Africa is a continent on the rise. With vast untapped resources and favourable demographics, Africa stands to be the next great driver of global demand and growth. The African Development Bank (AfDB) estimates that Africa has just over 30% of the world’s mineral resources, while the combined population of the continent’s 54 countries has reached 1.2 billion people, of which half will be of working age by 2020.

For almost a decade, Sub-Saharan African (SSA) average GDP growth rate has been over 5.5%. In 2016, growth sharply slumped to 3.4%, but the World Bank projection for 2017-2018 indicates a slight improvement, setting SSA growth rate to reach 4.1%, despite significant pressure on some key economies like Nigeria, South Africa and Angola. Notwithstanding these challenges, the African economy has shown outstanding resilience, still exceeding global growth rate.

Given its youthful, rapidly urbanising population, it is no surprise that Africa is the focus for many international firms. Africa is currently amid a structural change promising to happen for some time now, and recent trends show that investors’ interest has shifted from extractive activities to consumer-oriented ones, encompassing new sectors such as technology, media and telecommunications, financial services, consumer products and retail & real estate, hospitality and construction, as well as next-generation industries such as business services, clean tech, automotive, life sciences, amongst others.

The rewards promise to be substantial. The McKinsey Global Institute projects that by 2025, African household consumption and business-to-business (B2B) spending could reach $5.6 trillion. That is equivalent to nearly a third of current US gross domestic product. To get there, the continent has enormous infrastructure gaps to fill. Those gaps themselves represent enormous opportunities.

Mauritius has long been the jurisdiction of choice for firms wanting to expand their business into Africa. It is even known as the “Singapore of Africa”. Investors are equally attracted by the political and economic stability of the country, the risk mitigating avenues that it offers, its sound legal and regulatory framework, its pool of professionals as well as state-of-the-art infrastructure.

Mauritius has long-standing relationships with key African and international bodies, including the Southern African Development Community (SADC) and the Common Market for Eastern and Southern Africa (COMESA), the World Trade Organisation and the Commonwealth of Nations. It has also established a network of agreements, comprising 23 signed Investment Promotion and Protection Agreement (IPPAs) and 20 signed Double Taxation Avoidance Agreements (DTAAs) with African states, which means that global investors, traders and private equity companies gain preferential access to a number of key African markets and hundreds of millions of customers.

Mauritius is politically and economically stable, with a multi-party parliamentary democracy, a well-regulated financial services sector and an effective, independent legal system that has maintained the Judicial Committee of the Privy Council in the UK as its highest court of appeal.

The Mo Ibrahim Index of African Governance rated Mauritius as the top ranking country in overall governance in Africa for the tenth consecutive year in 2016, with a total score of 79.9 points. It was followed by Botswana with 73.7 points and Cape Verde with 73 points in second and third position respectively, with the average score for the continent being 50.1. The most comprehensive collection of data on African governance, it combines 93 indicators into four categories – Safety and Rule of Law; Participation and Human Rights; Sustainable Economic Opportunity; and Human Development.

Mauritius also boasts sustained economic growth over a long period of time. Per capita GDP grew from $200 in 1968 to over $7,700 today and its GDP grew by an annual average of 5.1% between 1977 and 2009. It has also achieved economic diversity. Its reliance on its traditional export – sugar cane – has fallen from 90% in 1968 to 3.5% today, with textiles and the manufacture of garments, financial and business services and tourism now forming the backbone of the economy.

In its pursuit to become a high-income economy, Mauritius has actively encouraged foreign talents, know-how and investment into the country. The infrastructure in Mauritius is on par with international standards and, combined with important financial incentives, this has helped to attract many international firms to choose Mauritius as a regional hub.

The fiscal regime of Mauritius is underpinned by a transparent system which provides for a level playing field and a competitive tax bracket for businesses and individuals at a single rate of 15%. This regime has successfully generated substantive economic activities across all sectors of the Mauritian economy. In addition, there are no foreign exchange controls and foreign companies enjoy free repatriation of profits, which enables Mauritius to offer investors a highly tax efficient platform in a very well governed and stable environment.

Mauritius is a fully collaborative and responsible international financial centre that has taken significant steps to adhere to international best practices. To enhance its transparency and collaboration framework, Mauritius signed the OECD Multilateral Convention on Mutual Administrative Assistance in Tax Matters in June 2015. Mauritius is also a member of the Early Adopters Group committed to the early implementation of the Common Reporting Standard (CRS) on the automatic exchange of financial account information.

The OECD Global Forum has rated Mauritius as a “Largely Compliant” jurisdiction – a rating which equals that obtained by developed economies such as the US, the UK and Germany. It was the first African country to sign up to an Intergovernmental Agreement with the US for the implementation of the Foreign Accounts Tax Compliance Act (FATCA) and has joined the OECD’s Inclusive Framework to implement the Base Erosion and Profit Shifting (BEPS) recommendations and the new initiative on exchange of beneficial ownership information.

Mauritius Companies

Setting up a company and starting a business activity in Mauritius is a simple and straight forward process. Mauritius offers a business environment which is very conducive to investment and business growth.

Each business structure varies in terms of category, nature and type of company. It is thus important to understand the various business structures and choose the most suitable for your business.

Mauritius can offer two main corporate forms – Category 1 Global Business licence (GBC 1) and Category 2 Global Business licence (GBC 2).

A GBC 1 is tax resident in Mauritius and thereby can access its network of 43 DTAAs signed by Mauritius with African and non-African states (a further seven treaties await ratification, six await signature and 17 are under negotiation). The headline tax rate for a GBC 1 is 15% for business generated within Mauritius and a maximum of 3% for external revenues. GBC 1 companies do not pay withholding tax in Mauritius on earnings interest and dividends remitted abroad to corporate or individual owners.

A GBC 2 is not tax resident in Mauritius and can only do business outside Mauritius. A GBC 2 company is not subject to corporate taxation in Mauritius and can trade in any currency except the Mauritius rupee. A GBC 2 is not subject to withholding tax on interest or dividends remitted outside Mauritius.

If one intends to actually carry out the majority of business in Mauritius (ie selling to Mauritian individuals or companies) it is advisable to establish a Domestic Mauritian Company. A Domestic Mauritian Company is also the vehicle of choice for residential property purchases on Mauritius.

The choice between whether you set up a GBC 1 or GBC 2 company will often be dictated by the type, source and volume of revenues that you expect to receive.

A company incorporated in Mauritius can be 100% foreign-owned, with no minimum capital.

The following types of companies may be incorporated in Mauritius:

  • Company limited by shares;
  • Company limited by guarantee;
  • Company limited by shares and guarantee;
  • An unlimited company;
  • A foreign company;
  • Limited Life Company.

The licence may be changed as your business evolves. Mauritius is one of the only jurisdictions that allows an existing trading or holding company to amend its tax base from non-tax resident, such as the GBC 2, to tax resident, such as the GBC 1, in order to gain access to the DTAA network. This provides investors with options if revenue streams or volumes change.

Mauritius has also developed a number of programmes that are specifically designed to attract foreign talent, know-how and investment. Foreign nationals wishing to work, live or retire in Mauritius can do so through the Occupation Permit, the Residence Permit or the Permanent Residence Permit. Successful applicants are eligible to acquire property in Mauritius under prescribed conditions.

Doing business in Mauritius

Mauritius again ranked best in the region on the World Bank Group’s Ease of Doing Business report for 2017, with an overall global ranking of 49 out of 189 economies, and was also ranked as sub- Saharan Africa’s most competitive economy on the World Economic Forum’s Global Competitiveness Index. Mauritius was ranked at number 45 on a global ladder of 138 countries with a score of 4.49, sandwiched by Italy and Portugal.

  • Efficient banking system. Mauritius has 22 banks, which offer accounts in a number of different currencies (USD, GBP and EUR along with many other African and Asian currencies);
  • Over 100 accounting and audit firms;
  • No foreign exchange controls;
  • A hybrid legal system based on English and French law;
  • A bilingual workforce, speaking English and French. This is of particular interest to businesses seeking to invest in the Francophone countries in Africa (Cameroon, Central African Republic, Chad, Congo, Cote d’Ivoire, Rwanda, and Senegal), Asia (Vietnam, Laos and Cambodia) or Europe (France, Belgium, Luxemburg and Switzerland).
  • Strategic time zone (GMT +4), which enables trading and business to be conducted with Africa, Europe, Asia and the US on the same business day.

In summary, investors are equally attracted by the political and economic stability of the country, the risk mitigating avenues that it offers, its sound legal and regulatory framework, its pool of professionals as well as state-of-the-art infrastructure.

Mauritius is a highly attractive jurisdiction in which to do business, particularly for facilitating expansion into Africa or from Africa to the rest of the world. While there is no single recipe for success in Africa, utilising efficient and flexible business structures increases the likelihood for success. As an African country, Mauritius has and continues to be a strategic development partner, in and for, the continent.

Richard Neal
Director - Sovereign Trust (South Africa) Limited
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