Business Reporter
MAURITIUS has become increasingly popular among Zimbabwean and foreign firms as the gateway to international finance and the spring board for expansion into other markets across the entire African continent.
Zimbabwean firms have found it almost close to impossible to raise fresh funding, due to the perceived high country risk profile, to refurbish and replace equipment after a decade of macro-economic instability.
The effect of this scenario has been drastic drop in productive capacity, high cost of operations, loss of competitive edge, drop in export capacity, viability constraints and loss of jobs as firms battle to survive.
The decade long economic meltdown, characterised by hyperinflation that peaked at 231 percent in August 2008, left many local based firms highly dismembered, financially weak and requiring huge fresh capital injection.
As a consequence of the battering endured industrial production capacity plummeted to an all time low of 10 percent in 2008, peaked at 57 percent in 2011 before falling to 44,2 percent in 2012 and dropping further down to 39 percent last year.
According to the Confederation of Zimbabwe Industries president Mr Charles Msipa, industry needs an estimated US$8 billion for working capital and capital projects to replenish its productive and competitive edge.
The protracted economic crisis also decimated the financial services sector as inflation destroyed the value of their assets and left them seriously hand capped in terms of their financial intermediary role.
All companies domiciled in Zimbabwe now face the grim reality of possible collapse unless they find means and ways to raise fresh funding to support operations yet local institutions cannot meet their needs.
Many have started waking up to the reality of the strategy being used by other global investors that identify opportunities in Zimbabwe, but because of the perceived risk profile largely emanating from the country high debt overhang, have to use other jurisdictions to mobilize the requisite funds.
Mauritius has thus evolved into a reputable international financial services centre that well managed local companies have sort to use to access cheaper international finance to support investment projects in Zimbabwe.
Equities research firm EFE Securities managing director Mr Edgeton Tsanga concurred that strong businesses operating in Zimbabwe were likely to use Mauritius to gain access to the much needed international capital.
“Mauritius is one of the best international financial centres in Africa. It has some of the best banking laws and will see more of those capital initiatives.”
However, Mr Tsanga said, while in general many local companies will struggle to raise the finance they need to recapitalise and ramp up production, he projected foreign capital will keep flowing into promising projects.
Companies that have of late been able to attract foreign capital include NMBZ (Norfund), Riozim (GEM Raintree), Seed Co (Vilmorin and Cie), ABC Holdings (ADC Mauritius), but such foreign funds have been few and far between in 2013 as foreign have tended to be too cautious on Zimbabwe.
And what looks likely to be growing trend, Innscor Africa Limited have moved its headquarters to Mauritius to tap into the jurisdiction’s abundant international capital it needs to expand in Zimbabwe and regionally.
Authorities in Mauritius have thus been extremely prudent by adopting best international practice in the laws and regulations to prevent misuse of the jurisdiction.
In 2002, the Financial Intelligence and Anti-Money Laundering Act were promulgated to combat money laundering and terrorist financing using Mauritius.
Over the years, this resulted in international banking institutions, insurance, investment, venture capital, fund managers, money changers, leasing, and management companies establishing business in Mauritius.
In the last two years, it has embraced bold reforms that have made it among the most open, competitive and low tax economies in the world.
It currently is proactively reviewing its legal and regulatory framework as well as its business environment, in line with world market demand.
Some of the unique elements that makes the Indian Ocean island an attractive and competitive jurisdiction include political, economic and social stability.
This will also cover pro-business environment, with the government acting as the facilitator, preferential market access to the EU (under Cotonou Agreement), US (Under the Africa Growth and Opportunity Act –AGOA) and Africa (under Common Market for Eastern and Southern Africa COMESA and Southern African development Community — SADC.
Other incentives entail high level of protection to investors through a wide network of Double Taxation Avoidance Treaties and Investment Protection Agreements.
Mauritius is also signatory member to a number of international, regional and bilateral conventions and agreements.
The jurisdiction has close historical, political, economic and cultural ties with countries on the competitive edge of technology and information society (India, China, South Africa, Europe and North America).
In addition, it has attractive package of fiscal and non-fiscal incentive and high level of facilitation services, ease of doing business for incorporation or registration of a company. One shareholder company, with no minimum capital requirement is permissible under Mauritian laws.
Further, as part of effort to incentivise investors, 100 percent foreign ownership is also allowed and has young, dynamic competitive and bilingual (English/French) workforce with first world qualifications, skills and experience. Businesses, in Mauritius, may be conducted as an individual operating as self-employed, in partnerships or through a multitude of entities such as private or public companies, protected cell companies, societies (partnerships) or trusts, which may conduct domestic or global business.
The presence of financial institutions is constantly increasing, the latest being the establishment in November 2010 of Global Board of Trade, an international commodity and currency exchange for global investors.