Mauritius has one of the continent’s most dynamic economies. The journey to becoming an offshore financial hub started in 1989 as an offshore gateway to Africa. Sustainable Competitiveness Observatory (SCO) ranked Mauritius as an attractive and leading African country. The SCO indicator is visualisation of the scores based on political and economic governance, infrastructure, human and financial capital, and the market.
Efforts are underway to transform Mauritius’ International Financial Centre (IFC) into a trade and investment hub for global investors looking for a base in Africa. Mauritius aims at offering large full-service centres with advanced settlement and payment systems, supporting large domestic economies, with deep and liquid markets where both the sources and uses of funds are diverse, and where legal and regulatory frameworks are adequate to safeguard the integrity of principal-agent relationships and supervisory functions.
Despite several challenge, Mauritius has achieved a remarkable transformation from a mono-crop economy to a sophisticated service-oriented economy. The country is well known as one of the most advanced and fastest-growing modern economies in Africa, consistently ranked among the 20 best places to do business in Africa and worldwide. Mauritius moved seven places to 13th out of 190 countries according to the latest World Bank Ease of Doing Business Report 2020, issued on 24 October 2019. The country remains 1st in Africa in that list and has shown remarkable resilience and agility over the years to scale from upper mid to high-income country.
Mauritius fosters an ambitious goal through notable efforts. First, financial services can provide a viable development for a small jurisdiction if they get the details right. Creating a climate that attracts financial professionals requires constitutional, political, and legal stability and adaptability. Mauritius has not rested on its laurels, instead, the country has innovated and determined to comply with international requirements for transparency.
And second, a successful offshore financial centre is not just a nexus of professionals, telecommunications, and air routes. It also requires a regulatory framework that reinforces and supports the financial sector. By creating appropriate legislation and establishing capable regulatory authorities, the jurisdiction has stricken the right balance necessary to innovate and grow.
Mauritius has become a highly financially integrated economy, with the financial services sector being a key pillar of the economy. Mauritius’ IFC comprising commercial banks and offshore global business companies (GBCs) plays a major role in the economy. With assets under management of over 50 times the country’s GDP.
Activity in the offshore global business sector has been broadly resilient. The vibrant global business sector is graduating towards the enhancing range of financial products and moving towards diversification into high value-added services to remain globally competitive. Setting the stage for global companies to put down more roots in Mauritius, with the inducement of tax incentives designed to attract regional headquarters, treasury management centres, international law firms, and fund and asset managers. The financial sector is growing by double digits, spurred by pent-up demand for pension and insurance services; securities and capital market intermediaries and financial ancillary services providers.
To grow sustainably, remain competitive and responding to increasing demand, Mauritius has widened the tent by becoming an early promoter of FinTech. Within the fintech domain, the authorities have issued licensing rules on Peer-to-Peer Lending, Security Token Trading Systems & Custody Services (Digital Assets) along with the guidance note on Security token offering and consultation on the framework for the regulation of virtual assets. A regulatory sandbox licensing (RSL) regime for fintech start-ups has already been set up, along with a National RSL Committee to coordinate and assess all fintech-related RSL applications. The authorities have taken stepping-stones in building an open and transparent regulatory regime for Fintech in Mauritius. Besides, the Mauritius ICT sector is playing a profound revolution in Mauritius. Taking the country to a new league of the higher-value financial services industry and boosting the competitiveness of the IFC with other global financial centers.
Moving towards the blacklist removal, Mauritius made a high-level political commitment to the FATF and the ESAAMLG (Eastern & Southern Africa Anti-Money Laundering Group) to address the identified strategic deficiencies in its AML-CFT Framework in February 2020. The Mauritian authorities and designated AML/CFT supervisors have since been working to secure the removal of Mauritius from the FATF and EU lists. Tremendous efforts are underway to be back from black.
Coping with the crisis, Financial Action Task Force (‘FATF’) has commended the tremendous progress made by Mauritius to strengthen the AML/CFT framework despite pandemic. At the June 2021 Plenary, the FATF has acknowledged that Mauritius has substantially completed its Action Plan aimed at strengthening the effectiveness of its anti-money laundering and combating terrorism financing (‘AML/CFT’) system. The FATF delegation is currently conducting on-site visit, following which a decision will be taken by the FATF, at its Plenary scheduled for October 2021, on the delisting of Mauritius from the grey list. The FATF has already rated the banking framework in Mauritius as largely compliant, based on the control measures implemented for cross-border transactions.
The key to success though remains with enhancement and innovations in regulatory structure while maintaining the competitive advantage. The real growth hinges on how quickly Mauritius can boost the economy while preserving fiscal sustainability and diversification into high value-added services.
Contributed by –
Mr Mayank Srivastava
Director and COO, Merceron Capital LTD, Mauritius
*The views expressed are personal.
