Mauritius, Work-in-Progress

The annual budget speech of Minister of Finance, Xavier-Luc Duval, reveals a very promising future for Mauritius. Government confirms its strategy to transform the country into a business center of excellence.

The Minister has so far produced excellent results, no doubt he has been voted as the Best African Minister of Finance for the second consecutive time. As a Chartered Accountant of high repute (I’ve been lucky to work along his side for a couple of years), Xavier-Luc has shown a no-nonsense approach to finance management during his tenure and he maintains his reputation in this field.

Through this budget speech, Government lays down its vision of future Mauritius, without casting its eyes off today’s hardships and the general difficult financial context.  This budget does not simply aim at devising strategies to tackle external factors or to adjust to the international situation or keep pace with economic trends. No, this budget aims at building a new Mauritius.  There is an intelligent mix of bold decisions and prudence.  Delicate issues have been treated with a good dose of sense, logic and vision.

I won’t go into a financial or sectoral analysis of this budget (sorry, you might be disappointed) as I believe there is enough coverage of same in the press and on the internet.  I’d rather concentrate on announcements that may affect those relocating or already residing in Mauritius under a residency permit.  You still can contact me in private if you need advice (or my opinion) on other points raised in the budget speech.

Well. Mauritius ranks among the best business destinations of the world (http://www.doingbusiness.org/data/exploreeconomies/mauritius/). Foreigners living in the country will confirm that they enjoy, among others:

·         a good business oriented environment,

·         a stable country (political, social and even climatic)

·         a pleasant population with no signs of xenophobia against foreigners

·         a well-defined & modern legal system

·         a low fiscal regime that favors business initiatives

·         modern work and residency permit schemes to attract foreign capital & expertise

·         a generally pleasant country with breathtaking views & world’s best beaches (did I go too far here? No, I don’ think so)

With no natural resources and the removal of guaranteed quotas on our sugar (and afterwards textiles) – Mauritius had to find new ways to continue its development. Different economic activities were introduced; tourism, financial services, textiles, ICT / BPO, etc.  Foreign investment and expertise were thought to be essential elements that would ensure a proper development of our island into a world-class business hub. And it was true!

The introduction of Business Facilitation Act 2006 and the creation of the Board of Investment led to unprecedented uplift in both our domestic and international business sectors. Foreign Direct Investment (FDI) reached interesting peaks, confirming on their way that Mauritius was appealing to the international community of entrepreneurs. We had to capitalize on this and we are just doing this.  It serves to purpose to attract foreign investment if we have no vision or strategy for the future. Strategy & vision, our decision-makers have them.  There were also the dangers that every nation faces when it opens its doors to foreign investment or inwards migration.  Striking the right balance is crucial and in my opinion, Mauritius is doing marvelously well in this field.  We have a selective approach to the immigration of capital and competence. Of course, no system is fool-proof but is good enough when it offers a comfortable level of security, both to authorities and to the common Mauritian. No one would want an invasion of foreign currency to kill his local money, and neither a massive immigration of expertise to drown the (highly and/or newly) trained local workforce. On the other side, the selection process should not be a hindrance to those who are serious about investing, retiring or working in Mauritius.  The right balance, yes, this is the key to success.

There were different times (or periods) where we faced serious problems and the dangers of unfiltered immigration.  Of course, these were teething problems. Clairvoyance, intelligence and improvement had to come into play and they did. 

I love to highlight the Mauritian team spirit, whenever it appears.  And here, is an opportunity to salute the common efforts made by both Government and the private sector in turning strategy into concrete results.  Success, because it is, would not have been possible without participation of banks, management companies, consultants, financial services and others. 

Success is not a destination in this kind of strategy. It is a milestone which leads to another one. Government’s objective, as announced in the budget, is to rank Mauritians as one of the highest income earners of the world. Yes, we can! Before I get too political or emotional, let’s have a look at the broad measures taken to further boost the local business environment.

The contribution of foreigners in the development of Mauritius is not questionable. Mauritians do not have any problems in sharing their country with non-Mauritians either. There has been no sign of xenophobia against businesses operated by foreigners despite the additional competition that they bring to our soil. This excellent socio-political feature of Mauritius added more sparks to the different schemes created to attract foreign investment and competence. Government now wishes to enhance the already avant-gardiste business legislation to support investors, actual and future.

Many expatriates and investors have been living in Mauritius without the possibility to own their residence. In fact, foreigners could only acquire residential properties classified as luxury through the RES and IRS schemes. The restrictive price tag (which confirms the luxury status) was not accessible to each and every expatriate living in the country.  We had to find the right balance in opening residential property to foreigners while eliminating negative impacts on Mauritian.  Dollars and Euros may put pressure on our small Rupee – so we did not want real estate prices to catch a high that local people would not be able to match.  Foreigner’s access to real estate has always been a very delicate issue.  The right balance has been found, in my opinion, again.

Investors holding an Occupation Permit (having invested a minimum of USD100,000 in their business) and professional earning more than USD3,000 a month can now purchase an apartment in any complex having ground +2 floors. This allows expatriates to own a residential property and avoid eternal rental. Since Mauritians are not too enthusiastic when it comes to high-rise living (we prefer our garden), it was very intelligent to direct foreigners to these types of accommodation. On the other side, it was quite a strange thing to see so many upmarket apartment complexes being built, particularly on the highway to Phoenix. There are three of them, literally one next to the other.  I first thought that these were doomed since the promoters would never reach decent percentage of occupation through Mauritians. Government saved them! Lobby or not, I find this move a very intelligent one. On one side it rewards those who contribute to the success of the country and on the other one, it helps local real-estate developers in their business.

Another brilliant announcement: extension of permanent residency to investors.  The only way to obtain permanent residency was through acquisition of villas under the RES/IRS schemes, worth a minimum of USD500,000.  This was a paradox.  Investors who put that same amount of money in developing businesses (and eventually creating employment) did not have access to permanent residency.  Now this has been corrected. Investors can now apply for permanent residency if they invested at least USD500,000 in qualified sectors (construction, banking, insurance, real estate development, ICT, tourism, manufacturing, healthcare, education, and many others).

It is worth mentioning that Permanent Residency is not actually permanent.  It is in fact a residency permit for 10 years, renewable.  We should watch how this affects the Naturalisation scheme which allows investors (+ USD 500,000) who spend more than 3 years in Mauritius to apply for citizenship. I presume amendments will follow, as it always does.

As we can see, the Government is polishing and improving the schemes to further attract foreign investors.  In fact, it going well beyond that by rewarding those who are already here through a better access to property. It is even catering for a petty but yet essential point, the age of dependent children.  This has been revised from 18 years to 24 years old (I see someone out there jumping with joy)

My observation is simple: authorities have relayed the usual grievances of expatriates and this has been tackled in an intelligent manner by the Government. Like any other things in life, foreign investment should be tamed, understood and kept under control.  Only then we can benefit from its positive sides and mitigate risks and reduce the dangers.  Up to now we have been very careful, working each step carefully before moving to the next one.

Mauritius has always survived difficult phases of its life through the vision of its leaders.  When sugar cane was hit by the dangers of commercial extinction, the country introduced the textiles industry.  It changed the local social context; women, usually confined to house chores were leaving their home for work, unbelievable!  And then textiles started to take the blows (elimination of quotas and birth of monster China). We had to adjust again, and there came tourism… and again tourism was hit, we created one of the best financial services of the world. All the above economic sectors are still operational and blend into the broader economic picture to make Mauritius a versatile & modern business center.

Minister of Finance stated that it will take 6 additional budget exercises (6 years) to transform Mauritius into one of the highest income earners of the world. This is not an illusion, it is achievable and right now it’s work-in-progress.

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Mauritius, paving the way for the future

We are observing, with satisfaction, that certain governmental organizations are making a real effort to evolve.  The recent Board of Investment (BOI) scandal has pushed decision makers to react – and they are doing so in very notable manner to transform what was once a stagnant and, to a certain extent, corrupt institution into a healthier one. It is undeniable that updating oneself every now and then is necessary, especially if one wants to keep pace in this fast changing world where information sharing has reached a hike. Mauritius is indeed riding on this tidal wave and we’re glad to see that some people of influence are not just sleeping on the laurels.

When it comes to foreign investment and residency, the the BOI is key and almost inevitable. I use the term almost inevitable because there is at least one scheme where a foreigner can invest, work & live in Mauritius without going through the BOI. This scheme is the Work & Residence permit scheme, operated by the Ministry of Labour and the Passport & Immigration Office.  I have always been somewhat virulent in my previous comments towards the BOI.  This is largely because I have always felt strongly against the inconsistency in their decisions, the ever changing rules & regulations (which are rarely communicated, if at all) and the arrogance of certain officers.

But things are changing at the BOI and I want to be the first to acknowledge and congratulate them for the effort.  BOI heads have finally seen what I was saying for years. There is a visible change in the way applications are treated.  The front desk officers now realise that foreigners have other destination choices too, some of which are more interesting than our paradise island.  Our duty is indeed to scrutinize, select and encourage the influx of real business & clean money.  The new procedure in place is as follows: an application for Occupation Permit goes first through the Passport & Immigration Office (PIO) desk.  Once the documents & records are found to be clean, applicants are allowed to move to next step: the BOI counter.  This may seem to be a small change but in the eyes of professionals it has a greater meaning. This change has removed the dependency on the BOI and eliminates the risks of corruption by splitting responsibilities between two highly important bodies: the BOI & the PIO.  Secondly, it gives due importance to the PIO which is the actual authority issuing and controlling Occupation Permits and leaves the BOI to shoulder its part as a mere facilitator.

To further avoid risks of unnecessary intervention by unqualified and pseudo consultants, the BOI is now registering official & known consultants (Gibson & Hills Ltd is one of them!).  People accompanying investors or other applicants to the BOI are now requested to officially register themselves with the BOI and after a screening process; they are either registered or rejected.  This measure obviously reduces unwarranted interventions and protects foreigners from ‘offers to buy’ their permits.

If I could apply the definition of unavoidable to one institution, it would be to the Registrar of Companies (ROC).  In fact, any foreigner who wants to invest, work or live in Mauritius has to go through the ROC (with the exception to expatriates who are not promoters of a business as well as retired persons).  If one wants to apply for an Occupation Permit as Investor or Self-Employed, one needs to first register one’s company or oneself at the ROC.

The ROC has always been an exemplary body and has always made the extra effort to stay updated in terms of legislation, procedures, and technology.  It is among the first to provide a computerized system for the public to access data on registered companies. One cannot but think aloud that this may be due to the fact that it does not have a political nominee at its head (!?). Stability and vision of the ROC’s management over the years definitely earned the ROC its reputation as one of the most respectable and respected para-statal body on the island.

Some recent changes last week shows that the ROC is one step ahead; again.  The ROC has upgraded all its paperwork.  All the forms required for company incorporation and registration of changes have been redesigned with a visually more appealing look, enhanced user-friendliness with provision for full computerization. I bet that once the E-Government concept becomes a reality, the ROC will be the first in the race.  They even sport a barcode on their forms now! At least someone knows what Cyber-Island means!

A last change has cost Rs50 million to the Government: the complete revamping of the governmental portal and its websites. These have become more user-friendly with simplified navigation, and definitely pave the way for the E-Government.

I thought worth writing about these little changes that albeit show a lot about our country’s strategic move to become an international business destination.

Favouristism & Non-equal opportunities in Mauritius

In my French blog, sometimes ago, I wrote an article about favoritism in Mauritius.  Some people didn't like my opinion and I was cursed.  Those people, some expatriates having spent few years on our soil, take themselves for experts mastering every aspect of life in the island. Anyway, this is not the subject of today's article but it's good to mention that the press, through the recent scandals, proved me right. As a pure-bred Mauritian, having spent all my life (so far) in my motherland, I have some legitimate reason to believe that my observations and opinions are not (totally) irrelevant.

I maintain this blog to help those who want to invest and live in Mauritius with backstage information on life in paradise-island.   It is essential that people understand the country's culture, habits and evils before taking the relocation leap. Foreigners are more vulnerable for many reasons.  First, they don't know the laws of the country and the idea of jumping milestones is so tempting when you are starting from scratch.  The BOI scandal confirms that many victims didn't have dark minds, they were simply abused of due to ignorance of rules. Your foreign currencies multiply their (purchasing) powers when they reach Mauritius; and we, Mauritians, very aware of this.

As regards favouritism, it is not a secret to any of my counterparts. It has been existing since the arrival of the first settlers and has prevailed over generations up to now.  I believe that the history and the demography of the country have played a very important role in the survival of favouritism.  Our population is mosaic of cultures originating from different regions of the world.  Indentured labourers from India, traders from China, slaves from Africa and master-minds from Europe (I prefer the word master-minds to colons). Favouritism, in my opinion, took birth from the moral obligation that each person felt towards those in his ethnic group. I wouldn't term this as racism, given the context, but solidarity.  We succeeded in building a nation of peace and harmony, but we cannot pretend to ignore some genes that compose our DNA. Favouritism is deep rooted and from there stems out other demons: corruption, power influence, racism, etc.

Having a bad gene is not dramatic in the sense that everything can be cured these days, well almost everything.  The introduction of the Equal Opportunities Act is a big step towards cure.  I concede that writing Law and applying it are two different things, but a Law in force is Law and any aggrieved party can have recourse to it to seek repair.  That’s a start.  The country is very self-conscious of its reputation and usually makes a point to get good classifications on international lists (For example: Transparency International's corruption ranking, Moody's banks ranking, Independence of the press, and so on).

The press recently revealed that the spectacular success of some 'brilliant businessmen and women' was the result of high-level occult protection.  Facts and details reported in the press show some coherence and confirm the presence of favouritism that we all were aware of and have been tolerating up to now.  The success story of this ex-shop assistant is visibly not the result of her effort but that of her relationships.  Succeeding in business in Mauritius is not mission impossible, we have a long list of impressive success stories. I still remember that young man starting his 'poster' business. From some thousands of rupees, his turnover has steadily grown to reach one hundred million. With the same dedication, humility and honesty, he is now aiming at the billion. Success, in every sphere, requires effort and it a process with requires constant focus towards your goals, irrespective of the obstacles.

If you want to reach the summit at lightning speed, you either repeatedly buy yourself a Lotto ticket until you hit the jackpot (with the risk of ruining yourself) or, if you are in Mauritius, do your best to get acquainted to an influential politician.  And when your ways are revealed in public, you can still run to the court for a gagging order.  But in any case, everybody has to assume his responsibilities, acknowledge the risks involved and accept them when they blow in your face.

Our ex-shop assistant has no known track record in business but is running an empire brewing millions of rupees.  In this small island, arrogance is to be avoided, particularly if your success is not legitimate.  Bluntly: you better shut up & be invisible.  When power and money invade your brain, you feel invincible, lower your guards and then inevitably take the blow.  It serves no purpose, other than to worsen your case, if you maintain arrogance and fight public opinion.

We have witnessed similar results with some foreign investors.  Many believed that Mauritius is a poor country and that money, wherever they are sourced from, are welcomed and can buy you a status. It works; but for a very limited time frame. And while you are enjoying it, you (again) better shut-up & be invisible.  You don't race your sports car on the beach and risk the life of others. If you are a foreigner, bear this in mind: you will first be alienated by your benefactors, then treated by public opinion; thereafter treated by law...you will be ejected from the island (after paying for your offence).  You can also be part of collateral damage if your benefactor’s ill-doings are revealed in cases which do not involve your person.

Success in business is not difficult in Mauritius.  One can argue that the domestic market of the island is restricted in size but the other incentives & features available do position the country as a strategic business platform for regional and international markets.  In our own case, we deal mostly with a foreign clientele and we have been consistently growing our business. Often we have had the opportunity to build occult relationships, but kept away from such enterprise. Our clients often ask for advice on suspicious offers they receive to speed up things.  We strongly & systematically advise people not to venture into shady business and to seek advice from professionals in case of doubt.

Honest business pays in Mauritius.

(c) Gibson & Hills Ltd - February 2013

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