Mauritius coming for South Africa’s crown

Mauritius is increasingly becoming a favourite location for South African businesses looking for a stable environment in which to access global markets and preserve their wealth. 

Standard Bank says South African businesses increasingly seek offshore banking products that offer wealth preservation, access to global markets, and currency risk management. 

This has traditionally been confined to large corporates, with banks offering these solutions through their Corporate and Investment Banking (CIB) division. 

However, smaller, family-owned businesses are increasingly seeking these offshore solutions. 

To meet this growing demand, Standard Bank has expanded its offering in Mauritius to serve these clients within its Business and commercial banking unit. 

Standard Bank said this offering will enable businesses of all sizes to benefit from a stable and favourable environment for international finance in a global commercial hub. 

Mauritius’ strategic position as an offshore banking destination has been carefully chosen based on its competitive tax rates, reliable financial systems, and business-friendly environment.

Businesses can leverage these advantages to optimise their financial structures, gain efficiencies in wealth management, and create a buffer against market instability.

The bank recently engaged clients in KwaZulu Natal regarding extending its offering in Mauritius, with the initiative first being launched in September. 

“By extending our Mauritius offshore offering to them, we are addressing a significant gap and allowing these businesses to thrive on an international scale,” said the head of business banking Simone Cooper. 

This offshore offering allows family-owned businesses to manage currency and liquidity risks and gain a strategic edge through asset diversification. 

Mauritius’ advantageous position and solid reputation as a financial centre allow us to extend our reach and provide more effective, wide-ranging support to businesses across the continent.

Tunde Macaulay, head of Africa regions for Standard Bank business banking, gave more fundamental reasons why South African companies are turning to Mauritius. 

Macaulay said Mauritius offers several advantages over other African markets for corporates, both large and small. 

The key reason companies look to set up shop in Mauritius is its political and economic stability, particularly in relation to other African countries. 

“Mauritius’s stable macroeconomic environment stands in contrast to Africa’s present macroeconomic challenges,” Macaulay said.  

“Significant currency devaluations, inflationary pressures and liquidity challenges have been experienced in several sub-Saharan countries, negatively affecting the operations of our clients in a range of sectors.”

“For African businesses, Mauritius is, therefore, a place for protecting wealth and working capital against the present challenges in some African markets.” 

African countries are increasingly looking to attract South African businesses as they grow much faster than the continent’s most industrialised economy. 

Botswana has become a very attractive destination for local businesses as it diversifies its economy away from mining and into financial services. 

Botswana and Mauritius want to improve the ease of doing business to attract foreign investment from companies based in South Africa. 

As these countries attract investment from these businesses, high-net-worth individuals are expected to follow. 

Standard Bank CEO Sim Tshabalala has emphasised that the bank will prioritise investments in regions of Africa offering the highest growth potential, which currently lie outside South Africa.

“We’re absolutely focused on total shareholder value, absolutely focused on it and on managing our portfolio of businesses with discipline,” Tshabalala told Daily Investor earlier this year.

“Clearly, the fastest-growing parts of the African continent are the countries outside of South Africa and, in particular, East Africa, which is growing at an annual rate above 5%.”

“Therefore, you want to be allocating your capital to these faster-growing parts of your business for obvious reasons – to grow lending, insurance products, and make acquisitions.”

The key consideration is economic growth rates. While South Africa is projected to grow at just over 1% in 2024, other African nations are expected to average growth rates exceeding 3%.

“What does this mean? It means that we are losing our national competitive advantage. We need to grow faster and get people healthier and wealthier,” Tshabalala said.

“Other countries are growing much faster. Where do you think that money is going to go? It is going to go to other countries and not South Africa.”

However, Tshabalala noted that this dynamic could shift if the South African government implements its reform agenda swiftly, potentially transforming the investment landscape.

“There is a beauty in having a portfolio of countries. South Africa is an absolute giant in the portfolio.”

“You might say its economic growth is pedestrian, but if the country suddenly grows at 2% or 3%, then the base is significantly bigger, and it makes sense to allocate more capital to the country.”

“So, we are sanguine about this, and we are not religious about where growth is. We will pursue that growth, servicing our clients and providing them with solutions.”

“The summary is that we will follow GDP growth and client activity. We will have strict discipline in how we allocate capital and keep going where we can grow the most.”