Mauritius International Financial Centre · Financial Centre (IFC), with the Mauritius Oﬀshore Business Activities Act and the Banking Act providing the right framework for activities

Mauritius InternationalFinancial CentreA Global Finance Mauritius Publication • April 2018 • Issue 7

Building Africa

New opportunities in the area of trade and investment

“We want a Mauritius where there is high quality of lifefor all inhabitants”

Reinventingthe Mauritius IFC

Where are we headed?

50 YEARS OF INDEPENDENCE

What future for the Mauritius IFC?What future for the Mauritius IFC?

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InterviewCharles Cartier

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Mauritius International Financial Centre 3

EDITORIAL

A goldenopportunity50

Years of Independence marks akey milestone in the history ofMauritius. It reminds us of howfar we have come in terms of the

island’s economic development, from a mono-cropeconomy to a diversified economy with a number ofthriving sectors, such as tourism, manufacturing, ICTand financial services. It is also an opportunemoment to reflect on how having a vision hashelped us on our journey in the past, and how it canhelp us again in the future.

If we look back in time to 1992, the EuromoneyConference was a defining moment in the creationof what would become the Mauritius InternationalFinancial Centre (IFC), with the Mauritius OffshoreBusiness Activities Act and the Banking Act providingthe right framework for activities to flourish in thefollowing years. Those who were active in theprocess at the time had a clear vision about whatthey wished to achieve, and took the right stepsaccordingly.

Now we are in a new phase. Twenty five years afterit was conceived, our Global Business sector is at acrossroads, and our tax regime, which has largelycontributed to its success, is now due for a majorreform. Is it now time to integrate the GlobalBusiness sector with the rest of the Mauritianeconomy to promote inclusive development? Thiswill be a key question for the months to come.

Furthermore, the shape of our market is changingapace. We are continuing to see consolidation in thesector, with Ocorian being the latest internationalplayer to strengthen its position in Mauritius throughthe acquisition of ABAX, hot on the heels of SGG andSANNE who are already present through theacquisition of our leading local players in Mauritius.

What does this tell us? First, the increasing interestof international players represents a sign ofconfidence in Mauritius as a jurisdiction. Second, it is

a testament to the high-quality and cost-effectiveservices provided in Mauritius which make thejurisdiction attractive from an integrationperspective. Third, none of these three groups hadany real presence in Africa and will now have aglobal footprint. Local companies in Mauritius andtheir staff will benefit as they will increase theirmarket size to reach out and be part of a largergroup.

So if we have a successful track record, andincreasing interest from international players, howcan our future vision for a world-class IFC bearticulated, and eventually implemented, to thebenefit of all? The Economic Development Board,created in January, is now due to play a crucial rolein bringing a more coherent approach in positioningthe island as an investment destination and aplatform for trade and services, and in the industrywe will be closely collaborating with this body toensure that Mauritius continues to be anInternational Financial Centre of choice forinvestors.

When it comes to defining the future of theMauritius IFC, we are already taking clear stridesforward with the elaboration of the Blueprint for thenext 10 years, assisted by the global consultancyfirm McKinsey & Co. We will also be seeking toposition Mauritius as a hub for FinTech andBlockchain, with work underway to develop the rightregulatory framework to put Mauritius on the map.

As we take stock of how far we have come on ourGolden Jubilee as an independent nation, we havea lot to look forward to. Mauritius has a long historyof reinvention and it is recognised for its openness,its ability to adapt and respond to changing times,and its highly educated and skilled workforce. Theseattributes will help us on our future path to a high-income economy which will generate jobs andgrowth for future generations, with the MauritiusInternational Financial Centre at the heart of it.

By Samade Jhummun,CEO Global Finance Mauritius


8 COVER STORY: WHAT FUTURE FOR THE MAURITIUS IFC?

14 THE TRANSFORMATIONAL JOURNEY OF THE SEM

17 REINVENTING THE MAURITIUS IFC: WHERE ARE WE HEADED?

23 WHAT NEXT FOR OUR GLOBAL BUSINESS SECTOR?

26 FINANCIAL SERVICES IN INDEPENDENT MAURITIUS: CLAIRVOYANCE IN ACTION

30 TACKLING THE FUTURE OF FINANCIAL SERVICES

INTERVIEW

32 CHARLES CARTIER, CHAIRMAN, ECONOMIC DEVELOPMENT BOARD

CONTENT

On the cover

What future for the Mauritius IFC?

Mauritius International Financial CentreA Global Finance Mauritius PublicationApril 2018 – Issue 7

Mauritius International Financial Centreis a publication of Global Finance Mauritius

1st Floor, Cyber Tower 1, Ebène, MauritiusTel: +230 464 84 09 - Fax: +230 464 83 88Email: [email protected] - www.globalfinance.muFollow us on Twitter (@gfmauritius) LinkedIn and Facebook

What future for theMauritius IFC?

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AcknowledgementsThis 7th issue of Mauritius International Financial Centre was prepared byGlobal Finance Mauritius with the assistance of Acuitas Communications.

Global Finance Mauritius expresses its gratitude to all of the contributors to this publication.

Dr Rama Sithanen (IFS, a SANNE company)Pierre Dinan (Economist)Couldip Basanta Lala (IFS, a SANNE company)Swadicq Nuthay (ABC Capital Markets)Kevin Ramkaloan (Business Mauritius)Hon. Dharmendar Sesungkur MP (Minister for Financial Services and Good Governance)Sunil Benimadhu (Stock Exchange of Mauritius)Graham Sheward (SGG Group)Shamima Mallam-Hassam (AlterDomus)Dean Lam (HSBC Bank (Mauritius) Limited)Marc Hein, SC, GOSK (Juristconsult)Fazeel Soyfoo (ABAX)Jameel Khadaroo (Deloitte)Tariq Caramtali (Temple Professionals)Charles Cartier (Economic Development Board)Harvesh Seegolam (FSC)James Duchenne (Crowd Machine)Loretta Joseph (Australian Digital Currency and Commerce Association)Ashvin Krishna Dwarka (Law Practitioner and Notary)Benjamin Yablon (Salt Lending Holdings, Inc)Saleem R Beebeejaun (Warwyck Private Bank Ltd)Priscilla Balgobin-Bhoyrul (Balgobin Chambers)Ravneet Chowdhury (Bank One)Ben Lim (ITL)Mathieu Mandeng (Standard Chartered)Richard Arlove (ABAX)H.E. Marjaana Sall (Delegation of the EU to Mauritius)David Ashiagbor (MFW4A)Barbara C Samuels II (Global Clearinghouse for Development Finance)Bronwyn Corbett (GRIT Group)Ritesh Anand (Crown Agents Investment Management)Shailesh Sreekeessoon (SBM Group)Muhammad Uteem (Uteem Chambers)Hirander Misra (GMEX/FinComEco)Sridhar Nagarajan (MauBank)Mikir Shah (AXA Africa Specialty Risks)Sanjay Parashar (IndianOil)Amit Shah (AURS & Co Ltd)Vanita Tulsidas (Global Desi)Dr Snowy Khoza (Bigen Capital)Drudeisha Madhub (Data Protection Office)Nagesh Kistnamah (SGG Group)Yogesh Ganoo Bapjee (SGG Group)Mohamed Khan (FSI)Dheerend Puholoo (PwC)

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3236INNOVATION

36 HOW CAN MAURITIUS DEVELOP AS A HUB FORFINTECH AND BLOCKCHAIN?

40 INTERVIEW, BENJAMIN YABLON, SALT LENDING HOLDINGS, INC.

44 DISRUPTION: WHAT NEXT FOR THE FINANCIALSECTOR?

BUILDING AFRICA

46 WHAT IS THE CONTRIBUTION OF MAURITIUS TO AFRICA?

51 NEW OPPORTUNITIES IN THE AREA OF TRADEAND INVESTMENT

54 WHAT ROLE FOR ALTERNATIVE INVESTMENTS IN AFRICAN PENSION FUNDS?

58 MAURITIUS, THE FINANCIAL CENTRE FACILITATOR AND GOLD AGGREGATOR FOR SSA

BANKING

61 THE NEXT WAVE OF GLOBAL BUSINESS IN MAURITIUS

MAURITIUS AS A HUB

64 MAURITIUS, PROVIDING A SOUND FOUNDATIONFOR REGIONAL EXPANSION

GOVERNANCE AND REGULATORY

69 ACHIEVEMENTS OF MAURITIUS IN THE FIELD OF DATA PROTECTION

71 DEALING WITH FINANCIAL CRIMES

CAPACITY BUILDING

74 FSI: THE SKILLS IMPERATIVE

TAXATION

77 DIGITAL ECONOMY: CHALLENGES FROM A TAX PERSPECTIVE?

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50 Years of Independence: What future for theMauritius IFC?The Golden Jubilee of Independence provides an opportunity to consider how farMauritius has come in building an International Financial Centre as part of adiversification strategy, and what the future may hold for the island as a regionalhub offering new skills and value-added services

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The island of Mauritius has come a long wayfrom its humble beginnings as a monocropeconomy to become a tourism, manufactur-

ing and now a Financial Services hub, where it hassuccessfully diversified over the years to become anattractive platform for investment. From a historicalperspective, the fifty years which have passed sinceIndependence have seen Mauritius embarking on anew path towards a successful future with the Fi-nancial Services sector playing a crucial role in theisland’s development, now representing 12% ofGDP, and setting the scene for future growth.

Dr Rama Sithanen, Chairman and Director ofInternational Financial Services (IFS) Limited (aSANNE company), who was Finance Minister in the1990s and who many gave credit for being one ofthe architects of the Financial Services sector as partof the diversification agenda, recently commented atan event that the International Financial Centre (IFC)“was extremely successful in terms of bringing ahigher scale of investment” and now it would beimportant to look forward to devise ways and meansof encouraging further investment towards Africa,through Private Equity and alternative investments,amongst others.

The Financial Services sector in Mauritius has a richhistory and the Golden Jubilee of Independence isan opportune moment to revisit how the model firstcame into being, as well the challenges and the needfor reinvention as the IFC moves into the next stageof development.

Setting the stage for future growth

In 1989, the Mauritian Government took the firststeps to establish an offshore financial sector in itsmove towards a diversified economy. The year 1992set the stage for the offshore sector, now known asthe global business sector in Mauritius, to emergeimmediately after the Euromoney Conference thatsteamrolled things into action, according to PierreDinan. The economist, who was a partner at theformer De Chazal Du Mee (DCDM), highlighted thatthe offshore banking legislation MOBAA Act(Mauritian Offshore Business Activities Act) whichcreated a framework allowing licensed banks to dealin offshore activities, was passed.

He recalls, “In those days, we were probably one ofthe first at DCDM to helm a management company,Multiconsult, where I was heavily involved in its day-to-day running, and the period between 1988 and

1992 helped to trigger the real offshore jurisdictionwhere India was looking for a DTAA (Double TaxationAvoidance Agreement) treaty arrangement withMauritius.”

Mr Dinan explains that the various laws such as theBanking Act and MOBAA Act in 1992 came at anopportune time where DCDM provided a linkbetween India and Mauritius, while acting as therepresentative of the large international companyArthur Andersen with a branch in India. Thedevelopments, he says, bolstered the entry ofinternational companies famous for offering qualityadministration and banking services, thus spurringthe sector’s growth over time.

“More management companies followed suit, amongwhich was CIM Global Business (now SGG Group)that acquired Multiconsult Limited, whichrepresented a continuation in the trajectory set uponto develop the Global Business Sector,” Mr Dinansays.

The former DCDM Partner adds that the 1990s erawas significant, taking into account that India was stilltreading on the Nehruvian path of development andwas a closed economy, but took a leap of faiththrough the vision embarked upon by its FinanceMinister Dr. Manmohan Singh to open up its shores.India was seeking opportunities for investmentcapital flows, but the biggest challenge was to ensurethat there was no double taxation.

“The idea was to trade in services with Mauritius andto entice Indian entrepreneurs to seek tax relief inservices. It worked in this fashion: UK-based lawyersand solicitors advised clients to invest by using theMauritius route but one glitch remained the huge

Couldip Basanta Lala, Founding Director of IFS Limited(a SANNE company)

“The future for IFCs will be onnon-treatyactivities”Couldip Lala Basanta

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capital gains tax slapped on in India. Therefore, therewas a need to seek a jurisdiction that was tax-freeand that’s how the DTAA between India and Mauritiusmaterialised,” he emphasises.

Founding Director of IFS Limited (a SANNE company),Couldip Basanta Lala pointed to the wave of changessweeping through the various laws. “Since itsinception, the Global Business Sector relied on theneed for diversification where the biggest questionshould have been: were we in a position tounderstand the intricacies of international taxation?”

Mr Basanta Lala alludes to the existence of a possible‘systematic vacuum’ in the initial period due to adearth in legal expertise and commented on the direneed at the time for transferability of skills, basicknowledge, and development that had to be suitedto international business needs.

There was growing interest from the first Britishinvestment managers, he recalls, in entering theIndian market immediately after Dr. Singh, as FinanceMinister, spearheaded the entire liberalizationstrategy to seek out Foreign Direct Investment.“There was only one stock market in India, BombayStock Exchange, and the UK lawyers zeroed onMauritius as the best place for transactions towardsIndia given the capital gains exemption with thetreaty,” he says.

CEO of ABC Capital Markets, Swadicq Nuthay,elaborates on the implementation of the properregulatory framework established, ushering in theliberalization policies that helped the sector tomodernise through a slew of constant revisions tothe legal framework.

“The move to establish an offshore financial sectorwas embedded with the vision to move towards adiversified service economy where new laws wereenacted for the Global Business Sector that emergedas an important economic pillar,” he explains.

Achievements, challenges androadblocks

There are numerous challenges to the sector, and thelocal jurisdictions has weathered a number of stormsin recent years, whether arising from the changes tothe DTAA Protocol with India or the OECD’s BaseErosion and Profit Shifting, amongst others, as part ofits capacity to adapt and reinvent itself.

Mr Nuthay remarks, “The sector is expected to entera new phase of development taking into account thetremendous progress achieved on the back of thevarious DTAAs and IPPAs signed”. He considers thatwhat worked in favour of the jurisdiction was also theconducive business climate put in place and the lowflat corporate tax rate of 15 percent, which boostedthe attractiveness of the jurisdiction in relation tolarger financial sectors as a place to do business.

At the same time, Mr Basanta Lala affirms that thetremors feared owing to the after effects of the DTAAProtocol change with India have not been felt locallysince the country is still in a transition period.However, the risks are still present, and he points toGAAR implementation and the introduction of theLong-Term Capital Gains Tax (LTCG) at 10 percent inthe last Indian budget. This, he says, may impactIndia-bound investment or global investorsallocating funds to more lucrative jurisdictions thatmay take away the sheen from the Indian capitalmarkets.

“However, it doesn’t take away the fact that Mauritiusremains a tried and tested route where it will prevailas the prime jurisdiction for investment managers,keen to set up their platform to drive the appetite forIndian investment.”

It may take various forms such as scaling up fromback-office operations to middle offices foradministration that represents a huge opportunity tothe jurisdiction.

Reflecting on the past, Pierre Dinan highlights theextent to which the Financial Services sector has notonly grown but also slowly integrated into theeconomy, as evidenced by its significant contribution

“New laws were enacted for theGlobal Business Sector thatemerged as an importanteconomic pillar”Swadicq Nuthay

Swadicq Nuthay, CEO of ABC Capital Markets

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in creating a surplus to the foreign exchange andoiling the system in offsetting debts.

The Africa Strategy

At a time when operators are increasingly focusingon the African continent to tap the burgeoningwealth market, Mr Basanta Lala candidly recalls that:“Back in time, we didn’t know which jurisdiction totap and Africa first came to mind where we hadclients right from day one, at the time DTAA wasincepted in 1982.”

In the present-day scenario, he says that, being thenew frontier for Africa-bound investment, the bigopportunities for Mauritius are greater “when localstructures far exceed investment structures whichcombines trading activities in exploiting the fullpotential of Freeport, SADC and COMESA protocols”.However, there is a need to get the right jurisdictionand trading partners while emphasising the need toimprove enhanced diligence, as well as issues offoreign exchange which are a major concern tointernational investors on the continent, he adds.

The need to foster the right ecosystem is advocatedby Swadicq Nuthay of ABC Capital Markets, as part ofthe Mauritius IFC’s strategy to emerge as a platformfor investment towards Africa, and this will helpattract international players such as top calibreprofessionals, investment houses, financialinstitutions and international lawyers to start localoperations.

The importance of selling technical and managerialskills to support private equity deals in Africa,

amongst others, has also been highlighted by KevinRamkaloan, the CEO of Business Mauritius, whoconsiders that linkages can be strengthened to makeMauritius a platform of choice. “Already, theinfrastructure needs in Sub-Saharan Africa arepegged at an annual USD 100 billion, where localskills can help in managing the massive developmenttaking place. The planned creation of SpecialEconomic Zone (SEZs) represents an effectiveinstrument to help enhance the value addition ofMauritius as a platform towards Africa,” he advocates.

Economist Pierre Dinan adds that, “The opportunitylies in French-speaking nations where there is anoverlap of professionals and I would prefer theMauritius IFC to offer selective on-the-spot servicesalongside the corporate, legal and administrativeservices. That way, the Mauritius IFC can legitimatelyaspire to be a hub for countries lacking in terms ofskills and services.”

Role as a regional hub

In terms of strengthening the Mauritius IFC’s role asa hub for the region, Kevin Ramkaloan suggests thatoutsourcing of treasury management and accountingfunctions in Mauritius through a global businessentity should be fleshed out and opportunities canbe deepened by availing of existing preferentialtrade agreements through the various RegionalEconomic Communities.

Mr Ramkaloan also underlines the importance ofconnectivity, saying that “our success as a cutting-edge IFC also relies on connectivity which includesair, sea and telecommunications and the

Dr Rama Sithanen and Pierre Dinan were among the speakers at the Euromoney Conference held in Mauritius on 12-14 April 1992

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strengthening of air corridor between Asia and Africais laudable, but it stands important to add a fourthfrequency by exploring the Singaporean route aswell as additional Kenya-bound flights”. Pierre Dinanagrees that, “There is a pressing need to furtherliberalize the open skies to ensure that we do not lagbehind competitors, such as Kenya which has anedge in vying for the setting up of a regionalheadquarters,” while Swadicq Nathay concurs thatcurrent connectivity issues represent a major hurdleto unlock potential.

The way forward

Looking ahead, Swadicq Nuthay emphasises that“the financial services sector is very much anessential component in our economic agenda forgrowth, especially if we are to move towards aknowledge-intensive and services economy, and theGlobal Business Sector is key”. Furthermore, MrNuthay calls for the Global Business Sector businessmodel to be changed from a treaty-based model toan equivalence-jurisdiction model, since achievingequivalence with key jurisdictions would enableoperators and funds domiciled in Mauritius to accessother countries without the hassle of requiringadditional regulatory prerequisites.

According to the Minister of Financial Services andGood Governance, the Hon. Dharmendar Sesungkur,

MP, good governance in the era of globalisationshould be the norm in the Financial Services sector.“The need to maintain a highly transparent andaccountable sector cannot be compromised for itgoes a long way to nurture and sustain productivityover time,” he says.

Defining the ingredients for futuresuccess

As the Mauritius IFC seeks to reinvent itself inchanging times, what will be the key ingredients forfuture success? Pierre Dinan claims, “We can nolonger rely on so-called tax optimisation, where it istime to call it a day. The trick lies in finding newservices and we already have an edge in terms ofbeing bilingual, with a hybrid legal system, and thefact that the jurisdiction is not expensive, unlikeSwitzerland or Jersey. However, the extent to whichwe would be able to maintain our advantages thatwill help attract international conglomerates forwhom facilities such as state-of-the-arttelecommunications remains a prime consideration,remains to be seen.”

Couldip Lala Basanta concurs that “the future for IFCswill be on non-treaty activities”. He argues that theMauritius IFC must be prepared to implementguidelines regarding risk assessments, anti-moneylaundering and anti-corruption fleshed out in OECDcountries which calls for systems and resources.“Management companies must be properlyequipped to pool resources and service new productlines in a bid to be fully prepared whileimplementing risk guidelines as set by OECDcountries.”

Mr Lala Basanta calls for the facilitation of new skillsand the need to offer full-fledged services asadministrators targeting Africa and South Asiancountries. He also sees that trust, wealthmanagement, and family offices for high net worthindividuals in Africa and India must be a priority aswell as revisiting the model to help assess therelevance of tax laws. Swadicq Nuthay concludesthat Mauritius should move towards becoming ajurisdiction with higher value-added services anddeveloping niche segments such as global fundadministration, cross border investmentadministration, private wealth management, Fintechand corporate finance, with greater visibility andpresence internationally, in order to realise its fullpotential.

“There is apressing need tofurther liberalizethe open skies toensure that we donot lag behindcompetitors”Pierre Dinan

Kevin Ramkaloan, CEO of Business Mauritius

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The TransformationalJourney of the Stock Exchange of MauritiusSunil Benimadhu, Chief Executive of the Stock Exchange of Mauritius, explains howthe Stock Exchange of Mauritius has developed from a pre-emerging Exchange to anattractive capital-raising platform for African issuers

As Mauritius celebrates the 50th Anniversaryof its independence, it is an opportune timeto reflect on some of the transformational ini-

tiatives taken post-independence to set the countryfirmly on the path of modernisation and innovation.One such initiative concerns the setting up of a StockExchange in 1989. Setting up a Stock Exchange in acountry with a GDP of only Rs 33 billion and an ini-tial market capitalisation of only Rs 1.4 billion re-

quired more than just a visionary drive. It required anact of faith in the country’s future. This article de-scribes the transformational journey of the Stock Ex-change of Mauritius (SEM) since 1989 and how theSEM has, in spite of the structural constraints and lim-itations of an island economy, successfully posi-tioned itself as one of the leading Exchanges in Africaand as an attractive capital-raising and listing plat-form for African issuers.

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Overcoming the structural constraintsof an island economy and redefiningthe capital markets’ space

There is no better way of appraising the SEM’stransformational journey than by looking at theevolution of a few key statistics of stock marketdevelopment and performance since 1989. The SEMstarted business on the 5th of July 1989 with 5 listedsecurities and a market capitalisation of only Rs 1.4billion, representing a market capitalisation to GDPratio of only 4.2 per cent. Over the years, thanks tothe implementation of a number of ground-breakinginitiatives coupled with the introduction of a numberof defining changes to its regulatory and operationalframework, the SEM has redefined the capitalmarkets’ landscape in Mauritius, boosted its marketcapitalisation in a meaningful way, diversified itsproduct offerings and succeeded in its transitionfrom an equity-centric domestic Stock Exchange to amulti-asset class international Stock Exchange. 182securities cutting across different asset-classes andissued by a diverse group of local, African andinternational issuers are currently listed on SEM. Totalmarket capitalisation has crossed the Rs 400 billionmark and currently represents a market capitalisationto GDP ratio of 91% which is the highest in Africa, exSouth Africa. Rs 219 billion rupees have been raisedby SEM’s listed companies to fund their expansionor restructure their capital base. The SEM has since itscreation in 1989 emerged as a powerful value-creation platform for investors, generating anannualised price return of 11.5% and an annualisedtotal return of 16.6%.

At the heart of the SEM’s transformational journeylies the successful pursuit of an internationalisationstrategy which rests on the following three importantpillars: 1) A thorough review of the listing rules toenhance the SEM’s attractiveness as a listing andtrading platform for a wider spectrum of products, 2)The establishment of synergistic links between thecapital markets and the Global Business Sector inMauritius to promote the delivery of higher value-add services from Mauritius, and 3) The introductionof a multi-currency platform on SEM which allows anissuer to raise capital, list, trade and settletransactions in its underlying securities in USD, EURO,GBP and ZAR.

Establishment of SEM as a compellingcapital-raising platform for Africanissuers

The pursuit of SEM’s internationalisation strategysince 2009 has generated commendable resultswhich can only inspire the Exchange to accelerate

the process of establishing itself as a compellingcapital-raising platform for niche internationalissuers, including African issuers. Since 2009, theSEM has listed 76 international products on itsplatform and Rs 160.2 billion has been raised bythese international issuers. Our focus in the comingyears is to leverage on SEM’s strengths andcompetitive advantages to firmly establish itsfootprint as a leading capital-raising and listingplatform for African issuers. African issuers wishingto raise capital in international currencies frominternational investors have so far turned to marketsoutside of Africa. The SEM now offers them anattractive and viable alternative on an AfricanExchange at much more competitive costs. Inaddition to the current attractive listing frameworkwhich makes listing on SEM relatively simple and themulti-currency platform which facilitates capital-raising from international investors, the SEM is alsoworking on attracting more global order flows to itsplatform through the promotion of remote brokersas members of SEM. In essence, we are activelyworking on the promotion of a financial ecosystemwhich will transform the financial landscape inMauritius and set the stage for the emergence of awhole range of high value-add services, includinginternational capital-raising, investment, banking,high-level corporate advisory services and riskmanagement services.

Conclusion

This article has summarised a few of the ground-breaking initiatives implemented by the SEM duringits relative short 29-year history which have set thescene for the gradual transformation of the capitalmarkets framework in Mauritius from its historicaldomestic focus to an internationalised focus andcreated the space for the provision of high value-addservices from Mauritius.

The key to unlocking Mauritius’ capital markets hugepotential lies in the ability to leverage off theinternational flows of funds converging into theGlobal Business sector in Mauritius to raise capitalfor the entities using Mauritius as a service platformto invest in the emerging regions of the world. It alsolies in our ability to attract international players andregional/global order flows to our platform. This canprovide the much-needed breakthrough toovercome the structural constraints of a smallinternal economy and help Mauritius consolidate ina meaningful way its role as a premier internationalfinancial centre in Africa and SEM emerge as thecapital-raising and listing platform of choice forAfrican issuers.

By Sunil Benimadhu, Chief Executive of Stock Exchange of Mauritius andChairperson of Global FinanceMauritius

The SEM hasredefinedthe capitalmarkets’landscapein Mauritius

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Reinventing the Mauritius IFC:where are we headed?The Mauritius IFC is on the verge of a new phase, with increasing consolidation inthe Global Business Sector, demand for new, sophisticated and innovative services,and calls to move up the value chain, which will provide food for thought as theBlueprint for the Financial Services Sector is elaborated

The Mauritius International Financial Centre(IFC) currently stands at a crossroads on the50th Anniversary of Independence, where it

faces numerous challenges in the light of tax changesto the DTAA Protocol with India and from OECD ini-tiatives such as the BEPS (Base Erosion and ProfitShifting) agenda and the Multilateral Instrument ontaxation (MLI), to which Mauritius is a signatory. Manyexperts have called on the local Financial Servicessector to reinvent itself by offering ‘sophisticatedservices’ to move up the value chain in identifyingnew avenues to growth in the sector, which currentlycontributes to 12% of GDP and the Government istargeting a contribution of 15% by 2019.

There are many reasons to believe in the long-termprospects of the Mauritius IFC to strengthen its

position as a leading and attractive channel betweenAsia and Africa, further bolstered by the recentacquisitions of leading local players by global firms.Several indicators such as the Global FinancialCentres Index (GFCI), the Global CompetitivenessReport 2017-18 and Doing Business Report 2018have put Mauritius in a leading position in the Sub-Saharan African region as the gateway to dobusiness, giving rise to the view that it is the righttime for the jurisdiction to strengthen its position onthe global map that goes beyond the traditional taxtreaties or investment routes.

Increasing consolidation in the GlobalBusiness Sector

The years 2017 and 2018 are considered to bemilestones for the Global Business sector in marking

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a new phase of international consolidation, withinternational firms SANNE, SGG and Ocorianacquiring some of the leading players in theMauritian market. Managing Director at SGG Groupand Vice-Chairman of Global Finance Mauritius,Graham Sheward believes that consolidation is not anew phenomenon which is unique to the MauritiusIFC, but anticipates that many such acquisitions thatwill cut across investor services on the map.

Mr Sheward considers that, “The tendency aligned torapid consolidation in the coming years will be drivenby clients pressing for multi-national support acrosstheir global business operations, which waswitnessed much before us by the Big Four in theaudit sector.” He takes the firm view that thepresence of respected European and internationalfirms will bring a huge panoply of benefits to raisethe profile and standing of Mauritius as an IFC.

“The recent activities pertaining to businessconsolidation will add extra comfort to internationalclients and will spearhead the development of theindustry by sharing expertise and proposing value-added products and services on the local market,” headds.

Bridge to Africa and Asia

Managing Director and Country Executive at AlterDomus, Shamima Mallam-Hassam, believes thatbeing strategically located between Africa and Asiagives the island an edge to act as a bridge forinvestment and trade. She alludes to the role playedby Singapore for the Asia Pacific region and believesthat Mauritius can emulate the same role for theWestern Indian Ocean region, targeting Africa whileselling itself as a platform to consolidate investmentsin a “somewhat fragmented market”.

She points out that, “Over the years, Mauritius hasendeavoured to present itself as a fund domicilejurisdiction but there is a dearth of critical mass,particularly in niche segments like asset managersand fund managers relative to other jurisdictions.Currently, some 1,000 funds are domiciled locallybut there are only 30 global CIS licensed managersacting mainly as local fund managers.”

Cross-border investment remains an importantaspect to boost the prospects of the Mauritius IFC.The Managing Director of HSBC Bank (Mauritius)Limited, Mr. Dean Lam, highlights that bilateral tradebetween China and Africa has shown a huge increasefrom $10 billion in 2000 to over $200 billion in2017. Moreover, according to him, the volume of

China’s bilateral trade with Africa far exceeds that ofAsia’s second-largest economy, Japan, to the tune ofUS$30 billion.

Mr Lam considers China to be an economicpowerhouse generating tremendous growth, whichcan be attributed to the demand for the imports ofcommodities where Africa remains an importantmarket. For him, banks are more likely to compete forlending and credit facilities in a bid to accompanyboth trade and investors while connecting them toexpansion and growth opportunities.

It can be noted that most investment flows are takingplace in one specific direction from Asia and Africa,which highlights the nature of ties between bothcontinents. “It’s without an iota of doubt that Asiaclearly has a greater weight today than Africa,characterised to a large extent by the size andstructure of various economies. It is fitting forMauritius to position itself as the trade andinvestment hub in the region taking into account theneed to consolidate existing ties with Asia,encompassing India,” he underlines.

Contributing to economic growth andemployment

In presenting an attractive proposition to globalplayers, it will be crucial to make the right pitch, towhich the Chairman at Juristconsult Chambers, Mr.Marc Hein, SC, GOSK says, “The first thing that Iobserved is that the local international centre is betterdescribed as an international centre for financial and

“There is a need to further improveour offerings since constantremodellingrepresents the keyto ensure success”Shamima Mallam-Hassam

Shamima Mallam-Hassam, Managing Director and Country Executive at Alter Domus

Graham Sheward, Managing Director at SGG Groupand Vice-Chairman of Global Finance Mauritius

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corporate services. Hence, the services sectoraccounts for 15,000 jobs that contributed hugely towealth creation and tax revenue in the economy.

“Global business has played an important role inchartering bright career prospects for younggraduates and therefore there is a need to innovateand develop policies to compete among the bestworldwide rather than being contented in earninglaurels of being the best in Africa.”

Promoting Regional Treasury Centres

In terms of offering new products and services toattract new players, the Regional Treasury Centreproposition can be further promoted, in the view ofa number of market players. “The setting up of aRegional Treasury Centre (RTC) will help a companyto align its treasury policies, improve the visibility ofinformation and fund flows as well as significantlyreducing the necessary resources for treasuryprocesses. Thus, clients can see a markedimprovement in cash management efficiencies,capital optimisation, and risk management,” saysShamima Mallam-Hassam.

Dean Lam agrees that Mauritius has all the makingsto establish itself as a reputable regional financialcentre, including the role of a regional treasury andinvestment hub, as well as that of a global shippingand logistics centre on account of its ideal location.There are incipient business opportunities, onaccount of the country’s regional and internationalstanding coupled with wide-ranging professionalexpertise, that are “certain attributes” that can seekadvantages offered by the Belt and Road initiatives inseveral areas.

“The manifold growth in investment will helpaccelerate the usage of Renminbi (RMB) as a globalcurrency, where China is sparing no effort for itsinternationalization since several years. The fact thatRMB has surpassed the US dollar and Japanese Yen

has reaffirmed the Chinese conviction in stimulatingits usage in projects taking place in BRI countries toencourage the currency’s widespread acceptance,”he underlines.

This could well be the reason why, according to Lam,the local HSBC operation boasts of a presence alongthe key trade and investment corridor that puts it ina strong position to partner with participating firmsunder the Belt and Road initiative. This could, in turn,be of huge benefit to Mauritius businesses tradingwith China, making significant inroads and derivinggains to make RMB a key component of foreignexchange considerations. The benefits are many, hesays, right from reduced foreign exchange andinterest rate risk to improved liquidity and cashmanagement as well as enhanced access tofinancing and investment opportunities in RMB.

Focus on private equity

Regarding other products and services which shouldbe promoted as part of the Mauritius IFC’s offer,SGG’s Managing Director Graham Sheward isconvinced that the continent can emerge as the nextprivate equity hotspot, stepping in to overcome thelimits of Governments’ undertakings in Africa whichgoes beyond the traditional means of financialservices funding.

“Both Asian and European investors are alreadypresent on the continent despite the fact that dealsizes are still low in relation to other emergingmarkets. The latter represents a massive opportunityfor Mauritius, poised to be a catalyst in Africa’sdevelopment where it has all it takes to become thenext Asia.”

Spearheading a new chapter

As Mauritius seeks to forge a new path for the IFC,greater cohesion and coherence in policy-makingcan be expected with the creation of the EconomicDevelopment Board (EDB), which should promotegreater competitiveness. Shamima Mallam-Hassamconsiders that, while there is no doubting the meritsof the EDB, it should be ensured that every sectorunder its umbrella benefits from full recognition andis equipped with proper resources to promote theFinancial Services sector.

Marc Hein, who has formerly served as Chairman ofthe FSC, emphasised that the setting up of the EDBshould be lauded in its bid to push ahead the agendathat was set up by the now defunct institutions suchas Board of Investment and the Financial ServicesPromotion Agency. “What is needed are effective

Marc Hein, SC, GOSK, Chairman atJuristconsult Chambers

Kevin Ramkaloan, CEO of Business Mauritius

Dean Lam, Managing Director ofHSBC Bank (Mauritius) Limited

“The Blueprintcould be a gamechanger”Kevin Ramkaloan

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marketing, keeping abreast on progress made bycompeting corporate and financial centres as well asways to deal with OECD imposed constraints.”

Graham Sheward has expressed concern aboutconcentration risk in Mauritius over past years, notingan over-reliance on India, and considers that theportfolio of products and services should beenhanced and diversified in order to compete on anequal footing with the likes of Singapore and Dubai.

“The global consolidation by reputed internationalfirms goes in the right direction to help leverage abroadened service offering and the jurisdiction’sreach in tapping new markets, whetheraccompanying clients in Cayman Islands,Luxembourg or the Netherlands,” he says.

Moving up the value chain

Diversification and the deepening of the entiregamut of activities and services will play a huge partin adding certainty to the Global Business Sectorcutting across the spectrum. Shamima Mallam-Hassam firmly believes that Mauritius must be in aposition to expand and scale up value-added chainservices to position itself as a private wealthjurisdiction that would go a long way to attractleading international brand names and private banks.

“There are so many things that can be offered rightfrom a domicile of choice for captive insurance andreinsurance, the introduction of a regionalpassporting regime for African funds, establishing theMauritius IFC as an ideal platform for asset holding,setting the enabling framework for Islamic Financeproducts and building the right ecosystem to emergeas a regional FinTech hub, among others,” sheexplains.

Marc Hein believes that it will be essential to amendthe laws in order to stay ahead of the curve in fieldssuch as aircraft, shipping finance, and registrationwhile insisting on the consolidation of captiveinsurance sector that must be engineered tostimulate growth. He also sees the need toimplement the concept of e-residency which iswitnessing a boom in Estonia.

When it comes to innovation, Blockchain remains animportant segment that is developing at a freneticpace. Mr Hein says, “We need to be resourceful, boldand swift in our approach from a legal and regulatorypoint of view to attract FinTech players to thejurisdiction while overseeing the extent to whichBlockchain application can be used not only locally

but to set the pace to emerge as a market ofreference.” Dean Lam also pointed to the relevanceof crypto-currencies in making Mauritius a FinTechhub. In the broader technological space, he notesthat, “The increasing demand coming from regulatorswould necessitate more and more investment in ITinfrastructure and Artificial Intelligence solutionswhile enhancing customer experience and servicesas a whole.”

The upgrading of skills in the Financial Services mayalso have a domino effect, with Graham Shewardsuggesting that, “There is a need to drive the righttalents on the market with professionals such asasset managers, fund specialists, investment bankersand private equity specialists, just to name a few.”

Towards a new Blueprint

The future path of the Mauritius IFC will be guidedby the outcome of the 10 Year Blueprint for theFinancial Services Sector, as announced in theNational Budget of 2017, with governmentauthorities and industry currently engaging indiscussions, and with the global consultancy firmMcKinsey & Co appointed to provide support.

The CEO of Business Mauritius, Kevin Ramkaloan,considers that the Blueprint could be a game changerthat would offer a long-term desirable businessmodel to foster growth in a future which will belargely reliant on playing by global rules such asKnow Your Customer (KYC), substance, and transferpricing to attract global banks and law firms to thelocal shores.

Concluding on a positive note, Shamima Mallam-Hassam considers that, “There is a need to furtherimprove our offerings since constant remodellingrepresents the key to ensure success and thenurturing process can hopefully take shape throughthe elaboration of the Blueprint for the FinancialServices sector.”

“It is fitting for Mauritius toposition itself as the trade andinvestment hub in the region”Dean Lam

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What next for ourGlobal Business sector?The Global Business sector is at a crossroads, 25 years after its inception, and it maybe time to think more in terms of global business than 'Global Business' to reflectfuture ambitions, in view of consolidation in the sector and growth in intra-Africatransactions

As the Global Business sector comes to termswith the reality of an ever changing interna-tional landscape, it is perhaps time to step

back and look at the future with a fresh pair of eyes.Indeed, the world is constantly evolving. Disruptivetechnologies such as blockchain and the Internet ofThings are threatening the status quo. The problemsof today cannot be fixed by the solutions of yester-day. The same applies to our Global Business sector.

Facing Challenges

Already, the first wake-up call came with therevisions to the India/Mauritius double taxationagreement. So far, it hasn’t been the doom and gloomthat some had predicted, although time will tell whatthe full impact will be. However, until then, our sectorfaces an even bigger challenge with the OECD’s BaseErosion and Profit Shifting (BEPS) project. Challengesoften bring the best out of us, so we remainoptimistic that it will also be the case for our sector.How timely then that a Blueprint for the FinancialServices industry is just around the corner. Itsrecommendations are eagerly awaited.

The BEPS project effectively calls for a rewrite ofinternational tax law, with the aim of establishing thecoherence of international corporate taxation. Indoing so, it seeks a realignment of taxation andsubstance and also addresses the need for moretransparency in international business. For manyyears, substance requirements were limited to amere box-ticking exercise. The rules of the gamehave changed: businesses now need to demonstratereal economic substance that leads to value creationin the jurisdiction. Moreover, the favourable taxframework which underpins the Global Businesssector, which has arguably been its most attractive

feature, is now being challenged in parts.

The latest available figures show that the GlobalBusiness sector manages assets 50 times worth thecountry’s GDP, and contributes 6 per cent to the GDPand 6.5 per cent to tax revenue. Around 3 per cent oftotal employment is generated from the sector,directly or indirectly. While the importance of thesector cannot be underestimated, there is amplescope to enhance its contribution to the economymainly through a successful transition to higher-value activities. The need to do so will be felt strongly

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in the context of the removal of tax benefits, as rightlypointed by the IMF in its report issued last November.

Enhancing the eco-system

Anticipating future trends in an ever changingenvironment is not easy. Innovative activities andprojects are critical, but they are not sufficient ontheir own. New regimes and incentives such as thoseintroduced a couple of years ago require time to takeoff, despite the generous tax holidays thataccompany them. What is needed is anenhancement to the eco-system to make it moreconducive for the type of business the jurisdictionwants to attract. This requires that we address suchconcerns as the difficulty for businesses to sourcefinance locally when their assets are offshore, andthe limited connectivity to Africa. There is noguarantee that the competitive advantage thatMauritius enjoys today will last forever. Otherregional players are catching up fast.

Enhancements to the existing compliance andregulatory framework are needed, whilst theidentification and development of talent is essentialto respond to future demands. On the internationalfront, the current efforts to increase the visibility ofour International Financial Centre (IFC) should beintensified, leveraging on deeper internationalcollaboration and exposure, and showcasing thevalue of our IFC.

Targeting diplomacy

In the same vein, our country’s Africa strategy shouldbe pursued relentlessly, both from the economic anddiplomatic standpoints. We should not forget thatdiplomacy has played a critical role in thedevelopment and prosperity of Mauritius since theturn of independence. As we turn increasingly toAfrica for opportunities, we should make sure thatour diplomatic efforts on the continent match ourambition. Our commitment to increasing the number

of our diplomatic representations in Africa is mostwelcome and so is the realisation that we need theright personnel to be the economic ambassadors ofour nation. Although we do form part of trading blocsand have signed economic partnership agreements,renewed and targeted diplomacy can unlock newdoors for the country and for our sector.

Towards a level playing field?

The integration of Global Business with the rest ofthe economy is another area which remains largelyunexplored. One may recall how the country’smanufacturing sector only really flourished oncelimitations around restricted Export Processing Zoneswere lifted and the sector became mainstream. Wecan draw a parallel with our Global Business sectortoday which is dissociated from the rest of theeconomy. The investors and businesses operating inthe sector bring along a tremendous amount ofwealth, knowledge, and experience which should becaptured to benefit the domestic economy morefully. The social and economic impact of a successfulintegration could be hugely beneficial if managedproperly.

Ultimately, it may be time that we thought more interms of global business than “Global Business” toadequately reflect our future ambitions. Manydomestic companies are involved in internationaltrade and transactions, despite not being players inthe Global Business sector. Consolidation and otherchanges in the sector also mean that an increasingamount of international business is being carried outin Mauritius beyond the traditional Global Businessactivities. We see more intra-Africa transactions, forexample, where we are called to add value indifferent ways. The distinction between GlobalBusiness companies and domestic companies interms of taxation is expected to be phased out in theforthcoming tax reform, creating a level playing field.Perhaps this is a sign of things to come?

A new page is about to be written in thedevelopment of our Global Business sector. Twenty-five years after its inception, we find ourselves at acrossroads. What will shape the sector over the nexttwenty-five years? By then, driverless cars may bethe norm, crypto-currencies may be legal tender, andmachines fuelled by artificial intelligence may haveovertaken humans. “Substance” will have to beredefined at that point. But for now, we need a newvision in order to successfully tackle the challengesthat lie ahead, in an environment where the onlyconstant is change.

By Fazeel Soyfoo, Director of Tax, ABAX

A new page isabout to be writtenin the developmentof our GlobalBusiness sector.

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Financial Services in IndependentMauritius: Clairvoyance in ActionMonetary policymaking, which has conventionally been the most important activityof central banks, has undergone drastic changes in formulation and implementationsince Independence, and plays a key role in the advancement of the Mauritianeconomy

In the context of the celebrations marking the 50Years of Independence, this article provides anoverview of selected measures taken in the fi-

nancial services industry that have had a profoundeffect in shaping the structure, efficiency and com-petitiveness of the Mauritian financial landscape. Thefinancial services policy and regulatory strategy hascontinuously evolved in line with best internationalpractice with the overarching aim of protecting thesoundness and promoting the advancement of theMauritian economy, and by ricochet the welfare ofthe people of Mauritius.

Safeguarding Credibility

The regulators, together with operators, have overthe past five decades constantly engaged in

intelligent proactive positioning or adjustment and,where necessary radical changes, in theformulation of interest rate, exchange rate,payment systems, credit information, supervisoryand regulatory policies to safeguard credibility ofthe Mauritian financial system. Through monetarypolicy, the Bank of Mauritius (the Bank) has been akey promoter of economic development whilstkeeping a constant check on inflation, thusensuring that growth is beneficial to the entirespectrum of the Mauritian economy andencourages durable employment.

Monetary policymaking, which has conventionallybeen the most important activity of central banks,has undergone drastic changes in formulation and

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implementation. The Bank has travelled a long way,from an era of monetary control, exchange control,administrative interest rates and pegged exchangerates in nascent Independent Mauritius to asophisticated contemporary policy environmentcharacterised by operational independence,heightened accountability and market-basedmechanisms. Decision-making on the policy interestrate (Key Repo Rate) has, over the past decade, beenmade by the Monetary Policy Committee (MPC),chaired by the Governor of the Bank and comprisingexternal independent members as well, whichextensively evaluates the economic outlook andproceeds by majority voting. In return for suchaccrued independence granted by the legislator, theBank faces a duty of enhanced accountability anddelivers through transparent regular communicationwith stakeholders and the public in general, usingseveral media outlets. For example, in line withinternational practice, the Governor holds a pressconference after each MPC meeting to explain theinterest rate decision.

Implementation of monetary policy decisions, whichused to hinge on administrative directives, is nowtypically performed through market-basedoperations in the form of repurchase transactionsand dealings in Bank of Mauritius securities. Inaddition, with Mauritius having an open capital andfinancial account in the Balance of Payments as wellas operating a managed floating exchange rateregime, the Bank has to ensure that interest rates andexchange rates in the country are at levels that arecompatible with soundness and stability of thefinancial system.

Uplifting Economic Growth

Since the onset of the financial crisis in August 2007,central banks around the globe including the Bankof Mauritius have occupied the centre stage in

ramping up their respective economy and rebuildingcredibility in the international financial system. TheBank has, in close coordination with the fiscalauthorities, been a key contributor in safeguardingand uplifting Mauritian economic growth over thelast decade through an accommodative monetarypolicy.

Financial stability has now become a prime policyobjective of financial services regulators worldwide.In Mauritius, the Governor of the Bank and the ChiefExecutive of the Financial Services Commission (theCommission) are members of the Financial StabilityCommittee, chaired by the Finance Minister. The Bankhas been upgrading capabilities in the post-crisis erain topical areas related to financial stability forproactive effective policymaking. The Commission,as the integrated non-bank financial servicesregulator, has been beefing up the supervisory andregulatory arsenal in order to undertakecomprehensive assessment of the state of thefinancial sector.

Looking to the Future

Turning to the future, the financial services industryfaces fresh key challenges in the burgeoning field offinancial technology. The recent establishment of theFinTech Regulatory Committee aiming to pave theway for Mauritius to become a FinTech hub of soundrepute demonstrates the commitment of theauthorities towards promoting innovative finance inorder to lead in the region. The Governor of the Bankand the Chief Executive of the Commission, asmembers of the Committee, will surely have criticalinputs to make for achieving the overall set target.Use of Distributed Ledger Technology (DLT) in thefinancial services sector and the design of asovereign digital currency are potential areas wherethe FinTech Regulatory Committee would have aleading role.

The legislators, together with financial servicesregulators and operators, have always responded tothe call of duty in upgrading and modernising theMauritian financial sector. On this occasion of theGolden Jubilee of Independent Mauritius, we shallsurely join forces to respond successfully to the newchallenge of turning Mauritius into a regional FinTechhub through a consultative approach, approving theright strategies and catering for risk factors in thedesign of appropriate regulations and infrastructure.

Long Live Mauritius!

By Jameel Khadaroo, Senior Adviser, Deloitte Mauritius

The Bank has been upgradingcapabilities in thepost-crisis era

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Mauritius has come a long way over the last 50 years, and four fundamentalconcepts can provide some insights into how the local financial services landscapemay evolve against a backdrop of increasingly pervasive international regulationand transformational digitization

Hurrah for the first 50 Years

Mauritius has come a long way since V.S.Naipal’s damning 1972 account of the island as an “overcrowded baracoon”.

As we celebrate our momentous 50th Year of Independence, let there be no mistake - it would befoolish to expect the next 50 years to be at all the same. The next 10 years alone hold a promise ofradical change still largely beyond our grasp.

The four fundamental concepts below provide some insights into how our local landscape may be expected to evolve against a backdrop ofincreasingly pervasive international regulation, andtransformational digitization.

Transparency and Accountability: the way forward

Have you heard of FATCA1, CRS2 or OECD BEPSmeasures3? Dizzying acronyms aside, the trend isclearly set in the direction of greater collaborationbetween countries, though arguably not always onequitable terms. One leading reason has been togradually eliminate the loopholes in internationaland domestic tax frameworks as the discoursearound the morality of previously establishedpractices has changed. Countries such as Mauritius,trying to carve out a place on the international scene,have been seeking to demonstrate conformity andbest practice in alignment with the initiativesemanating from the OECD or US.

The interconnected nature of global trade, coupledwith an increasingly nuanced understanding of theinternational structures facilitating illicit flows ofmoney, also make for more stringent due diligenceverifications on identity and source of funds by

financial institutions. The compliance function iscalled upon to grow out of its checklist role and takeon a more engaged presence in business operations.This inevitably comes at a cost with one internationalsurvey4 indicating that in 2017, 70% of firmsexpected the focus on managing regulatory risk torise, and 60% of firms expecting senior skilled staffto cost more compared to previous years. Theimplementation of the National Code of Corporate

Tackling the future of Financial Services:

Four key underlying principles not to lose sight of

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Governance also heralds the advent of a newbaseline aligning Mauritius to international norms.

Data Protection; A Tool for CitizenEmpowerment

Still in the realm of international frameworks withdomestic reach, drastic new measures introduced bythe EU set the tone for a different power dynamicbetween individuals and the companies that dealwith their sensitive data. The EU’s General DataProtection Regulations will come into effect on the25 May 2018, with the Mauritian counterpartlegislation, the Data Protection Act 2017, in effect inMauritius since January 2018.

The right to be forgotten, as well as more harmonizedapproaches to ownership and transfer of data,consent and dissemination practices, all set a cleartone for promoting individual empowerment,protecting privacy, and generally overhauling howorganizations are expected to deal with data. Theeffects are far reaching, as can be surmised fromFacebook’s announcement in January that it wasrolling out new privacy settings rather than risk a fineof up to $1.1bn.

Technology; The 4th IndustrialRevolution Is Not Coming, It’s Here

And then there was Technology. When we thinkabout technological changes, the words “FinTech”and “RegTech” come to our mind. Without beingreductionist, it suffices to remind ourselves that disruptive technologies cover a vast array of new possibilities from Artificial Intelligence, tocryptocurrencies, to cloud computing, to robotics; therepercussions of which transcend financial servicesdelivery and impact upon the very foundations ofhow businesses are run in the first place.

The basic premise of the 4th Industrial Revolution5, as

introduced by World Economic Forum in 2016 wasexpressed as follows: “The changes we are facing areso profound that, from the perspective of humanhistory, there has never been a time of greaterpromise or potential peril.”

In the same way the internet started out as a web-based platform but now permeates everyconceivable aspect of our daily work, thetechnological breakthroughs we expect to see in thecoming years are coming at an exponential pace.They are disrupting almost every industry in everycountry. How we live, work, and interact is set for aparadigm shift. We do not yet fully understand howour businesses will be called upon to evolve in thelong term, as we cannot even fully conceive theimpact of technology on our lives. In the face of suchaccelerating change, the businesses and jurisdictionsdemonstrating agility and preparation have the bestchance of staying relevant.

Capacity Building & Training; The Eternal Learning Curve

One of the repercussions of automated andstreamlined processes is that the role of the humanbeing will be called into question. Indeed, it has beenestimated6 that 85% of the jobs which people willbe performing in 2030 do not exist today.

One outcome of this is that organizations will have toconstantly engage in the exploration of new skillsand undertake more specialized tasks requiring ahuman element for risk assessment, analysis andinterpretation. Automation is not set to replacehumans as much as certain processes in theforeseeable future. The pace of change however, as outlined above, is expected to bring about ‘in-the-moment’ learning with the use of augmented reality.Ongoing learning is to become a staple of theworkplace of tomorrow.

A fluid learning environment would ideally take intoaccount diversity in the workplace to promoteexposure and creative problem-solving. Diversity isincreasingly deemed to be a key differentiator ofinnovative organizations, be it gender-based,generational, cultural as well as skills-based.

Conclusion

As we continue to bank on people capital and aservice economy, the organizations embracing agilityand developing structures for client accountabilitywill be the ones to surf the wave of change ratherthan be submerged by it.

By Tariq Caramtali, Senior Compliance Consultant,Temple Professionals

The compliancefunction is called upon togrow out of itschecklist role

1. Foreign Account Tax Compliance Act2. CRS – Common Reporting Standards3. Organisation for Economic Co-operation

and Development measures against Base Erosion and Profit Shifting

4. Cost of Compliance Report 2017 publishedby Thomson Reuters

5. “The Fourth Industrial Revolution”, authored by Klaus Schwab, Founder and Executive Chairman of the World Economic Forum, and published by the World Economic Forum in 2016

6. Dell Technologies - Emerging Technologies’ Impact on Society & Work In 2030 The Next Era Of Human-Machine Partnerships

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INTERVIEW

CHARLES CARTIERCHAIRMAN, ECONOMIC DEVELOPMENT BOARD

“We want a Mauritiuswhere there is high qualityof life for all inhabitants”The Chairman of the Economic Development Board (EDB), set up in January 2018,explains that the challenges of today require an even more coherent approach interms of positioning Mauritius as an investment destination and as a trade andservices platform

The Economic Development Board hasbecome operational as from Januarythis year following the merger of theBoard of Investment, EnterpriseMauritius and the Financial ServicesPromotion Agency. Why was there aneed for this merger, and what role isthis new institution expected to play? We are celebrating our 50th anniversary as anindependent nation this year, and over time, therehas been the need to continuously realign ourinstitutional setup to adapt to changing local andglobal economic conditions. In fact, the Board ofInvestment itself was the product of a merger ofMEDIA, MFA and an earlier FSPA at some point intime, while Enterprise Mauritius was formedfollowing the integration of EPZDA, MIDA and SUBEX-M. All these institutions have contributedsignificantly in the development of the Mauritius thatwe know.

However, the challenges of today require an evenmore coherent approach in terms of positioningMauritius as an investment destination and as a tradeand services platform. These are major contributorsto development, and there has been the need forsome time now for a complementarity of actionsfrom policymakers to ensure that we reap maximumbenefits from marketing and promotional efforts,which will, inter alia, be done by the EconomicDevelopment Board. Furthermore, as a continuation

of the promotional efforts, facilitation and aftercare,as important variables in the overall sustainable andinclusive business equation, will be undertaken bythe same institution, offering visibility andconfidence to investors and other businesspersons.

Most importantly though, the EDB will aim at filling avoid that existed in terms of concerted policymaking,yielding subpar results following announcedGovernment measures and actions. In the absence ofan overarching body with the mandate of guidingpolicy, developing appropriate strategies andassessing viability of projects undertaken, there havebeen duplications, scattered actions and opinion-based measures resulting in more confusion insteadof providing a clear direction for the economy. TheEDB will attempt at filling this gap, with its mandate toundertake research for the purpose of policy-making.This function will be carried out in close collaborationwith different ministries, the private sector and civilsociety to fulfill the vision of Government.

“The financial services sector hasgrown from strength to strengthsince the 1990s”

As you have mentioned, the EDB isexpected to be key in driving theeconomic agenda of the Governmentand achieve its vision. What is thisvision for the economy and thepopulation?The vision is a simple one - we want a Mauritiuswhere there is high quality of life for all inhabitants.This quality of life is multi-dimensional,encompassing a good healthcare system, qualityeducation, safety, a clean environment, moderninfrastructure as well as decent work and income.There are several means to achieve this, prime ofwhich being economic growth. In this respect, wehave set ourselves the target of becoming a high-income economy, pulling ourselves from themiddle-income trap that is often the bane ofemerging countries.

Of course, GDP growth in itself is merely animprovement in production. We should ensure that,through the right policies, the economic gains thatwill accrue translate to the wider population,reducing inequality and eradicating poverty. Thus,policies that we develop should focus on thecreation of high-value added jobs for the populationwhile creating a living environment that suits theaspirations of each and every one in Mauritius.

The action plan of the EDB will therefore focus onactionable areas that will ultimately help achievethese very objectives, and certain of these enablershave been identified.

What are the priorities of the EDBtoday?The utmost priority today reflects the operationaldemands based on the enlarged mandate of the EDBand the expectations of the Government. We are inthe process of recruiting a CEO and the Head of theStrategic Planning Directorate, and thereafter willfollow an organizational realignment within the EDB.So far, we have opted to maintain a quasi-unchangedstructure keeping the functions of the entities thathave merged to prevent any major disruption inactivities while we work on the new structure. AStrategic Planning unit has already been set upnonetheless to start working on the upcomingbudget, as we understand that planning requirespatience and that research for policy takes time.What we want to avoid are half-baked measures andincoherencies in the next budget.

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“Fintech will certainly play a major role in this newparadigm”

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INTERVIEW

The Board has meanwhile identified certain more‘strategic’ priorities. It should be remembered thatone of the reasons for the merger was the avoidanceof duplication of promotional missions andimproving our country branding, thus reducing oreven eliminating wastages. The Board is alreadyworking with the management on a concertedmarketing plan based on thorough market researchand on our production potential.

In addition, the Strategic Planning unit is alreadyworking on several subjects that could form thebasis of measures for the budget. In parallel,consultations have already started, includingthrough sector-specific commissions that have beenset up, to identify bottlenecks and ways to addressthem as well as devising appropriate instruments tocapture the benefits from opportunities that arecropping up.

The financial services sector has beenpositioned as one of the key enablers ofthe new development model. What isthe strategy for this sector?The financial services sector has grown from strength

to strength since the 1990s, when a clear strategywas elaborated. The success, it should be conceded,has been driven to a large extent by the dynamism ofthe offshore segment. However, the treaty-basedmodel for the sector cannot be sustained anymore, inparticular with changing global requirements andstandards on taxation. The Prime Minister has alreadyannounced an upcoming blueprint for the financialservices industry, and this will pave the way towardsa more substance-based approach for thedevelopment of the sector.

Fintech will certainly play a major role in this newparadigm. We have an already sophisticated financialservices sector, and our ICT capacities are also welldeveloped. So, the technical abilities to tap in thebenefits that such disruptive endeavours offer arealready present. The ecosystem is being built up, withthe Regulatory Sandbox License and the forthcomingFintech Association. The FSC has also set up aCommittee on Fintech, as well as proposing thesetting up of a sovereign fund for such projects. Theneed today is to have more collaboration betweeninstitutions to attract start-ups in this particular fieldand make the most of Fintech solutions.

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INNOVATION

How can Mauritiusdevelop as a hub forFinTech and Blockchain?With the setting up of a new Regulatory Committee on FinTech and Innovation-Driven Financial Services by the Financial Services Commission,leading players share their perspectives on the steps to be taken to put Mauritius on the global map as a hub for innovation in financial services

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HARVESH SEEGOLAM,CHIEF EXECUTIVE, FINANCIAL SERVICES COMMISSION

The FinTech and Innovation-Driven Financial ServicesRegulatory Committee [whichhas been established under theauspices of the FinancialServices Commission (FSC), andchaired by Lord Meghnad Desai of the UKHouse of Lords, with members participatingin the Regulatory Committee including LordSt John of Bletso of the UK House of Lords,Ms Loretta Joseph, Chair of the AustralianDigital Currency and Commerce Association;Mr Nishith Desai, Founder of the Nishith DesaiAssociates Law Firm in India; Mr YandraduthGoogoolye, Governor of the Bank of Mauritiusand Mr Rajesh Sharma Ramloll S.C, DeputySolicitor General, and which held its firstmeeting on 9 February 2018] has been set

up with the specific mandatein line with our strategy todevelop and encourageinnovation-driven financialservices activities in Mauritius.The Committee initially

undertook an assessment of the currentregulatory set-up with respect to FinTech andInnovation-driven Financial ServicesRegulations. It will further identify priorityareas within the FinTech space and makerecommendations on the need to introducenew sets of regulations for those activities.

In terms of the possible establishment of asovereign fund, it has been observed that innumerous jurisdictions, sovereign fundshave been set up to promote Fintech

activities. In this respect, on the side-lines ofthe Committee meeting, the possibility ofestablishing a sovereign fund to promoteFintech activities was discussed. In thisrespect, this idea will be channelled to therelevant quarters.

In terms of the next steps, the Committeewill submit its final report in April this year.This report will be instrumental in furtherenabling innovation-driven financialservices and related activities in Mauritius. Itis also important to note that any regulatorychanges recommended in the report will bein line with the best international norms andpractices. We are also looking to establishMauritius as a benchmark for regulating ofFinTech in the region.

Innovation thrives when the right conditionsexist. This means having a robustinfrastructure, regulatory clarity, skilledlabour, an environment that favours learningfrom mistake and failures, the ability tocommunicate on a global stage and accessto capital. Commercializing innovativeventures in hyper-growth industries can leadto explosive wealth creation.

Mauritius benefits from a goodinfrastructure, a bilingual population, askilled workforce and the mechanisms of aRegulatory Sandbox License (RSL) schemethat is flexible enough to allow innovationto flourish without the burden ofuncertainty. Mixing these together shouldenable Foreign Direct Investment (FDI), or anemerging subset of FDI, namely ForeignDirect Crypto Investment (FDCI) to follow

suit. I’m a firm believer that FDIdoesn’t drive innovation,rather innovation and theenvironment that creates it,drives FDI.

One of the previous challengesfor Mauritius was itsremoteness from centres ofinnovative activity, but physical presence in alocality is no longer a prerequisite to thecommercialization of innovative ventures.Indeed, business models are becomingdecentralized. Access to capital is becomingdemocratized and less constrained bytraditional banking. This is the reason whyDubai, Isle of Man, Gibraltar and other smallernations are very serious about Blockchain andinnovation. They see it as an opportunity,which I believe Mauritius shares, to become

global innovation and wealthcreation centres.

The industry is currentlymaturing, so the sky is the limitfor Mauritian entrepreneursthat can use Blockchain tosolve problems. For Mauritiusas a nation, it has the

opportunity to showcase its transformationfrom an analogue economy into a digital oneunderpinned by Blockchain technology. Thismeans reinventing KYC, Blockchain assetexchanges, land title registries, notarizations,financial markets, maybe even a nationalMauritian Rupee on the Blockchain. Oncethis knowledge base acquired, it can resultin significant export revenues for Mauritiusby providing solutions or leveragingguidance to other nations.

JAMES DUCHENNE, CHIEF OPERATING OFFICER AT CROWD MACHINE

AND HONORARY REPRESENTATIVE OF THE BOARD OF INVESTMENT IN THE UNITED STATES

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ASHVIN KRISHNA DWARKA, LAW PRACTITIONER AND NOTARY

The Blockchain is a computer algorithm thatserves to create, maintain and update adecentralised and (theoretically) indelibleledger of transactions. It is decentralisedbecause it is not operated on a single server,but on several participating computerscalled nodes, who can all have access to thedata recorded without having to depend ona central authority.

When it comes to private cryptocurrencies,there is growing consensus that they aredevoid of inherent value if issued outsidethe regulated financial system. If Mauritiuswants to explore this area, only the CentralBank should be legally allowed to issuecryptocurrencies, on the essential conditionthat they are asset-backed.

Since technology evolves so fast, we are

already witnessing flaws inthe Blockchain mechanism.Two blatant examples are (i)reward-based mining (i.e. theeconomic incentive that theoperator of a node has toperform work to update theBlockchain ledger) whichmeans that nodes are notnecessarily acting impartially and (ii) theunchecked growth of digital ledgers, whichbecome so large that only a handful ofpowerful servers, and not individualcomputers, are capable of remaininginvolved. Just imagine the consequencesof a Mauritian Blockchain getting hijackedby the more powerful servers of a foreignState! Fortunately, the evolution oftechnology can also remedy theseproblems.

Looking forward, Blockchain-based databases can bedesigned in Mauritius beforebeing exported to our Africanneighbours who are in direneed of a reliable LandRegistry, or those who need asecure system to hold medicalrecords or keep track of

financial transactions.

If we play our cards well, with ourreputation as a secure democratic Statewith a strong legal system, we should evenbecome the automatic choice for hostingthe nodes and servers that would operatethe Blockchain (or ideally Tangle which islike Blockchain with superpowers) basedledger systems that we export to theAfrican continent.

We are writing the rules for theresponsible adoption ofBlockchain technology inMauritius. The eco-systemaround Blockchain is veryfragmented, which dates backto around 2008, and we see alot of jurisdictional arbitrage.There are a lot of countrieswriting around technology and ICOs but a lotof them are not jurisdictions which have afinancial services background. Mauritius hasa fabulous financial services backgroundand a really good reputation.

Regulation never moves as fast asinnovation and can’t keep up. It isimportant to find the happy medium

where regulation andindustry come together, andto build an eco-system whereinnovators can build and becomfortable. When it comesto the potential role of asovereign fund, it isimportant to note that US$ 8billion has been raised in

ICOs (Initial Coin Offerings) in the last threeyears, which is a lot of money, but there hasbeen no regulation. How do you foster theinvestment and build the regulationaround it, to allow for a new wave of capitalraising? We are now on track to writeregulations on ICOs which show that wehave a comfortable jurisdiction with properlaws in Mauritius where people will come.

We will be moving quickly as the eco-system has grown so much in the last fewyears, and every Head of State has this ontheir radar. If we don’t do it, someone elsewill.

If we look at the international scene, nocountry has yet got it right as an overallpackage. Gibraltar is trying to regulate thetechnology, but how do you do that? Thereis no longevity if you don’t have a financialservices centre, and Mauritius, India andAfrica have all established financial serviceshubs. Regulation needs not to becumbersome, and regulators are still tryingto understand a whole new eco-system. Ifregulations look backwards then they won’twork in the new world.

LORETTA JOSEPH, MEMBER OF THE FINTECH AND INNOVATION-DRIVEN FINANCIAL SERVICES

REGULATORY COMMITTEE, CHAIR OF THE AUSTRALIAN DIGITAL CURRENCY AND COMMERCE ASSOCIATION

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BENJAMIN YABLONEXECUTIVE VICE PRESIDENT & DIRECTOR OF GLOBAL STRATEGY, SALT LENDING HOLDINGS, INC., AND SPECIAL ADVISER, ORGANIZATION FOR ECONOMIC COOPERATION AND DEVELOPMENT (OECD)

Mauritius has a bright future and an amazing opportunity in its 50th year ofIndependence to grab the mantle of Blockchain Island, says Benjamin Yablon, whosees that the nation is taking an admirable path by carefully screening candidatesyet allowing businesses to grow

“Legislation in line with international norms is a must ifMauritius is to take its place amongthe world’s blockchain centres”

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Your company SALT Technology, Ltd., asubsidiary of US-based blockchainlending platform Salt Lending Holdings,Inc., was one of the first to obtain aRegulatory Sandbox Licence inMauritius. Why did you choose to applyfor such a licence in Mauritius, asopposed to London or Singapore, forexample? The decision to seek the Mauritian Sandbox Licensewas driven by two interrelated factors. The firstrelates to the strategic geographic location thatMauritius enjoys. The second key factor was thewarm reception that SALT received from the businessand regulatory communities in Mauritius. We aredeeply honored to be one of the first blockchainprojects to have a presence here.

What kind of operations have you set upin Mauritius, and what has been yourexperience so far? We have created an entity that will help further ourcore business initiatives through agreements withour parent and subsidiary companies. Theexperience has been eye-opening and rewarding. I’vebeen the most impressed by the manner in which theGovernment and the State Bank have taken ameasured and caring approach to the opportunitypresented by blockchain. Many places have been toofast to either ban things they didn’t understand orembrace them out of a perceived need to stay aheadof the competition. Mauritius is taking an admirablepath by carefully screening candidates yet allowingbusinesses to grow.

What is your view of RegulatorySandbox Licences and their usefulnessfor innovative operations such as yourown? In the UK, the FCA is looking intothe introduction of a Global Sandbox,where new ideas can be tested inparallel in a number of internationaljurisdictions, is this something whichMauritius should consider? The RSL framework is a useful tool for companies thatare testing out a particular product and may need toadjust their business strategies to meet changingmarket dynamics. The RSL provides a great deal offlexibility to understand how the business should bepositioned long term, and under whose ultimateregulatory jurisdiction particular products reside.

As someone who is very much involvedin international debates, including at

OECD level, on blockchain and its futureapplications, is it true to say thatblockchain will revolutionise thefinancial services sector and, if so, how? As Special Advisor to the OECD I'm tasked withhelping to formulate global policy recommendationsaround the deployment and utility of differentblockchain use cases. To that end I’ve spoken beforethe OECD’s Secretary General and Heads ofDirectorates, and most recently at the 2018Ministerial Conference in Mexico City. Ourconversations relate directly to the dramaticmovement underway to represent nearly everythingof value on blockchains. This will revolutionize theway in which we interact with money because it willchange what money is. Take for instance the way thatreal estate is bought and sold traditionally. Using theblockchain we will be able to transfer the ownershipto a piece of property instantly and with completesecurity. This tokenized representation of a piece ofreal estate will be transferable and divisible inessentially the same way a bitcoin is today. Tokenizedrepresentations of other assets like stocks and bondswill be similarly transferable and divisible, increasingnot only the velocity of money, but also the velocityof the movement of value itself by many orders ofmagnitude. Leveraging these newly tokenized assetsis where SALT's business is positioned.

In recent weeks, we have seenvaluations of cryptocurrencies on arollercoaster ride, with dramatic peaksand dips. How would you respond tothose who say that Bitcoin and othercryptocurrencies are a ‘bubble’? Whatwould be the right regulatory approachfor Mauritius and others to adopt? The real story is not cryptocurrencies, it is thetokenization of nearly all forms of value unfolding ata staggering pace before our eyes. The revolution isin how we perceive and interact with value and theever-increasing speed at which these interactionswill occur as a result of the blockchain. Like manyassets, cryptocurrencies can be highly volatile. Thereasons behind the current market swings are amatter of constant debate. Some of the factors that

“In terms of regulation, consumer protection is important”

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are likely driving the price swings relate to the factthat futures contracts have recently been introducedinto the system. These products have allowedinvestors to take various long and short positions incrypto. This created a situation that many believedrove the underlying price up higher than it shouldhave been in a very short period of time, and thenbrought it down again just as quickly.

Another fact of cryptocurrencies is that they haverecently begun to draw a large amount of attentionfrom traditional media sources, which in turn drivesup consumer interest - and price - which then furtherdrives up media attention. New adopters are skittishand tend to follow the news cycle. When newscoverage is negative, many new adopters flee themarket. This in turn drives the negative news cycle -and price - down further than market corrections inmore mature asset classes. As the crypto marketbegins to mature it would seem likely that the wildprice oscillations will begin to stabilize. I’m not aninvestment advisor, but common sense dictates thatconsumers should be wary of anything that soundstoo good to be true and should only invest fundsthey are prepared to lose in anything they don’t fullyunderstand.

Legislation in line with international norms is a mustif Mauritius is to take its place among the world's

blockchain centres. In terms of regulation, consumerprotection is important. Only compliant, regulatedentities should be allowed to participate in theMauritian economy. Depending on the type ofproducts a company is offering, many existing rulesare sufficient.

Mauritius, like other forward-thinking marketeconomies, should regulate most blockchain assetsas they would for gold or stocks, rather than ascurrencies. Adopting the consensus view - whichrecognizes most blockchain assets as akin to gold orstocks for tax purposes - would allow compliantentities to interact with them in the regular course oftheir businesses while maintaining a high level ofconsumer protection. Mauritius has a bright futureand an amazing opportunity in its 50th year ofIndependence to grab the mantle of BlockchainIsland.

“Only compliant, regulated entitiesshould be allowed to participate inthe Mauritian economy”

Benjamin Yablon was one of the speakers at the February 2018 OECD SME Ministerial Conference on “Strengthening SMEs and Entrepreneurship forProductivity and Inclusive Growth

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Disruption: What nextfor the Financial Sector?The emergence of Artificial Intelligence in finance, fuelled by new platforms such asBlockchain and connected to cloud-based data, is pushing the financial sectortowards an accelerated pace of change, which may lead to an almostunrecognisable sector in thirty years from now

The discussion around the rise of Artificial In-telligence and its effect on the way we will liveis becoming increasingly prevalent. Everyone

has heard of Bitcoin with its erratic, bulbous presenceand we have now begun to question how AI is set toaffect our job markets, everyday life and our ability toremain free. Some point towards pictures of adystopian and ultra-controlled future, while othersspeak of bright prospects ahead.

AI as a real force for change

The fact is that we have already entered theunknown, forging ahead, and Artificial Intelligence is

a real force of change comparable to the IndustrialRevolution of the nineteenth century and the earlydays of the internet in the late twentieth. TheFinancial Sector and, more specifically, money itselfis an early adopter of technology. And this is wherechanges have already begun to affect us with moreinnovation and disruption to come.

Before Bitcoin became a buzzword, algorithmictrading was already a mainstay in financial markets.A significant proportion of trading already takes placewith the use of predictive algorithms.

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The emergence of Artificial Intelligence in finance,fuelled by new platforms such as Blockchain andconnected to cloud-based data, is pushing thefinancial sector towards an accelerated pace ofchange. At the current trajectory we are set for theemergence of a different operating environment inthe next half a decade and an almost unrecognisablesector in thirty years.

The nature of money is changing

The most interesting aspect of this change is the riseof the cryptocurrency. Token-based money hasbegun a process in which people, everyday people,are able to connect directly to issuers of currency.This means that the traditional financial sectorstakeholders, banks and regulators face the risk ofbeing cut out of the “money” equation. Establishedcryptocurrency markets and exchanges are a realpossibility in the near future and people will tradedirectly in these arenas. The nature of money itself,then, is changing.

Early applications of Artificial Intelligence in thefinancial services sector point towards theautomation of the bank, the investment broker andthe insurance company. Loans and insurance policieswill be assessed and underwritten by cloud-based,predictive Artificial Intelligence tools, while at thesame time people will use similar technology toinvest directly in financial markets. A chip in your carand real-time biometric data will monitor yourbehaviour and health resulting in constantlychanging insurance premiums. Banks - as wecurrently know them - will slowly begin to move frombrick-and-mortar to the cloud and onto our smartphones or their equivalent. Without the traditionalpresence of banks and the regulators behind them,finance will become democratised on one hand andhighly tailored for the individual on the other.

Changes as deep as the nature of money and theways in which we interact with it bring up importantissues. Immediate and direct access to moneymarkets and bespoke insight allows for a faster, moreefficient, flow of finance across markets and morepeople having the expertise to partake in this flow.Emerging markets will benefit greatly by the ability toleapfrog over infrastructural and institutional hurdlesthat currently hold them back.

Heading into the unknown

The way we will experience the larger and morecomplex effects of Artificial Intelligence on Finance,however, is simply not clear from the current vantagepoint. As was the case in the early years of the

internet, entrepreneurs will chase ideas and thehype, investment and bubbles will follow; money willbe won and lost before stabilisation. From theInternet of things we are moving to the Internet ofknowledge.

Beyond this initial volatility, however, is thefundamental question that will have to be addressedgoing ahead, one that always emerges in moments ofdeep financial change. This concerns the control andregulation of cloud-based financial markets.

Regulators and governments under pressure

Traditional regulators and governments are alreadyunder pressure as they play catch-up totechnological innovation. They still have de jurepower over regulation, something that will notchange in the near future, but this power isincreasingly challenged by the multinationals, andthe technology giants in particular, who have de factocontrol over the rate of innovation and the data onwhich it is based. Fierce competition between theUnited States and China in Artificial Intelligenceinnovation makes the question more complicated toanswer, with relative corporate freedom on the onehand and implicit state control on the other. IfArtificial Intelligence will increase people’s access tothe financial sector and the capacity for them tobenefit from it, we still do not know who will regulateit in their name.

The speed at which innovation is currently takingplace and the competition that drives it means thatthe future is always now, leaving little time for us tohold back these forces in order to control the result.Humans, however, are unique in their ability to adaptconstantly, building new systems to control theenvironment in which they live. So, as finance drivesthe foundation of change brought on by the rise ofArtificial Intelligence, we may have an eventfuljourney ahead, but it is going to be an exciting andthoroughly human expedition.

Mauritius to play an innovative role

Our island stands in a favourable position to play aninnovative role in participating in the Age of ArtificialIntelligence in all sectors including the FinancialSector. We have the immense talent and access toglobal finance to drive such a strategic initiative.What we require is nimbleness, proactivity, foresightand the determination to unlock this potential.

In the meantime, change will not wait for us.

By Saleem R Beebeejaun,Chairman, Warwyck PrivateBank Ltd

ArtificialIntelligenceis a realforce ofchange

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What is the contributionof Mauritius to Africa?As Mauritius seeks to forge a new path as a leading platform for trade and investments, what role is it playing in helping to build economic prosperity and growth on the continent?

While Mauritius consistently leads Africa ona number of indices, such as the WorldBank’s Doing Business Report and the Mo

Ibrahim Index of Governance, amongst others, itscontribution to the continent of Africa is not alwayswell understood. In reality, the Mauritius InternationalFinancial Centre (IFC) is emerging as a leading plat-form to encourage trade, investments and capitalraising to generate greater prosperity and growth forthe African continent.

Promoting trade and investment ties

The Mauritian Government has a long history ofpromoting trade and investment ties with thecontinent as a member of the African Union.Mauritius is also one of the founding members of theCommon Market for Eastern and Southern Africa(COMESA) and an early member of the South AfricanDevelopment Community (SADC), and hasemphasised its desire to contribute towards theeconomic development of the African continentthrough trade.

Most recently, the announcement that the MauritianGovernment and the Economic Development Boardare spearheading a New Africa Strategy has not goneunnoticed. One of the aims of the new strategy is toestablish a sound network of bilateral treaties withother African states, in addition to the existingInvestment Promotion and Protection Agreements(IPPAs) and Double Taxation Avoidance Agreements(DTAAs) which are already in place.

Mauritian companies are already identifyingopportunities to expand through exploring newavenues in Africa. Mauritian investors are alreadypresent in Madagascar, Seychelles, South Africa,Mozambique and Kenya, and Priscilla Balgobin-Bhoyrul, Barrister-at-law Balgobin Chambers adds“we have seen investment on the continent or a keeninterest to do so from Mauritian companies operatingin the banking, insurance, financial, logistics andFreeport operations sectors. Mauritius has been theflagbearer for the African continent as a model ofstability and economic prosperity, good governance,

economic freedom, standard of living anddemocracy, thus flying the African flag high.”

In terms of other initiatives, the MauritianGovernment set up the Mauritius Africa Fund toencourage domestic enterprises to invest in Africa,and committed to a maximum of MUR 500 million inthe Fund over a period of five years. It alsoparticipates as an equity partner up to 10% of theseed capital invested by the Mauritian investors inprojects targeted towards Africa.

Agreements with Ghana, Senegal and Madagascar,establishing Special Economic Zones (SEZ) in thesecountries to open up niche markets for Mauritius’export industries, have been approved. East Africa isreceiving particular attention. Mauritian firmsinjected more than US$ 50 million into the Kenyaneconomy in 2016, through acquisitions andinvestments in Kenyan companies, indicatingtightening economic links between Kenya andMauritius. So far, 49 Mauritian companies haveinvested in 14 countries in mainland Africa, in avariety of sectors including agribusiness, banking, ICTand renewable energy.

Promoting an enabling environment for funds

There are reportedly a total of 968 funds with a GBL1 licence in Mauritius, of which 466 are closed-endfunds. An increasing number of funds are impactfunds with a focus on Africa. In terms of assessing thelong-term attractiveness of those funds towards thecontinent and being the preferred domiciliation forimpact investment funds, Africa is home to asignificant portion of the world’s resources which areyet to be exploited, which explains why internationalbusinesses have elected to focus on Africa with aview to fostering their development initiatives in linewith their respective strategies.

“It is no surprise that firms from around the world areincreasingly using Mauritius to structure, coordinateand manage their investments into Africa; thus,enhancing our position as a tried, tested and trustedfinancial centre with substance. With the rise inAfrica-based Private Equity funds and internationalAfrica-focused Private Equity funds, we are alsowitnessing the emergence of a new class ofcompanies with the sole purpose of providing exit tothese funds,” stated Ravneet Chowdhury, Bank OneChief Executive Officer.

It is understandable that some may have the view

that abandoning Mauritius’ tax advantages willreduce investment into Africa, but the review of thedifferent DTAAs that Mauritius has with othercountries needed to be done. "I strongly believe thatMauritius can do the same role to the benefit ofAfrican countries. I am struggling to understand thata US$ 13 billion GDP economy is impoverishing aUS$ 2.3 trillion economy," adds Mathieu Mandeng.

Furthermore, Mr Chowdhury says, “currently,Mauritius has a network of agreements, comprising23 signed IPPAs and 20 signed DTAAs with Africanstates. The general view is that Mauritius has themost conducive enabling environment in Africa forPrivate Equity funds in terms of investment climate,perceived low political risk and availability offinancial services providers backed by skilledprofessionals and enabling legal, regulatory andinstitutional frameworks.”

Trusted partner for DFIs

According to Global Infrastructure Outlook, Africaneeds to spend US$6.0 trillion by 2040 to bridge itsinfrastructure gap, which represents a shortfall ofUS$1.3 trillion based on current trends.Development Finance Institutions (DFIs), whichrepresent 35% of external financing in infrastructureprojects in Africa, can play a critical role in leveragingprivate funding.

The impact of DFIs is especially decisive in early-stage ‘greenfield’ projects characterized by ahigh degree of risk and uncertainty, and in whichdevelopers and commercial lenders are reluctant toinvest. DFIs can also improve the social output ofprojects through a sustained emphasis onenvironmental, social and governance (ESG) criteria. “Projects financed by DFIs span across theunderserved sectors of Africa that are not attractive

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“Mauritianinvestments havemade a tangibledifference to thelives of people inAfrica for decades” Ravneet Chowdhury

Ben Lim

to traditional Private Equity vehicles seeking superiorreturns in high growth and disruptive sectors such asinformation technology and financial services. Forinstance, DFIs conducted investments in the areas ofagriculture, food security, renewable energy,infrastructure and education. These sectors areeffectively the cornerstones towards building asustainable future for Africa, while promotinginclusive growth,” states Richard Arlove, ChiefExecutive Officer of ABAX.

DFIs, such as the World Bank Group and the AfDB,will continue to represent an important source offinance especially in lower-income countries andunderfinanced sectors. “Perhaps, more importantthan their direct role in financing, DFIs have a uniqueability to improve projects’ bankability through themitigation of sovereign risks and the improvementof business environment. If fully realized, thisenabling capacity will have a determinant impact onthe reduction of the infrastructure gap in Africa,” saysRavneet Chowdhury.

DFIs, as agents of their respective governmentforeign development policy, look for jurisdictionsthat give them all the required comfort in terms ofcompliance and good governance, which is often notthe case across many African countries. This isprecisely where the Mauritius IFC intervenes. The factthat the Mauritius IFC is trusted and used by DFIs isa strong point in explaining the preferred positionMauritius is taking as a platform from where to investin Africa.

Emerging role in capital raising

Mauritius sits in the nexus between Africa and Asiaand the rest of the world and has long been regardedas the ideal platform for routing investments into theburgeoning sectors of countries in Africa. The nextchallenge for the country is to reinforce its position asa capital raising platform of repute, where the StockExchange of Mauritius is well poised to continue onits trend of broadening its product offering in order tomeet the demand from investors and foreigncompanies. The economies of African countries arehungry for capital but at a reasonable cost and whatis reasonable will depend on where and how thecapital is deployed.

“Mauritius can certainly play the game in thisconnection but there needs to be a change inmindset regarding the facilitation which is requiredto attract international capital and expertise, withoutwhich the desire of the country to become the hub

for capital raising initiatives for Africa-focusedventures will only be seen as a mirage. What we needto attract to our shores are the international players– brokers, fund managers, corporate financespecialists, merchant banks and so on, those whowould help to fortify our ecosystem and elevate theprofile of our jurisdiction,” says Ben Lim, ChiefExecutive Officer of Intercontinental Trust Limited.

The profile of the jurisdiction for capital raising canalso be reinforced in Africa through the promotion ofsustainability initiatives according to MathieuMandeng. “In Mauritius, the development of the SEMSustainability Index (SEMSI) which identifiescompanies listed on the Official Market or theDevelopment & Enterprise Market demonstratingstrong sustainability practices showcases the will ofthe authorities to position Mauritius as a sustainablejurisdiction. Based on the above, African countrieswould do well to emulate Mauritius by aligningthemselves with the practices which take intoaccount the sustainability equation,” he comments.

Recognition of home grownopportunities

While the rules of the game have changed with theloss of preferential treatments in several sectors ofthe Mauritian economy, such as sugar and textiles,

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“We need to signeconomic andcooperationagreements withour Africanneighbours”

Priscilla Balgobin-Bhoyrul

Richard Arlove

“Mauritius has been the flagbearerfor the African continent as amodel of stability and economicprosperity”

and recent changes impacting the global businesssector, a number of foreign firms have elected to dobusiness not only through but in Mauritius.

Examples of these are found in numerous sectorsincluding hospitality, real estate, financial servicesand healthcare, where companies and investors have recognised that business operations in Africacan be smartly managed from a Mauritian base. Thisis due to a host of factors that have made Mauritiuswhat it is today – political and social stability,independent judiciary – with the possibility to appealto the Privy Council, efficient tax system, bilateraltreaties, bilingual and highly skilled workforce,international standards of best practice in manybusiness sectors and rigorous and yet flexible legalinfrastructure.

What does the future hold?

“Mauritius can aspire to be the Jewel of Africa bydiversifying from being Euro-centric and India-centric, becoming a maritime and air hub for Africa,shifting from an investment driven approach to aninnovation driven approach and becoming aneducation hub for Africa” says Mathieu Mandeng. Heargues that, in the same way that Mauritius leveragedon its Asian DNA and history to connect Asia toEurope and America, Mauritius can now leverage onits African heritage to connect Africa with Asia,Europe and America as “a vector of a sharedprosperity”.

Ravneet Chowdhury comments that, “Mauritianinvestments have made a tangible difference to thelives of people in Africa for decades. With the recentestablishment of the Mauritius Africa Fund as avehicle to generate funds for the development ofSpecial Economic Zones in Africa, Mauritianinvestment on the continent will be fast expanding tonew geographies and sectors.”

“Mauritius could migrate best practice to othercountries considering that it is ranked as the topAfrican country in terms of good governance,business efficiency, infrastructure, regionalintegration and democracy. All these elements haveenabled Mauritius to grow into an economicpowerhouse that can help the growth of the Africancontinent”, highlights Mathieu Mandeng.

In terms of the road ahead, Richard Arlove believes,“First, to ensure a win-win situation for all parties, weneed to sign economic and cooperation agreementswith our African neighbours and not merely Double

Taxation Avoidance Agreements (DTAAs) andInvestment Promotion and Protection Agreements(IPPAs). Second, our Government must engage in realeconomic diplomacy, with people with the right skillson the ground. Third, I think that we should work intandem with other business hubs on the continent –in the likes of Johannesburg, Nairobi, Abidjan, Accra,Lagos, Casablanca – so that we are seen as afacilitator to building growth on the continent ratherthan a revenue-grabbing competitor.”

The ABAX CEO also highlights that the role that someMauritian-born companies can play in Africa shouldnot be overlooked, where their experience and skillshave ample ground to flourish further. He says, “Inmy belief, to the exception of some of our biggerGroups, I do not see a lot of Mauritian SMEs lookingto venture in Africa. In this respect, I would invite mylocal fellow entrepreneurs to scout Africa foropportunities because that is where our future lies. AtABAX, we have been doing just that for a number ofyears now, not only in Eastern and Southern Africa,but also as far as Abidjan, a fast-growing businesshub in West Africa where we opened an office in2017.”

Considering that the huge opportunity in Africa is fragmented with many different trading blocsresulting in varying regulations on tax and currencycontrols, the Mauritius IFC can play a crucial role in allowing investors to access opportunities.Summing up, Mathieu Mandeng concludes:“Mauritius has one of the longest running andthriving banking and financial sectors. With its strongregulatory framework and its historical ties with Asia and Africa, the country offers a unique platformto facilitate trade and investment flows into thecontinent.”

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“Mauritius canaspire to be theJewel of Africa bydiversifying frombeing Euro-centricand India-centric”

Mathieu Mandeng

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European Union – Republic of Mauritius

New opportunities in the areaof Trade and Investment H.E. Ms Marjaana Sall explains how the European Union is supporting tradeand investment in Mauritius and in Africa through initiatives to boost the investmentclimate and to foster growth through the European External Investment Plan, thelargest ever investment plan for Africa

The European Union (EU) and the Republic ofMauritius have built a historical and solid part-nership over more than four decades. Starting

with the Sugar Protocol in 1975 to the signature ofthe Economic Partnership Agreement (EPA) in 2009,the partnership today has a strong focus on Tradeand Investment, and there are new prospects to en-hance this partnership with the new European Ex-ternal Investment Plan.

EU-Mauritius cooperation in the area ofTrade and Investment is not new

Mauritius is well recognised as a leader in sub-Saharan Africa on a number of international indicessuch as the World Bank Ease of Doing Business andthe Mo Ibrahim Index of African Governance. Throughits Africa Strategy, the Government of Mauritius hasa vision to further develop its ties with the African

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continent and to increase cross-border investment.The country has already signed Investor Protectionand Promotion Agreements with several Africancountries offering protection to investors. How is theEU contributing to this vision? The EU has beensupporting the regional integration agenda ofMauritius for many years through its regional EUfunded programme for COMESA, SADC and IndianOcean Commission.

The EU and the Republic of Mauritius have also builtsolid trade ties. The EU remains Mauritius' maintrading partner. The EU is the most important marketfor Mauritius exports - with 50% of Mauritian exportsgoing to Europe (2017), it provides 69% of ForeignDirect Investment (September 2017) and representsaround 51% of tourists' arrivals (2017). The EU andMauritius signed an EPA in 2009 which has beendelivering tangible benefits to business people in thecountry in view of access to the EU single market.Actually, the agreement provides complete andimmediate quota-free and duty-free to a market of500 million consumers. It offers Mauritius a long-term transition period to open only partially its

market to EU imports. The agreement also offersmore flexible rules of origin, making it easier forMauritius to export products with inputs from othercountries that may be less expensive, of betterquality and more innovative. Several Mauritianbusinesses we have approached have talked aboutthe positive impact of the EPA on their operations.The EU will continue to work closely with theGovernment in its endeavours to unlock the fullpotential of the EPA, notably to further strengthenthe investment and business environment.

One of the key projects where the EU is helpingMauritius is to reform and streamline the investmentregulatory framework and develop an electronicplatform which will be a single point of entry forbusiness permits and licences. This will considerablyreduce administrative burdens for businesses and willoffer the opportunity for reduced business transactioncosts and more efficient allocation of resources. TheEU will also support Mauritius to develop an enabling

national Intellectual Property framework which wouldfacilitate innovation, attract investors in high value-added sectors and lead to gainful job creation. The EUwill also work with the private sector in both Mauritiusand in the region to enhance competitiveness,promote regional value chains and improve businessdevelopment, especially for Small Medium Enterprises.

The future

The EU, working with Mauritius, looks forward toplaying its part in fostering growth and job creationspecially for young people, to make a real differenceto the daily lives of citizens, not only in Mauritius, butin Africa as a whole. The EU is now moving into a newphase, which will benefit Mauritius and the continentof Africa more broadly, through the implementationof the European External Investment Plan aslaunched at the EU-Africa Summit of 2017.

The European External Investment Plan, the largestever investment programme for Africa, provides newopportunities to companies to invest and operate inthe African markets. The Plan will help mobilise up to€44 billion of private investment by 2020 in supportof more inclusive and sustainable development onthe continent. The Plan is a key element of Europe'seffort to mobilise the resources needed to achievethe UN Sustainable Development Goals. Throughfinancial instruments, including the European Fundfor Sustainable Development guarantee, the planaims to reduce risks for private investment in partnercountries. It will also provide technical assistance inpreparing investment projects and strengthenpolitical dialogue to stabilise the investment climate.

The EU has already defined five investmentwindows, in which the first actions of the Plan will beimplemented, namely: Sustainable energy andconnectivity; Financing Micro, Small and MediumEnterprises; Sustainable agriculture, ruralentrepreneurs and agro-industry; Sustainable Citiesand Digital for Development. Projects should have aclear sustainable development objective andcontribute to economic and social development,with a focus on sustainability and job creation,particularly for young people and women. Individualcompanies will be able to consult the web portal,which will operate as a 'one-stop-shop', and requestaccess to funding and a guarantee for an investmentproject directly with the Secretariat which will bespecifically designed for the Plan. The Plan, whichwill be operational soon, represents newopportunities to work together for theimplementation of the Mauritian Africa strategy andthe promotion of a more Sustainable Development.

By H.E. Ms Marjaana Sall, Ambassador, Delegation of the European Union to the Republic of Mauritius

The EU remainsMauritius’ maintrading partner

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BUILDING AFRICA

What role for alternativeinvestments in Africanpension funds?Can African pension funds in Africa improve their returns by being “braver” when itcomes to alternative investments? This was one of the key questions at the secondPension Funds and Alternative Investments Africa Conference held in Mauritius

The conference, organised by AMETrade andheld at the Intercontinental Resort in Bala-clava, Mauritius on 15-16 March 2018,

brought together 130 leading representatives of theAfrican pension funds and alternative investmentsindustry, as well as representatives of governmentauthorities in Mauritius and the African continent, to consider how the right balance can be struck between ensuring that pensions remain safe on the

one hand, while making significant returns on theother. A number of expert speakers gave their viewson the potential impact of pension funds on Africa’seconomic development and on the potential role tobe played by Mauritius.

David Ashiagbor, Coordinator of the Making FinanceWork for Africa Partnership of the AfDB, noted thatwhile there was exponential growth in Assets under

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Management (AUM) in pensions, that growth has notreally translated into a diversification of investmentportfolios, and that 60-80% of AUM was ingovernment paper of one shape or another, thenlisted equities represented between 10-15%.

Need for a “fundamental shift”

Sunil Benimadhu, Chief Executive of the StockExchange of Mauritius, estimated that the totalquantum of AUM in pensions in Africa was aroundUSD 650 billion, but that around half of this was inSouth Africa. He saw that AUM were increasing at afast rate in line with economic growth, withprojections that by 2050 the total amount could riseto around USD 7 trillion. Mr Benimadhu said “there isa need for a fundamental shift in the way pensionfunds are managed in Africa” and that saw that theywere now too conservative, and were bound tounderperform over time in view of theirconcentration in government bonds. He noted thatin Mauritius around 20% of pension fundinvestments are going into alternatives, and thoughtthat pension funds should look at opportunities ininfrastructure, although not necessarily in ‘greenfield’projects as the returns may not be there.

In terms of the implementation lifecycle, Mr Benimadhu noted that for Private Equityinfrastructure there was a seven-year gap which istoo long for a pension fund, and that the lifecycleneeded to be shortened. He added that pensionfunds could look at investing in funds such asAfrica50 instead of infrastructure funds as “the risksare too big”.

Governance is a “big question”

Dr Barbara C Samuels II, Executive Director &Founder of the Global Clearinghouse forDevelopment Finance and Vice Chair of the UnitedNations Business Steering Committee on Financingfor Development, considered that it was good toinvest in long term investment grade infrastructure,and noted that investments can go throughintermediaries who can meet the fiduciary needs ofpension funds. She saw that the biggest problem wasthat there was a lack of investible assets that meetthe fiduciary demands of pension funds. Shesuggested that DFIs (Development FinanceInstitutions) and governments should recycleexisting high performing assets off their balancesheets so they meet the requirements of pensionfunds.

Bronwyn Corbett, Chief Executive Officer of GRIT

Real Estate Income Group, saw that governance is a‘big question’ in Africa and noted that for PrivateEquity-type transactions ‘governance was foundwanting’. She explained that GRIT Group had listingsin South Africa and Mauritius and were looking forassets which were sustainable to the market, withhospitality being one in Mauritius.

On the conservative nature of pension funds, MsCorbett explained that a lot of pension funds havetaken three to four years to invest in their vehicle, andthat they sit with a long term lease profile which suitstheir cash flows. She commented that it is good tosay that pension funds should invest, but “is there a product? The more optimal returns are not sittingin the bonds, they are sitting in alternativeinvestments.”

Regulatory impetus needed for assetallocation to alternatives?

Ritesh Anand, Executive Vice President of CrownAgents Investment Management, remarked that hiscompany was owned by Helios Private Equity firm, which had raised over USD 3 billion in funds,but that none of that capital has come from Africa.He saw that there was an asset allocation and aregulatory issue, aside from South Africa whereregulation allows for up to 10% of investments tobe allocated to private equity. He suggested thatregulators and governments needed to legislate fora minimum allocation of 5% or 10% to alternativeasset classes.

He said that alternative investments provide anuncorrelated stream of returns and urged pensionfunds to “be brave and take that first step”. He addedthat nothing in legislation stops pension funds frominvesting in alternative investments now, so asked“why haven’t they done it?”

“There is a need for a fundamental shift in the way pension funds are managed in Africa”Sunil Benimadhu

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Role of Mauritius as a facilitatorDr Rama Sithanen, Chairman and Director of IFSGroup (a SANNE company), encouraged domesticfirms to invest in Africa, and saw that pension fundswere conservative in terms of their asset classes anduse of alternative investments. He saw that there wasan initiative to grow the economic space in tandemwith Africa for Special Economic Zones andtechnology parks to attract investment in Ghana,Senegal and the Ivory Coast. He explained thatMauritius had set up an equity fund to assist domesticand international companies for Special EconomicZones. He saw that the most important contributionto funds was infrastructure or growth for capitalraising and that Mauritius could be used as afacilitator for the rest of world to Africa.

Shailen Sreekeessoon, Head of Strategy, Researchand Innovation at SBM Group in Mauritius, saw thatthe economies of Africa were performing below parand that profitable investment was not going to theright place, whether institutional or alternativeinvestments. Regarding investment in infrastructure,he saw that commercial financing was seekingprivate investment to go into infrastructure as a resultof debts, while there were also opportunities throughdevelopment banks and DFIs to bridge the financinggap, and also saw the need for reforms. He saw thatMauritius was the ideal place to streamline PrivateEquity funds towards Africa and to build a role in

terms of intermediation to structure investments.

Muhammad Uteem, Founder and Head of UteemChambers, commented on the development of thepensions sector in Mauritius, highlighting that therehave been supply side constraints in the past, withonly insurance companies investing in pensionsfunds. He said that the Private Pensions Schemes Act2012 in Mauritius led to well-regulated legislationtaking on board international best practices, andensuring due diligence to avoid money laundering,and noted that the law provides for the licensing offund managers authorised by the FSC.

“The more optimalreturns are notsitting in the bonds,they are sitting inalternativeinvestments.”Bronwyn Corbett

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Mauritius, the FinancialCentre facilitator andgold aggregator forSub-Saharan AfricaMauritius can carve out a new role as a Financial Centre facilitator and goldaggregator for Sub-Saharan Africa through the creation of the Gold and PreciousMetals Exchange Ecosystem (MINDEX), which can act as a catalyst to developFinancial Centres across Sub-Saharan Africa and interlink them

Multi Sector Financial CentreAggregationThe Republic of Mauritius Government has hadapproaches over the last few years from variousAfrican nations to support the development ofInternational Financial Centres (IFCs) in thosecountries. Mauritius as a strongly regulated financialcentre is ideally placed to facilitate this for greaterinter-Africa trade and economic development. In thisarticle we explore what this means in the context ofgold and to some extent agricultural commoditieslinked to Sub-Saharan African countries for thebenefit of all.

Gold and Precious Metals ExchangeEcosystem (MINDEX)

The Government of Mauritius has been keen tolaunch the Mauritius International Derivatives andCommodities Exchange (MINDEX) for some time andhas determined that it should be a private sector-ledinitiative. The commodity exchange and associatedecosystem will include a new gold refinery and vaultbased in Mauritius linked to key African gold hubsand is designed to provide:• The access point for trusted ethically sourced

African gold • A complete tracked ecosystem for gold from the

mine to the consumer• Refining and assay of gold to international best-

standards

• Trading of physical gold on a spot market

Such an exchange could expand to include:• Derivative contracts on gold, FX and agricultural

products• A hub for African agricultural trade and financing• Borrowing and lending of gold, e.g. gold loans• A gold backed cryptocurrency based firmly on

physical assets underpinned by Blockchaintechnology

How MINDEX can benefit Sub-SaharanAfrica

This is an opportunity to set up a MINDEX linked tokey gold origination countries. It will develop theassay and financing of gold and the associatedecosystem in those countries with an aggregation ofservices and gold into Mauritius. This can be easily

By Hirander Misra, CEO of GMEX Group and Co-Chairman of FinComEco

There is growingdemand from theinstitutional and high networth sector in Mauritiusfor gold-related products

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achieved in Senegal, for example, which is part of the8 country West African Economic and MonetaryUnion (WAEMU) region and already acts as anaggregator today for countries such as Mali.Zimbabwe can also become a key centre as it isincreasing production given new political optimismand has the local assay and as an added bonusrefining capabilities. It can be replicated in good goldorigination countries with responsible supplyincluding but not limited to Ghana, Nigeria, Kenyaand Mozambique in addition to the other WAEMUcountries such as Mali, Burkina Faso and CoteD’Ivoire. This will lead to:

• Localised aggregation of Dore supply, storage andassay with infrastructure improvement

• Funds for pre-financing gold ensuring a betterprice and official market for artisan miners, whichresults in traceable supply and availability of goldand other commodities leading to positiveeconomic and social impact.

MINDEX could potentially partner with the WorldBank, the IMF and the Bank of InternationalSettlements if they are amenable, to facilitate Bullionallocation and reserves developing Sub-SaharanAfrican counties into the safe neutral and trustedvault in Mauritius to create a new natural hub formany developing country central banks and facilitatethe settlement of their government commodity tradebalance.

In addition there is growing demand from theinstitutional and high net worth sector in Mauritiusfor gold-related products. There is also anopportunity for the well-established Mauritian banksto service such high net worth and assetmanagement demand on the structured productsside, lending against the gold and retail gold, whichcan be spent on a card.

The Economic Benefits of MINDEX

• Direct injection of USD $35M into the MauritianEconomy

• 512 new jobs are estimated to be created over 2years.

• The total cumulative trade volume over the next5 years is estimated to be x2.27 the gross GDP ofMauritius

• After 5 years, the volume of transactions tradedon the MINDEX Exchange will nearly match theGDP of Mauritius as USD $30.3Bn projectedtraded over a five year period

• It could result in $18.3M of additional tax revenuefor Mauritius over 5 years

Trading Diversification

• MINDEX will attract trading in a wide range of newcommodities and trading into the Mauritianeconomy

• The Mauritian offshore sector will be able todiversify its services offering gold, preciousmetals and other commodities which will attractfunds, asset managers and HNW individuals

• The derivative exchange will have a ripple effecton the economy; broadening and deepening theservices on offer

• Gold assets of African Governments will beattracted to Mauritius by a range of financialproducts as assets can be securitised anddigitalised to unlock their value allowing AfricanGovernments to borrow and lend against theirgold in a neutral location as a cheaper alternativeway of financing to Eurobonds to raise debt.

• MINDEX will be linked to a network ofinternational gold vaults and will become a keyhub of gold trading and commodities aggregationwith better prices achieved for local producersand exporting governments along with atraceable taxable value chain.

• Related industries such as airlines and logisticswill directly benefit

• The reputation of Mauritius as a regional IFC andmajor trading centre will be enhanced

• International investment banks, International tradersand support service companies will be attracted toMauritius deepening the available pools of skillsand companies with local staff training

Conclusion

MINDEX will not only benefit Mauritius but also leadto increased local investment, cheaper finance, moreoutput, more taxable income, an increase in exportincome and as a result an increase in national GDP.This will act as the catalyst to develop financialcentres across Sub-Saharan Africa and interlink themalso resulting in increased inter-Africa trade andInternationalisation.

MINDEX will attract trading in a widerange of new commodities andtrading into the Mauritian economy

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BANKING

The next wave of GlobalBusiness in MauritiusMauritius should have the ambition to become the African leader in commoditytrading, M&A facilitation and project finance, says Sridhar Nagarajan, Chief ExecutiveOfficer of MauBank Ltd, as new opportunities emerge in international banking

As Mauritius reaches its 50th Anniversary of In-dependence, the financial services sector isundergoing a drastic change. The landscape

of this sector will not be the same anymore in thecoming years. Are the recent acquisitions of the Man-agement Companies (MCs) related to the outlook ofthe sector? Of course yes, but the way a seller willlook at it will be completely different from the way abuyer will foresee the future of the sector. Manywould agree that the global business sector is ex-pected to go through a new era with the introductionof BEPS. Then the next logical question is to movebeyond tax planning and related services towardssupporting real economy activities of corporate en-

tities. In fact, value-added financial solutions are lessabout finance and more about augmenting the un-derlying economic activity of clients.

It is not a mere coincidence if global players areinterested in local MCs. Looking at the profile of thenew owners of MCs, they are international playersactive in a number of segments and involved notonly in corporate services but also in family officeservices other than fund, accounting and taxadministration. Mauritius must definitely have acompetitive advantage and, at the same time, becomplementary to the other major financial centreswhere these service providers are already present,

We must notbe shy ofcompetition

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namely London, New York, Singapore and HongKong. Mauritius remains a politically andeconomically stable country with a good legalframework and a strategic location. The WorldEconomic Forum (WEF) claims that Mauritius couldbecome the unavoidable gateway to Africa. Giventhe strategic location of its natural and historic port towhich a world-class container island terminal is beingadded soon, it is indeed unavoidable.

Embracing African opportunities

All companies having a long-term vision forexpansion will target or have already targeted the bigAfrican cities. Today all the major western corporatesare in at least three major African cities according tothe WEF. Our financial services sector will be calledupon to play a leading role for trading and in tradefinance within the region. The key ingredients to bea high-intensity International Financial Centre forAfrica are free flow of capital, political neutrality,

internationally recognised legal framework, a FreePort and a vibrant Financial Services sector. Mauritiushas all of these vital components which are alsounsurmountable entry barriers for certain competingjurisdictions. Additionally, it is an African nationforming part of the African Union right from itsinception. Thus, Mauritius can have the ambition tobecome the African leader in commodity trading,Mergers & Acquisition (M&A) facilitation and projectfinance. For this to happen, banks must understandthe specific business and financing needs such asguarantees, loans, pre and post shipment financing,country-risk coverage and so on. So the future isbright.

Another factor attracting foreign investors to thesector is the number of Investment Promotion andProtection Agreements (IPPAs) signed by Mauritius

with partner countries. According to the EconomicDevelopment Board, over 40 IPPAs have alreadybeen signed, which give guarantees to investors. Thesaving on premiums of Political Risk Insurance (PRI)payable is one aspect, while the various guaranteescovered under the IPPAs are numerous. They not onlyprotect investors from the risk of expropriation butprovide protection of investments, transfers ofmonies relating to investments and returns andcompensation for losses in certain cases. Thenetwork of IPPAs thus makes Mauritius an investmentplatform of choice.

Evolution of International Banking

Similarly, the banks operating an InternationalBanking department will need to evolve and adaptto changes. The traditional way of doing business willno longer meet the requirements of internationalclients. A wave of change and opportunities isapproaching us and the game changer now is thefacilitation role banks have to play for the globalbusiness operators. MauBank Ltd has in this contextrecently launched its International BankingDepartment, headed by Robin Appadoo. Leveragingtechnology to bring innovation, we have put in placean online platform that allows introducers orinternational clients to open an account from thecomfort of their office or country. The departmentcaters for cross-border transactions of globalbusiness companies and Non Resident PrivateClients with its network of correspondents linking allthe major international financial centres.

International Banking is much more than providingservices to the global business players. Banks willhave to be partners of MCs in providing professionaland tailor made financial solutions to internationalclients, be it to corporates or individuals. Theopportunities are huge; new players are bringing anew dimension to the Mauritian Financial Centre.Banks must be geared to satisfy the requirements ofinternational clients and innovate in the way bankingservices are provided. The perfect mix of expertiseand experience in different market places will helpthem to look at business proposals in a very open-minded way.

In this landscape, we must not be shy of competition,and the time has come to look beyond tax planningas an offer to attract investors. Competition is endlessand it keeps us on our toes. A number of advantagesmake Mauritius an International Financial Centre ofchoice, one of these being its rightful position as thestrategic hub for the fast growing continent.

By Sridhar Nagarajan, Chief Executive Officer ofMauBank Ltd

The network ofIPPAs makesMauritius aninvestmentplatform of choice

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Mauritius, providing a sound foundationfor regional expansionRepresentatives of global companies active in financial services, technology, energy, infrastructure and textiles explain the benefits of setting up a regional hubin Mauritius, including access to African markets, a strategic location and a safe and predictable framework as a base for expansion

Mauritius has strong potential to strengthenits position as a regional hub for globalcompanies since its strategic location com-

bined with various other key elements make it theperfect blend to emerge as the gem of the IndianOcean from a business perspective. Despite its lim-ited resources, Mauritius has all ingredients requiredfor promoting and strengthening the business envi-ronment. The political stability, skilled and trainedworkforce and ease of doing business throughfavourable policies are attracting business frommany parts of the world.

Mauritius is only 65km long, 45km wide and 2,000km away from Africa, yet over the past decadeMauritius has enjoyed rapid development as a centrefor international business which has been largely dueto its strong regulatory and legal framework,following the highest internationally agreed

standards. The World Bank has ranked Mauritius asthe top country in sub-Saharan Africa for ease ofdoing business for eleven consecutive years, whichprovides a clear testament to its standing.

Industry representatives from global companies,active in financial services and beyond, areincreasingly recognising the positive benefits ofsetting up a regional base in Mauritius from which toexpand and to achieve their commercial goals.

Mauritius as a regional HQ

In 2017, GMEX Group, a global provider of multi-asset exchange trading, post trade business solutionsand technology based in London, announced theopening of its regional headquarters in the MauritiusInternational Financial Centre (IFC) and that itsinitiative FinComEco, an integrated financial andcommodities ecosystem, would also establish its

global headquarters in Mauritius. Both companies,GMEX Holdings Ltd and FinComEco, obtainedregulatory approval from the Financial ServicesCommission (FSC) to operate as global businesscompanies.

Hirander Misra, CEO of GMEX Group and Co-Chairman of FinComEco, highlights that placingFinComEco in Mauritius was strategically importantas the island is conveniently located and connectedto the various ventures they are undertaking not onlyacross the African continent but also in the MiddleEast, Europe, and Asia. “Initially the idea to open anoffice in Mauritius was specifically for our venture,FinComEco, the integrated Financial & CommoditiesEcosystem which is geared towards improvementsin food security, economic diversity and financialinclusion with a focus on emerging agriculturalcommodities markets,” he comments.

Since setting up in August 2017, GMEX Group hasreceived good support from the local authorities inMauritius and it has also entered into positivecommercial discussions with other jurisdictionsacross Africa.

In addition to its ecosystem and proven track recordin global investments, the Mauritius IFC has a numberof Double Taxation Avoidance Agreements (DTAAs)and Investment Promotion and ProtectionAgreements (IPPAs) in place across Africa and the restof the world, and is currently growing to include firmsdelivering a range of bespoke financial products forAfrica, making it an ideal location for FinComEco tobase its multi-jurisdictional platform, according toGMEX Group. “Being in Mauritius offers preferentialaccess to African markets such as the African Union,COMESA, IOR-ARC and SADC,” Hirander Misra adds.

Position as a hub for insurance

In the insurance sector, AXA Africa Specialty Risks,which was a new joint venture between AXA Group,a worldwide leader in insurance and assetmanagement, and Chaucer, a member of the Lloyd’sof London underwriting market, decided to set up itsoperations in Mauritius in 2016 as the Coverholderhub to target the rapidly expanding market forAfrican corporate and specialty insurance.

Speaking about the decision to set up in Mauritius,Mikir Shah, CEO of AXA Africa Specialty Risks says,“We are firmly convinced that Mauritius has a keyrole to play as an insurance hub for Africa, as anemerging International Financial Centre, which is why

we chose Mauritius as the Coverholder hub for ourAfrican operations. We see lots of potential forgrowth driven out of Mauritius.”

AXA Africa Specialty Risks was also keen to find theright base in Africa with the requisite skills andexpertise needed to develop their operation. "Withour locally recruited Mauritian staff having alreadyreceived training in London and Paris, we considerthat Mauritius has a well-educated workforce with a

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“Being in Mauritius offerspreferential access to Africanmarkets such as the African Union,COMESA, IOR-ARC and SADC”Hirander Misra

“Mauritiushas a well-educatedworkforcewith abilingualadvantage”Mikir Shah

bilingual advantage and we intend to recruit furtherlocal staff in the near future,” adds Mr Shah.

Role in energy exports

The role of Mauritius as a regional headquarters orhub is not confined to the financial services sector,and the jurisdiction is also taking steps to attractmajor players in other sectors such as IndianOil. TheManaging Director of IndianOil (Mauritius) Limited,Sanjay Parashar, notes, “As far as the petroleumsector is concerned, the Government has a firm planof making Mauritius a regional petroleum hub. In myopinion, this ambitious plan of the Governmentcould shape the future of the island nation. Mauritiushas a definite competitive advantage in this sectorbecause of its strategic location. Recently, shipmovements have increased in the vicinity ofMauritius and in the marine territory of the island. Tostrengthen its position, Mauritius should be makeproduct and services attractive enough so that thevessels passing by call at Port Louis and meet theirbunker fuel requirement.”

IndianOil is partnering with the State TradingCooperation of Mauritius and Mangalore Refineryand Petrochemicals Limited to set up a largepetroleum storage in Mauritius and to re-export toAfrican markets. Feasibility studies are being carriedout to look at the various possibilities of setting uppetroleum facilities in the island in order to gain acompetitive advantage. Competition in thepetroleum sector would be mainly from African

countries, including Mozambique, Rwanda,Botswana, Ghana, South Africa, amongst others.

Supporting foreign brands

In the technology sector, leading brands such asHUAWEI and Samsung are present in Mauritius,which brings a lot of benefits according to Amit Shah,Managing Director at AURS & Co. Ltd, which is theofficial agent, importer and distributor for HUAWEIand Samsung. He comments that, “The advantage ofbringing in multi-national companies in any under-developed or developing countries is firstly it helpscreate a lot of employment which helps to theeconomy of the country. It brings in a lot oftechnology and helps in modernization of thecountry. For any government in a developing country,ensuring a higher rate of employment is crucial andcreating employment through multi nationals raisesthe standard of living for the employee due to thebetter salaries than the local companies.”

Furthermore, Indian entrepreneurs in the fashionindustry have also had a positive experience settingup in Mauritius as their first step into the region, fromwhich to expand. Vanita Tulsidas and her husbandDinesh founded Vidiyan Co Ltd in 2007, whichcomprises of international brands Global Desi, AND& House of Anita Dongre. They currently representseveral brands across the island due to the strongbacking of their investors, including some fromCanada, with many years of experience in retail anddistribution.

“Mauritius was an ideal location at the time becauseit is the first time Global Desi ventured outside India.When we launched the brand in 2008, the scope forfurther development could be predicted. The growthfor fashion textiles in Mauritius is steadily increasingand brands are of interest. The popularity of fashionbrands in the last past few years has shown asignificant increase in the population with more andmore people wanting to buy from reputable brands.The island has come a long way despite its size andinternational exposure. The people of Mauritius arehardworking and determined to achieve their highestpotential. Nevertheless, there is always room forimprovement. More training facilities and workshopscould be made available so that people can reach ahigh level of excellence,” says Vanita Tulsidas.

Stable and predictable framework

As companies look towards regional expansion fromMauritius, one of their key requirements is a sound,stable and predictable legal framework, which

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MAURITIUS AS A HUB

Amit Shah

Sanjay Parashar

“If our standardsare high, it is onlynatural thatMauritius willattract the righttype of businessthat will help theisland flourish”Sanjay Parashar

Mauritius is able to offer with its independentjudiciary and hybrid system of English and Frenchlaw, with the Judicial Committee of the UK’s PrivyCouncil as the final court of appeal, as well as fullyfunctioning institutions, which are well establishedin the country.

Dr Snowy Khoza, Executive Chairperson at BigenGlobal, a leading player in engineering andinfrastructure, believes that, “Althoughgeographically somewhat isolated on a regionalscale, Mauritius does have sound legal andinstitutional capacity to handle commerce in generalwith the countries where we are operational.Investing from Mauritius to our operations incountries like Ghana, Rwanda, Tanzania, Zambia andBotswana, is relatively easy. Various tax treaties are inplace which protects our investments and ultimatelyfacilitates repatriation of our financial returns toMauritius. Of course we also believe that our valueoffering is attractive to our clients and partners herein Mauritius where we plan to expand our operations.Bigen’s investment strategy onto the continent aimsto create, capture, extract and share value in theinfrastructure space and distribute same amongst allour stakeholders. This matches well with our motto ofdoing good while doing business.”

This sentiment was echoed by Sanjay Parashar ofIndianOil who says, “From my perspective, asuccessful and sustainable business can only beachieved with a legal system that is fair. The longevityof healthy economies depends on our values andcode of ethical conduct. If our standards are high, it isonly natural that Mauritius will attract the right typeof business that will help the island flourish.”

The position of Mauritius as a risk-mitigation platformwas also highlighted by Dr Snowy Khoza, who notedthat, “The island also continues to set up more robustintra-country investment treaties, exchange controlmechanisms, regional political insurance coverschemes and other instruments to nurture businessand to protect assets for business in general.”

More broadly, companies and investors usingMauritius for regional expansion can also benefitfrom the country’s strong corporate governance,boosted in 2016 by the introduction of a newCorporate Governance Code, the fact that the islandhas no exchange controls and its ranking as a“Compliant” country by the OECD’s Global Forum,proving its adherence to international best practicesand standards.

Potential as a regional services andskills aggregator

In terms of the potential of using Mauritius as aregional hub across a range of sectors, the island canbe the service and skills aggregator, as well asfacilitator, by fostering effective links to othercountries in the region of Sub-Saharan African interms of commodities, capital markets and FinTechlocal development as well as collective economiesof scale for the benefit of each based on the uniquepropositions of each country. Mauritius is wellpositioned to do this and to work with otheremerging hubs like Kenya since it is often perceivedas being more cooperative than South Africa, whichtends to take a more competitive approach.

“Kenya and South Africa are competing strongly inthe region for the landing platform for internationalbusiness in the region. Chinese investment is and willremain critical capital injections to many countries inthe region. Mauritius can facilitate and channel suchinternational investment better,” states Dr Khoza.

Building growth and prosperity

The role of Mauritius as a regional headquarters andhub for operations is one which is growing and whichhas major potential for the future. The island isalready playing a pivotal role in creating a conducivebusiness environment to do business in and throughthe country into the wider region. The role ofMauritius as a regional base can be a ‘win-win’situation through helping global companies across arange of sectors to achieve their goals, while buildingopportunities for job creation and growth in thedomestic economy.

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Vanita Tulsidas Dr Snowy Khoza

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Achievements of Mauritius in the field of Data ProtectionThe Data Protection Commissioner of Mauritius explains some of the mainaccomplishments and landmark projects of the Data Protection Office, which has seen a tremendous leap forward as data protection has substantially andpositively grown in stature and influence

IntroductionThe Data Protection Office of Mauritius is theregulator which aims at protecting the privacy rightsof individuals by enforcing the provisions of the DataProtection Act 2017. This office became operationalon 16 February 2009 when the Data Protection Act2004 came into force. It operates under the aegis ofthe Ministry of Technology, Communication andInnovation.

Since its institution, this office has witnessed atremendous leap in the achievement of its objectivesas data protection has substantially and positivelygrown in stature and influence. As a privacy authority,this office has persevered in diversifying its servicesthrough sensitisation, education, new registrations,investigations on complaints, audits and securitychecks and providing timely advice to organisationsin spite of various challenges and constraints. The last few years have been the architect oftremendous changes in the current data protectionand privacy landscape in Mauritius. This article sumsup the main accomplishments and landmark projectsof the Data Protection Office since its creation todate.

NationalAmendment of the Data Protection Act

A strong data protection framework is required tostrengthen the control and personal autonomy ofdata subjects (individuals) over their personal data. Amajor achievement for this office is the alignment ofthe existing Data Protection Act 2004 with the newEuropean Union General Data Protection Regulation(GDPR) which will come into force by end of May2018. The Data Protection Act 2017 was passed on8th December 2017 at the National Assembly ofMauritius and presidentially assented on 23rd

December 2017. The new data protection legislationcame into force on 15 January 2018.

Undeniably, with technological advances such as BigData Analytics or Internet of Things, effective dataprotection legislation is vital. Organisations andindividuals processing personal data for a businesspurpose, including in the ICT realm, need to ensurehigher standards of protection of information undertheir custody. For instance, organisations will berequired to carry out a data protection impact

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assessment (DPIA) in situations where dataprocessing is likely to result in high risk to the rightsand freedoms of individuals in order to assess theimpact of any envisaged processing operations onthe protection of personal data. Techniques such aspseudonymisation of data in big data analytics mayhave to be applied to data sets to ensure thatpersonal data can no longer be attributed to aspecific individual. Organisations will require theexplicit consent of individuals when processinginformation for transparency purposes.

Sensitisation

Since its institution, the Data Protection Office hasengaged in continuous sensitisation activities topromote awareness on the legal provisions of theData Protection Act and application of dataprotection principles in real-life scenarios. This officehas adopted a customer-centric approach by movingtowards people. The following sensitisation activitieswere organised:● Publications of guidelines (13)● Presentations and trainings (82)● Workshops (4)● Mass sensitisation (7) [TV (6) and Radio

Programme (1)]

Enforcement of data protection

One of the objectives of the Data Protection Office(DPO) is to remedy the infringements occurringthrough the mishandling of personal information ofour citizens and fiercely does so through its enquiriesand investigations with a view to establishingwhether a breach has taken place or not under theData Protection Act (DPA).

Investigation and Decisions on complaints

As at now, the Data Protection Office investigated atotal of 121 complaints and the Data ProtectionCommissioner has provided 37 decisions. Thedecisions of the Data Protection Commissionercontribute in protecting the privacy rights of ourcitizens and are seen as an effective deterringmeasure in avoiding the reoccurrence of suchbreaches again.

International/Regional36th edition of the InternationalConference for Privacy and DataProtection Commissioner

This office also hosted the 36th edition of theInternational Conference for Privacy and Data

Protection Commissioner from 13 to 16 October2014 at the Intercontinental Resort in Mauritius,where 275 international experts attended to discussthe current trends in data protection at the openingsession and to vote the international resolutionsadopted at the closing session of the conference. Thefact that this event took place in Mauritius sets anexample for the developing world which is currentlylooking at the transformative role of technology toprosper and bring success to its people.

Accession to Convention 108

The Data Protection Office acceded to the Council ofEurope’s Convention for Protection of Individualswith regard to Automatic Processing of Personal Data(Convention 108) on 17 June 2016 in Strasbourg,France. The convention is the first and onlyinternational legally binding instrument dealingexplicitly with data protection. The Convention 108had 48 signatories including 47 Council of EuropeMember States, as well as Uruguay, until Mauritiusbecame the 49th State Party and the 1st Africancountry to accede this convention. The treaty enteredinto force on 1 October 2016 in Mauritius.

The ratification of Convention 108 has providedseveral benefits for our country, for instance:● recognising the mission of the Data Protection

Office; ● facilitating trans-border data flows amongst

countries which have ratified the Convention thusattracting foreign investment; and

● receiving assistance and cooperation from theCouncil of Europe.

International Cooperation

The Data Protection Office collaborates with thefollowing international counterparts: ‘AssociationFrancophone des Autorités de Protection desDonnées Personelles’ (AFAPDP), Réseau Africain desAutorités de Protection des Données Personelles’(RAAPDP), Commission Nationale de l'Informatiqueet des Libertés (CNIL) France, Global PrivacyEnforcement Network (GPEN), Common ThreadNetwork (CTN), the Council of Europe and EuropeanUnion. Such cooperation enables this office toestablish a dialogue with enforcement authorities,exchange information, undertake or support specificactivities and sharing of enforcement knowledge,expertise along with best practices. As such, thispromotes our country’s reputation and disseminatesour commitment towards the development of aglobal privacy framework.

By Drudeisha Madhub, Data Protection Commissionerof Mauritius

Effectivedataprotectionlegislationis vital

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Dealing with Financial CrimesWith the evolution of criminal methodologies, increased regulatory obligations andsanctions globally, an innovative approach must be adopted by financial institutionsthrough embedding a strong Financial Crime Framework and deploying RegTech tomitigate financial crime

Introduction

Over the past decade, “Financial Crime” has gained alot of momentum in the global financial servicessector. According to PWC’s Global Economic CrimeSurvey 2018, 49% of global organisations havebeen the target of fraud and crime. While thedefinition and scope of financial crime varies fordifferent institutions, in broad terms financial crimewould involve not only money laundering andterrorism financing, but also internal and externalfraud, including information security fraud andcorruption.

Financial Crime is growing into a specialized areaseparate from Regulatory Compliance, and matureinstitutions have set up separate Financial Crime Riskor Financial Crime Compliance departments to focuson such criminal threats. With incoming challenges ofnew technologies and the advent of FinTech,financial institutions must adopt a holistic andcreative approach and adapt their existing businessmodels to cater for the evolving financial crimelandscape.

Financial Crime Governance - Tone atthe top

Inevitably, the fight against Financial Crime rests on astrong and effective governance framework withinfinancial institutions in order to permeate a culture ofcompliance with a strong tone from the top. It isimportant that the Board of Directors sets out FinancialCrime risks as a matter of high priority on its agenda,defines the organisation’s risk appetite and adopts

rigorous policies and procedures to manage financialcrime risks. In addition, the Board, together with seniormanagement, must monitor on a regular basis theimplementation of adequate controls through keyperformance indicators and set metrics. Whilst theremay be concern from shareholders to maximiserevenue interests over compliance, it is noteworthy tohighlight that recent scandals and sanctions arereflective of those businesses which have pursued‘lucrative’ clients at the cost of compliance.

The three lines of DefenceThe three lines of defence model is generally used toexplain the relationship between different functionswithin an organization and how responsibilities aredivided. Under the first line of defence, the operationteam is the gate keeper of the financial institution in

By Nagesh Kistnamah, Barrister-at-law, Head of Compliance and Risk Management, SGG Group

Yogesh Ganoo Bapjee, Compliance Officer, SGG Group

Financial Crime isgrowing into aspecialized areaseparate fromRegulatoryCompliance

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terms of identifying and mitigating the financialcrime risk. Under the second line of defence, thefinancial crime compliance team and other controldepartments provide support by bringing expertise,process excellence and management to ensure thatthe identified financial crime risk is effectively andefficiently managed. An independent internal auditfunction will constitute the third line of defence andprovides assurance and advisory support to the firstand second lines’ efforts, consistent with thedirectives of the Board of Directors and seniormanagement of the financial institution.

Adopting a Risk-Based approach

The risk-based approach is central to the effectiveimplementation of a proper financial crimecompliance framework. According to the FinancialAction Task Force (FATF), a risk-based approach meansthat countries, competent authorities and financialinstitutions identify, assess, and understand themoney laundering and terrorist financing risk to

which they are exposed, and take the appropriatemitigation measures in accordance with the level ofrisk. The main challenge of financial institutions is thepractical implementation of the risk-based approachand its implications. In essence, such an approachwould require the financial institution to adequatelyallocate resources to monitor higher risk clients andadopt more rigorous procedures for the on-boardingand reviews of higher risk clients, rather thanapplying a ‘one size fits all’ approach.

Importance of Robust Training

Training must be at the core of any financial crimeframework and forms part of the organisation’secosystem to ensure that staff are trained to detectany potential or actual use of the financialinstitutions to perpetrate financial crimes. Trainingsessions, face to face or through technology, must becreative and revolutionary, adapted to the role andseniority of the staff and encompassing theregulatory framework of the relevant jurisdictions,

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the organisation’s internal policies, suspiciousactivity/ transaction reporting process, amongstothers. The Financial Crime Compliance personnelmust receive more advanced and regular training todevelop internal capabilities to detect, investigateand report financial crimes. Organisations globallyare investing more and more on financial crimecompliance, which is estimated to be between $900million and $1.3 billion a year according to ananalysis by corporate governance recruitment firmBarclay Simpson.

The ongoing aspect of Monitoring andTesting

According to a preliminary investigation in thealleged fraud of $ 1.8 billion at the Punjab NationalBank, the internal process of the Bank was flouted.Putting in place policies, procedures and processesserves no purpose if they can be bypassed withoutdetection. The Financial Crime Compliance andInternal Audit functions, which must have sufficientindependence from management (they usuallyreport into the Chairman of the Risk and AuditCommittee) must conduct independent audits ofprocedures and processes to verify their integrity andtest their effectiveness. Identifying deficiencies andproviding remedial actions are vital to theorganisation’s survival and to stay clear fromregulatory action. It is worth noting that financialinstitutions are now also placing a lot of reliance onRegTech, i.e the use of technology to assist inRegulatory compliance, including the use of nameand sanctions screening services, automatictransaction monitoring system and Anti-MoneyLaundering or Risk Management software.

Challenges Ahead

Criminals are always a step ahead as theycontinuously develop new techniques to perpetratecrimes. “Hacking”, “Spoofing”, “Phishing” and“Malware”, are the trending techniques to commitfraud, steal data or even lock an organisation’s ITsystem via the use of technology.

FinTech, which is the new buzzword, is essentially theuse of new technology and innovation that aims tocompete with traditional financial methods in thedelivery of financial services and includes mobilebanking and cryptocurrency. With regard to the

latter, China has banned crypto exchanges, Gibraltarand Australia have regulated cryptocurrencies, whilstVenezuela has launched its own cryptocurrency (thePetro). In general, there is an endeavour fromregulators around the world to introduce rigorousregulations covering crypto exchanges in an effort tocurb the illicit use of cryptocurrencies for financialcrimes and to adapt to innovation in new financialproducts.

Mauritius is determined to position itself as aregional hub for FinTech. This is demonstrated by therecent set up of a FinTech and Innovation-drivenFinancial Services Regulatory Committee to bolsterthe regulatory framework in Mauritius and theintroduction of a Regulatory SandBox Licence fromthe Board of Investment (now falling under the aegisof the Economic Development Board) for investorswishing to conduct a business activity for which thereexists no legal framework, or adequate provisionsunder existing legislation in Mauritius. Also, Mauritiusis contemplating a standardized centralised online

KYC platform for the non-banking segment of thefinancial services sector. It will be exciting to see howthe future of the regulatory framework in Mauritiuswill expand and spur confidence for investors.

To conclude, with the evolution of criminalmethodologies, increased regulatory obligations andsanctions globally, an innovative approach must beadopted by financial institutions to fend off financialthreats. Embedding a strong Financial CrimeFramework and deploying RegTech can proveinvaluable for financial services industry to mitigatefinancial crime.

The risk-based approach is centralto the effective implementationof a proper financial crimecompliance framework

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CAPACITY BUILDING

‘The Skills Imperative’The Financial Services Institute One Year On:

Mohamed Khan, Chief Executive Officer of the Financial Services Institute, highlightsthat the challenges ahead for the Financial Services Sector are daunting, and that toremain competitive on the global map and take advantage of new opportunities weshould not stop learning

The Financial Services Sector is on track to beone of the most important engines of growthfor the Mauritian economy and it is well

poised to keep growing in scope and sophistication.

As the Sector’s steady growth pursues an upwardtrend, new markets, new opportunities, new areas ofactivity and a plethora of competitors will keepoperators on their toes to stay on course and remaincompetitive. The real question is not whether thepresent incumbents of the Sector will continue toexist ten years down the line, but whether they willstill be flourishing businesses.

The competitiveness of the Sector relies on thebreadth and depth of its talent and, more than ever,forward-looking companies recognize that enduringsuccess lies in skilling, upskilling and re-skilling of theworkforce so that they remain ever-ready to competeand keep up with the best of the league. FinancialServices is a knowledge-intensive commercial

operation and the imperative lies in Human ResourceDevelopment Policies aimed at enhancingcompetency standards by nurturing a culture ofcontinuous learning.

Growing capabilities

At the Financial Services Institute (the Institute), weare committed to assisting industry operators to growtheir capabilities to keep pace with market andcustomer demands. We see ourselves very much asa partner of choice working towards the achievement

of shared objectives. To this end, the Institute isbuilding strong connections with sector associations,professional bodies, governmental agencies, industryplayers, regulators and providers of higher educationboth locally and internationally with a view toformulating meaningful talent developmentstrategies for the Financial Services Sector. Lendingan attentive ear to current and future trainingrequirements of operators is vital for us at theInstitute in order to plug appropriate and timelyinformation in course and curriculum design.

The mission of the Institute is to gradually etch itsway among the best and earn the reputation of beingone of the finest training providers of the country. Inthe light of conversations with partner institutions

The competitivenessof the Sector relieson the breadth anddepth of its talent

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and in response to demand from industry players, anumber of competency-based, fit-for-purposecourses are being conducted at the seat of theInstitute on the 8th Floor of SICOM Tower, Ebene. TheInstitute has served its beneficiaries with well over844 participants having enrolled on more than 11course offerings ranging from IFRS 17, Directors’Duties, Trusts, FinTech, Global Business Etiquettes,Financial Crime and AML to name just a few. Anti-Money Laundering, Directors Duties and EffectiveLeadership are among the upcoming programmesscheduled in the near term. Certain programmes andlectures are also conducted off-site upon requestfrom individual companies.

A right to education

The calling of the Institute since inception has alsoundoubtedly been for the youth of the country. Over625 young graduates and HSC holders have startedthe journey with us since we began a little over a yearago, and more than 60% have already signed up forjobs in the Sector after having been coached,mentored and groomed for success. At the Institute,our philosophy is that every young person has a rightto education. Every young person has a right to a job.Every young person has a right to earn a decentlivelihood. To this end, we have tailored bespokeYouth Employability Programmes which not onlycover the hard skills of finance but also teach thesofter skills an individual needs to be Life Ready andWork Ready so that he can be confident about gettinga job, about pursuing a career and building a home.

We keep in touch with those employers who havetaken our participants on board in order to assess therelevance and quality of training imparted to theseyoung graduates. The database maintained at theInstitute is a repository of homegrown talent holdingthe promise of innovative ideas and freshapproaches. Employers include Barclays Bank,Standard Chartered Bank, Standard Bank, the Bank ofMauritius, Ernst & Young, Deloitte, Temple Group,Habib Bank, ABC Banking, Accenture, Ceridian, MITCO,CITCO and Sun Insurance to name a few.

A new incarnation for the FSI

Going forward, the Cabinet of Ministers has, in itsinfinite wisdom, recently resolved to give theInstitute a new incarnation with new pairs of wings toembrace more challenges. Accordingly, the Instituteis now in transition mode and will soon beestablished as a full-fledged body corporate underthe aegis of the Ministry of Financial Services andGood Governance. Once instituted, our vision will beto create a new national asset for Government andthe people. In the realisation of this objective, weshall forge alliances with stakeholders, attracttalented participants to our lecture rooms, share bestpractices and intelligence with patrons of industry,develop curricular innovations and attract eloquent,experienced and competent speakers and resourcepersons.

The transition is an opportune time for us to set newobjectives in our collective quest for a world-classFinancial Services workforce. We invite our partnersand beneficiaries to look out for our next articlewhereby we shall announce interesting initiativesand new offerings for the second half of 2018including Financial Literacy Programmes and higherlevel certificates in collaboration with internationalprofessional bodies and standard setters.

From our vantage point, the past year has been anexciting journey. We believe that it has just begun.By any measure, the challenges ahead are dauntingfor the Financial Services Sector. To remaincompetitive on the global map and take advantageof new opportunities, we should not stop learning.The Institute will remain nimble and will continue tooffer tailored offerings so that we ensure ourrelevance today and tomorrow.

By Mohamed Khan, Chief Executive Officer, Financial Services Institute

We are committedto assistingindustry operatorsto grow theircapabilities to keeppace with marketand customerdemands

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Digital Economy: Challengesfrom a Tax Perspective?The digital economy is ushering in a new set of challenges to tax regimes aroundthe world, including in Mauritius, not least from the use of cryptocurrencies where a lack of international consensus may lead to cross-border tax disputes. Will this leadto disruption of the tax environment or can solutions be found?

In recent years, technology has been instrumentalto major developments in the world. It hasbrought in many benefits including new

market opportunities and sophisticated businessmodels. With the increasing pace in technologicaladvancement, we are witnessing an evolution and anincreasing growth in digital activities. Today, digitaltransactions not only encompass online buying andselling of goods with online credit card settlement,but also payments through virtual currencies.

The digital economy brings its share of challengesand one field where this is also being felt is taxation.Mauritius as a financial hub is no exception to thistrend.

Contribution of BEPS

The Organization for Economic Co-operation andDevelopment (OECD) has extensively addressed taxissues in the context of a digital economy in Action 1of the Base Erosion and Profit Shifting Project (BEPS).While traditionally an enterprise pays tax in thecountry where it carries on business, a number ofquestions arise when it comes to taxation of digitaltransactions - for example should tax arise where thepayments are effected, or where the order is placedor where the delivery of the goods is made, etc.Suppliers can now remotely interact with clients.Many tax jurisdictions impose taxation onenterprises on the basis that these have a certaindegree of permanency in the country. But withtechnology, a taxable presence, under the current taxregime, could be reduced to a minimum despitesignificant trading activities taking place in a country.To address these concerns, the OECD has proposeda number of ways to establish the tax link of anenterprise in a country. Examples are in-countrycustomer transactions, the use of a local domain

name or a local digital platform. However, theconsultations are ongoing and no position has yetbeen taken globally although countries have beenissuing their own local guidelines.

Approach in Mauritius

Unlike some countries, Mauritius has so far notintroduced any unilateral tax measures to tackledigital transactions. It has relied on its traditional taxcode and established international tax principles todeal with digitalization. The Mauritius RevenueAuthority (MRA) has also, in a couple of cases, issuedtax rulings which are in conformity with the domestictax legislation and international tax practices. Forexample, an enterprise shall not be taxable inMauritius if it does not carry out business through aphysical presence in the country.

The taxing issue of cryptocurrencies

Another area which has in the recent past madeheadlines is the use of virtual currencies, also knownas cryptocurrencies, and the most commoncryptocurrency that is presently used is Bitcoin.Virtual currencies are a medium of payment and arealso tradable. They are, however, not backed by anycentral bank or corporate entity. While somejurisdictions have taken a position on the taxtreatment of virtual currencies, so far there is nointernational consensus on their taxation. And thislack of harmonization may give rise to cross-bordertax disputes.

In the UK, the tax treatment of any transactioninvolving a virtual currency needs to be looked at ona case-by-case basis taking into account the facts andcircumstances around the transaction. For example, acompany that makes sales in exchange for virtualcurrency in the course of a trade is required to

By Dheerend Puholoo, Partner, PwC

TAXATION

compute the profits of its trade under normalaccounting principles and pay income taxaccordingly. Cryptocurrencies used for investmentpurposes or capital asset are subject to Capital GainsTax (CGT). In the US, virtual currencies are treated asa property and the general tax principles in respect ofproperty transactions apply to transactions in virtualcurrencies. Virtual currencies are not treated as acurrency that could not generate foreign currencygain or loss for US Federal Taxes.

The MRA has so far not issued any guidance on the taxation of virtual currencies. But, broadly, the tax rules in Mauritius may already be equipped to tackle new financial instruments, including cryptocurrencies. In my view, if cryptocurrencies areregarded as a medium of exchange and used as partof trading transactions, any profits arising on theexchange of the virtual currencies may be taxable asthey relate to the underlying trading activities. Gainson virtual currencies held as capital asset should beout of the scope of income tax and non-taxable inMauritius, while any short term gains on virtualcurrencies held as inventory may be subject toincome tax. However, there may also be scope forthese gains to be exempted on the same footing asgold, silver and platinum in Mauritius (as currentlyprovided in the tax legislation). As the use ofcryptocurrencies becomes more prominent, the MRAmay need to consider adopting specific rules on thematter.

Disruption of the tax environment?

The digital economy will continue to disrupt

the economic environment, bringing with it opportunities and challenges that may be relevantfrom a tax perspective. There are suggestions of having a separate taxing system for digitaltransactions, but this may create negativeconsequences for cross-border trade andinvestment. The concern with digitalization is that itmay erode the tax base of countries. There arecontinued international discussions and, hopefullythrough the BEPS initiatives, we will move towards aglobal consensus on this issue.

Mauritius has so far responded well in dealing withemerging issues based on its existing tax laws. It hasamended certain aspects of its tax legislation in the past, but fundamentally the changes were in line with international tax norms. It has not broughtany radical unilateral changes thus providingcertainty and predictability to investors. Further, asdigitalization takes hold, we can expect that the MRAwill issue a Statement of Practice to address areas ofambiguity.

Mauritius has so far responded well in dealing with emerging issues based on its existing tax laws

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Documents

Mauritius International Financial Centre · Financial Centre (IFC), with the Mauritius Oﬀshore Business Activities Act and the Banking Act providing the right framework for activities