Delicious Mauritius

Once dependent almost entirely on sugar cane and tourism, this tiny island nation is fast becoming the entrepôt of choice for private equity and hedge funds pursuing investment opportunities in the emerging markets of East Africa and India.

Ideally situated off the coast of Madagascar in the southwestern Indian Ocean, Mauritius is a politically stable, economically vibrant and racially harmonious potpourri of 1.3 million Hindu, Muslim, Christian and Chinese citizens.  It was discovered by Arab mariners in the 9th century but not settled until 1598 by the Dutch East India Company which introduced sugar cane to the island.  The Dutch colony lasted only 20 years and was succeeded first by the French (in 1715) and then by the British (in 1810) who brought East African and Indian slaves to work the cane fields and run the sugar mills.  Slavery was abolished in 1835 and Mauritius achieved political independence in 1968. To this day, however, the French and British remain the island’s industrial elite and Mauritius’ legal system is based on both English common law (for property and contract rights) and the Code Napoléon (for the penal system).  Mauritians also commonly speak both English and French (along with Hindi, Creole and other Indian and African mother tongues).

Since 2000, Mauritius has dedicated itself to becoming the Singapore of the Southern hemisphere, with a specialization in financial services.  It has passed legislation prohibiting discrimination between local and foreign investment (Investment Promotion Act) and has entered into Investment Promotion and Protection Agreements with India and 19 (soon-to-be 25) sub-Saharan African nations guaranteeing against nationalization and permitting the free repatriation of capital and profits.

By far the most magnetic element in the island’s attraction of over 800 private investment funds to date, however, are the Double Taxation (Avoidance) Agreements it has negotiated with India and now more than 36 other countries, including 19 in sub-Saharan Africa.  These treaties enable foreign fund operators to avoid income taxation altogether in the investee economies and, in Mauritius, to limit the taxation of their interest and dividend income to a maximum of 3% and to completely eliminate taxation of their capital gains.

Thanks to its favorable regulatory climate, Mauritius currently accounts for over 40% of foreign direct investment in India and an increasing proportion of the FDI flowing into Africa (which totalled $50 billion last year).  Descendants of the Indian and African slaves who initially populated the island now constitute a financially sophisticated talent pool of lawyers, accountants and fund administrators determined to mold Mauritius into the financial hub of the Southern hemisphere.  Its GDP per capita (almost $15,600 in 2012) is one of the highest in Africa and its literacy rate is almost 90%.

Surrounded by pristine waters and blessed with gorgeous beaches and the second cleanest air in the world (behind Estonia), Mauritius has for years been renowned as a top tourist destination, boasting a long list of ultra-luxurious resort hotels and celebrity vacationers.  Any private fund manager with an investment interest in India or sub-Saharan Africa would thus be well-served by combining a little Mauritian R&R with a little financial R&D.

  • Ex-pat’s spouse

    Hello Stephen,
    It’s interesting to read your account of Mauritius. It may be attempting to be the Singapore of the southern hemisphere, but it is far from the idyllic haven you point out. Some years ago I attempted to set up a manufacturing business there. Despite doing all that I was asked I found ‘officials’ constantly asking for more $$ to ease the burden of getting things done quickly. And the police – don’t even start that one. Also when I was leaving through the airport one of the Customs staff asked me directly for money to allow me to take my baggage out of the country! I’ve been to a lot of places that that was the most blatant I’ve ever encountered.
    All I can say is CAVEAT EMPTOR

    • Leena

      Hi I am Leena from Mauritius, I am very sorry you have been through such troubles in Mauritius but things have changed and the rule of law prevails. Actually none of what you have mentioned is practiced today in Mauritius, as in its move of being an IFC Mauritius has developed its destination to a first class level. This could have possibly been the situation some 10-20 years ago as all developing nations should have undergone such phases in its development but this is not the case today.