Fend­ing off charges that the coun­try is a tax haven, the gov­ern­ment of Mau­ri­tius is look­ing for ways to im­prove gov­er­nance, at­tract in­vestors and di­ver­sify sources of rev­enue as the days of the coun­try’s bil­lon-dol­lar ties to In­dia come to an end

The Africa Report - - CONTENTS - By Kervin Victor in Port Louis

Fo­cused on fi­nance Fend­ing of f al­le­ga­tions that the is­land is a ta x haven, Mau­ri­tius is build­ing up a rep­u­ta­tion as a global fi­nan­cial hub

Of all the coun­tries that trum­pet them­selves as the ‘Sin­ga­pore of Africa’, Mau­ri­tius prob­a­bly has the strong­est claim. It has a solid ed­u­ca­tion sys­tem, a ro­bust bank­ing sys­tem and sta­ble pol­i­tics, all of which at­tract in­vestors. But, while the glit­ter­ing white sands and rolling turquoise sea be­yond buoy the spir­its, there may be storm clouds ahead for the is­land. It will need to shake off con­cerns about gov­er­nance if it wants to stake its claim to a greater share in the lo­gis­tics of global cap­i­tal.

Three sig­nif­i­cant chal­lenges lie ahead: fight­ing off re­peated ac­cu­sa­tions of laun­der­ing dirty money; the end of the tax break to in­vestors in In­dia; and the is­sues raised by lo­cal cor­po­rate gov­er­nance, such as the 2015 col­lapse of the Bri­tish-amer­i­can In­vest­ment Com­pany (BAI) and the re­cent dis­missal of the chief ex­ec­u­tive of Air Mau­ri­tius. Mau­ri­tius is a reg­u­lar tar­get of in­ter­na­tional tax-jus­tice cam­paign­ers. The most re­cent crit­i­cism comes from the non-gov­ern­men­tal or­gan­i­sa­tion Ox­fam, which pub­lished the re­port ‘Tax Bat­tles: The Dan­ger­ous Global Race to the Bot­tom on Cor­po­rate Tax’ in De­cem­ber 2016. In the Ox­fam re­port, Mau­ri­tius ranked 14th out of 15 tax havens across the globe. The ad­min­is­tra­tion of Prime Min­is­ter Anerood Jug­nauth is try­ing to clean up the coun­try’s im­age and pro­mote trans­parency. To this end, the gov­ern­ment cre­ated the Min­istry of Fi­nan­cial Ser­vices, Good Gov­er­nance and In­sti­tu­tional Re­forms in De­cem­ber 2014. Its min­is­ter, Roshi Bhadain, tells The Africa Re­port that he was en­trusted with a clear mis­sion: “I had to en­sure that the fun­da­men­tals of good gov­er­nance were ad­hered to and [bring] much-needed re­form.” The coun­try in­tro­duced an Or­gan­i­sa­tion for Eco­nomic Co­op­er­a­tion and De­vel­op­ment ini­tia­tive called the Com­mon Re­port­ing Stan­dard on 1 Jan­uary, with the first re­port­ing to be­gin in July 2018. Ravneet Chowdhury, chief ex­ec­u­tive of Bank One in Mau­ri­tius, says: “That will au­to­mat­i­cally give ac­count bal­ances for non-res­i­dents from most ma­jor coun­tries around the globe […] which should make things much cleaner.”


But since the ar­rival of Al­liance Lepep, an al­liance of three po­lit­i­cal par­ties, in 2014, the Mauritian fi­nan­cial sec­tor has been shaken by a more se­ri­ous chal­lenge: the end of a lu­cra­tive tax ar­range­ment with In­dia that helped in­vestors into the sub­con­ti­nent avoid pay­ing In­dian cap­i­tal gains tax. The dou­ble tax­a­tion avoid­ance treaty had bol­stered the fi­nan­cial sec­tor for more than 30 years and was re­spon­si­ble for bil­lions of dol­lars of in­vest­ment in In­dia. Upon the In­dian gov­ern­ment’s in­sis­tence, in 2016 Jug­nauth’s gov­ern­ment agreed to amend the treaty to make us­ing the Mau­ri­tius route less at­trac­tive (TAR82-83 July-aug 2016). Most op­er­a­tors in the Mauritian off­shore sec­tor have crit­i­cised the de­ci­sion. Ka­mal Hawab­hay, di­rec­tor of Global Wealth Man­age­ment So­lu­tions, says: “With In­dia, there is vir­tu­ally no new busi­ness.” How­ever, Mau­ri­tians keen to mir­ror Sin­ga­pore’s suc­cess will be happy to note that Sin­ga­pore it­self had a dou­ble tax­a­tion agree­ment with In­dia that was amended in New Delhi’s favour in 2016. Mau­ri­tius is fo­cus­ing on di­ver­si­fi­ca­tion to fill the gap left by this amend­ment, which some op­er­a­tors had seen com­ing. Last year, 58% of struc­tured in­vest­ments in Mau­ri­tius were routed to Africa, ac­cord­ing to fig­ures from the Fi­nan­cial Ser­vices Com­mis­sion. Struc­tured in­vest­ments in In­dia ac­counted for only 9%. The gov­ern­ment has crafted sev­eral laws of­fer­ing new av­enues for the fi­nan­cial ser­vices in­dus­try. The sec­tor is cre­at­ing new ser­vices in cap­tive in­sur­ance, global head­quar­ter­ing, trea­sury man­age­ment and over­seas fam­ily of­fices. The third ob­sta­cle the coun­try needs to over­come in its bid to be­come a fi­nan­cial hub is do­mes­tic gov­er­nance con­cerns. As the forced liq­ui­da­tion of the con­glom­er­ate BAI – af­ter the gov­ern­ment ac­cused

it of run­ning a Ponzi scheme – shows, there are still prob­lems to fix. The sur­prise Oc­to­ber dis­missal of Air Mau­ri­tius chief ex­ec­u­tive of­fi­cer (CEO) Megh Pil­lay in ques­tion­able cir­cum­stances high­lights other chal­lenges in cor­po­rate gov­er­nance. As a com­pany listed on the stock ex­change, Air Mau­ri­tius is sup­posed to fol­low lo­cal best prac­tices in terms of good gov­er­nance. How­ever, Pil­lay was sacked fol­low­ing dif­fer­ences with Air Mau­ri­tius chair­man Ar­joon Sud­dhoo, who is known to be close to the gov­ern­ment. There were many faults with the dis­missal: the meet­ing of the board was at­tended only by the mem­bers rep­re­sent­ing the gov­ern­ment and it was called in the morn­ing for the af­ter­noon of the same day. The sack­ing pro­voked an out­cry, and the gov­ern­ment was di­vided. Good gov­er­nance min­is­ter Bhadain says : “As far as Air Mau­ri­tius is con­cerned, I can­not com­ment on the sub­stance of this case, which comes un­der the ad­min­is­tra­tion of a listed com­pany. In the form, I think the CEO’S con­tract has been ter­mi­nated in a way that is not in ac­cor­dance with the prin­ci­ples of good gov­er­nance.” Mem­ber of par­lia­ment Sangeet Fow­dar says that the re­cent event at Air Mau­ri­tius is not the norm: “Most of the chair­men of the board, they are not chair­men of the com­pany and they do not in­ter­fere in the day-to-day op­er­a­tion of the or­gan­i­sa­tion.” Bank One’s Chowdhury also points out that Mau­ri­tius has reg­u­larly been at the top of var­i­ous African gov­er­nance rank­ings, from the Mo Ibrahim Foun­da­tion’s to the World Bank’s. The lat­ter en­dorsed the orig­i­nal Code of Cor­po­rate Gov­er­nance in its gov­er­nance eval­u­a­tion of the coun­try. Nev­er­the­less, this code is now more than 12 years old. The g ove r nment hi re d ex­pert Chris Pierce, CEO and founder of Global Gov- er­nance Ser­vices, to pro­pose new cor­po­rate gov­er­nance stan­dards, which were adopted in 2016. Pierce ex­plains: “If Mau­ri­tius wishes to main­tain its po­si­tion in the [Ibrahim] In­dex of African Gov­er­nance, it must con­tin­u­ously im­prove its gov­er­nance prac­tices since other coun­tries are catch­ing Mau­ri­tius up!” Pierce says all pub­lic-in­ter­est en­ti­ties and other en­ti­ties re­quired to re­port on cor­po­rate gov­er­nance will need to ap­ply all the prin­ci­ples con­tained in the new gov­er­nance code and to ex­plain in their an­nual re­ports how th­ese prin­ci­ples have been ap­plied.


For­mer Bank of Mau­ri­tius gover­nor Dan Maraye says the new guide­lines are a step in the right di­rec­tion, but he adds that the code of cor­po­rate gov­er­nance will not help in­crease trans­parency in com­pa­nies where the state is the ma­jor share­holder. “We of­ten hear min­is­ters re­fus­ing to di­vulge in­for­ma­tion when an­swer­ing par­lia­men­tary ques­tions on th­ese en­ti­ties, ar­gu­ing that they are pri­vate com­pa­nies. We should seek a so­lu­tion for this,” he says. Maraye adds that this code will not work be­cause it is based on the prin­ci­ple of vol­un­tar y com­pli­ance. “[It] should be im­posed on in­sti­tu­tions by law. Oth­er­wise, we will sim­ply be wast­ing our time. In most parts of the world, such codes are vol­un­tary and we have seen how in­sti­tu­tions were gripped by cri­sis,” he adds. Annabelle Ri­bet, a le­gal ex­ec­u­tive with in­ter­na­tional lawyers Jurist­con­sult, ex­plains that Mau­ri­tius’s busi­ness code is on a par with those of other size­able fi­nan­cial cen­tres: “Vol­un­tary codes are in­creas­ingly be­ing adopted world­wide be­cause they are seen to be flex­i­ble in­stru­ments. There is some de­gree of non-com­pli­ance with the pro­vi­sions, which is ex­pected, in con­trast to the more rigid and manda­tory na­ture of leg­is­la­tions.” Min­is­ter Bhadain says that the gov­ern­ment could mod­ify the law to ad­dress prob­lems of non-com­pli­ance. “When you is­sue a code of best prac­tice, you ex­pect peo­ple to fol­low it. Now of course, if there are ma­te­rial de­par­tures from the code in terms of non-com­pli­ance and chair­per­sons and chief ex­ec­u­tives are not act­ing as they should, then that will be the log­i­cal next step and we will come […] with amend­ments to the Fi­nan­cial Re­port­ing Act,” he says.

New ser­vices and bet­ter gov­er­nance may en­able Port Louis to keep its sparkle and di­ver­sify its client base in the new, postIn­dian tax treaty, dawn

The sur­prise dis­missal of Air Mau­ri­tius CEO Megh Pil­lay in Oc­to­ber raised ques­tions over gov­er­nance

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