Island of Opportunity
Category News
Political and social stability, a highly skilled workforce and an open business enviroment make Mauritius an attractive investment destination for foreigners - provided they're well prepared.
Mauritius has done very well economically since agining independence from the UK in 1968, emerging from a mono-crop (sugar) economy to a leader in textiles, banking, export orientated maunfacturing, real estate and tourism. In fact, it is now rated as an upper-middle-income country, with a GDP of almost MUR1,3 million that's grown at an impressive 5% a year for the past 3 decades.
This is partially the result of the government opening the economy and making it attractive to foreign investors of all backgrounds. It's instituted a low tax regime (personal and corporate tax are harmonised at 15%), declared dividends are tax-free, abolished exchange controls and reduced tariffs for electricity and water (the latter's a pressing issue on an island that uses much of its freshwater reserves on the sugar industry).
Export-orientated operators enjoy duty-free priviledges for their inputs and equipment.
Mauritius has now secured preferential market access to the European Union, the USA (through Africa Growth and Opportunity Act), the Common Market for Eastern and Southern Africa and the Southern Africa Development community. The island nation has also signed taxation-easing agreements with almost 40 countries and investment promotion and protection agreements with another 36 of them. No surprise, then, that it's ranked first in Africa and 23rd globally in terms of ease of doing business, according to the latest World Bank Doing Business Survey.
Global Citizens
Part of this success may be due to its relative cultural homogenity: the vast majority of the island's population are of Indian descent. But they're also truly global citizens. Although many speak Creole, most are bilingual (English and French) and the country is a member of both the Commonwealth and Francophone countries. It's precisely this ability to (re)position itself as an offshore extension of Europe, Africa and Asia (the overseas Chinese population, the second-largest demographic, are economically powerful) that explains Mauritius's appeal as a global manufacturing and banking harbour. And with the highest literacy rate in Africa (education is free up to tertiary level) and a young workforce (almost 30% are under the age of 30), the countrys an excellent place to open light industry facilities. Íts also a model of political stability, consistently ranked top on the continent for good governance.
Listening and Acting
One look at the government's Board of Investment website (www.investmauritius.com) is enough to show that Mauritius is serious about attracting foreign investors. It proudly proclaims that "a foreign investor can settle hassle free in Mauritius and be operational in just 3 days" and offers the forms for registering businesses. And government's recently liberated policies, making the purchase of residential property - previously a thorn in the side of foreigners - more accessible. Foreigners can now acquire combined work and residence permits, known as ''occupation permits" that allow for the purchase of properties for business and residential purposes (within specific schemes). According to Shamima Mallam-Hassam, Senior Director of the board: "with these changes [to the occupation permits], there's now a sense of belonging and certainty. The governement's listened and acted by adapting the law to the needs of [foreign] investors."
The results speak for themselves: according the board figures, foreign direct investment in 2012 amounted to MUR12,669 million, with the lion's share being in real estate, financial and insurance activities and construction, respectively. Last year, SA was the second-largest investing country (after the UK), followed by France, China and a distant Switzerland, funnelling R925 million at today's rates into the island's industry.
Setting Up Shop
Set-up costs in Mauritius are similiar to those in SA, although it's necessary to import a considerable amount of goods that are readily available in SA. It's also vital for foreign companies setting up new businesses on the island to investigate the impact and application of local regulations and taxes on their ventures, as in some instances they're very different from those in SA - including equipment importation duties.
Husband and wife team Bernard and Hilary Stern of Metal Concentrators (www.metcom.co.za) a multi-billion rand operation specialising in refining metals in SA, moved to Mauritius in order to "take life a bit easier". They saw the country as a beautiful safe place to live, as well as a central point from which to trade with the rest of Africa. The Stern's small precious metals refinery treats local industry waste such as scrap and polishing dust. The Mauritian operation, with a staff of nine, processes gold and silver and supplies them to local dealers and jewelery manufacturers.
Bernard appreciates the assistance of the Board of Investment: "They're very proactive and will assist South Africans with any matter" he says. He cautions that certain Mauritian consumer-orientated regulations take some getting used to, but these aren't insurmountable. "The board will assist and advise on any regulatory or legal issue that the prospective investor may come accress" he adds.
However, Alan Lowe, MD of EGL SA (www.egl.co.za) a diamond, gemstone and jewelery grading and certification laboratory that assisted the Mauritian government to conduct training, had a different experience from that of the Sterns. ''I used a local firm of accountants to handle the set-up of the company and accounts at the bank, which was a breeze and done in days. But there were accountability issues. The Mauritians weren't clear about the customs process. They communicate well with the client, but not with each other. I had to personally spend a day and a half arranging the clearance of EGL equipment at the airport."
Employment Issues
Mauritian labour issues are very different from South African ones. "You must change the way you operate" says Bernard. "The unemployment rate is low and in many cases, Mauritians dont appreciate the aggressive nature of South African business. There are some gems, as most Mauritians are well educated. We've found that training, even for technical positions, has shown positive results. Employment was mostly by word of mouth - once we found a good person who understood how we operated and was suitable for our business, they recruited other staff members.
Roberto Tucci, founder and MD of the Bijem Group (www.bijem.com) an international company operating in the high-end jewelery sector that has its manufacturing and retailing operations in Mauritius, agrees: "By training, selecting and utilising the capacity of each population group, one can get a mixture of employees with a lot of potential. We have Hindus, Muslims and Chinese all working together in our workshop. However, unless you've already trained staff, it will take five to 10 years to do so, so its better to join forces with an existing company or set up a large concern capable of importing labour".
No Walk In the Park
For all the measures taken by the Mauritian government in attracting foreign investors, any South African who thinks doing business there is a walk in the park is sorely mistaken. Local markets are well developed and not always open to foreign products. "The population aren't waiting for us: They're been surviving and doing their own thing for many years," notes Bernard. "It takes a long time for locals to trust foreigners, but I suppose that attitude is similair in other countries." Even large South African retail complanies have found it difficult to penetrate the Mauritian market.
Alan agrees: "Do your homework in terms of viability very carefully - people will encourage you to come in, but you need to know your market share. Deal with a well recognised commercial accounting operation to do some serious research."
Roberto, whose business took 10 years to crack the domestic market - and that only because its products were sold in local hotels - is adamant that a company wanting to open in Mauritius needs the capacity and infrastructure to export its goods prior to making the move, as the domestic maket's still small. Ïts difficult and costly to gain market from the middle of the Indian Ocean, " he says. (Bijem has a distributor for the American market and is currently developing its own retailing network in Europe).
Article in January 2014 SAWUBONA Magazine.
Written by Stuart Rothgiesser, award winning writer & MD of Roth Communication.
Author: Stuart Rothgiesser
