“Africa is a land brimming with opportunities BUT…”
We have all heard this time and again. While much of those BUTs are true, we have to acknowledge that things are changing, and changing for the better. At a recent conference in Johannesburg, the President of the African Development Bank, Dr. Akinwumi Adesina, kicked off with a strong statement: “I do not seek aid, I seek investment for Africa.”
This clearly sets the tone for the decades to come. Africans have realised their potential (as have others before Africans!) and are stepping up their game to unlock the continent’s riches. First movers in the continent – mostly savvy investors from Asia have generated massive value from investments all across the continent, mostly in much needed infrastructural and energy generation projects. However, the past years have not been the best in terms of Foreign Direct Investment (‘FDI’) from outside the continent. USD41 billion was invested in 2017, down from a high of USD74 billion in 2013. The 2018 figures are not expected to be a far cry from last year’s and the reduced investment trend is a concern and threat to the African dream.
In the actual context, it is becoming more important for Africa to reduce its dependence on extra-continental flows and promote intra-regional investment, alongside international investment. No one knows Africa better than Africans and African companies that invest in the continent are better poised to generate higher returns. Let’s consider Shoprite Holdings; they are the largest FMCG retailers on the continent, ahead of European competitors such as Spar. Their sustained growth and successful market penetration have largely been driven by cognizance of the local markets. Companies like Old Mutual and Sanlam have had similar experiences in the insurance and wider financial services sector.
In line with this, the African Union’s Agenda 2063 emphasises on the need for intra-regional investment as the new conduit to enhance regional integration and boost economic growth. Increasing the scale of investment by African companies can propel the region’s integration efforts. As more African businesses steer towards intra-continental investments, the Continental Free Trade Area (which is the goal to move Africa towards a Continental Free Trade Area of 54 countries with a total population of more than one billion people and a GDP of more than USD3.4 trillion!) set out by the African Union moves into sharper focus. South Africa and Morocco are amongst the top countries that invest in Africa by project numbers. Kenya, Nigeria and Mauritius are also important sources of intra-African investment.
All investments entail an element of risk and we know that the continent’s investment risk has historically been higher than other areas of the world, with several obstacles highlighted by investors. However, do those obstacles outweigh the opportunities that the continent can offer to investors? Food for thought. Admittedly, most African countries cannot always meet all the conditions being sought by investors – uncertain economic and political environments, along with overwhelming administrative red tape and infrastructure gaps can impede investments. However, from an inter-continental perspective, many of the hurdles to promoting African investments in Africa are being removed as part of the continent’s integration and prosperity agenda. Measures such as the removal of visas at borders and promoting airline connectivity across the continent are already being implemented and are key to economic transformation. Promoting intra-African investments will help fast-track the continent in reaching its development goals.
As Mauritians and Africans, we have an important hand to play in the continent’s developmental blueprint as we position ourselves as the International Financial Centre (‘IFC’) for Africa. An interesting aspiration for us would be to become what Singapore is to Asia, to Africa. While extra-continental investors have definite advantages of using Mauritius as a platform for investments in Africa, be it for our enabling business environment (1st in Africa and 20th in the World), our highly educated bi-lingual workforce, our network of Investment Promotion and Protection Agreements (‘IPPAs’) and Double-Taxation Avoidance Agreements (‘DTAAs’), our offer is as compelling to inter-continental investors. Many South African companies have already used Mauritius as the stepping stone to invest in other African jurisdictions, with numerous success stories. Others are following.
The Mauritius IFC is home to one of the oldest commercial banks in the Southern Hemisphere and has a sophisticated banking system, with more than 20 banks operating on the island and including conventional as well as Islamic banking. As a result, transacting with the continent is a formality. Its stock exchange, the Mauritius Stock Exchange (‘SEM’) is continuously improving and operates two markets namely the Official Market and the Development and Enterprise Market – two platforms that have been used by enterprises from mainland Africa. The various options for structuring global businesses have also been of paramount importance in boosting the competitiveness of the Mauritius IFC. General Partners often choose to domicile their funds in Mauritius since this provides them the flexibility to easily structure and deploy capital into promising portfolio companies while providing their Limited Partners with liability protection and tax efficiency. For these reasons, amongst others, Mauritius is a preferred domicile for many investors focused on Africa.
With the presence of international as well as local law firms, Mauritius also offers excellent legal services to local and international corporations on all aspects of corporate, commercial and regulatory laws. The highest court of appeal to settle legal disputes is the Privy Council of the United Kingdom. The country also hosts most of the top accountancy and auditing firms, all within a well regulated environment. The Mauritian jurisdiction is rated as an OECD compliant jurisdiction and has been acclaimed for its continued commitment to implement the best standards in terms of transparency and exchange of information for tax purposes. With such attributes, the Mauritius IFC has created the enabling framework to serve both African and international investors willing to take on African investment opportunities.
Amidst dwindling global foreign direct investment flows and volatile international outlook, African companies can still drive Africa’s growth by diversifying their continental investments and presence. With enhanced cooperation between private and public sectors, investment returns and growth will catalyse, resulting in more certain and predictable business environments. Our role? Well the promise of a connected and prosperous Africa should drive us all in our endeavours to position Mauritius as the platform of choice for African investments.
Antish joined Rogers Capital in 2018 and is a manager in the Corporate Finance Advisory team. He assists our clients with their corporate finance needs, with a focus on transactions within the African continent. Antish holds a first class BA in Accounting and Finance from the University of Manchester (UK) and a Masters in International Business and Management from the Manchester Business School (UK). He is also an Associate Chartered Accountant (ACA) – member of the Institute of Chartered Accountants in England and Wales.