Mauritius celebrates 55 years of independence this year. For the past three decades, the financial services sector has been the catalyst for opening the economy to the world. Financial services are an important pillar of the economy; the sector contributes 13 per cent of the country’s GDP.
The country has focused on continually developing Mauritius as a regional and international financial centre, offering investors a pro-business environment, excellent infrastructure coupled with high end connectivity. The well skilled labour force is obviously another crucial asset. However, we cannot be content to compare ourselves with how we were, or how others are, but with where Mauritius could be. The narrative of the financial services sector is ever changing. Innovation and technology are disrupting the business model and human talent is no longer bound by geography. With a long, deeply entrenched relationship with African nations, Mauritius must leverage even more on its sophisticated platform and decades of experience to be the financial hub of the region.
The continued vibrance and adaptability of the Mauritius Financial Centre is largely attributable to its ability to innovate. In April 2022, the Financial Services Commission (FSC) launched the new Variable Capital Companies (VCC) structure under the VCC Act. The objective of this versatile structure is to encourage the domiciliation of investment funds in Mauritius. This new corporate structure provides an in-built flexibility that allows investment managers to incorporate multiple strategies within the same investment vehicle. This investment vehicle provides an easy entry point but, more interestingly, it gives the manager several options in terms of exits. In essence, one cell of the entity may become a legal entity in its own right.
To keep abreast with the rise of bitcoin and other digital assets, the Parliament introduced in February 2022 the Virtual Asset and Initial Token Offering Services (VAITOS) Act. The latter provides a comprehensive framework for the regulation of the digital assets. To complement its muscle as a ‘digital hub’ in the African region, the Mauritius Africa FinTech Hub (MAFH) has been set up to bring substance to the environment needed to promote Mauritius. This hub brings together innovators, entrepreneurs, government agencies and corporates. It opens the possibility to work with regional African FinTech Hubs, thus allowing financial services providers and FinTech companies to work together to create products in a safe, innovative, and nurturing environment.
Though in its embryonic stage, virtual assets offer a lot of potential for growth and innovation. However, it is worth mentioning that there are many challenges which need to be addressed before virtual assets reach their full steam. As such, it is imperative that African countries take a collaborative approach in their quest to embrace virtual assets. This would help the African economies to consider the wider cross border risk and share learnings and best practices. A pragmatic regulatory and regional approach, coupled with bold and innovative endeavours, is witness to the fact that Mauritius continues to find ways to grow and innovate in its offerings to investors.
In another landmark decision and as part of its ongoing strategy to boost the competitiveness and innovation of the Mauritius IFC, the FSC has introduced the Insurance (Structured Investment Linked Insurance Business) Rules 2022, effective since 3 September 2022. The Insurance Act was amended to make this sector more flexible and attractive to foreign players.
An investment-linked product has unique features, whereby premium contributions paid by a policy owner are invested in investment-linked fund(s) offered by the licensed person. Flexibilities of the investment-linked policy certificate, which are provided to policy owners may include the switching between investment funds based on their risk appetite and financial needs and varying their insurance coverage as their protection needs or financial circumstances change, by adding or removing extensions of cover.
To drive the new economic goal, Mauritius needs a sustainable pipeline of talent, which is skilled, qualified, and most importantly productive. The country needs a new generation of talent which learns, re-learns, and unlearns. In a seminar held in July 2022, 1,000 youths were fast trained in data communications, 5G, Cloud Computing, artificial intelligence and Cyber security. The aim of this development programme was to enhance the employability of these individuals in an ever-dynamic digital environment.
Mauritius needs to focus on providing quality education to its youth. It is a no brainer that a well-educated workforce with a well-formed mind will be productive and will have high aspirations, which will ultimately lead to high quality employment opportunities. In addition, Mauritius needs to widen its definition of education to skill and quality development and apprenticeships. Mauritius also needs to stop the brain-drain which is gripping many businesses.
The Gateway To Africa
The Global Business sector is ideally suited to attract demand for funds earmarked to invest in the African continent. As per the FSC newsletter for March to June 2022, 543 licences were delivered by the regulator, out of which 344 were to Global Business Companies. As such, 22 per cent of the licensees are based in Europe, and 50 per cent invested in the African continent. This is laudable, in terms of achievement of the Mauritius IFC. According to the Overseas Development Institute (ODI), more than US$20 bn of public and private co-financing has been invested into Africa via Mauritius. This money has been invested in countries including Ivory Coast, Kenya, Burkina Faso, Mali, Tanzania, Ghana, Cameroon and Rwanda, financing infrastructure projects.
Mauritius has adopted its “Africa strategy”, structured around two axes. The first relates to bilateral arrangements to expand the economic horizon of Mauritius, riding on the African Continental Free Trade Area (AFCFTA), which came into force in 2021. It is the continent's most ambitious integration initiative. The main objectives of this trade pact are the free movement of goods and services in a single continental market, expansion of regional trade within Africa, enhancing Africa’s competitiveness and supporting its economic transformation. The second axis is institutional and aims at increasing the presence of Mauritius companies in the continent. Local Mauritius conglomerates are increasingly investing in continental Africa, expanding their markets and bringing their experience to these new markets.
Economic Environment In Mauritius
Last year, coming out of COVID, was the year of reopening the borders. During the lockdown and pandemic, the Government, assisted by the Central Bank of Mauritius (BOM), took drastic steps to finance and sustain economic actors in need, adding obviously to the level of indebtedness of the country, but maintaining crucial sectors of the economy alive.
The economy rebounded sharply in Mauritius, close to 8.7 per cent GDP growth. Tourism arrivals almost reached the one million mark, close to pre-pandemic levels, allowing for the renewed inflow of foreign currency. However, the value of imports has surged, a consequence of the general price increases worldwide. This is the main reason for the weakening of the Mauritius Rupee and therefore induced inflation rise. The BOM is regularly intervening in the markets to support the value of the currency.
Locally, major infrastructure works are being carried out to alleviate traffic congestion and sustain the development of the Island. A so-called “Metro”, in fact more of a tram service, was built and is being expanded at a fast rate. Ring roads around major cities are also developed. In terms of international travel, Mauritius has resumed its air connections, with a network growing larger than pre-COVID levels.
Live, Work And Play In Mauritius
The Mauritian lifestyle is much more than sandy beaches, tropical climate, world class real estate developments, golf, a favourable tax system and other amenities. It includes the warmth and friendliness that is inherently Mauritian, and which is especially evident in the level and quality of service provided in the financial services community. Foreigners who invest at least US$18,000 per year are entitled to apply for a Retired Non-Citizen Resident Permit. The most common form of investment associated with applications for economic permanent residency is the purchase of a residential property to be used as either a primary or secondary home. Residents and tourists alike have access to a wide variety of medical services at low cost, in line with European standards. The biggest value proposition for the Mauritius IFC is that while there might be a legislative or financial rationale for a move, it is also a stunning country to live in.
In the past few years, many new businesses have been established in Mauritius, namely in financial services, private banking, asset management and administration, call centres and of course tourist and leisure activities as well. This has been accompanied by an influx of welcome foreign talent, active in these fields. It is also provoking a shortage in local skilled workforce. The Government and professional associations are following this situation closely. As a result, more schools and universities are being established. At the same time, conditions to become resident here and to deploy a professional activity have been greatly relaxed.
Mauritius has known an evolution and growth which is hard to describe. I first came to Mauritius exactly 40 years ago. When looking at the changes of infrastructure and urban development, one realises it is not the same country anymore. Just to give one example, sugar exports represented then some 90 per cent of all exports. Today, it represents only 4 per cent. All the rest is new economy. Needless to say, standards of living have increased dramatically, close to the US$10,000-mark yearly income per capita.
One thing however which has not changed is the warmth and friendliness of the Mauritius people. Come and discover for yourself. You will be tempted to ask for a reimbursement of your return ticket and stay here.
Dr Ludovic C. Verbist
PhD, LLM, TEP, Managing Director of AAMIL (Mauritius) Ltd. Ludovic has contributed to a number of articles and interviews, including: Prudence et Préservation du Capital - Business Magazine (October 2017); Guaranteed Real Estate Investment – Cap Sur Maurice Magazine (October 2018); Luxury Property Market in Mauritius – Cap Sur Maurice Magazine (October 2019); Vendre Maurice comme une destination refuge – Le Mauricien Newspaper (May 2020); Jouer à fond la carte africaine dans l’ère post-Covid-19 – Business Magazine (May 2020); Global Business « Désamorcer la Bombe » - Business Magazine (June 2020); Liste Noire – La bataille se jouera sur le terrain diplomatique - Business Magazine (July 2020); Interview – « Parlons économie » - Radio Lac (October 2020); «Maurice face à la menace d’un maintien prolongé sur la liste noire » - Business Magazine (February 2021).