Conduits of Capital

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paying financial advisers fees (except on success) and there are few investment banking businesses that are able to absorb deal origination costs, especially in markets that are generally more unpredictable than those in developed economies and where there are simply fewer viable transactions. There is greater recognition in the donor community that investment instruments are often a more appropriate means to achieving development outcomes than grants, and may result in less market distortion (i.e., uneven playing fields). Besides their ability to leverage private capital, thereby making more capital available to the market, investment instruments encourage partners (i.e., investees) to take risks without transferring risk, which is what happens with grants. Thus, they require that partners properly assess risks and think through the achievability of goals and how to best allocate capital in the most efficient way. Conclusion It goes without saying that donors cannot do everything (and obviously should not attempt to do so). However, Conduits of Capital has shown that in nascent markets there are numerous entry points where donors can play a constructive role investing in “soft” market infrastructure, such as regulation and skills. This requires effective market facilitation and intervening where there is a clear market-building opportunity to do so, but avoiding becoming a market player where possible. The guiding principle should be to provide the real market actors with the resources they need to carry out their functions effectively—occasionally providing funding, but more often access to information, networks and skills. Our hope with Conduits of Capital is that it will lead to a better understanding of what needs to be done to create viable onshore financial centres in Sub-Saharan Africa, and how donors can play a supportive role in accelerating their development. No one is pretending this is an easy task. For centres such as Nairobi or Lagos, they will have to either outcompete Mauritius at its own game, which they will find very difficult (as Michael Fuchs argues in his paper), or commit to creating a new kind of financial centre which offers advantages (not least locational advantages such as proximity to investment opportunities) that Mauritius can never offer. Moreover, they must do so whilst ushering in the basic regulatory and tax reforms which international investors regard as a prerequisite. Michael Mainelli from Z/Yen describes this as “getting real”—setting proper targets, being accountable for delivery of these targets and ensuring that real political capital is invested in the achievement of those targets. We hope that this publication assists all stakeholders in “getting real” about the challenges of building onshore financial centres, but that it also demonstrates the agency we all have in driving toward a more financially inclusive future. Mark Napier Director, FSD Africa October 2015 10 |
Industry Views: EMPEA 2015 African Fund Domicile Survey Conduits of Capital – Onshore Financial Centres and Their Relevance to African Private Equity | 11
Page 1 and 2: Conduits of Capital Onshore Financi
Page 3 and 4: TABLE OF CONTENTS I. FOREWORD .....
Page 5 and 6: predictable, legal systems that res
Page 7 and 8: works and that everyone loves.” D
Page 9: Because of the fragmented nature of
Page 13 and 14: EXECUTIVE SUMMARY In April 2015, FS
Page 15 and 16: INTRODUCTION Across the emerging ma
Page 17 and 18: As a general rule, GPs tend to foll
Page 19 and 20: “Offshore” refers to a jurisdic
Page 21 and 22: expressed by GPs). Over 61% of GP r
Page 23 and 24: “The industry has found a very sa
Page 25 and 26: INDUSTRY ATTITUDES TOWARD ONSHORE A
Page 27 and 28: A RANKING OF ONSHORE FUND DOMICILES
Page 29 and 30: Conduits of Capital - Onshore Finan
Page 31 and 32: WHAT COULD MAKE ONSHORE SUB-SAHARAN
Page 33 and 34: “Other” actions include: “rem
Page 35 and 36: “ STAKEHOLDER VIEWS ON THE RELATI
Page 37 and 38: APPENDIX 1 - DETAILS ON SURVEY PART
Page 39 and 40: Expert Perspectives: Onshore Financ
Page 41 and 42: Experts were asked to make recommen
Page 43 and 44: Table 2 - Prerequisites for a succe
Page 45 and 46: 3. FINDINGS 3.1 Evolution and Compa
Page 47 and 48: particular jurisdiction (communicat
Page 49 and 50: that it is obvious: a well-function
Page 51 and 52: • The development of an onshore f
Page 53 and 54: amined the impact that venture capi
Page 55 and 56: 4.1. Where do Private Equity Fund M
Page 57 and 58: in absolute terms, or relative to t
Page 59 and 60: average. With respect to regulatory
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For future research, it is importan
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ENDNOTES 1 World Bank Enterprise Su
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33 African Development Bank. Maurit
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71 Unfortunately, the DTAAs lists b
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The financial activities carried in
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The OECD has reviewed over 100 juri
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Importance of Domestic Flows The re
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Rwanda is not included in any of th
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Other possible contenders may emerg
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APPENDIX 1: LISTING OF COUNTRIES IN
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Country / Territory Palau Listed by
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Country Mauritius Morocco 16 Nigeri
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Onshore Options for Africa-focussed
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Developing skills in these areas re
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2.2 Policy Issues Related to Onshor
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• Good accessibility. Good commun
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4. ROLE OF DONORS AND TECHNICAL ASS
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Thus, while some PE general partner
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management extends to monitoring co
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ANNEX 1: CATALOGUE OF FINANCIAL CEN
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Dublin Mauritius Dubai Botswana Cap
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To some extent, policymakers also n
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In administrative financial centres
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services industry. However, recent
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gains, even if it involves offshore
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ather than an onshore centre that i
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generally look to London or in some
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Onshore Options for Africa-focussed
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whether it is ‘Local,’ ‘Trans
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are suited to particular financial
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In GFCI 16, only three African cent
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The ‘stable’ centres in the bot
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GFCI 16 Investment Management Centr
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Professional service providers tend
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Busan and Doha have been advancing
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Zambia and Zimbabwe, the report not
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Get Connected - Ease Scaling Up In
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Financial centres are added to the
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The SVM then uses the data to predi
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Instrumental Factor Country or City
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Instrumental Factor CA* BU DO DU IS
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Open Government The World Justice P
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Securitisation TheCityUK http://www
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Human Capital Instrumental Factor S
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Global City Competitiveness EIU htt
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6.4 Appendix D - Group Respondent P
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Dubai Istanbul Conduits of Capital
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6.5 Appendix E - Country Summary Ov
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Uganda 26.086 33,800,000 772 Kampal
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