly used for private equity funds, for example, and increasingly a number of multinationals are also using the financial centre. That said, we have many challenges.

One of the challenges we have is really to build the bridge between our country and other financial centres as well as other business hubs such as Lagos, Nairobi and Johannesburg as far as Africa is concerned, and Dubai and Singapore. We really need to see networking and the ability to work in tandem with other financial centres.

We need to understand that we are a country that, in the 1970s, had a per-capita GDP of US$300; now, we are nearing US$10,000. If we can have 4% over the years, Mauritius should, in 15 to 20 years’ time, be at approximately the same level of per-capita GDP as Europe is today. That is a very interesting perspective for many people who want to use this place to live and as a springboard to do business with Africa.

Also, in terms of the composition of the GDP, today it cuts across many industries. In the 1970s, it used to be sugar and that was it, with a few services. Today, the whole of agri accounts for 4% of our GDP. Manufacturing is 17% and financial services is 10%. Then there is the ocean economy and ICT, etc. We have today, in Mauritius, a variety of different industries that have developed, and new ones that need to develop. When we look at what Mauritius can offer to people using the jurisdiction, there is a lot that can be done rather than, for example, for these global companies, just administering the companies in Mauritius. This is the future and this is what we should be working on.

We should develop and formulate a clear vision. The government wants to move with more substance in Mauritius in order to have a better base for businesses. This substance will use the different components that we have in Mauritius to add value. It is not just the administration of companies; trade finance is one, as is the use of Mauritius as a place from which you have security, because of the various agreements that exist, and many other elements.

We should really work towards the integration of the global business sector and the domestic economy. If we do not do that, we will remain an offshore centre. We cannot afford to be an offshore centre: we are not. If we are seen to be an offshore centre, we have the problem of being seen as a tax haven. We need to take advantage of the fact that Mauritius is a real economy.

Radhakrishna: Over the years, we have built a very good, solid reputation as an investment location. Looking at Mauritius, given its strategic position between Africa and Asia, we are the ideal location and we will be attracting a lot of further investment. I can tell you that, in the last few months, I have received a number of delegations: 19 big players from the US, and two big trade delegations from China. We are receiving delegations practically every two weeks from India, and from the Czech Republic, headed by their Minister of Industry, who praised Mauritius as an investment location all the time while he was here. Of course, we also have a huge interest from South Africa. I ask the delegations the same
question: why do you want to set up your hub or your investment in Mauritius to do business with Africa? Why not go directly to Africa? The answer is the same: investment guarantees, security, the political situation and the high rate of corruption.

We see a lot of Chinese investment coming to Mauritius to establish hubs here in order to do business in Africa. Already, we have a lot of email inquiries and delegations coming in. With the eventual establishment of the Bank of China – and the information I have is that not only one bank but two or three banks are interested in establishing themselves in Mauritius – there will definitely be much more business coming from Asia and from China, and even from Taiwan.

Dhar: Essar went out into the global market and wanted to set up a trading desk. It chose Mauritius for various reasons: we were already established here, and we had a building and staff here. I wish to share my experience with the panel as to how we feel as a business house about the environment in Mauritius. I will confine myself to trade finance. Mauritius has a tremendous ability to become a trading hub, but there are various things that are required to be done for it to really reach that achievement.

The first thing is the will to reach that status. I hear a lot of things. We talk about investment. The panel talked about not wishing to concentrate on being an offshore centre. Why not? Look at Singapore. What did they have? They had nothing. Today, they are one of the most developed offshore trading business hubs in the world, so what is wrong in becoming an offshore trading hub?

Second, do the banks have the potential to provide that kind of capital for trading activity? I need US$1bn for my trade. What kind of facility am I getting – under US$200mn? The banks are extremely cautious here in lending to corporate enterprises. This could be because, first, perhaps they do not have the business knowledge, so the first thing is that they have to get the business knowledge of this trading activity. Second, they have to start taking some risk. Every business has risk. You cannot develop without taking risks.

In terms of connectivity, if I wish to go anywhere I have to wait two or three days to go to Singapore, because there are two flights a week or something. How can a country that is talking so big make traders wait for two days to get to Singapore? Let me tell you that there are businesses all over the world that are willing to invest in Mauritius – let there be no doubt about that – but Mauritius has to be geared up, mentally and with the right kind of infrastructure, to take that kind of investment.

Withers: On the banking point, there is no lack of appetite – please rest assured. We have not grown to where we are today by having a lack of appetite. As you are well aware, however, there are rules of the game. One of the most important rules of the game, from a regulatory perspective, is that banks cannot have an exposure of more than 25% of their capital to any individual customer. Our capital is US$1bn now – you can do the arithmetic. That means that we can have a maximum exposure to a single counterparty of US$250mn. You need US$1bn: you are going to need help from outside Mauritius until such time that there is additional banking capital, which may come from organic growth or from additional banks setting up shop here and bringing capital in. But please understand that there is no lack of appetite to help companies such as
yours grow their business.

We are, however, faced with regulatory requirements, the most important of which is this single counterparty limit on exposure of 25%. That is enough for most businesses, certainly here in Mauritius and in a regional context, but there are one or two businesses – and we know the oil business is one of them – which, even though the oil price has come down by more than half, still have enormous capital requirements from a trading perspective.

Prasad: The way Mauritius is establishing itself as a trade hub or as a gateway to Africa is exceptional. I have some suggestions from a corporate point of view that I would like to share with the panel. When we work in Africa and are dealing with the authorities, as per the OECD’s strict definition, Mauritius is not treated as a tax haven. However, there is always a perception among the authorities in Africa that, if a company holds a structure in Mauritius, there is something not right, or the scrutiny level of a company which has a holding structure in Mauritius will double. What is Mauritius going to do to change that perception of being a tax haven that will further attract a lot of investments into Mauritius?

Ismael: I think the term ‘tax haven’ is not used properly. We are a low-tax jurisdiction, like many other countries in the world. In fact, we have a flat tax rate. One must understand that we were early adopters of many conventions such as the Foreign Account Tax Compliance Act (FATCA). Recently, we signed the multilateral convention on the automatic exchange of information. In terms of the Indian treaties with many other countries, we were the first to have at least automatic exchange of information. Transparency is key.
Mauritius is moving ahead as early adopters of these conventions. We have also seen that Base Erosion and Profit Shifting (BEPS) is coming. We do not take it lightly. As a jurisdiction, we perhaps have to do a bit more promotion and campaigning on what we do right as opposed to letting others come in and say what we do when we do things wrong.

Moller: It depends on how you define a tax haven. If you look at the way the system in Mauritius works, the dividends received by individuals and investors who come here are not taxed here. If you are resident in India, that dividend should form part of your income in India and, therefore, you should be paying tax on it. In terms of the multinationals that have subsidiaries overseas, that is how the system works: they pay their taxes when they bring the money back home. It is not a ‘tax haven’ in a true sense. There are those who do it for other reasons and that is what we need to guide against, but not people who do it legitimately because, at the end of the day, they do pay their taxes in their home jurisdiction.