Ganessen Soobramanien, Director JTC (Mauritius) Limited, examines why international groups choose Mauritius for their regional / global headquarters.
In the days when European vessels trading with Asia needed to navigate the Cape of Good Hope, Mauritius’ strategic location was highly prized as vessels would stop at Port Louis for refuelling, repair and rest. Such was the island’s importance that the French and English battled for possession and this is reflected on the Mauritius coat of arms which bears the words: “Stella Clavisque Maris Indici” meaning “Star and Key of the Indian Ocean”.
150 years after the Suez Canal transformed such trade, Mauritius has again emerged as a strategic base in the Indian Ocean. The commercial world is re-discovering the advantages offered by this small island republic not too far from the African coast, in fact a mere four hours flying time from South Africa. Now Mauritius is widely seen as offering a unique springboard to do business in Africa, an advantage not lost on pan-Africa focused multinational corporations (“MNC”s) such as Aspen Pharmaceutical, Essar and Huawei who have all established headquarters in Mauritius.
So why do international firms choose the Mauritius International Financial Centre (“IFC”) to base their HQ? Mauritius is one of the very few countries in the Southern Hemisphere (and probably the only country in Africa) with the following combination of features:
- History of stable democracy with free and fair elections every five years.
- Mature, independent and reliable judiciary system with UK Privy Council as court of last appeal.
- Hybrid legal system (Common Law inherited from the British and Civil Code from the French).
- Modern legislation that enables business.
- Low tax rates, effectively zero after credit on many sources and up to 15% as a maximum rate.
- No capital gains tax, no inheritance tax and no stamp duty on capital transactions (except local real estate).
- No foreign exchange restrictions and full permissibility of doing business in all major currencies.
- Developed international banking services with global institutions like HSBC, Standard Chartered, Barclays, Standard Bank, etc represented on the island.
- International securities exchanges with listing in at least five currencies (United States Dollars, British Pounds, Euros, South African Rand and Mauritian Rupees)
- An abundant pool of highly qualified, very experienced and cost-efficient finance and legal professionals holding predominantly UK qualifications.
- Newly developed international centre for arbitration.
- Well regarded diplomacy and several bilateral and multilateral agreements with Africa, including in areas of taxation, trade and investment.
- Strong sentiment of national peace and harmony in a multi-cultural society where security on the street is enjoyed by locals and foreigners alike.
- Bilingualism of the population (English and French).
- Fibre optic connectivity to the world.
Although many MNCs have a significant presence in cities such as Johannesburg and Nairobi, neither comes close to having the full features shown above and it is no surprise that Mauritius is the highest ranked African nation in the World Bank’s Ease of Doing Business Index and Mo Ibrahim’s Governance Index.
The Mauritian Government actively promotes the Mauritian Headquarters solution and introduced the ‘Global Headquarters Administration’ (“GHA”) licence in 2016 with the aim of strengthening Mauritius’ position as the preferred regional financial and business hub for multinationals doing business in Africa. This licence (provided to a company incorporated in Mauritius) allows MNCs to set up their regional administration and secretarial, procurement, accounting and auditing, registered offices and resident directors within the IFC. These services can be offered to groups of companies operating in other countries, the ideal focus being those operating in Africa. Companies holding GHA licenses are required to offer at least three of the following services to at least three related corporations:
- Administration and general management
- Business planning and development and coordination
- Economic or investment research and analysis
- Services related to international corporate headquarters in Mauritius
The GHA licence provides an eight year tax holiday on all income generated by the MNC from its HQ activities, provided it satisfies the conditions of minimum employment and substance of its activities.
The success of the Mauritius IFC in attracting South African businesses expanding their activities on the African continent is not just tax driven, but depends heavily on the island’s ability to support both the MNC and its expatriate staff and their families. A variety of factors ensure Mauritius provides an environment where expatriate staff and their families enjoy living and working, such as it being safe, possessing excellent international schools, quality healthcare services at affordable cost and ample leisure opportunities.
Singapore is a prime example of how families from around both the developed and developing world enjoy being stationed there and having the opportunity to explore interesting parts of Asia. In the same way, the peaceful multi-racial island of Mauritius, inhabited by descendants from Europe, Asia and Africa, has a lot to offer expatriates looking for a healthy, active lifestyle which is why it is now home to thousands of expatriates from around the globe.
The Government’s declared policy of: ‘Work, Live, Play’ for foreigners supports its ambition for Mauritius to become one of the best places in the world to live. Consistent with this policy, the island has invested heavily in its infrastructure by building new roads and a new international airport terminal, and in its leisure sector with particular focus on preserving and enhancing the natural beauty of the fauna and flora of the island and its surrounding seas. Expatriates very reasonably demand high levels of security, access to international English-medium schools, well-developed air connectivity, world class healthcare including well-run and well-staffed private clinics. Mauritius delivers on all counts, particularly safety, which is a paramount feature for many expatriates from South Africa.
Unlike many other countries the Mauritian government has introduced a number of schemes that enable expatriates to acquire properties in Mauritius, recognising that this is high on the list of “wants” of many incoming professionals.
Typically MNCs require larger numbers of expatriates to run their operations in less developed countries, which places a vulnerability on the MNC as such expatriates are internationally mobile. The deep pool of professionally qualified talent an MNC can access in Mauritius mitigates this vulnerability, making the island a more cost-efficient and stable environment in which to locate a large HQ operation. It is quite feasible that an Africa focused MNC centralising its administrative and finance related HQ operations in Mauritius can reduce its expatriate headcount from around 40% to below 10%.
The presence of highly developed port infrastructure and services, including within the Freeport makes Mauritius unique in Africa as the island can host both an MNC’s office-based operations and its port logistics. The port consists of 2.6 km of deep water quays, post panama gantry cranes and a container park of over 30 hectares. It provides a variety of value-added services including cargo handling, bunkering through pipes and barges, ship supplies, ship repairs, fish landing operations, pilotage, towage, round-the-clock security and firefighting services. Port Louis is serviced by major shipping lines such as Maersk, Safmarine, Mediterranean Shipping Corporation and Mitsui.
The appeal of Mauritius is further enhanced by its membership of SADC and COMESA, giving access to 600 million consumers and a total Gross Domestic Product of around one trillion US Dollars.
An International Finance Centre that offers such a solid legal and regulatory framework, well-developed banking and professional services infrastructure, qualified human resources and good sea and air logistics presents a compelling case for many Africa-focused MNCs.
Contact Ganessen for more information about the services JTC group can offer international corporations considering establishing a regional base.
JTC (Mauritius) Limited is regulated in Mauritius by the Mauritius Financial Services Commission.