BusinessExecutivesA financial services centre must innovate

Tue,21Nov2017

Posted on Monday, 28 October 2013 12:52

A financial services centre must innovate

By Gemma Ware in Port Louis

Charles Gaëtan Xavier-Luc Duval VICE PRIME MINISTER AND MINISTER OF FINANCE. Photo©All Rights ReservedLimited liability partnerships and revisions to the tax treaty with South Africa should attract more banks, explains Charles Gaëtan Xavier-Luc Duval, vice-Prime Minister and Minister of Finance of Mauritius.

 

The Africa Report: What's your ambition for the future of Mauritius's financial services sector?

Charles Gaëtan Xavier-Luc Duval: It's become a bit of a platform for worldwide investment, particularly India and China. But now we see that about 60% of the companies formed in the global business sector are actually targeting Africa. It's excellent news for Africa because it means that we are channelling a lot of investment to Africa. It's excellent news for us because we feel particularly lucky to be on the shores of Africa and being able to play perhaps the same sort of role that Hong Kong played for China.

If we want to increase the supply of services from this island, each company that is formed here [needs] to be able to have more commercial substance. We already have a quite varied sector, but, especially in terms of invest- ment into Africa, we don't want people to come here just for the tax advantages. A financial services centre [keeps] having to innovate in terms of products – that's why we're going to have limited liability partnerships soon.

In terms of making Mauritius an investment hub for Africa, is one of the key pillars bringing more African banks here?

I think more international banks, including African banks. We want this island to have a large source of talent that people can tap when thinking of investing into Africa. We have about 4,000 highly talented people who come on a special work permit called an occupation permit. We want to increase that to about 5,000 in the short term and to 10,000 in the medium term.

There was a new tax agreement signed with South Africa in May. Has that been ratified?

No. The agreement was negotiated just before I joined this ministry. It was signed recently, but there has been some uneasi- ness, here and in South Africa, with article 4 of the agreement, which deals with low-tax residency for companies. Investors hate uncertainty, and in their view it provides too much uncertainty as to where a company will be tax resident. It has to be carefully considered and maybe should be accompanied by an MOU [memorandum of under- standing] between the tax author- ities. I've engaged with the South African embassy here.

It's not exactly related to the India treaty, but it is the same aspect: that is the greater the certainty, the better all round. The issue that we also have with India is that the General Anti-Avoidance Rules (GAAR) regulation left too much uncertainty as to when the tax authorities may act, and people don't like that.

Statistics Mauritius revised the economic growth rate down from 4% to 3.5%. Are you confident you're going to see improved growth?

The diversification of the economy has meant that we've been able to achieve remarkable resilience really, given the huge dependency on Europe. Of course we can always do better. Maybe on our tourism side there should have been more buoyancy. We need to look at how we accompany our private sector. We can do it a little bit better. But to imagine that we would have had 5% growth once our main partner was in recession is just not possible.

Once Europe picks up again, we [will] have had a stronger non-Europe market, [so] with a resurgence in European earnings, that is then going to be a very substantial thing.

We've also obviously got new sectors coming along, like the maritime hub. We also hope be- fore the end of the year to have a framework for deep-sea [oil and gas] exploration. ●



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