Our history and the decision taken right at the time of independence of placing Mauritius as part and parcel of the African continent have been hugely beneficial to our economic and social development over the past half of a century
The launch of the African Economic Platform was well attended with many African Heads of State and government having travelled to Mauritius on the occasion. The fact that Mauritius has been chosen as the venue for this first edition of the event is a great opportunity for the country and stands testimony to the high esteem in which Mauritius is held by many of the African states. This represents yet another window of opportunity for Mauritius in its endeavours to set itself up as a business platform for trade and investments in the continent.
For this to happen though there is an urgent need to follow up on what has been discussed and to translate words into actions. Unfortunately the dominant view concerning such conferences and summits the world over is that they usually only serve as an occasion for leaders to make the right sound bites and say the things which their audiences want to hear. May it be said again that this sort of criticisms of summitry is certainly not restricted to African meetings but apply generally to all such meetings including the G 20 meetings of Head of States, for example.
What we are concerned with here though is our interest in Africa as an eventual if not potential hinterland, especially for the development of the services industry in Mauritius as well as for investments by Mauritian companies on the continent. These are the two most obvious avenues for business opportunities which have been identified up to now.
Many Mauritian enterprises forming part of the Top 100 Companies have initiated operations in Africa over the past decade or earlier such as GML, CIEL, MCB, Harel Mallac and Rogers among others. They are already doing very well in several ventures in different countries in Africa – from Kenya to Cote d’Ivoire passing through Tanzania and Mozambique. Some of the ventures have of course suffered (Afrasia Bank in Zimbabwe).
There is no doubt that we are here on a steep learning curve and such mixed performances must be expected. The Mauritian company ALTEO Ltd, which was born out of a merger between FUEL and Deep River Beau Champ Ltd, is one of the leading sugar producers in Tanzania where it produced nearly 100,000 metric tonnes of sugar in 2015; this represents nearly a quarter of the total production of sugar in Mauritius in the same year.
One of the lessons which can be drawn from their experience is that size matters when it comes to certain specific areas of operations on the continent, such as mining, agriculture or real estate development. There is however huge scope for investments in services such as education, health, the financial services generally (insurance, banking, leasing) to serve the rising middle classes in so many of the most successful countries. In these areas the need for capital investments may be less onerous and the key success factors may consist of the acquired experience of the promoters, their entrepreneurship drive and knowledge capital.
Several of the global private equity firms and large multinationals which were initially attracted by the ‘Rising Africa’ story have been rather disappointed by the dearth of opportunities for large investments of the size which start to be interesting for their level of operations. Some of them such as Nestle have either closed their operations or scaled down their commitments. While this may at first sound as bad news, it may actually represent interesting opportunities for Mauritian companies, including the local Equity Funds, looking at investment opportunities as well as for our ambition of becoming a financial and headquarters hub for the continent. It means that there is a space which is opening up for precisely the size and level of operations for which Mauritius could position itself being given its own economic size and experience.
In this context, this extract from an article by Ibrahim Sagna, Head of Financial Advisory at Africa Finance Corporation, writing about investment opportunities in Africa is most telling: “However many of these entrepreneurs present opportunities which are too big for microfinance institutions and informal investors, but too small or too risky for regular banks and private equity firms.” The limited access to finance in this space, which has been referred to as the “missing middle” by Aubrey Hruby and Joanne Yoo in a blog in the Financial Times, is commonly seen as the main barrier to some much-needed accelerated growth on the continent.
All of the above outline some of the opportunities and threats which stand on the route to the realization our ambition to become the business hub for Africa. Our history and the decision taken right at the time of independence of placing Mauritius as part and parcel of the African continent have been hugely beneficial to our economic and social development over the past half of a century. Being presently a member of the African Union, COMESA and SADC, as well as considering the numerous double taxation treaties which have been signed with nations on the continent definitely provides the right environment for realizing our objectives.
However in order to achieve the results which we are hoping for and making our future relations with the African continent a major plank of our development strategy, there are two things which are necessary – strategy and structures. Unfortunately, as has been consistently argued in this column, we do not seem to have any of these two.
Private initiatives have been the drivers over the past decade. Writing in the Financial Times, David Stevenson wrote the following: “Financial markets are not exactly renowned for their intrinsic sense of fair play and decency. One might have thought that equity investors would have rewarded many emerging and frontier stock markets where the “macro” fundamentals are positive and looking brighter by the day. Far from it – investors have actually dumped a whole raft of global non-developed markets as they flee anything that looks remotely risky or illiquid.” A perfect illustration of market failure and the need for some form of “nudging” from the State to accomplish what is basically a win-win achievement.