Monday, May 20, 2024

BITC has a template to follow in Mauritius financial services

Exactly 52 years ago, Mauritius gained its independence. Before then, very few people gave Mauritius a chance in development. The country’s economy, according to a renowned writer VS Naipaul was at the time dominated by “sugar cane and sugar cane ending into the sea.” He called Mauritius an “overcrowded Barracoon”, a name that was to become a title of his 1972 world famous essay. A Barracoon is an enclave of slaves.

According to the World Bank, per capita has since risen from $200 just after independence to $10 000 today, bringing the country within a touching distance of high-income status. Since independence, Mauritius has transformed itself from being a monocrop economy to a fully diversified services economy. Working on value addition has been a recurring theme of the country’s developmental path. The sugar industry, by far the most dominant at independence today accounts for small fraction of the country’s GDP. The country’s financial services center is by far Africa’s most dynamic. It provides a ready-made boilerplate template for our own IFSC (International Financial Services Centre) that is managed by BITC (Botswana International Trade Centre).

Using its own IFSC, Mauritius has become a textbook case of how with a strong management an economy is capable of moving up the ladder of diversification and value chain. That economy has been able to comfortably move and adapt from sugar processing to textile manufacturing to up-market tourist destination and now to financial services and back-office service provider. All these have happened because the country has a strong legal system. The country has little chest-beating by authorities or those in power. Rather it is totally united in recognising that future success of their financial services center is dependent on a willingness and ability of the country to continue reinventing their economic structures.

Most recently, Mauritius is working hard at transforming itself into a world class education provider. To achieve that it has been systematically targeting flagship universities with a view to convincing to set up campuses in Mauritius. Additionally, Mauritius is also working at becoming a global provider of sophisticated legal and consultancy services for all companies going into Africa. A dependable and predictable legal system is key. Not the one where the judiciary is clearly not independent and where judges can be suspended on the flimsiest of grounds. Mauritius highest court of appeal is the Privy Council in London. The reason why Botswana IFSC has struggled has to do with a lack of pro-active and timely intervention by policy and law makers to make the IFSC more responsive to the needs of its players. Too often by the time they act, an opportunity would have been missed. In Mauritius there is a standing committee dedicated just to the IFSC.

At the moment Botswana IFSC is a light-years behind Mauritius. Catching up is practically and realistically not envisaged. In his State of the Nation Address last year, the president talked of creating a Board of Investment, which he would be chairing. That has still not happened. Ostensibly, this board would be high profile enough to ideally assess the needs of IFSC and implement them well on time and even on the spot. Right now it is a tedious process. BITC management and the Board make recommendations to the Ministry of Trade and Investment who in turn approach cabinet for approval and amendments, before a process is handed to the Attorney General for drafting.

The AGs Chambers then takes it back through a reverse osmosis. And by the time it’s done a year or two have passed. Mauritius has a very strong rule of law as demonstrated by a State President who resigned after misusing $24 000 in a shopping expedition. Botswana’s economy needs to ramp up and move swiftly up the value chain. That includes taking advantage of automation in manufacturing so as to stay competitive. Botswana’s IFSC still has a fighting chance. But it has been abandoned for far too long. To resuscitate it, we need to look not too far, but here in the African continent. And Mauritius is an example of how to get everything right.


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