Investment plays a pivotal role in fostering economic growth, innovation and resilience. The African private capital industry is rising in prominence along with the number of high net-worth individuals across the continent.
According to the Africa Wealth Report 2024 published by Henley and Partners, High Net-Worth Individuals (HNWI) in Africa cumulatively hold USD 2.5 trillion of liquid investable wealth. The continent has 135,200 millionaires, 342 centi-millionaires and 21 billionaires. The report also highlights that Africa’s Big wealth markets are South Africa, Egypt, Nigeria, Kenya and Morocco representing 56% of the continent's millionaires and over 90% of its billionaires. It should also be noted that 1,600 millionaires moved between African countries over the past decade. While most relocated to Mauritius and South Africa, some also moved to Morocco and Namibia. Mauritius has around 5,100 HNWIs, ranking 6th in Africa. The village of Grand Baie is home to some of Africa’s most exclusive houses and apartments, with prices reaching over USD 5,000 per square meter.
The Mauritian Context
Over the years, Mauritius has carved a solid reputation as a trusted and well-regulated jurisdiction meeting all global standards. The Mauritius International Financial Centre (Mauritius IFC) is the only sub-Saharan African IFC that has an investment grade rating according to Moody’s and S&P rating agencies. Additionally, Mauritius is only one of five jurisdictions that has achieved the status of compliant/largely compliant with all 40/40 score of the Financial Action Task Force (FATF) recommendations.
This includes Recommendation 15 (R15) which is adhering to measures in ensuring AML/CFT compliance for Virtual Assets Service Providers (VASP). On the other hand, the OECD’s Forum on Harmful Tax Practices (FHTP) Peer Review Mechanism has deemed Mauritius having no harmful tax practice/regime along with the EU placing Mauritius on its Whitelist. To cap it off, Mauritius has already implemented measures for the Automatic Exchange of Information as per the Common Reporting Standards under the FACTA with the USA.
The African Context
According to the IMF, 7 out of the 10 fastest economies in the globe are in the continent of Africa. However, the IMF also highlighted that the finance gap for infrastructure projects across the continent is around USD 300 million annually. Subsequently, the growing liquid investable wealth within the continent could help plug the finance gap of Africa.
Repositioning the Mauritius International Financial Centre to plug Africa’s Finance Gap
Since its inception in 1992, the Mauritius IFC has established global repute as a trusted, reliable, efficient and effective cross-border financial jurisdiction. It has successfully established SPVs & SPFs for the pooling of funds to finance infrastructural projects across Asia & Africa. To that end, over the past 20 years, over USD 160 billion of direct investment has been structured into India through the Mauritius IFC. This has helped India rise from an USD 800 billion economy towards the road in reaching USD 5 trillion in 2027 and becoming the 3rd largest economy of the globe.
However, India had a mass of large conglomerates that could successfully establish global funds through the Mauritius IFC and raise billions to help finance their respective capacity building projects over the past three decades.
On the other hand, Africa is a fragmented economic space with 54 nations and has a limited number large of conglomerates to replicate the India Model. To that end, the Mauritius IFC is currently developing its Wealth Management Ecosystem to allow High Net-Worth Individuals across Africa to set up various structures under the Variable Capital Company (VCC) Structure for their respective investments.
Under the VCC, several SPVs & SPFs can be created for the pooling of funds towards projects across the continent. To enable this ecosystem, the Mauritius IFC has aligned itself with the OECD’s Multilateral Instruments (MLIs) in ensuring substance within the jurisdiction. Subsequently, we are seeing an increasing number of Fund Managers, Wealth & Asset Managers, Investment Bankers & Portfolio Managers domiciling in the jurisdiction.
Additionally, Mauritius is also reengineering its framework by introducing new licenses such as the Virtual Asset Initial Token Offering Services (VAITOS Act 2021) with the following 5 licenses:
- Virtual Assets Broker-Dealer Licence
- Virtual Assets Wallet Services Licence
- Virtual Assets Custodian Services Licence
- Virtual Assets Advisory Services Licence
- Virtual Assets Marketplace Licence
Today, we have seen an emergence of service providers moving to the Mauritius IFC. This is exemplified by the capital markets whereby the total market capitalization has more than doubled since 2021 with the recent setting up of AFRINEX & Mindex (a fully digitalized exchange platform recognized by His Majesty’s Revenue & Custom- HMRC) that complements the Stock Exchange of Mauritius (SEM) which is in operation since 1988.
Today, the cumulative market capitalization of the three exchanges is closing on USD 30bn.
Mauritius-based Africa Specialty Risk (ASR) has been appointed by global leading insurer, Lloyds to be its re-insurance representative for Africa. Subsequently, we are also seeing an emergence of pure captive insurers across the Mauritius IFC.
Fund/Asset/Wealth Managers along with PEs & VCs are complementing existing Mauritian based banks in providing trade and credit financing facilities across the continent.
All these latest developments have expanded the breadth of services available through the Mauritius IFC. This has subsequently made Mauritius more attractive for Investment Advisors to include African Investment through the Mauritius jurisdiction as part of their recommended portfolios.
Going forward, the EDB is collaborating with various Ministries, Governmental Institutions and Private Sector representatives to pursue the evolution of the Mauritius IFC towards becoming the undisputable financing platform for Africa.
Spotlight on the Private Capital Activity in Africa
Africa’s private capital landscape witnessed significant growth and metamorphosis between 1990 and 2010. Private capital in Africa has come a long way since the emergence of the first wave of fund managers in South Africa over two decades ago. While to date it only represents a small share of global investment activity, the metamorphosis of Africa’s private capital landscape has not only encouraged the development of home-grown fund managers, the impressive growth of the industry in recent years has also attracted investors from all over the world to the continent’s shores.
According to the African Venture Capital Association (AVCA), investment funds constitute one of the main drivers of local and international capital flow into African economies and this has led to the emergence of key service providers such as asset managers, fund managers and trust and corporate service providers.
Regional Spotlights of Private Capital Deal Activity in Africa: 2016 - 2022 H1
Volume and value of private capital deals reported in Africa, by region 2002-2022 H1
