Conduits of Capital

Table 1 – Overview of topics explored
Topic
Bella
Research
Econsult
Botswana
Fuchs Lion’s Head Z/Yen
Financial centre definition X X
Onshore versus offshore financial centres (financial centres) X X X X X
Typology of financial centres X X X
Prerequisites for a new / thriving financial centre X X X X
Economic benefits associated with financial centre X X
Importance of private equity (including role, location and economic impact) X X
Attracting international companies and / or private equity funds domiciliation X X X (X)
Africa-focussed private equity investment opportunities and local private
equity industry development
X
X
Fund managers attitude towards financial centre (including drivers
underpinning fund domiciliation)
X X X
Comparison of African financial centres X X X X X
Role of donors and technical assistance (X) X X X X
2.1 Financial Centre – Definition,
Typology and Requirements
All reports agree that it is difficult to classify financial centres as
‘onshore’ or ‘offshore’ financial centres. Definitions and criteria
vary. Most reports outline how typically ‘offshore’ financial
centres are conceptualised in terms of their favourable
regulatory environment and attractive tax regimes. Z/Yen
adds secrecy and long-term finance to the list of offshore
financial centres’ comparative advantages. Lion’s Head and
Fuchs highlight how in offshore centres, financial services
tend to account for a significant share of the economy but
only represent a narrow range of actual financial services,
such as administrative and legal services to support nonresident
capital, funds and companies’ domiciliation. Both the
Lion’s Head and Fuchs reports suggest that onshore financial
centres usually reflect a broader development of the financial
services industry.
Three of the five reports outline frameworks to categorise
financial centres. The resulting typologies vary in terms of
scope and criteria, and are summarised below.
• Econsult Botswana proposes to compare the
dimensions of a financial centre in terms of the size of
international business compared to domestic; sources
of capital and investment destination—local, regional,
international; the type of financial service activities;
and the compliance with international requirements
and best practice.
• Lion’s Head categorises financial centres into global,
regional and administrative according to their size,
scope and breadth of activities. Accordingly, global
centres are the largest and most influential financial
centres providing the most sophisticated services
at a global scale and hosting the largest collection of
financial services providers. Regional financial centres
draw their competitive strength from their location and
provide sophisticated financial services to their region.
Administrative financial centres provide administrative
and legal services to a broad cross section of clients.
• Z/Yen Group categorises financial centres by globaltransnational-local,
broad-shallow and specialiseddiversified,
according to three dimensions. First,
connectivity—the extent to which a centre is well
known around the world and how much non-resident
professionals believe it is connected to other financial
centres. Second, diversity—the breadth of financial
industry sectors that flourish in a financial centre. Third,
speciality—the depth within a financial centre of the
finance industry, in particular investment management,
banking and insurance.
Three out of five reports—again Fuchs, Lion’s Head, and
Z/Yen—outline the prerequisites for a successful financial
centre. Prerequisites that are common across all reports
include infrastructure; connectivity; a conducive business
environment; a stable political environment, political will to
develop a financial centre; and, human capital. It should
be noted that Bella Research and Econsult Botswana
also analyse these requirements, but in relation to factors
influencing fund managers’ decision-making on office location
or fund domiciliation. Table 2 below provides an overview.
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