Mauritius’ Financial Sector: Emerging Stronger Post-COVID-19

The country observes strictest COVID-19 protocols and is regarded as having one of the world’s best responses to the pandemic. Strict quarantine measures and thorough testing protocols have been in place since the outbreak. Hotels have been transformed into quarantine centres. Oxford University Stringency Index gave Mauritius a 100 per cent on tackling the pandemic. As a result, the country has seen an increase in demand from visitors looking to relocate to a COVID-safe environment for work, leisure or retirement. The Premium Visa has been introduced for this purpose and allows for extended visits of 12 months, with an option for further extensions.

However, the COVID safe image of Mauritius was dented after a few cases of the virus were detected in the local community in March 2021. To counter its propagation, Mauritius went into a two-week renewed nationwide lockdown on 10 March. This was the second time that the island had to go into lockdown since the pandemic began. At the time of writing, total cases among the community stand at 156. Authorities, this time, are much better prepared to face the situation. They have ramped up the number of tests and contact tracing to identify infected which yielded faster results. To curb the infection rate, numerous vaccination centres have also already been set up around the island with the help of the private sector. While 50,000 people or around 4 per cent of the population have already been vaccinated, 3,000 front line workers are currently receiving the jab every day with authorities aiming to increase the number of vaccinations to 10,000 a day soon. With the island facing a second wave of infections, the task to vaccinate front liners and the goal to reach herd immunity has become more urgent.

At this juncture, the aim of the vaccination campaign is to inoculate 60 per cent of the country’s population. The first batch of the Oxford-AstraZeneca vaccine, produced by the Serum Institute of India, arrived in January 2021 as a donation from the government of India. Doses required to complete the vaccination campaign are expected from Oxford-AstraZeneca and Pfizer with an initial consignment approved through the COVAX facility. India and China have also recently donated a total of 400,000 vaccine doses to the island. 

Based on the evolution of the pandemic and upon locals and foreigners having achieved immunity, it is hoped Mauritius will ease restrictions and open its borders to vaccinated tourists in the coming months, without going through a mandatory quarantine. This is expected as of 1 June. To further redress the damages caused by the pandemic to the economy, the authorities are consistently working together with the private sector to ensure that a stronger and more sustainable Mauritius emerges post-pandemic. Institutional reforms, development of new regulations to facilitate technological breakthrough, and Fintech innovation and consolidation of strategic ties with India have been some of the measures undertaken to ensure that Mauritius’ future remains bright.

Creation Of The Mauritius Investment Corporation (MIC) Ltd

In a context marked by uncertainty over the duration and depth of the COVID-19 pandemic, the Central Bank of Mauritius set up the Mauritius Investment Corporation (MIC) Ltd in June 2020. The establishment of the MIC is fully in line with the Bank of Mauritius’ mandate, which is to ensure an orderly and balanced economic development of the country as well as safeguard the stability and soundness of the financial system. The MIC has three portfolios of investment, namely:

1. The Future Generations Portfolio, which invests in a diversified portfolio of growth assets with the aim of generating wealth for future generations of Mauritians;
2. The Infrastructure Portfolio, which invests in the development of critical infrastructure of the country such as port development, power generation, food security, water and similar assets in order to stimulate the growth and diversification of the economy and create jobs for the people;
3. The Equity Participation Portfolio, which invests in systemically important corporations or companies, through debt-to-equity swap arrangements, to financially redress these corporations or companies.

So far, the MIC has approved 34 applications under both the Equity Participation Portfolio for COVID-19 impacted companies and the Future Generations Portfolio. It has already come to the rescue of the largest hotel groups of the country, namely Sun Limited, Lux Island Resorts Ltd, and NMH Limited by providing them financial assistance. In so doing, these groups have been enabled to meet their financial commitments and safeguard jobs in the short term. Hotel employees are being urged to get the jab as soon as possible. It is now assumed that conditions will improve by the end of this year for the hospitality sector and ergo, the Mauritian economy.

Boosting The Economy Through Technological Breakthrough

The Financial Services Commission of Mauritius (FSC) has issued the Financial Services (Peer to Peer Lending) Rules 2020 (the P2P Lending Rules) with the objective of fostering innovation and furthering access to finance in Mauritius. Start-ups and small entrepreneurs have typically relied on bank finance to thrive. But they present risks that banks are not always prepared to take, at least not cheaply.

The P2P Lending Rules provide for a sound and efficient regulatory environment to support the offer and execution of Peer to Peer (P2P) lending for the benefit of stakeholders in the non-bank financial services sector of Mauritius. Under these Rules, a Peer-to-Peer operator will facilitate access to finance by matching borrowers and lenders on its online platform.

Security Token Offerings  

As part of its core strategy, the FSC is aiming at positioning Mauritius as a regional hub of sound repute in the field of Fintech. The publication of a Guidance Note on Security Tokens Offerings (STO) and Security Tokens Trading Systems in June 2020 is another stepping stone in building an open and transparent regulatory regime for Fintech in Mauritius. There is a growing interest for these specific licences. We are expecting to receive several applications in the upcoming months.

With this new regulation, Mauritius will allow security token trading platforms to apply for a FSC license. This will enable companies to legally issue a token offering for STOs as well as operate a trading house for such digitised securities in the jurisdictions under a strong and well-regulated environment.

Bridging Africa And Asia

This is likely the most promising area for Mauritius, given its geographical location and numerous bilateral and multilateral agreements in place. Recently, two major trade agreements were signed or came into force, both with China and India.

The Free Trade Agreement (FTA) between Mauritius and China was signed in October 2019 and entered into force on 1 January 2021. It is important to note that this is China’s First FTA with an African country. It is the declared intention of China to develop bilateral trade with Mauritius but more importantly, to use Mauritius as a platform for investing and trading with Africa.

The FTA comprises of four main components which pertain to Trade in Goods, Trade in Services, Investment, and Economic Cooperation.

On the other hand, the much awaited Composite Economic Cooperation and Partnership Agreement (CEPCA) was signed on 23 February this year on the occasion of the visit to Mauritius by Hon. Minister of External Affairs of India, Subrahmanyam Jaishankar. It is interesting to note that although negotiations started in 2003, they were interrupted and later restarted, this signature takes place now, on the back of the coming into effect of the FTA with China. It is also very noteworthy that this is the first such agreement India has signed with any country for over 10 years, and the first one signed with any African country.

The Minister himself pointed out that CEPCA would facilitate the use of Mauritius by Indian investors into Africa and help project Mauritius as what he called the “hub of Africa”.

Another important event took place on 1 January 2021. It marked the start of the African Continental Free Trade Area (AfCFTA) Agreement, which brings together 54 out of the 55 African Union’s Member States. The AfCFTA will cover a market of 1.2 billion people, including a growing middle class and a combined gross domestic product of more than US$ 3.4 trillion. It aims at creating a single market for goods and services. It will be a great booster to the African economies, short and long term, acting as a further incentive to invest in this region.

Conclusion

The two superpowers in Asia have just signed trade agreements with Mauritius with the declared aim to use this as a platform to invest in Africa. This is happening while Mauritius is still on the EU blacklist of jurisdictions with strategic deficiencies in their regimes to counter money laundering. It might be that both China and India view this inclusion as a temporary setback, due to be repaired soon.

Notwithstanding this blacklist, Mauritius has maintained its status as a jurisdiction of choice. Although there is always room for improvement, its workforce is remarkable. From its languages, legal system, strategic location and many other advantages, Mauritius certainly deserves its permanent seat in the league of preferred jurisdictions. It will shine ever more brightly as the Star and the Key of the Indian Ocean.

Dr Ludovic C. Verbist
PhD, LLM, TEP, Managing Director of AAMIL (Mauritius) Ltd. Ludovic has contributed to a number of articles and interviews, including: Prudence et Préservation du Capital - Business Magazine (October 2017); Guaranteed Real Estate Investment – Cap Sur Maurice Magazine (October 2018); Luxury Property Market in Mauritius – Cap Sur Maurice Magazine (October 2019); Vendre Maurice comme une destination refuge – Le Mauricien Newspaper (May 2020); Jouer à fond la carte africaine dans l’ère post-Covid-19 – Business Magazine (May 2020); Global Business « Désamorcer la Bombe » - Business Magazine (June 2020); Liste Noire – La bataille se jouera sur le terrain diplomatique - Business Magazine (July 2020); Interview – « Parlons économie » - Radio Lac (October 2020); «Maurice face à la menace d’un maintien prolongé sur la liste noire » - Business Magazine (February 2021).