SA companies making switch from London to Mauritius for financial services

Historically, South African companies have often had a relationship with big financial services companies in London. When they need to raise capital, issue bonds, or bed down some currency hedges, many SA corporates have headed up north to foggy London, which is one of the world's biggest financial centres, second only to New York. But the clever folks in Mauritius have ideas. Specifically, they believe that they can offer South African companies a more convenient full-service financial destination, complete with some nice tax deals for South African corporates looking to do more business in Africa. Unfortunately, I wasn't able to find any hard numbers, but according to this interview, more and more South African companies are choosing to use Mauritius as a financial hub, further underscoring the island nation's growing status as an up-and-coming African tiger economy. – FD  

ALEC HOGG: Joining us now to take a look at Cross-border investing, and how useful International Financial Centres are to the South African global networks, is Colin Grieve, Chief Representative Officer of AfrAsia Bank South Africa. That's quite a mouthful – the introduction – Colin, but if reading through the research I've done and the information you sent us beforehand, what you guys are offering is an alternative to London for South African companies by using Mauritius.

COLIN GRIEVE: That's quite right, Alec. There's a long history between London and Africa and many African companies have used London as their international financial centre. It won't for one moment, take anything away from London. It is an acknowledged international financial centre. In fact, AfrAsia Bank even has an office there. What I'm saying is that with the emergence of this south-south paradigm, which has led to a considerable amount of investment and trade between the likes of Africa and Asia, as well as South African companies buying into the African growth story that perhaps we should be looking at other international financial centres closer to home.

ALEC HOGG: Does it matter, if you think the geographic time zone is the same? Even though London's a long way north, does it really matter with technology nowadays?

COLIN GRIEVE: Sure, if you compare flying to London compared to flying to Mauritius – four hours versus a whole night etcetera – certainly, the feedback I get from many South African clients is that they do appreciate the much shorter journey. Mauritius is an African country and what they've done is specifically tailored for the African market. The double taxation agreements for instance, that they have with 14 African countries imbues a considerable advantage on entities that are using Mauritius as their base for international…

ALEC HOGG: So AfrAsia – the company you're involved with…

COLIN GRIEVE: The bank – yes.

ALEC HOGG: They have an office in Mauritius. Do they also have offices in London?

COLIN GRIEVE: Yes, we have an office in London as well.

ALEC HOGG: Much smaller, I presume.

COLIN GRIEVE: Yes, it is much smaller. Here in South Africa, we're a team of about 30 spread between Johannesburg and Cape Town. We also have a banking operation up in Zimbabwe – AfrAsia Bank Zimbabwe – and we're growing our presence. I think that in the not too distant future, you will see AfrAsia in other African countries.

ALEC HOGG: Just give us a sense of how it has grown in the last five years here in South Africa. What I'm trying to get to is, are South African companies actually buying the story that they can use Mauritius rather than London and indeed, if they are, are they renewing? Are they coming back for more?

COLIN GRIEVE: Yes. Okay, that's two questions. I'll answer the first one. I was granted a license by the South African Reserve Bank – a representative office license. I established the offices here in South Africa not long after that, in Johannesburg. Shortly after that, we acquired a corporate finance boutique and so we have not just the representative office representing the banking side, but we also have a full-on corporate finance team in South Africa capable of executing in South Africa as well as other African markets. Some of the largest JSE-listed companies actually have treasury operations in Mauritius – fully functioning treasury operations in Mauritius.

ALEC HOGG: And not in London.

COLIN GRIEVE: Some of them may well have entities in London. I'm trying to think.

ALEC HOGG: Do you see what I'm trying to get at here? I'm just trying to get a sense of whether those who've tested the Mauritius option rather than the old traditional option of going north…whether they're happy with it, whether they're telling their friends to do the same thing, and whether business on your side is booming.

COLIN GRIEVE: Well firstly, there are a number of advantages of doing business in Mauritius.

ALEC HOGG: I've heard that and I've heard the list, but are people actually doing it?

COLIN GRIEVE: Yes, they are.

ALEC HOGG: The problem is you can get the PR story, but then the reality can be different. In this case, they are.

COLIN GRIEVE: It's the ease with which you can open a global company in Mauritius and the ease with which you can get an occupational permit to run that international subsidiary. It's the double taxation agreements, which I've already mentioned, and the fact that there are no foreign exchange controls, and the fact that there are no withholding taxes to take your profits and capital out of Mauritius.

ALEC HOGG: But London has a lot of those as well.

COLIN GRIEVE: Yes, they do.

ALEC HOGG: Where's the competitive advantage, apart from being able to only fly four hours and get onto the beach?

COLIN GRIEVE: Let me mention one. Mauritius is a member of COMESA and that's important because COMESA comprises of 19 countries, a market of 430-million people who import $152bn worth of goods and services every year. If you establish a business in the Mauritius Freeport, you can export what you manufacture there, duty-free into that market. There are a number of advantages. As I've said, it's tailored for Africa. Mauritius is tailored for Africa. It's an African country and it's addressing the needs and requirements of Africa.

ALEC HOGG: How hard has it been to change perceptions? We often hear South African business/corporates are stodgy, they do things the way they have for a long time, and they don't like changing. Are you finding that that's a reality, or are you getting people to…are you getting minds that are changing?

COLIN GRIEVE: I think since South Africa's reacceptance back into the international community – way back when – that South African corporates are right up there in terms of flexibility and in terms of seeking efficiencies. Use the example of MTN and what fantastic success they've had on the African continent. It's actually world class.

ALEC HOGG: But MTN's hardly driven by – if you like – South African business establishment. There's a whole bunch of new guys who came in, in the early 90's, took control there, and looked at things differently. The establishment didn't want to go into Nigeria as an example, and certainly wouldn't want to go into Iran as well. What I'm trying to see is, is the thinking of South African corporates changing? Are they saying 'yes, let's try Mauritius rather than doing our normal trip to London where perhaps we have the company flat'?

COLIN GRIEVE: Without a doubt. When people analyse and understand the advantages of using the Mauritius International Financial Centre, world-class banks, well regulated, modern legislation, caters for things such as derivatives and foundations, they are using Mauritius.

ALEC HOGG: So it's not just the young companies.

COLIN GRIEVE: No, it's not just the young bucks. There's a number of very well established old JSE-listed companies present in Mauritius and using Mauritius.

ALEC HOGG: A question I had right at the beginning, which we didn't get around to because I did ask two at the same time: is business booming?

COLIN GRIEVE: Yes, it is indeed.

ALEC HOGG: What kind of index? I don't need the exact numbers, but if you took an index of three years ago to today, how much has it grown?

COLIN GRIEVE: Well, for AfrAsia Bank it's grown in multiples. We are not only offering our banking services for central treasury operations – international treasury operations – but also for things such as structured trade finance and various transactional banking.

ALEC HOGG: So you're adding products as well as getting customers.

COLIN GRIEVE: Yes, absolutely. We never stand still

ALEC HOGG: But the Big Five aren't worried about you yet, or are they?

COLIN GRIEVE: Well, we're not here to compete with the Big Five. We have our own particular niche and our niche is to bank companies and individuals. We also have a very active private banking arm who want to use Mauritius as an international financial centre.

ALEC HOGG: Good story. Colin Grieve from AfrAsia Bank and he is the representative of that company here in South Africa.