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A ttendees at the recent African Global Business Forum in Dubai came away with one certainty: Africa is the world’s largest

developing marketplace, and it is open for business. The African continent is rife with opportunity in a variety of sectors including transport, infrastructure, energy, mining, telecommunications, agriculture, logistics, trade and tourism. Flows of foreign direct investment (FDI) into Africa have increased significantly in the past decade, and the World Bank has recently forecast that FDI will rise in the coming years, reaching an

MENA INvEsTMENT INTO AFRIcA: MAURITIUs Is ThE BRIdgEKerri L. Lefebvre and stephen V. scali of Conyers Dill & Pearman share their expertise on why Mauritius is an ‘ideal investment platform’ for the MENa region.

estimated USD54 billion a year by 2015. The continent’s economic growth is expected to increase during the next five years, benefiting from commodity prices and increasing investment as well as a general pick-up in the world economy.

Many MENA-based investors looking to expand into Africa operate from Dubai, which has positioned itself as the regional leader for trade, transport, tourism, logistics and financial services. Ideally positioned between the Asian tigers and the African lions, Dubai is very much the choice of investors seeking to do business in the

African continent, with COMESA member Mauritius increasingly serving as the bridge.

MAuritius – the ideAl investMent PlAtforMMauritius is in the same time zone as Dubai. It is an international financial centre with sophisticated corporate legislation and deep African roots. The country has close cultural and commercial ties with Africa, Europe, India and China, from which its diverse population hails. Mauritius was ranked 1st in Africa (and 19th worldwide) in terms of “Ease of Doing Business” by the World Bank’s

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Doing Business report, 2012. It is a signatory to the major African conventions and a member of the major African regional organisations which provide preferential access to African markets, such as the African Union, the Common Market for Eastern and Southern Africa (COMESA), the Indian Ocean Rim Association for Regional Cooperation (IOR‐ARC) and the Southern African Development Community (SADC). COMESA, for example, is dedicated to providing an extensive and accessible trading bloc for FDI and is seeking to develop its trading ties and relationships with Dubai.

The success of Mauritius as an international finance centre is based on its commercial advantages as well as fiscal strengths. It benefits from its position as a treaty‐based jurisdiction, with 37 double taxation avoidance treaties in place. As such, it combines the traditional advantages of an offshore financial centre (such as no capital gains tax, no withholding tax, no capital duty on issued capital, confi-dentiality, exchange liberalisation and free repatriation of profits and capital) with the distinct advantages of a treaty network and, for purposes of African investment, its ideal location, regional stature and relationships.

Mauritius has entered into advantageous treaties with 14 African countries: Botswana, Lesotho, Madagascar, Mozambique, Namibia, Rwanda, Senegal, Seychelles, South Africa, Swaziland, Tunisia, Uganda, Zambia and Zimbabwe.

Treaties with the Republic of Congo, Egypt, Kenya and Nigeria are being ratified. There are also treaties awaiting signature (Gabon and Ghana), and further treaties under negotiation (Algeria, Burkina Faso, Malawi and Tanzania).

Mauritius has treaties with Middle Eastern countries including the United Arab Emirates, Qatar, Oman and Kuwait as well as other Asian and European jurisdictions (including Luxembourg, France, Germany and the United Kingdom).

Mauritius also has entered into various Investment Promotion and Protection Agreements (IPPAs) with a number of African countries which provide, amongst other things, for free repatriation of investment capital and returns, guarantee against expropriation, most favoured nation rule with respect to treatment of investment, and compensation for losses in case of armed conflict.

MAuritius GlobAl business CoMPAniesMauritius investment business is generally carried out through “Global Business Companies”. There are two types, based on the category of licence: the Category 1 Global Business Company (GBC1) and Category 2 Global Business Company (GBC2). Only GBC1s are able to avail the treaty network.

GBC1A GBC1 may carry out a broad array of business activities, such as asset management, credit finance and other financial business. A GBC1 is tax resident in Mauritius and enjoys benefits under the country’s extensive tax treaty network. Income earned by a GBC1 is taxable at a maximum effective rate of 3 per cent.

A GBC1 is of particular interest when overseas income is predominantly in the form of dividends, royalties and interest, and also when capital gains are relevant.

Investment into a variety of African sectors would generally be made through a GBC1, in order to benefit from the tax treaty network, which operates to minimise or avoid altogether taxation on capital gains and withholding taxes (notably on dividends, interest and royalties). This represents a significant advantage which Mauritius has over other traditional offshore jurisdictions.

The treaties can result in savings of 5 per cent– 20 per cent on withholding taxes, and 30 per cent – 35 per cent on capital gains tax, payable in the African country.

GBC2A GBC2 is well suited for asset/investment holding, invoicing, marketing and international trading. A GBC2 cannot conduct activities such as banking, financial services, provision of registered office facilities, or directorship services. A GBC2 is not subject to any tax in Mauritius but, unlike the GBC1, it cannot benefit from the tax treaty network.

Applications for the GBC1 and GBC2 (as well as other licenses as may be required) are submitted to the Mauritius regulator, the Financial Services Commission (by a licensed management/trust company, which also oversees administration of the entity).

other AdvAntAGes of MAuritiusWhile the fiscal advantages offered by its series of tax treaties play a major role in the choice of Mauritius for African investment, there are additional factors which should be taken into account. Mauritius is a well-regulated business jurisdiction which has a record of adherence to international standards and best practice. It enjoys a sophisticated

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international telecommunication service, an abundance of professional service providers at a relatively low cost, an educated and multilingual workforce, with English and French being the main business languages, as well as economic and political stability.

Mauritius has a hybrid legal system consisting of British common law practice and the French Napoleonic Code, although the Privy Council of the United Kingdom is the final court of appeal. Its forward‐looking legislators have created modern and flexible company/commercial legislation which is essentially based on British common law, and the Financial Services Commission of Mauritius oversees the regulation of its non-banking financial services industry.

investMent ProteCtionMauritius has signed IPPAs with numerous African countries, six of which are in force (Burundi, Madagascar, Mozambique, Senegal, South Africa and Tanzania). As noted above, the IPPAs provide, amongst other things, for free repatriation of investment capital and returns and guarantee against expropriation, in addition to a most favoured nation rule with respect to treatment of investors, and compensation for losses in case of war, armed conflict

or riot. They also provide arrangements for the settlement of disputes between investors and contracting states. Mauritius’ location and its membership in the leading regional African organizations make it the most desirable financial service centre for investment into Africa. On the other hand, while fully belonging to Africa, Mauritius is not a continental nation. This ideal geo‐political situation limits spill-over effects of any potential neighbouring conflicts.

investMent struCture The appropriate structure will depend in each case upon factors including the investors, the target industry sector and jurisdictional regulation and requirements. However, in a typical African investment structure, a GBC1 is set up in Mauritius to acquire shares or other equity interests of a local operating entity, which is financed by a combination of debt and/or equity. Operating profits are channelled to Mauritius by way of dividends or interest, with an exit gain realised by way of a disposition of assets and/or shares (generally giving rise to capital gains). For example, MENA investors might incorporate a GBC1 to hold shares of a limited liability company incorporated in the Republic of South Africa (RSA) to facilitate inward

FDI into the various trading blocs of which the RSA is a member. This type of trading structure is of appeal where the substantive benefits of RSA (including human capital and industry access) are especially attractive. Where matters such as oil and gas, mining and/or licensing arrangements are involved, the structure may involve payment of royalties to the GBC1.

The shares of the GBC1 often are held through a company established in the British Virgin Islands (BVI) or the Cayman Islands (or directly by an entity established in a jurisdiction that is party to another Mauritius treaty where appropriate). The BVI, particularly, is used extensively in circumstances where joint venture partners wish to structure their shareholding and commercial arrangement in a neutral environment with sophisticated corporate legislation, or where third party finance is involved and the parties wish to avail the BVI’s regulatory and commercial court regimes for matters relating to security, insolvency and enforcement.

In family office situations, it is also quite usual to see the shares of a Mauritius Global Business Company held (directly or indirectly) by a private trust company as the trustee of a trust for the benefit of various family members. The trust provisions may accord with Shari’ah to the extent desired by the settlor. Mauritius also lends itself to collective African investment by way of investment funds and private equity arrangements.

Mauritius, in tandem with Bermuda, the BVI and the Cayman Islands, offers a wide variety of vehicles that may be adapted to maximise African investment opportunities, including limited partnerships (of particular interest in the private equity context), protected cell companies, trusts and foundations.

text by: 1. Kerri L. Lefebvre, director and head of Dubai office, Conyers Dill & Pearman2. Stephen v. ScaLi, head of Mauritius office, Conyers Dill & Pearman

1 2

investors/Joint venture PArtners

holdinG CoMPAnY (bvi)

sPv (MAuritius GbC1)

oPerAtinG Co. (AfriCA treAtY

PArtner)

AssetsroYAltY-eArninG

Assets (AfriCA treAtY PArtner)

Royalties Withholding tax: 0.15%

Dividends No withholding tax

(subject to Mauritius tax at maximum rate of 3%)

Dividends Withholding tax (typical): 0-15%

Income (subject to jurisdiction tax)

AfriCAn holdinG struCture