AFRICA

Island business

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South Africa’s High Commissioner in Mauritius, Dr Nomvuyo Nokwe, has on a number of occasions stated that South Africa and Mauritius are complementary, not competing economies. Therefore it makes business sense that the two countries can gain from doing business together.

Following the June 2015 gazetted South Africa-Mauritius tax treaty (also referred to as the Double Taxation Avoidance Treaty), which entered into force on 28 May 2015, and the latest statements by the Mauritian Prime Minister (PM), Sir Anerood Jugnauth, at the launch of the country’s High Powered Committee On Achieving The Second Economic Miracle And Vision up to 2030, the opportunities for South Africans doing business in Mauritius are now even better than ever before.

Jugnauth told his country (and the world) that, working towards their 2030 goal, four key focus areas have been identified: “…addressing unemployment; alleviating, if not eradicating, poverty; opening up our country and new air access policies; sustainable development and innovation.” Although all of these will indirectly play a role in boosting trade with Mauritius, opening up the island and introducing new air access policies, will probably more directly attract trading opportunities with the island.

“While a considerable extent of this strategy [The Second Economic Miracle And Vision up to 2030] will be driven by the government, we will certainly rely on the close collaboration of private sector operators in making the necessary investments. It is exactly in this bid that I am constantly pushing to review growth strategies for all our sectors of economic activities to attract more investment. And, one thing is of paramount importance: we inevitably need a more open and robust air access policy that takes into account both the national interests and economic growth… I am also giving a new dimension to our economic diplomacy through our main diplomatic missions in order to maximise on global opportunities for our country,” Jugnauth said.

Key pillar

According to the PM, the financial services industry is also a key pillar to help achieve the second economic miracle. The creation of a new ministry dedicated to financial services and good governance is a strong signal to international investors, with a new strategic vision to develop Mauritius into a vibrant and sophisticated international financial services centre of substance. “The Financial Services Consultative Council has been re-activated and has since March addressed a number of burning issues, which had impeded the growth of this industry. The Double Taxation Avoidance Treaty (DTA) with South Africa has been ratified on 25 May 2015 to bring more clarity, substance and predictability to international investors using Mauritius as a hub to invest in Africa.”South Africa’s Department of National Treasury says the new treaty reflects changes in the tax policies of the two countries and is in line with international best practices to deal with tax abuse as outlined in the Organization for Economic Co-operation and Development.

(OECD) Model Tax Convention. “The new treaty deals inter alia with the treatment of dual residence for persons other than individuals and withholding taxes on interest and royalties,” according to a media release.

In a bid to further expand Mauritius’ economic space and ultimately its Gross National Product, Jugnauth encouraged Mauritian firms to expand their footprints across the continent, in order to generate more value for Mauritius. “This brings me to a very important part of my intervention, which is the Africa Strategy we are adopting to make Mauritius become the regional platform for trade, investment and services. We have over the last eight months signed MOUs with several countries in Africa, including Ghana, Senegal and Madagascar, for the development of Special Economic Zones. Negotiations are also on-going with Cote d’Ivoire and Zambia. This is just to indicate to you that I am giving particular importance to our role as a key partner in ensuring the economic development of many countries in Africa, with the significant benefits accruing to Mauritius,” he said.

Considering that SA and Mauritius have always had good trade relations, experts say that especially the new treaty is a big positive for South African individuals interested in doing business with the island - and companies considering venturing into Africa.

Opportunity Editor, Lindsay King (on a media educational courtesy of Air Mauritius and the Indigo Hotel Group), had the pleasure of talking to a number of Mauritian key role players about why South Africa should be doing more business on the island.

Enhancing business

South African Chamber of Commerce President in Mauritius, Richard Robinson, says South African corporates don’t fully realise how using Mauritius could enhance their business.

“Mauritius has marketed itself extremely well as a holiday destination, but not necessarily as a corporate destination. There’s a wealth of knowledge in this country, and the opportunity is there to work in an open exchange environment, which releases an enormous amount of beaurocractic costs and hassles that you get in SA. The tax is a secondary issue, but it is important. This is a low-tax jurisdiction, so using Mauritius to access the world, specifically Africa, is a very viable proposition for South African companies and there’s a good reason why a lot of big SA companies are establishing subsidiaries and operations here.”

Robinson says considering that the biggest company by turnover in Mauritius on the island is a SA company (Aspen Pharmaceuticals), South Africans have reason to be excited with the possibilities of doing business in Mauritius. Other SA companies which settled in well on the island include  Vodacom, SA Breweries, Old Mutual, Sanlam, Standard Bank, Investec and Nedbank. So literally it means there is an enourmous contingent of SA companies using Mauritius as a stepping stone to other destinations.

“Mauritius is absolutely open for more trade. However, from a South African perspective, crazily SA  sees Mauritius as a major competitor and I don’t believe it is. It is a tiny economy compared to South Africa. The two countries could work hand in hand. There should be far more agreements between the two countries, and far more bilateral trade. There’s the freedom of information and there’s a tax sharing arrangement - so its not like Mauritius is trying to do something clandestinely at all.

“Mauritius has a very flat structure. We can easily access government. If we need to meet with the minister in a particular sector, we can arrange a meeting within, depending on the minister’s schedule, within a month. Here there’s a willingness for the ministers to actually talk with you and engage with you. They’re looking for inward investment and they’re keen to try and explore ways to increase it and to uplift their own community.

“The big thing is that there’s huge opportunities to use Mauritius, but not necessarily to do business in Mauritius. So use Mauritius as a stepping stone to the rest of the world, whether it is in finance or in trading. It will be hugely beneficial,” Robinson says.

Financial services

Graham Sheward, Managing Director of Cim Global Business, a financial services company specialising in trust administration and fiduciary services, fund administration and corporate services, told Opportunity large corporates in South Africa that are expanding into the rest of Africa, should ask themselves where it would be best to setup their corporate structure (their holding company, their topco, or indeed even their headquarters and their operations). The big question is: is it best to do that from SA to trade into the rest of Africa, or are there better opportunities through for instance Mauritius?

Sheward says from an infrastructure point of view, Mauritius has the second most developed infrastructure in Africa, after SA – with a bilingual professionally qualified population, yet the wage costs are relatively low (lower than in SA), as a matter of fact, lower than in many parts of Africa. “So there’s real opportunity and advantage for South African companies to set up their regional headquarters for Africa from here. Some of the advantages include the fact that there’s no exchange control requirement, there are no BEE requirements here, and the fiscal environment is favourable. Mauritius is the number one country in Africa in terms of ease of doing business. It is also the number one competitive country, overtaking SA.”

Expanding on how SA and other foreign companies contributed to the state of doing business on the island, Sheward says Mauritius’ success, particularly in financial services, has predominantly been due to its trade and interactions with India and Asia. “That’s where the global business sector that I’m part of started over 20 years ago, exploiting the double taxation avoidance agreement between India and Mauritius. Mauritius became the largest provider of foreign direct investment into India - over 40% (several billion dollars worth of investment over the last 15 years). Going forward, what Mauritius would like to do is to leverage the expertise, capabilities, and know-how to develop Africa as the emerging continent.”

Sheward praised the South African high-commisioner for being supportive of industry in South Africa on the island. “South Africa has a continuing part to play in the development of Mauritius and vice versa, because under the DTA, one of the main objectives is, not only to ensure that companies don’t get taxed twice, but to promote and encourage investment into SA using Mauritius and the advantages that the country offers. Those are beyond the fiscal advantages. Some of the main advantages that companies leverage are the political situation, economic stability and security compared to those aspects in South Africa.

“The political uncertainty, the de-valuation of the SA currency, the load shedding, the lack of power and maybe even water going forward - these are all concerns for investors when looking into a destination. Mauritius can mitigate some of those risks by acting as the hub for investment into SA and the rest of Africa,” he says.

Mutual benefit

Prominent lawyer and businessman Kamal Taposeea, current Chairman of Minerva Fiduciary Services (Mauritius), says historically the island has been there for South Africa, even during the all-sad times – and Mauritius has always benefitted from South African wealth in one way or another.

According to him, Mauritius should be a favourable partner for SA, especially as the country is highly regulated and can offer South African companies an array of well educated professionals, especially lawyers, accountants and chartered financial analysts - all available at a much cheaper price than in Joburg or Cape Town. In addition to this, he says, Mauritius is a safe place with a very low crime rate.

“I think there’s a degree of safety in people’s minds when they know a country has full democratic elections every five years. We have a regime that is not top-down politically on the person, so we have pretty much a fair regime that is highly regulated.”

“SA firms are now going throughout Africa, Australia, South East Asia and the world. Why do they use Mauritius? Because our strategy has been to form as many treaties as we could with countries where we could demonstrate to these countries that getting in bed with us will be beneficial for both parties.

“The Indian Mauritian treaty for instance was built for Indian firms using Mauritius to go into Africa. Another pro is that in Mauritius there is no capital gains tax - and there is no foreign exchange laws. If you are on the global side, we don’t report the tax to the FSC. Once you’ve paid your tax, there is really separation of powers,” says Taposeea.

MD of Indigo Islands, Rolph Schmid, says, apart from doing business with the rest of Africa, Mauritius is the ideal space for South African companies seeking to do business with especially the Far East, because of its geographical location. “Mauritius today is a platform between Africa, Asia and Europe. So it’s really strategically located. There’s a lot more going on in Mauritius than people might think. We have a number of industries - from textile, to finance, to banking – and it’s quite a broad spectrum. A lot of Mauritian companies are using SA expertise in term of consulting and so on.”

Stable politics

According to him, Mauritius is an ideal country for other African states to do business with, especially as the country’s politics are very stable – and so is the Mauritian currency.

Schmidt says his industry [tourism and hospitality] has had strong ties with SA for years and doing business with South Africa is nothing new to the Mauritian public, as many SA brands are firmly established on the island. South African businesses therefore looking to do business in Mauritius will not have to deal with resistance from the Mauritian public, which make doing business easy.

“Historically it started with the establishment of Southern Sun in Mauritius 40 years ago. So for the Mauritian public South African businesses on the island is not something new. There are a lot of SA hoteliers on the island as well. In our hotel we have a few. We also use a lot of consultants from SA. There’s a big South African community here as well. This all counts in favour of SA doing business in Mauritius.”

Looking at the hotel industry, Schmidt says traditionally about 90% of all tourists from mainland Africa are from South Africa, although traffic from other countries are now starting to pick up.

Talking about the popularity of ‘Meetings, Incentives, Conferences, and Exhibitions’ (MICE) in Mauritius, Schmid says historically, Mauritius only focuses on ‘incentives’ and is very much conference driven. “When you look at conference packages and pricing, we are just as competitive as SA. There’s always been a perception of Mauritius being expensive. Today, if you look at how things have evolved in SA, prices have been kept on going up because of the devaluation of the rand. If I compare the price of food, drinks and even hotels, we are not far off from South African hotels. And when we compare prices for conferencing, we’re actually more competitive.”

However, Schmidt says the one thing that makes it difficult to change perceptions, is the price of the airfair. “It’s an expensive route. But the hotels themselves in terms of room rate and conference rate are very comptetive. So we are working on it. We’ve asked government to help us to have more expsosure, because we believe that South Africans can come here and do conferencing and still experience the leisure side of the island as well.

 

“There is enormous government support for business in Mauritius. We have an organisation called ARHIM (Association for Restauranteers and Hoteliers in Mauritius) and the chair of its executive council is also on another council that meets with the office of the PM. So the PM is very close to all the industries. The same would be in the case of for example the banking and textile sectors - they would have their executive councils and representatives in the same capacity. So there’s a lot of interaction between private sector and government, because they know they need each other to grow and there is indeed good communication,” Schmid concludes.

Lindsay King

 

 

 

 

 

 

 

Richard Robinson.jpg SF092033.jpg Rolph Schmid Dr Nomvuyo Nokwe Kamal Taposeea.jpg
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