The MIFC’s strong pull

Most investment funds, including private equity funds investing in Africa, choose Mauritius to structure their fund vehicles, Ashvin Deena said in a recent episode of the podcast MCB Talk.

The head of MCB’s Global and International Corporates (GIC) was commenting on the bank CEO Thierry Hebraud’s declaration in an interview published in June to the effect that the Mauritius International Financial Centre (MIFC) was central to MCB’s growth strategy.

Deepa Bhookhun Rainer, Editorial Content Creator, MCB and Ashvin Deena, Head of Global and International Corporates (GIC),MCB, during the recording of MCB Talk's podcast.

Mr Deena said the reason Mauritius as an IFC is so popular has to do with the country’s legislative framework “that is well adapted to this kind of investment vehicle”. He adds that the fact that Mauritius has signed a number of bilateral agreements with countries around the world, from Investment Promotion and Protection Agreements (46) to Double Tax Avoidance Agreements (DTAA) (54) and Memorandums of Understanding (50) was also a big pull.

Mauritius’s absence of exchange control, its diverse and robust ecosystem of service providers such as accountants, auditors, lawyers, and banks, and the fact that the country, as a sovereign, is investment-grade-rated by Moody’s, also influence investors’ decision to do business via Mauritius.

Add to this the fact that MCB “is one of the few investment-grade rated banks by Moody's in Sub-Saharan Africa,” and this makes Mauritius’ largest bank the obvious choice for foreign investors as “this gives them the right level of comfort to structure through the MIFC”, Ashvin Deena explained.

He said those same reasons (the absence of exchange control and the legal framework) led large African corporates to use Mauritius, adding that many of them use Mauritian-incorporated entities to raise bonds or to structure their procurement activities or sales.

The MIFC was created over 30 years ago and was mainly focused on investment in India until about eight years ago when a strategic shift towards Africa took place. In February 2020, Mauritius was placed on the Financial Action Task Force (FATF)’s list of jurisdictions under increased monitoring, commonly known as the ‘grey list’. This also put Mauritius on the EU’s list of high-risk countries, known as the ‘black list’.

A year later, in October 2021, FATF removed Mauritius from the list of jurisdictions requiring increased monitoring following key reforms implemented by the country. While the downgrading prejudiced players like MCB, the removal of Mauritius from the blacklist has likewise come with benefits with the MIFC now playing a central part in the bank’s performance.

Ashvin Deena believes the episode has strengthened the jurisdiction’s Anti-Money Laundering/Combatting the Financing of Terrorism (AML/CFT) framework. For him, the key is “knowing who we are doing business with.”

“It's about understanding who the client is, understanding the broader client ecosystem, understanding their business, and therefore, getting a grasp of the risks associated with those clients and then making the call as to what level of risk is acceptable to us or not as a jurisdiction first, but also as a bank”, he said.

The head of MCB’s GIC also believes the bank is playing an important role in helping private equity funds and fund managers bridge Africa’s significant financing gap “as they bring in external money, sometimes patient capital from Europe, from the US, from Asia and sometimes from Africa itself to invest into Africa”.

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