Fareed Soobadar, Head of Corporate Banking at Bank One, explains that it is time for Mauritius to seize business opportunities in Africa, against a challenging international backdrop, and that innovation and digitalisation will be the watchwords for the future to meet customer needs and expectations in the corporate banking arena.
Challenging times for the local and international economy
We are living through challenging times as the local and international economies continue to experience the ripple effects of the COVID-19 pandemic, with the emergence of new variants, renewed lockdowns and rising death tolls in many parts of the world.
In Mauritius, government figures show that the economy contracted by 15.2% in 2020, which makes it possibly the worst year on record. Prospects for a rebound in 2021 are inextricably linked to the successful rollout of vaccination programmes at home and abroad, which may pave the way for the revival of the tourism sector, as a key pillar of the local economy. Despite government support, there is no doubt that the very survival of sectors and sub-sectors of the Mauritian economy which are directly linked to tourism (such as taxis, restaurants, dry cleaners, leisure activities, fishing and agriculture, among others, which include a large proportion of SMEs) depends on the re-opening of borders and a sizeable inflow of tourists.
The Mauritian Government has recently indicated that the launch of the vaccination programme on the island will permit a review of the entry protocols for passengers to allow the tourism sector to restart, which would represent a huge boost to the entire ecosystem.
If we turn to the international context, the World Bank expects the global economy to expand by 4% in 2021, according to its January 2021 Global Economic Prospects report, assuming that an initial COVID-19 vaccine rollout becomes widespread throughout the year. The World Bank anticipates that the recovery is likely to be subdued, unless there is decisive action from policymakers to tame the pandemic and to implement reforms that enhance investment.
Finally, if we look to the United States, which is the second largest export market for Mauritius after the UK (with Mauritian exports to the United States amounting to $357 million in 2019), there is reason for optimism as the Biden administration settles in. Most of the bilateral trade is from Mauritius to the US, particularly textiles under the African Growth and Opportunity Act (AGOA), which is due to expire in 2025. International observers believe that, in future, this may be replaced by new, reciprocal bilateral and regional trade agreements with Africa, which may offer new opportunities for Mauritius over the medium to longer term.
Seeking out new opportunities
As we survey the international scene from our vantage point in the Indian Ocean, it is time for Mauritius to seize the numerous business opportunities available in Africa, instead of focusing mainly on Europe and the United States, which are unfortunately set to remain crippled by the COVID-19 pandemic and its after effects for the foreseeable future. Rapid and decisive action to counter the virus in a number of African countries, including Mauritius, has played a vital role in containing or limiting its spread, with the African Union reporting 3,418,514 total cases since the outset across the continent and 84,637 total deaths as at 24 January 2021.
Does Africa represent the way out for Mauritius, therefore? While the World Bank’s growth forecast for Sub-Saharan Africa in 2021 is muted at 2.7%, according to its latest Global Economic Prospects report, there is high economic potential on the continent. The implementation of the African Continental Free Trade Area (AfCFTA), which came into effect on 1 January 2021, has eliminated tariffs on 90% of goods produced on the continent, and comes as a shot in the arm when it comes to boosting investment prospects. While some countries may struggle with trade liberalisation at the start, including South Africa and Nigeria among others, there will be opportunities to expand intra-Africa trade as each country finds its own niche and is able to specialise and add value locally.
Getting to grips with current challenges
For the year ahead, there will certainly be a number of short-term challenges to tackle for the financial sector in Mauritius in light of the global economic downturn and, in parallel, we must also contend with the consequences of the FATF and EU listings of Mauritius as a high-risk country in relation to anti money laundering and countering the financing of terrorism. While the Mauritian Government is actively engaged in dialogue with the relevant authorities to prove the effectiveness of our regime, it will take time for the on-site inspections to be conducted and the subsequent assessments made, which means Mauritius may not be removed from the EU blacklist until Q2 2022. In the meantime, we no longer appear as attractive as the IFC that we used to be, and this situation will continue to generate bad publicity for Mauritius over the months to come. It will be incumbent upon all financial services operators to promote the many benefits of doing business in Mauritius in the interim, which is currently ranked in 13th position globally in the World Bank’s Doing Business Report 2020.
Meeting the expectations of our customers and innovating for the future
The experience of the past year has shown us that necessity is the mother of invention, and at Bank One we are highly focused on ensuring digitalisation and innovation within our product and service offering to meet the needs and expectations of our clients, now and in the future. We will shortly be announcing the launch of a new payment solution/app which will be available soon, and we are also investing in the future of our people and our operations by opening a new HQ on the Port-Louis Waterfront in June 2021. With these new initiatives and projects well underway, we look forward to working with our clients to navigate the challenges and opportunities arising over the year to come.
