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Known as “the star and key of the Indian Ocean”, Mauritius has served as a gateway between Africa, India and the Middle East, bringing together people, cultures and markets in a uniquely positioned island environment.
Indian influence, in particular, is central to modern Mauritian identity, with two-thirds of inhabitants tracing their ethnic roots to the subcontinent.
The connection is not only cultural but financial as well. Despite its small size, Mauritius has historically been a large source of foreign investment in India, accounting for about 30% of total foreign direct investment (FDI) to the country in the past 20 years.
India-Mauritius ties revived
It is well-known the island served as a preferred hub for optimised financial flows into the subcontinent. This ended abruptly in 2016 when India ended the arrangement, triggering much soul-searching as Mauritian operators strived to pivot to Africa.
Now we are witnessing a dramatic reversal: many Indian private equity investors and corporates are repurposing their ties to the island as a trusted base for their African expansion.
India is quietly emerging as the third global economic force and has set its sights on Africa.
India’s corporates are increasingly tapping into opportunities presented by the continent with the fastest-growing population. This has accelerated under the leadership of President Narendra Modi, who has sought to deepen strategic ties by proclaiming the 10-point Kampala Principles to guide India’s engagement with Africa.
This was followed by big announcements. In September, a group of four Indian conglomerates pledged to invest $14bn in Nigeria – Indorama Petrochemicals, Jindal Steel and Power, SkipperSeil and Bharti Enterprises.
These names don’t capture the complexity and sheer volume of the emerging India-Africa corporate relationship. Mauritius stands to gain enormously from this shift, as will the continent by increasingly being able to diversify economic partners and deepen access to financial markets and international investment flows.
African banks expected to step up
This momentous change is taking place as international banking institutions are rethinking their commitment to Africa. Several multinational banks have sold off their operations in Africa.
Rather than seeing this as a vote of no confidence in the financial future of Africa, local banks should recognise the shift as an opportunity to step up and fill the void. For example, more and more Indian customers are eager to work with local banks.
With the right actions, Mauritius can reassert its status as the bridge linking Africa to India, facilitating increased financial interaction between some of the fastest growing economic areas in the world
With India resolved to increase its investment in Africa and African investors looking to expand beyond the continent’s borders, stronger ties between the two regions are sure to develop. Western and Chinese companies focussed on home efforts during the post-Covid recovery mode.
With the right actions, Mauritius can reassert its status as the bridge linking Africa to India, facilitating increased financial interaction between some of the fastest-growing economic areas in the world.
This is particularly true within the context of the African Free Trade Area (AfCFTA), which is likely to facilitate the expansion of African banks and financial markets.
Privileged central position
There are various ways “the star and key of the Indian Ocean” can act as a connector and stabiliser between Africa and India. Mauritius holds a privileged position in the middle of this partnership, both culturally and geographically. It also benefits from having decades of expertise in operating as a financial hub.
India has set up its financial centre, GIFT City, in Gujarat. This initiative highlights the need to build bridges between economic zones and financial markets to attract more foreign investment.
A new global financial paradigm is rapidly taking shape
What has been done in Mauritius should be more actively replicated on the continent. The AfCFTA will hopefully go a long way towards consolidating a more equitable and self-sustaining banking ecosystem in Africa, but precise and bespoke actions are needed to fully grasp the momentum.
A healthy, interconnected financial system would benefit not only Mauritius, but would go a long way towards legitimising the new order likely to arise in African finance after the retreat of international banks.
The economic choices of Mauritius serve as a blueprint for the rest of the continent – the island is going beyond its previous arrangement as a tax tool for the world’s wealthy and becoming a high-end financial hub in its own right, benefitting Africa and India.
With the right policies in place, the trend of Indian corporations investing in Africa could be replicated the other way around, using Mauritius as its key. African private investments into India can also be channelled via Mauritius, through private equity and wealth management products.
A new global financial paradigm is rapidly taking shape and Africa must play its part. Mauritius stands ready.
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