Conduits of Capital

Other possible contenders may emerge in future. In
(Anglophone) Sub-Saharan Africa most jurisdictions (other
than Botswana, Mauritius and the Seychelles) do not
have legal and regulatory structures specifically aimed at
attracting international financial service activity. Rwanda
is actively considering moving in this direction, and could
challenge other jurisdictions in the next few years with the
introduction of competitive tax and regulatory regimes.
Elsewhere in East Africa, Kenya offers advantages simply
due to the size and sophistication of it financial sector—
similar to South Africa, although on a more modest scale.
Plans to actively pursue regional integration within the East
African Community (EAC) could be a mixed blessing. On the
plus side, deeper integration of regional financial and capital
markets and payments systems will support the emergence
of a regional hub, but on the minus side, if the EAC proceeds
to introduce a single regional currency without political and
fiscal integration this could—as in Europe—undermine the
stability of financial markets. In West Africa, Ghana seems
to have backtracked from its earlier interest in developing an
internationally-focussed financial services sector, and while
Nigeria benefits from its economic size, and the growth
of domestic capital markets, its poor governance and oilrelated
macroeconomic instability are likely to hold it back
for the foreseeable future.
Other African countries currently going through the OECD
Global Forum EOI exercise include:
• Mauritania
(Phase 1, 2014 H1 and Phase 2, 2015 H2)
• Burkina Faso
(Phase 1, 2014 H2 and Phase 2, 2015 H2)
• Cameroun
(Phase 1, 2014 H2 and Phase 2, 2015 H2)
• Gabon
(Phase 1, 2014 H2 and Phase 2, 2015 H2)
• Senegal
(Phase 1, 2014 H2 and Phase 2, 2015 H2)
• Uganda
(Phase 1, 2014 H2 and Phase 2, 2015 H2)
• Lesotho
(Phase 1, 2014 H2 and Phase 2, 2015 H2)
• Tunisia
(Phase 1, 2015 H1).
5. POTENTIAL ROLE OF
DONORS AND TECHNICAL
ASSISTANCE
There are a number of areas where Technical Assistance
is required and where donor support could be useful for a
country intending to develop as a centre for international
financial services.
The main technical requirements for such a strategy would
be as follows:
1. Reviewing and developing legal, regulatory and fiscal
frameworks for international financial and business
services.
2. Ensuring that the legal, regulatory and fiscal
frameworks are:
• compliant with international best practice;
• consistent with the requirements for satisfying the
OECD EOI assessment; and,
• offering competitive tax rates to investors while
not falling foul of international efforts to combat
tax base erosion.
3. Negotiating a network of double taxation agreements.
4. Determining where bottlenecks might occur and
which supportive reforms and investment might be
necessary in a particular jurisdiction (communications,
transport, immigration, land / buildings, etc.).
5. Developing publicity and awareness material /
programmes.
6. Establishing the necessary institutional structures
(promotional, regulatory, etc.).
This is a challenging list of requirements, especially for a
small economy that may lack the necessary skills. Many of
the skills can be obtained on a commercial basis, but are
likely to be expensive. Donors can play a role in meeting part
of the costs, but beyond that can have additional beneficial
influence by ensuring that compliance with international
best practice is built into the structures, laws and standards
that are developed by a new Financial Centre.
Given that the success of a Financial Centre is likely to
be dependent on achieving sufficient scale, having a
substantial initial impact is likely to be important; a slow,
incremental build-up may not be feasible. Hence donors
could play a role in developing and financing a large scale
publicity, branding and marketing initiative.
Conduits of Capital – Onshore Financial Centres and Their Relevance to African Private Equity
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