A Head Office in Mauritius

Port Louis Harbour

The Financial Times in an article yesterday (19 May 2011) said that the world is waking up to the fact that Africa is poised for growth as a result of foreign direct investment.  The commodities boom has led to other areas of growth such as telecommunication and other infrastructure.  The vast untapped agricultural resources are waiting for exploitation.

“The perception that Africa has reached a turning point – one qualitatively different from previous false dawns – stems from a combination of global and regional circumstance.” The FT article says.

“With many of its 48 economies rebounding from the crisis faster than the rest of the world, sub-Saharan Africa is increasingly viewed as an opportunity rather than a burden.” FT says.

Financial Times Analysis

Graphic: Financial Times Analysis 19 May 2011

The problem that keeps getting in the way seems to be dishonest politicians.  I know…this is an oxymoron, with less emphasis on the oxy bit.  One spin-off from the ever tightening web of bank supervision is that it is getting really hard for these politicians to transact their personal affairs internationally.

In the world of international financial services where I have worked for the last 18 years, it is our job to separate the good guys from the dodgy ones.  We come across many potential and existing clients that are keen to do business in Africa.  But the future investors find it impossible to buy shares of companies, or enter into contracts,  where one or more of the parties involved is a  ‘Politically Sensitive Person’.  PSP’s cannot receive funds from Mauritian banks, nor can they pay into our bank accounts.

While this puts an incredible burden on our small businesses resources, the banks are also gate keepers and we work together with them.

All this due diligence gets in the way of legitimate commerce, and it is no different in Mauritius.  But when it comes to dealing with Africa, Mauritius makes the perfect regional head office.

Here’s why:

For the senior executive, Mauritius is a lovely place to live.  Safe, warm, beautiful, good lifestyle, not too expensive, and multi lingual.  Time Zone centrality makes it easy to talk to the bosses, and other regions.  Flights out of Mauritius are plentiful, and regular.

For the business, Mauritius has good banking support, telecommunications (internet speed is still not great, but good enough for most needs).  The graphic at the top of this post shows Mauritius as the easiest country in Africa to do business and ranks 20th in the world.

While Mauritius is part of Africa, it could be argued that it is also part of Asia, with exceptional volumes into India.  So from China to the USA, business interested in Africa are starting to give Mauritius a good hard look.

What do Regional Head Offices do?

The first thing that a regional head office in Mauritius could do would be to create subsidiaries in the target countries.  The basic business model is to keep the capital in Mauritius, and manage the operations on the ground accordingly.  The key risk, nationalisation or theft or dissipation of assets is therefore minimised.

Expatriate staff could be hired and remunerated out of Mauritius.  Mauritius would not tax these employees unless they physically worked in Mauritius.   Intellectual property, contracts, royalties, purchasing, treasury operations, marketing, credit risk, insurance and many other aspects of the business could be managed from Mauritius.  And the best of it all, the Mauritian company would only pay 3% tax on its foreign earned income and 15% on the balance, if any.

As Africa is set to grow, Mauritius is set to explode.

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