Conduits of Capital

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STAKEHOLDER VIEWS ON KEY FACTORS IN CHOOSING A FUND DOMICILE:
“The first driver of our decision of where to domicile a fund is of course tax optimisation for our LPs; second is tax optimisation
for us; third is regulatory approvals and regulatory burden; and, fourth is the composition of our LPs—some of whom face
constraints with certain jurisdictions, such as Cayman.”
– Sub-Regional GP
“The most important factor for us when evaluating a fund domicile is the limited liability status of the investors. It has to
be watertight.”
– Fund of Funds
“An important variable for us was the ability to use one global administrator. At the time we launched our most recent
”
fundraise,
we had no idea whether we would have one fund vehicle or a number of parallel vehicles, nor did we know where they
would be domiciled.”
– Pan-African GP
THE ROLE OF MAURITIUS IN SUB-SAHARAN
AFRICAN PRIVATE EQUITY
The importance industry participants place on tax efficiency
in a fund domicile helps to explain why Mauritius has
emerged as the preferred jurisdiction for fund vehicles
targeting investments in Sub-Saharan Africa. Mauritius
has implemented a lean effective corporate tax rate. It
maintains zero taxes on capital gains and has very low
or often zero effective rates on dividends. This creates a
relatively neutral environment for investment funds that
pool capital from limited partners located across the globe,
each of which faces its own idiosyncratic tax code and
reporting requirements.
Source: https://en.wikipedia.org/wiki/Ebene_CyberCity.
Moreover, Mauritius has built up a robust network of
double taxation agreements and investment promotion
and protection agreements with Sub-Saharan African
countries. These not only provide limited partners with
tax efficiency, but they also offer fund managers a greater
ability to enforce contracts. Mauritius has an increasingly
experienced pool of professional advisors—accountants,
administrators, arbitrators and lawyers—who are familiar
with fund administration, structuring and dispute resolution.
Its judiciary increasingly deals with fund-related matters. In
addition, as one experienced private equity lawyer relays,
“Mauritius is part of the Commonwealth, and, as such, any
appeals of Mauritius legal decisions go to the Privy Council
in London. So there is a reliability and robustness of the
legal regime that is very important to investors and fund
managers.”
Nonetheless, Mauritius, similar to other offshore and
onshore financial centres, has come under political criticism
in recent years and is viewed suspiciously by some civil
society groups. 5 To get a better sense of industry views,
the survey asked participants if they had any concerns
about Mauritius as a domicile. In response, only 17% of
respondents report that Mauritius raises concerns as a
domicile—a ratio that is relatively consistent across LP, GP
and SP respondents.
5
For example, some of the concerns that civil society groups have raised include clarity over corporate ownership and control, tax evasion, money
laundering, secrecy and non-disclosure over banking, financial and tax information.
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