Integrating Mauritius in Sub-Saharan Africa: A Private Sector Perspective
In Mauritius, over the last 5 years, policymakers and the corporate sector felt that an ‘Africa agenda’ had to be built and pursued. Consequently, an Africa agenda is under construction and, as such, Mauritius is poised for a very long and meaningful partnership with Africa. This agenda will be pursued in collaboration with other partner countries that share common interests.
In Mauritius, the time ‘to think’ of regional integration in Sub-Saharan Africa is past. Today, as economic opportunities increase and as foreign partners find their way in Africa, the time is to ‘act’ and ‘to do’ business in the region. In this context, both policymakers and the business community have developed a shared understanding on the urgency for an accelerated economic integration with Africa and have therefore embarked on a wide range of actions, meant to improve the business environment and market access conditions.
This paradigm shift has taken place because of a convergence of both the ‘push’ and ‘pull’ effects towards Africa. The global financial crisis, the Euro zone recession and the Chindia context drove the ‘push’ effect while the growing business opportunities in Africa formed the basis of the ‘pull’ effect. At the same time, the reforms undertaken over the recent years in Mauritius with respect to fiscal harmonisation, business facilitation and labour environment have gradually enabled it to position itself as a platform between Asia and Africa.
Mauritius’ initiatives to access opportunities in Africa
At present, around over 75 local companies have invested in some 20 countries in Africa. In 2012, 58% of total outward investment from Mauritius went to Africa. For the first five months of 2013, the outward investment to Africa had reached 68% of total outward foreign direct investment. The private sector launched the Mauritius Africa Business Club (MABC) in October 2012 with the main objective of networking business interests into Africa.
The Stock Exchange of Mauritius (SEM) is active in internationalising the stock market and moving up the value chain of products listed and traded. It has reviewed its legal framework to enable the listing of global companies and the trading and settlement of products in US dollars, Euro, and Pounds Sterling to position Mauritius as a prominent gateway linking Europe/USA/Asia to Africa. The SEM is also accredited to the African Securities Exchanges Association (ASEA) and the Committee of SADC Stock Exchange (COSSE). Financial institutions including banks are developing financial instruments for the region.
Pro-Africa policies pursued by the Mauritian authorities are significantly on the rise. In 2012, the Board of Investment (BOI), the investment promotion agency of Mauritius, launched the Africa Centre of Excellence (ACE) with the main objective of encouraging and supporting outward investment to Africa. The BOI has signed a Memorandum of Understanding with investment promotion agencies in 20 countries already with a view to facilitating information and joint ventures for Mauritian investors with businesses in these countries. In the same vein, the Government of Mauritius has expanded its network of Double Taxation Avoidance Agreement (DTAAs) and Investment Protection Promotion Agreement (IPPAs), and, at present, Mauritius has signed 18 DTAAs and 19 IPPAs. The country is presently negotiating 6 new DTAAs and 2 new IPPAs.
Manufacturing companies currently operating in the Mauritius Freeport, which export 85% of their production to Africa, enjoy favourable fiscal incentives: they are exempted from the corporate tax of 15%. Enterprise Mauritius (EM), the export promotion agency has organised around 15 road shows in selected African countries during the last 12 months. EM is focusing its annual trade fair, Maitex on Africa and last year, the fair attracted over 500 participants from the Africa region.
What strategy to increase the presence of Mauritius in the region?
In order to enhance the regional integration strategy, Mauritius is applying the interim Economic Partnership Agreement (IEPA) with EU together with Seychelles, Madagascar and Zimbabwe. The latter is based on the already agreed COMESA Common External Tariff. Although mostly driven towards maintaining market access in Europe, the IEPA allows countries to source their inputs from the region through ‘cumulation’ provisions, and therefore is expected to encourage regional value chains.
Mauritius firmly believes in the virtue of deep regional economic integration as a vector integration in the global market and more importantly, as a means to foster scale economies of small fragmented economies. In this context, it is an active member of the Southern African Development Community (SADC) and of the Common Market for Eastern and Southern Africa (COMESA) and is fully implementing their respective free trade areas. It is also active in negotiations in trade in services, increasingly viewed as essential element for business operations and for the movement of professionals. Furthermore, Mauritius is also very active in the tripartite Free Trade Agreement (FTA) negotiations between the EAC, SADC and COMESA, meant to address the practical challenges of regional overlapping memberships and to facilitate the movement of goods and services among the three regional economic communities and to harmonise regulations and standards.
Moreover, in an effort to promote even greater and faster trade and investment, the Governments of Malawi, Mauritius, Mozambique, Seychelles and Zambia, launched an Accelerated Program for Economic Integration (APEI) at a Ministerial meeting held in Seychelles, in September 2012. The participating countries emphasised that implementing an accelerated program for economic integration is necessary to improve competitiveness, enhance growth and create jobs in the region. The purpose of the APEI is to support countries that are willing and able to advance their economic reforms at a faster pace to do so. It is viewed a complementary element to the existing regional economic initiatives (SADC, COMESA, Tripartite) and as an initiative for a group of fast-movers to champion the dynamics in few priority sectors. Closer collaboration among such a group of reform-oriented but diverse countries will also create more scope for peer-to-peer learning and knowledge sharing. The countries agreed to accelerate reforms and pursue closer collaboration through:
The approach of APEI is a very pragmatic one with the participating countries agreeing on measures to implement the five pillars identified at the first Ministerial meeting on an agreed timeframe against measurable performance indicators. Each of the five countries has already established their National Coordinating Working Group (NCWG), which will coordinate their respective activities at the national level. The NCWGs will then harmonise their respective activities at the level of the Regional Coordinating Committee, which will monitor progress with respect to the time bound commitments undertaken by the participating countries. Regular video conferences and technical meetings are being organised on a regular basis to discuss and clarify the activities of the APEI. The APEI, which is an innovative approach, may well become a model for accelerated regional integration. It is open to any other countries willing to speed up their integration process.
In Mauritius, over the last 5 years, policymakers and the corporate sector felt that the ‘push’ and pull’ effects towards Africa were so strong that an ‘Africa agenda’ had to be built and pursued. Furthermore, there was a quasi-unanimity that despite the systemic constraints, in particular related to the infrastructure deficits and governance challenges, and the challenges of investing in Africa for a small country like Mauritius, the latter had a clear competitive advantage because of its history of doing business with mainland Africa and its geo-strategic location as a pathway between Asia and Africa. Consequently, an Africa agenda is under construction and, as such, Mauritius is poised for a very long and meaningful partnership with Africa. This agenda will be pursued in collaboration with other partner countries that share common interests. We are at the very dawn of this journey which will re-design the economic model of Mauritius and Africa will be a key component in this new model.
Raj Makoond is the Director of the Joint Economic Council in Mauritius and is Board Member of ECDPM.
This article was published in GREAT Insights Volume 2, Issue 6 (September 2013).