All services Fund and Asset Managers Private and Institutional Asset Owners Debt, Capital Markets and Corporate

Mauritius: India’s gateway to African ventures and international trading

31 Aug 2023

Indian companies are making increasing forays into the African continent, either by investing or through trading activities in the region. Mauritius, with its strong ties to both India and Africa, is an ideal gateway from India into Africa leveraging an economic partnership signed in 2021.

Africa’s economy is expected to multiply by a factor of 10 to USD$29 trillion by 2050, providing massive growth opportunities for Indian companies looking to expand. The 2021 economic agreement between India and Mauritius provides Indian investors with the opportunity to use Mauritius as an economic aggregator and regional management base for investments into Africa.

The CECPA advantage

The Comprehensive Economic Cooperation and Partnership Agreement (CECPA) between India and Mauritius, the first such agreement with an African nation, has paved the way for sustained economic partnership between India and Mauritius. The agreement allows Indian investors to leverage the mature and globally connected Mauritius International Financial Centre (MIFC) as a launchpad for the expansion of businesses into Africa. From an Indian perspective, Mauritius provides preferential access to over 300 products, with tariff rate quotas on 88 products, including spices, tea, plastics, and wooden furniture.

Thus under CECPA, Indian manufacturers can move part of their manufacturing processes to Mauritius, establish a procurement or trading centre, or set up a holding company to leverage duty-free access to 600 million consumers through COMESA (the Common Market for Eastern and Southern Africa) and SADC (the South African Development Community).

The wide-ranging benefits of Mauritius

  • Reputable and reliable IFC: Mauritius provides world-class opportunities in cross-border banking, personal banking, investment banking and specialised captive insurance. Robust professional services are also available, including international law firms, renowned ‘Big 4’ accounting firms and business process outsourcing (BPO) providers
  • Attractive business climate: The business environment in Mauritius is ranked first in Africa and one of the top globally. In 2020, the World Bank rated Mauritius 13th in the world for ease of doing business, and it has ranked highly on several other indices as well, including World Economic Freedom and the Global Competitiveness Index
  • Efficient tax regime: The corporate tax rate in Mauritius is 15%, with the ability to claim 80% under the partial exemption regime for certain types of income or actual underlying tax suffered, making the effective tax rate 3%. Exports are also taxed at 3%. Mauritius collects no capital gains tax or withholding tax
  • Financing: Over 20 banks on the island have a track record of financing cross-border deals in Africa, opening up the possibility for Indian corporates to raise financing through Mauritian SPVs and entities. There are more than 200 pan-African securities listed on the stock exchange, so the Indian MNC can raise capital for African operations on the Mauritian exchanges

Holding entity example

Let’s examine how an Indian pharmaceutical company expanding its operations into Africa may use a holding company based in Mauritius. By establishing the holding company as a Global Business Corporation (GBC) in Mauritius, the parent company can establish subsidiaries in Africa.

Advantages of the structure:

  • The holding entity can raise debt financing and provide long-term capital to the subsidiary companies
  • Managed according to international standards and good governance practices in an economically and politically stable jurisdiction
  • No exchange control and free flow of funds, supported by a sophisticated banking platform
  • The arrival of new investors—and the possible exit of other investors—can be done at the level of the GBC, without impacting shareholding at the parent company in India. In addition, any capital gain resulting from a sale of shares at the GBC level (in the case of the arrival of new investors) will not be taxable

Procurement/trading centre example

In a second example, an Indian FMCG manufacturing conglomerate may establish a trading company as a GBC in Mauritius.

Advantages of the structure:

  • The platform is created and administered in an economically and politically stable jurisdiction by a highly qualified workforce and managed according to international standards and good governance practices
  • An advantageous financial ecosystem with the presence of international banks, possibilities for financing equipment purchases, and competitive bank loans
  • Absence of exchange controls and free flow of capital, plus the possibility of operating various bank accounts in major foreign currencies to facilitate trading activities
  • Profits from trading or central purchasing activities are taxed at a rate of 3% in Mauritius; there are no taxes or other deductions on dividends paid by the GBC to the parent company in India
  • The GBC can eventually be converted to a Global Headquarters Administration or a Global Treasury Centre and enjoy a multi-year tax holiday on profits

In all, Mauritius represents an unparalleled opportunity for Indian corporates looking to expand into the greater African continent.

IQ-EQ has extensive experience establishing and administering Indian corporate structures from Mauritius into Africa. Get in touch with our team today to learn how we can help your business expand its horizons.

Working with IQ-EQ has been seamless – you and your team understand our business, advise us appropriately, and handle your side of our collective partnership so that we can focus on making good investment decisions. Evan Gibson SVP, Merchants Capital

Get in touch with us today

We’re ready to listen.

Make an enquiry

Interested in joining our team?

We are always on the lookout for passionate people that possess IQ and EQ to join our growing team.

View job vacancies