Africa Connected: Issue 7
What is the current investment appetite in the region?
In Mauritius, the investment appetite has been on a decline and it was further shaken by the COVID-19 pandemic. In 2019, gross direct investment stood at MUR21 billion and for the first three quarters of 2020 it stood at MUR9 billion1. However, it is expected that there will be a positive change in this declining trend as boosting the country’s investment has been identified as a major pillar of the 2021/2022 budget. Around MUR142 billion has been committed under the Public Sector Investment Programme (PSIP) for the next three years and the Finance (Miscellaneous Provisions) Act 2021 has brought new amendments with the potential to boost private investment and attract FDI to Mauritius.
To improve the investment climate and ease of doing business in Mauritius, a premium investor certificate has been created that allows companies investing more than MUR500 million to benefit from wide-ranging incentives such as tax, infrastructure and public facilities and duties. This could potentially attract multinational companies to set up in Mauritius to benefit from the trade agreements Mauritius has signed. In fact, 2021 was a landmark year, with four trade agreements coming into operation – the CECPA with India, the China FTA, the UK-ESA Agreement and the African Continental Free Trade Agreement.
An export development certificate has also been introduced to incentivise companies to set up in Mauritius to export goods. More attractive incentives have been added to the tax regime such as dividends paid by a non-resident to another non-resident not being taxable in Mauritius and investment dealers now being covered under the partial exemption regime under the Income Tax Act. Immigration laws have also been amended to further open Mauritius to foreigners and investors. The validity of an occupation permit for a professional has been extended from three to ten years.
It is expected that the abovementioned changes will enhance the business climate in Mauritius, boosting investments in 2022.
In which sectors do you expect to see increased investment and/or financial movement in the next 18 months?
As the government has embarked on putting Mauritius on the path of recovery from the negative fallout of COVID-19, it is expected that there will be increased investment in infrastructure projects, more specifically in road and land transport, some of which had been halted due to the lockdown.Under the Public Sector Investment Programme, the government plans to invest MUR50 billion in social and economic infrastructure for 2021/2022. Some of the major road and land transport projects include the completion of the Metro Express and the construction of bypasses and fly-overs on the M1 motorway.
Investment in public infrastructure will help build long-term resilience, widen opportunities, stimulate job creation, facilitate trade and contribute to improving the quality of life in Mauritius.
Where do you see the key areas of growth or opportunity for businesses?
An emerging area of growth for businesses in Mauritius is the biotechnology and pharmaceutical sector. In the 2021/2022 budget, the government announced wide-ranging incentives to encourage companies to build factories for manufacturing pharmaceutical products and medical devices. In fact, all companies operating in the industry will be eligible for the premium investor certificate (as mentioned above). The tax rate for these companies will be significantly lower, namely 3% instead of 15%, and they will benefit from a series of additional incentives such as exemption of the registration, land conversion and transfer tax and payment of VAT on construction materials.
Which sectors have been most affected by COVID-19 and what have businesses in those sectors done to cope with these changes or potentially benefit from new opportunities?
Mauritius’ travel and tourism industry has been the hardest hit sector due to international travel bans and border closures. The businesses affected include not only those in the hotel industry but all ancillary businesses to the tourism sector such as restaurants, tour operators, travel agencies and shopping malls. As the tourism industry contributes about 20% of the country’s GDP and is labour-intensive, the negative impact has unfortunately translated into a massive loss of jobs and a decline in foreign exchange in the country.
The sector has benefitted from an extended government wage assistance scheme and is still on “life support” from the government. Many hotels provided their premises as quarantine centres and received an income from the government, though it could not compensate fully for their losses. During the period between the two waves of the pandemic in Mauritius (from July 2020 to February 2021), when Mauritius was “COVID-19 safe,” many hotels relied on domestic tourism by offering attractive packages to Mauritians. While the industry has opened up 14 hotels since mid-July 2021 as “bubble resorts” to fully vaccinated international tourists. It is expected the future of the tourism industry will be different and it will take some time before it regains momentum. The mindset, attitudes and inclinations of travellers have undoubtedly changed with the pandemic.
In terms of the legal services market, what areas growth are you seeing on the horizon in the next 18 months?
In the last year, the number of employment-related matters has grown since the enactment of scattered amendments to employment laws. Different regulations mandating COVID-19 vaccination in certain sectors have provoked uncertainties for employers and employees alike. Services have been retained on matters ranging from advising on issues such as mandating vaccination and testing to access to the workplace, discrimination with respect to mandatory vaccination, employees’ leave and remuneration during periods of self-isolation and drafting vaccination policies. As businesses had to quickly implement new systems to shift to remote working, many frauds and scams have been perpetrated by employees and consequently there has been a surge in requests to assist employers with disciplinary hearings. There has been an increase in insolvency and administration disputes, including between businesses and contractual disputes between promoters, contractors and buyers under construction or preliminary reservation contracts that have been compromised because of the unprecedented circumstances brought by the pandemic. Several companies are seeking advice on their winding up or removal.
In terms of the legal services in the near future, an increased demand in anti-money laundering / combating the financing of terrorism (AML/CFT) regulatory work is expected, following increased regulations applying to regulated entities. In connection with the government’s aim to significantly increase (from 13% to 60%) the share of renewables in the energy mix, there will be opportunities to advise sponsors, developers and financiers on transactions across the spectrum of renewable energy technologies, including hydro, solar and biomass.
Given the recent measures in the 2021/2022 budget to boost financial services in Mauritius, there will be a good pipeline of activity in corporate work, especially in the field of capital markets given that new legislation is being contemplated by the government such as a securitisation bill, a new securities bill and a new legislation for virtual assets. This legislation will reinforce the country’s position as a fintech hub following the recent introduction of new peer-to-peer lending rules and rules on crowdfunding.