Conduits of Capital

It is also interesting to ponder whether financial centres
should be a focal point for donors—Lion’s Head, “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?” The Round Table noted—“Any
attempt to build onshore centres will need to be differentiated
from, and competitive with, Mauritius’s offer.”
The Round Table concluded that the principal options for
technical assistance to prospective onshore centres might
include:
1) Providing case studies of successful examples of
financial centre development, including Mauritius’s own
evolution as an offshore centre;
2) Creating a diagnostic roadmap to support a country to
gain international approval, identifying risks and pitfalls
along the way;
3) Expanding Double Tax Avoidance Agreements
(DTAA) networks, and helping stakeholders understand
the process of regulatory reform;
4) Improving messaging and communication to mend
the political reputation of tax efficient centres and
highlighting the sensible character of their structures;
5) Establishing a policy performance bond, supported or
underwritten by donors, as a political risk mechanism
to hold governments to account on promises made.
Scoping could establish how risk could be fairly and
effectively shared among partners; and,
6) A benchmarking service for national governments
to assess appetite and ensure that projects are effective
and not wasteful.
The Round Table concluded that the principal donor support
for private equity might include:
1) In-depth research to understand what does and does
not work when building PE in emerging markets;
2) A survey of preferences and insights from financial
institutions in the region, who are well positioned to
assess, assist and monitor the market;
3) A system of professional standards that can be
applied across the continent;
4) Better benchmarking of cities, countries and
companies; an accurate, potentially pan-African
system of information can help companies share
knowledge and observe market dynamics;
5) Better incentives for fund managers such as the
adjustment of hurdle rates (the return after which
carried interest is received), rather than soft funding /
capital support; and,
6) Technical assistance funding to capable fund
managers, that is structured to ensure managers bear
part of the costs.
4.3 Conclusion
On balance, the reports indicate two principal axes for
donors to consider:
• Public sector or private sector emphasis –
the reports at times emphasise engaging with
governments, at other times engaging directly with
businesses and investors. The reports also switch
between the need for substantive reform preceding
development and the need for achieving economies
of scale quickly. Fuchs favours specific engagement
on specific issues with business—“Looking beyond
the issue of scale experience suggests that the
political economy of financial sector reform is an
uncertain process, particularly when such reforms
entail provision of public goods, such as a conducive
legal and regulatory framework, strong judicial and
oversight processes, efficient financial infrastructure,
etc. Local private sector parties most impacted by
shortfalls in current systems are likely to be the most
vocal and effective drivers of such reform processes.
Thus, rather than engage directly in dialogue with
authorities on the reform process, the most impactful
approach to supporting improvement may well be to
build on the influence of those local private sector
parties most impacted by current circumstances (such
as PE fund managers whose activities are hampered
by shortfalls in the enabling environment). They are
likely to be the most effective drivers of such reform
processes;” and,
• People or information or institutions emphasis –
the reports vary from Z/Yen emphasising training and
education as well as information, to Bella Research
recommending improved information provision for
investors, to Econsult Botswana, Fuchs and Lion’s
Head focussing on institutions. All of the reports make
suggestions on infrastructure as well. Infrastructure
issues range from power, water, telecoms, sanitation,
and transportation to schooling, security, rule of law,
and public information. However, there is no clear
infrastructure theme possibly due to an assumption
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