With the small size of its local market, Mauritius should develop better linkages with other African countries, says Afsar Ebrahim, Director of new corporate finance solutions firm, KICK Advisory Services. “Mauritius should be able to take advantage of a much bigger market in Africa”, he tells Aufait Business.
How to sail through the current crisis?
Today with the Covid-19, we are in uncharted territory. Our past is no guarantee for our future. What we have learned in the past, is no guidance to take us forward. We have to create history by being more resilient and having policies that are going to help us sail through the current crisis.
We have no visibility. No country has visibility on when this problem will end.
Mauritius is facing, as an open economy, a demand crisis. Demand for our products, demand for our services, and demand for the tourism sector. Nobody has got visibility when this demand will pick up, and at the current juncture, we are managing with about 25% of the economy not performing. The direct and indirect impact is being felt across, and we still don’t know whether this 25% will go down or will become 50%.
There is no clear forecast. Even our main traditional markets like Europe, especially England, France, and Germany, are facing a severe crisis, much more than Mauritius.
They are managing in terms of economic impact, they are bigger economies as well. We don’t know when they will be able to open for business for us.
The Mauritian private sector, as a result, is facing huge challenges, be it in terms of liquidity, be it in terms of managing the leverage position. The biggest challenge is when will demand resumes? This is not in anybody’s hands.
Is the Mauritian economy sufficiently diversified?
The economy is well diversified today, in terms of agro-business, financial services, textiles, tourism…We are more and more seeing new sectors emerging. But they are not major pillars yet.
The economy has been suffering in the past. We have not had 6 or 7% growth over a long time. The challenge is not only about Mauritius. The challenge is how do we go forward from the positioning that we are in.
We have been traditionally a trading hub and today with the emergence of Africa as a land of opportunity, we should be in a position to take advantage of a much bigger market, because nobody will be interested in a market of 1,2 million. So, unless we carry those business linkages with Africa, we’ll not be able to attract major investment.
Why would Mauritius be the place to be for investors wanting to invest in Africa?
Mauritius is the place to do business if you want to do business in Africa. As a financial center of substance and repute, you can structure your investment out of Mauritius, you can bring in your equity, raise your debt out of here, and use Mauritian professionals to get access to the local knowledge which exists. And also, be the linkages with, especially the East Coast of Africa.
The fact that we need to embrace international businesses, the future lies in Africa, where Mauritius can bring its knowledge, especially through the quality of its professionals. This will be a determining factor in making investors succeed.
Which countries offer the best prospects in Africa?
You can’t look at Africa as one, its 54 countries, 54 markets, 54 jurisdictions, 54 fiscal environments, 54 different cultures. It depends on which industries you want to look at. If you are looking at a fast-moving consumer market, you’ll probably be looking at Nigeria, because it has a huge population. But, if you are willing to look at a long term bet, you’ll probably be looking at Ethiopia, which until recently, was showing great signs. But now, we are hearing some political trouble that may result in civil unrest.
South Africa remains a first world in the third world and, there are opportunities there, but still, it remains politically a hotbed.
You look at the East Africa belt. The interesting thing is, if you invest in Kenya, you are investing in five countries in one go. Because of the East Africa Community. The same thing if you invest in some countries in West Africa, it’s like you go through the whole regional grouping of the ECOWAS. It depends on where you are heading. For us, at Kick Advisory, we tend to favor countries that have a vibrant private sector. So we prefer to look at countries like Kenya, Uganda, or Morocco where you can have this alignment between the partners.
You can’t go to Africa without a local partner. That’s the key to unlock value.
What about the blacklist of Mauritius IFC by the European Union. It is a thorn in the side of the financial center.
The EU blacklist is a long history of politics and various factors included. Some are within our control, some are not. Mauritius is not a problematic jurisdiction. It is not a jurisdiction that has no rule of law. It’s a country that prides itself on its rule of law. It has regulators who do their jobs. We have professionals who are doing to the best of their ability to deliver on international standards. Unfortunately, this blacklist is a result of a number of various issues that have so far, already been addressed. It is a temporary blip. I am pretty convinced that early next we should be back on the list where we should be. Mauritius has always been open for business. Even during Covid, the business has continued. Companies have continued to be incorporated in Mauritius, unlike other jurisdictions. Blacklist or no blacklist, Mauritius has survived over the last six months and there is no reason that the financial services will not continue its growth over the next few years.
Is India’s new financial center, Gift City, a threat to the Mauritian center?
Mauritius has developed expertise in the administration of companies. I don’t see Gift being a major threat. If we look at it properly, and analyze it, it could be an opportunity for Mauritian companies to grow internationally and bring our expertise, especially about Indian investment, which has been the core of Mauritius financial center over the last 25 years. This knowledge can be useful.
You talked about the emergence of new economic sectors in the Mauritian economy. What sectors were you talking about?
Agribusiness is getting a renewed interest. A lot is happening in this area. We are seeing online-business emerging. We’re seeing interest in developing the IT sector. Outsourcing is going to be a separate pillar from financial services and we can see that there is a breed of young entrepreneurs emerging. It is only a matter of time before these sectors become pillars of the economy.
Afsar Ebrahim, how do we attract more foreign investors to invest in Mauritius?
Well, it depends on how we open the economy. Foreign investors are looking, especially South Africans, are looking to move to Mauritius. We need to attract not only investors but also people who are going to be here as residents. Because we need to create dynamism in the consumer market. We need people who are high net worth and can spend…To come and live here and spend, because Mauritius does offer a quality of living which you don’t have in many parts of the world. And if we can attract some families, high net worth, probably about 10,000 families, that should create a major cascading effect in the economy.
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