Conduits of Capital

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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 48 |
that it is obvious: a well-functioning financial centre will require adequate infrastructure across-theboard, as well as the fact that Africa is diverse and infrastructure weaknesses vary. There is an optimistic tone to the reports, a feeling that Africa has a chance for rapid development and that simultaneous financial centre development can speed and reinforce African advancement. The FSD Africa process of encouraging a diversity of opinion has achieved the desired effect of having a number of worthwhile suggestions for donor action. APPENDIX A - DOCUMENTS REVIEWED FSD Africa sources Document description CDC Group plc, Department for International Development (DFID) and FSD Africa (FSDA), Round Table Discussion – Executive Summary, 25 February 2015 Reference Round Table summary External sources Document description Reference Bella Research Group, “White Paper on Private Equity and Financial Hubs,” March 2015 Bella Research, 2015 Econsult Botswana Ltd, “The Potential of Onshore Financial Centres for Africa-Focussed Investment Funds Econsult Botswana, 2015 and Vehicles,” March 2015 Lion’s Head Global Partners, “African Onshore Financial Centres,” January 2015 Lion’s Head, 2015 Michael J Fuchs, “Onshore Options for Africa-Focussed Investment Funds and Vehicles,” January 2015 Fuchs, 2015 Z/Yen Partners Limited, “Onshore Options for Africa-Focussed Investment Funds and Vehicles,” March 2015 Z/Yen, 2015 Conduits of Capital – Onshore Financial Centres and Their Relevance to African Private Equity | 49
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 and 10: Because of the fragmented nature of
Page 11 and 12: Industry Views: EMPEA 2015 African
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: particular jurisdiction (communicat
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
Page 61 and 62: For future research, it is importan
Page 63 and 64: ENDNOTES 1 World Bank Enterprise Su
Page 65 and 66: 33 African Development Bank. Maurit
Page 67 and 68: 71 Unfortunately, the DTAAs lists b
Page 69 and 70: The financial activities carried in
Page 71 and 72: The OECD has reviewed over 100 juri
Page 73 and 74: Importance of Domestic Flows The re
Page 75 and 76: Rwanda is not included in any of th
Page 77 and 78: Other possible contenders may emerg
Page 79 and 80: APPENDIX 1: LISTING OF COUNTRIES IN
Page 81 and 82: Country / Territory Palau Listed by
Page 83 and 84: Country Mauritius Morocco 16 Nigeri
Page 85 and 86: Onshore Options for Africa-focussed
Page 87 and 88: Developing skills in these areas re
Page 89 and 90: 2.2 Policy Issues Related to Onshor
Page 91 and 92: • Good accessibility. Good commun
Page 93 and 94: 4. ROLE OF DONORS AND TECHNICAL ASS
Page 95 and 96: Thus, while some PE general partner
Page 97 and 98: management extends to monitoring co
Page 99 and 100:
ANNEX 1: CATALOGUE OF FINANCIAL CEN
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Dublin Mauritius Dubai Botswana Cap
Page 103 and 104:
To some extent, policymakers also n
Page 105 and 106:
In administrative financial centres
Page 107 and 108:
services industry. However, recent
Page 109 and 110:
gains, even if it involves offshore
Page 111 and 112:
ather than an onshore centre that i
Page 113 and 114:
generally look to London or in some
Page 115 and 116:
Onshore Options for Africa-focussed
Page 117 and 118:
whether it is ‘Local,’ ‘Trans
Page 119 and 120:
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
Page 137 and 138:
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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