The World Bank Doing Business Report 2018 ranks Mauritius ahead of South Africa for the first time and the leading position in the Sub-Saharan Africa region.
According to investment banking firm, Bravura Holdings, in the race between Mauritius and South Africa for the most investor-friendly regime, South Africa’s island rival is gaining ground. It said that political turmoil, corruption, a weakening rand and credit downgrades have hit South Africa’s economy hard – while Mauritius boasts political stability and a flourishing economy.
Mauritius has been ranked 25th out of 190 countries by the World Bank’s Doing Business Report 2018 and Mauritius’ score went from 75.45 to 77.54. The country’s ranking witnessed a significant leap of 24 places compared to last year. South Africa, meanwhile, is ranked 82nd among 190 economies, having deteriorated from 74th in 2016 to 82nd in 2017.
In Sub Saharan Africa, Mauritius is ahead of countries such as Rwanda (41), Morocco (69), Kenya (80), Botswana (81) and South Africa in the 82nd place.
Investment into Mauritius and other Sub-Saharan African jurisdictions has increased significantly, said Soria Hay of Bravura.
“Both South African and foreign investors and businesses are looking to more attractive states; tired of dealing with South Africa’s pedestrian returns and the challenging regulatory environment, while still facing the volatility and risks of an emerging market.”
Bravura, an independent investment banking firm specialising in corporate finance and structured solutions services, has a primary listing on the Stock Exchange of Mauritius and a secondary listing on the Namibian Stock Exchange, with offices in Mauritius, South Africa, Namibia and Australia.
Bravura said that South Africa has lost growth momentum, with the economy in a downward growth trend over the past several years. Growth in 2016 marked the lowest rate in the past 16 years, apart from the 2009 recession. Economists project that the economy will grow between 0.6% and 0.7% in 2017, and only 1.1% in 2018.
“The low growth is mainly a result of South Africa experiencing an investment recession due to a lack of business confidence and policy uncertainty. Internal events like political infighting, wide-spread corruption and the problems with state owned entities like Eskom and SAA are adding to the woes.
“Recent figures released by the OECD show that South Africa’s economic growth is now below that of both sub-Saharan Africa and world growth, and this is not a trend that will change in the foreseeable future,” Bravura said.
In stark contrast to South Africa, Mauritius provides a secure, stable and well-regulated jurisdiction and has set itself up as a preferred domicile for African capital, said Hay. “Mauritius boasts well-developed infrastructure, the most healthy and educated workforce in Africa, the most efficient goods market and strong institutions.
The island country, Hay said, is creating flexibility for global companies, making Mauritius very attractive for business. Incentives, including lengthy tax holidays for certain types of companies, have further been created to support innovation and the creation, or implementation of, technology throughout the country.
Hay highlights that the Mauritian government is working proactively to attract investors through the Economic Development Board and the creation of Special Economic Zones.
“An Economic Development Board (EDB) is being set up, which will spearhead all investment and export promotion matters. Measures such as releasing companies holding a GBC1 Licence, that are also listed in another jurisdiction, from prospectus requirements, aim to promote Mauritius as a capital raising platform by reducing legislative burdens.
“The Stock Exchange of Mauritius is aiming to transform the local debt market and setting up an international capital market to attract international governments and companies from Africa and other regions to issue multi-currency bonds in Mauritius.”
Hay conceded that when it comes to the size and scope of a local market, South Africa will always win with its population of over 50 million and the largest middle class in Africa.
“The ability to do business within South Africa itself makes South Africa more than just a location for corporate headquarters and remains the most compelling argument to base a business there, the analyst said.
However, from GDP numbers to FDI flows to credit ratings, other African countries like Mauritius are not just catching up to South Africa, but taking over.
“It remains obvious that South Africa has limited time to get economic, political and social trends moving in a positive direction if it wishes to stem the flow of FDI to neighbouring countries and claw back the desired status as a key gateway to Africa. And that needs to be a unified focus,” said Hay.
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