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“Mauritius should raise its Profile...”

The affirmation “I'm investing in Mauritius” is usually followed by the question “Why are you there?” observes Patrice Backer. Mauritius should solve its access restriction and be more aggressive in its marketing strategy, the expert advises



❚ You said in your address

that not enough has been done to market the Limited Liability Partnership structure in Mauritius, as well as the necessity to add more substance to what is being done. Can you please provide a summary of these two issues in regards to your presentation? The LLP is a fantastic legislation because it now provides Mauritius with a legislation that aligns it with other jurisdictions. The Limited Partnership structure is the preferred structure for Private Equity. Up to now we were operating under a separate legislation, which works, but is not optimised. We think that is the optimal way but I don't think Mauritius has done enough to let the world know that «Hey, we also have this structure!» Obviously the fund administrators know about it because we work with ABAX and Cim Fund Services. Both of them sent us notes to inform us about the LLP structure. Unfortunately it was too late since we were incorporated in 2008. But if we are going to think about future funds, we now know. However, many of our investors and potential investors from the United States are still not aware. To them Mauritius is a far-off country, and they often ask us, “why are you there?”, and we have to explain to them. Mauritius should raise its profile in order to let investors who are looking at Africa know that it is the gateway. Papa Madiaw Ndiaye, the Founding Partner and CEO, Advanced Finance & Investment Group, said

earlier in his keynote that the Board of Investment (BOI), the Financial Services Commission (FSC) would have to be enabled and empowered to be more proactive to promote the Mauritius brand. The second point I was making is in respect to substance. In order not to be viewed as one of those tax haven and so forth, Mauritius has taken steps to add substance to what is being done here. For us, who are on the offshore side of things, we understand the need for more substance but it would mean having staff here, open offices here and so forth. However there are certain things that would need to be thought through. If you ask me to be here, then there have got to be some incentives as well. ❚ We talk of Africa as being

the land of opportunities for private equity funds and investments. At the same time there is also this fear of being in Africa which has not been dissipated. How do you feel about it? I think fear comes with a lack of knowledge. We have the advantage of being based in West Africa, and knowing the land since our team is basically an African team from Senegal, Congo, Central Africa, Ghana, Mauritania, Nigeria... The perception of risk is actually higher than the risks. Of course there are risks. Overcoming fear can only be done through education, and we do spend a lot of time educating potential investors, particularly North American investors, about the opportunities. At the end of the day they have to make up their minds, but we try to do our best and tell them,

“Look, whatever your perception may be, this is the reality on the ground.” And where Mauritius comes in is that, as a middle-layer between the investors and the actual companies, it provides them a level of confidence. Not only are we making risk investments, but imagine if the fund itself which channels the investments was based in risky jurisdiction, then you have a double layer of risks. So, by bringing them in Mauritius, we remove one layer of risks, and we expose the investors to the true risks. And obviously with higher risks come higher rewards. They need to understand this. ❚ During the Questions and

Answers session, there has been the question of tax risks. Can you please elaborate on this? The question was more on the countries in which we invest. Governments set tax policies. What that person was asking during the session was, how do we manage those tax risks. Let's take an example. One day, in the Central African Republic, the tax policy is X, and the next day the tax is raised by 10% or a new tax is introduced which is not reasonable. How do you manage that? It's our role to be able to define what the risk is and to basically protect ourselves in our legal agreements. You could define a drastic change in the tax environment as being a 'force majeure' event, which forces you to do certain specific changes to your investments. We want to have as much visibility as possible over the life of our investments, and that's a risk. Which brings me back to Mauritius. We have this tax risk on the ground; we

I think fear comes with a lack of knowledge. The perception of risk is actually higher than the risks. Of course there are risks. Overcoming fear can only be done through education don't also want to have this tax risk at the fund level. And Mauritius' legislation in taxation has been extremely constant. This helps mitigate a bit the risk. If you have a fund based in Mauritius investing in the Central African Republic, and you have a tax event in Mauritius as well as in the Central African Republic, then things won't be simple. ❚ You talked about the inte-

gration of the offshore and domestic economy as being a sensitive one. What should we understand by this? I call it sensitive because

it's a debate that has to be done by policy makers in Mauritius. There has been a policy to set up an offshore centre, and basically there is a perimeter around it. It means that as a GBL 1 we can invest anywhere but not in Mauritius, for example. What I am trying to say is that this taxation issue is related to the issue of substance. If you say you want to keep things the way they are, then it's fine. If you say you have to increase substance, then at the same time I have to ask; “Can I look at investments in Mauritius potentially?” since you have an economy and companies.

Capital Edition 147  

Capital Edition 147