Why Mauritius is the Key Hub for GCC Investors Expanding into Africa

Ajith Madhavan, Managing Partner of Ajith M Legal Consultancy, based on his 14 years of experience in dealing with Mauritius regulators, financial service providers, and various facilitators, analyses the significance of Mauritius, and its key role in regulating GCC investment in African Countries. 

Mauritius, an island nation in the Indian Ocean and the sub-Saharan African region, possesses significant geographic and strategic importance due to its location, special environmental features, vibrant cultures, and rich influence of Africa, Asia, and Europe. Even its history reflects its close relation and attachment with Arab countries as the Island was first discovered by Arab sailors in the Middle Ages. The Island has transitioned from its original low-income economy based solely on agriculture to a robust economy with diverse sectors including textiles, tourism, sugar, and financial services. Mauritius, based on several elements including but not limited to (i) strategic geographical position; (ii) favourable regulatory environment; (iii) availability of world-class financial service providers; and (iv) social ties with the Asian continent.  

Geographically, Mauritius lies roughly halfway between Asia and Africa, located approximately 2,000 kilometers off the southeast coast of Africa and about 4,000 kilometers southwest of India merely due to its strategic geographical location itself, Mauritius is considered an ideal maritime gateway for trade and investment in the African region and is widely acknowledged as a key hub for directing investments from the GCC into African markets.  Due to its strategic location, Mauritius has access to numerous regional African markets.  

It offers a business-friendly environment with significant tax advantages, such as an effective corporate tax rate as low as 3% for certain types of income, no capital gains tax, and robust financial services. These regulatory advantages make Mauritius an appealing jurisdiction for GCC investors seeking to manage their African investments efficiently. The financial sector in Mauritius is well-developed, providing a range of services that support international business operations, including banking, insurance, and legal services. 

The business relationship between India and the Arab world also goes back centuries. Some Gulf countries even used the Indian rupee as currency before they gained independence. According to the statistics of the Indian Foreign Ministry published in 2022, around 66% of the total 1.34 crore Non-Resident Indians (NRI) and approximately 9 million Indians living in the GCC countries. Today the Indian diaspora is the largest expat population in the Middle East. There are several billionaires of Indian origin based in the Middle East and some of the largest homegrown brands in the region were started by Indian expats. The UAE is home to the second-largest number of wealthy Indians globally, with 20 Indian-origin entrepreneurs residing in the country and 18 of the 20 of the world’s richest Indians living in Dubai. Similarly, Indian investments in Africa have increased considerably in the last decade. It is a well-known fact that most Indian investments in Africa are directed to Mauritius, a tax haven. Leading Indian public sector oil and gas companies like ONGC Videsh, Gujarat State Petroleum Corporation, and Oil India Limited private sector have also invested in non-energy sectors, including manufacturing. Business giants like TATA, Sun Pharma, Dr. Reddys, Mahindra & Mahindra, KEC International Limited, the Shapoorji & Pallonji (SP) Group, Sterling & Wilson, Afcons Infrastructure, L&T, Jindal, Vedanta, TCS, WIPRO, Infosys, Tech Mahindra, HCL, Zensar, Nihilent, State Bank of India, ICICI Bank, Bank of Baroda, EXIM Bank, Bank of India, Canara Bank have established their prime business presence in African countries. Similarly, many African countries including Nigeria, South Africa, Angola, Egypt, Algeria and Morocco also trade with India by exporting oil, gas, ores, and gold. 

For Indian entrepreneurs in the GCC, managing their African business is made easier by utilizing the facilities available in Mauritius. They have unique opportunities to expand their trading activities into Africa through Mauritius, leveraging the island nation’s strategic advantages and favorable trade agreements.  

Mauritius also has a well-developed financial services sector, which typically provides a wide range of services to support international corporate operations, such as banking, insurance, and legal services. Mauritius’s financial institutions are well-regulated and provide the necessary infrastructure for managing cross-border investments efficiently. The financial institutions in Mauritius are adequately regulated and have the infrastructure needed to manage cross-border investments. Additionally, Mauritius’s advanced infrastructure, including modern port facilities, a well-connected airport, and reliable telecommunications networks provide critical links for shipping and trade routes between Africa, the Middle East, and Asia.   

Mauritius's cultural and historical connections with India and Africa is another positive factor to enhance its role as a mediator between GCC investors and African markets and provides a familiar environment for Indian-origin businessmen from the GCC, helping them navigate the African market more effectively.  

Economic partnerships between the Gulf Cooperation Council (GCC) states and Africa are also emerging. As part of Saudi Arabia and the United Arab Emirates’s aggressive plans of diversifying their economies away from oil dependency, there have been more investments made in African industries including real estate, banking, and telecommunications. A few examples are UAE’s telecom giants Etisalat and DP World’s significant investments in the African countries and investments of Saudi Arabia, the UAE, and Qatar in agricultural projects throughout Africa. 

A recent development is the signature of a Comprehensive Economic Partnership Agreement (CEPA) on 22 July 2024 between the UAE and Mauritius, the first such agreement of the UAE with African countries. CEPA aims to provide a reduction of tariffs from customs duties, covering trading goods and services. Statement of His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, that “the goal of CEPA is to promote economic growth and create more opportunities for the two countries” and the statement of Dr Thani bin Ahmed Al Zeyoudi, UAE’s Minister of State for Foreign Trade that “for CEPA, we focus on countries that can add value to our economy while we add to theirs. Economy model of Mauritius shows the impact of trade will be more than other countries” itself sets out the intent of both countries to have more trading opportunities between them. 

Mauritius not only enhances its economic prospects but also facilitates the broader economic integration and development of the African continent and acts as an ideal platform and gateway for Asian countries to African countries.