Conduits of Capital

investor market. Examples of studies include the African
Development Bank’s “Structured Finance: Conditions for
Infrastructure Project Bonds in African Markets.”
There is evidence to suggest that financial centres go hand
in hand with economic development. But what this means
for donors in terms of shaping their policies and interactions
in African countries needs more analysis. As a starting
point, it is important to acknowledge the difference between
regional centres and administrative centres in terms of the
developmental benefits each model brings and the policies
needed to catalyse the growth of either type of centre. This
may also inform the debate between ‘onshore centres’
and ‘offshore centres’ since, as we have acknowledged
elsewhere, most offshore centres are administrative centres.
Does it really make sense for donors to promote the creation
of more than one administrative (offshore) centre for Africa
when it seems that most fund managers find that Mauritius
is serving these needs well?
If transparency is the main concern, there is an argument
to focus efforts on that issue specifically and to work with
policymakers and financial institutions in Mauritius to
improve those standards. Indeed, there may even be an
argument for donors to help Mauritius improve its current
capabilities such that it is seen as a world class administrative
centre. It will be able to achieve the benefits of economies of
scale and may in due course attract international providers
of these services.
benefits of investing in infrastructure, and the benefits of
commercial markets in key sectors of the economy. At the
same time, building a regional financial centre would create
a centre with greater capacities than a typical national
centre. This may then attract financial activity to this centre
at the expense of its surrounding national centres.
So, for the debate over creating bigger regional centres the
key questions are:
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How many regional centres can the African continent
accommodate?
Which national centres have the ability to grow and
service neighbouring countries?
What would be the effect on the region and the
immediate proximity of the regional centre?
Do the relevant national centres have policymakers
alive to this potential and willing to undertake the
necessary policy measures?
What policy measures are necessary to catalyse the
growth of such centres?
For donors, the important questions revolve around
understanding the advantages and possible disadvantages
of creating larger regional centres. This does not need to be
a purely theoretical exercise; there are obvious precedents.
These show that global, regional and national centres
coexist. However, once a regional centre has established
itself, it is resilient and not easily dethroned by other national
centres achieving the regional centre status.
Indeed, donors need to acknowledge that in the cases of
countries such as Mauritius or the Cayman Islands, the
creation of administrative centres was the result of proactive
government policies to create development in those small
economies. Those economies are not large enough or have
enough other alternatives to be able to diversify if these
activities moved elsewhere.
In the absence of a regional (onshore) centre in Africa, it
is expected that as any African country develops, its main
commercial centre will develop as a national financial
centre.
For example, in the Middle East, Dubai occupies a role
as the dominant regional financial centre. It is certainly
the dominant financial hub, it has the largest regional
stock market and it has the largest collection of financial
services companies in the region. However, Doha, Bahrain
and Abu Dhabi all have their own financial markets that
coexist with Dubai. At the same time, Dubai coexists with
the global centres. In fact, companies in Doha may need to
work through Dubai for some specialised services and for
other services—capital raising in particular—they will turn
to London, New York or Hong Kong. So the role of Dubai
varies according to the needs of the client.
We can even argue that this is important in order for the
national economy to continue to grow and to benefit from
best practice in financial markets and financial products.
Donors should be looking to help at this national level by
advocating the benefits of improving financial markets, the
Similarly, the development of Central Europe since 1989
went hand in hand with the development of their national
financial centres in countries such as Poland, Slovakia
and the Czech Republic. Yet, there has not been the
creation of a single centre to service the region. They
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