Shahannah B. Abdoolakhan is CEO of Abler Consulting Ltd, an independent specialist financial services firm with a global reach and client base, which has a strong focus on compliance and RegTech solutions. She was recognised in the Africa’s Woman Leaders Awards in December 2017. In the interview that follows, she analyses the year 2017 and gives an insight for 2018.
2017 has been a very interesting year in all the sectors. How do you assess the performance of the Mauritian economy?
The IMF has noted a slight decline in the average GDP growth for 2017 in its latest staff report, and economic growth is projected to remain at the same level as that of 2016. A few domestic economists have already pointed out that the slowing of manufacturing exports together with higher imports is widening our current account deficit.
The IMF report highlighted 10 key areas of “vulnerabilities,” which need to be addressed in the very short term. Our Global Business Sector faces pressure from international anti-tax avoidance initiatives from the OECD and the EU.
Mauritius has been identified as a “Compliant” jurisdiction by the OECD and is committed to meeting EU tax governance principles by 2018. Having said this, the fact that we have a strong track record of reinventing our economic model provides grounds for optimism for the future.
The local political scene has been going through quite a few ups and down. To what extent does this situation affect the financial sector?
Mauritius developed its economic strategy more than two decades ago and successive governments have refined and adapted to changing global economic conditions while never making drastic changes or U-turns, and I believe it is a positive point that we have a vibrant democracy.
It is in the nature of business for operators to come and go. If businesses decide to exit Mauritius, in most cases, the real reason can be ascribed not to our local political scene but rather to changing circumstances, e.g., a change in the tax rate and regime, in most cases related to their own home country.
What are the upcoming challenges for the offshore companies in Mauritius?
As an international financial centre with relatively low tax rates, Mauritius is being scrutinized by international bodies, which are engaged in promoting fair tax competition practices. We are facing challenges as from the EU in relation to our tax regime and in particular the Deemed Foreign Tax Credit (DFTC), and we also signed the Multilateral Instrument under the OECD/G20 Base Erosion and Profit Shifting (BEPS) package.
Offshore companies in Mauritius should adapt quickly to the constantly changing regulatory environment and the revision of the Mauritius Double Tax Avoidance Agreement with India. Both have started to have their impacts. The regulators are trying to reposition Mauritius as a regional financial hub, however, there are some uncertainties, and this may very well have a spill over effect on the wider economy.
This year we have seen evolution in FinTech. What about the opportunities financial technology has to offer to Mauritius?
There are numerous opportunities that FinTech can offer to Mauritius and the most important ones are financial inclusion, more efficient and tailored banking services, lower costs of transactions, amongst others.
Through digital finance management, financial services can be provided to more people with greater speed and accountability. Banks, when partnering with FinTech companies, can innovate their traditional banking products and services in many ways. Innovations from FinTech players can speed up transfers and payments while reducing related costs, but there can also be risks like strategic risk, operational risk, cybercrime and compliance risks to deal with.
What, do you think, of the evolution of the Blockchain technology?
Blockchain was developed for Bitcoin, a cryptocurrency. Blockchain could create new economic systems, upsetting how we view money and the transfer of value and assets from seller to buyer. For now, real-life use of blockchain technology is still limited.
Its current use is mostly to be seen in cryptocurrencies that cross borders with negligible regulation. Major financial centres, incumbent banks, asset managers, insurers and technology firms are keen to experiment with the new technology.
Their initial trials focus on niche areas of trade finance, payment settlements and reconciliation. While interest in applying the technology is growing, widespread implementation may take years. An all-encompassing financial blockchain is unlikely to emerge from current projects.
Do you think Mauritius can benefit from it?
Definitely yes, but only if applied efficiently within the proper regulatory framework. However, we must first ask ourselves the right questions and decide in which areas and sectors of our economy we should apply this new and still in the process of being tested technology, as we are a small economy with a small financial centre.
We have been talking about being innovative. Do you think Mauritius is not innovative enough?
I would agree on that. There are some gaps to bridge for Mauritius to be considered an innovation-based economy.
How can Mauritius be developed as a hub for innovation?
For Mauritius to be developed as a hub for innovation, three core elements need to work together and these are institutions that attract and support the people with the talent and foresight to create new ideas; industry networks that encourage interaction, stimulate further innovation, help develop specialised services to support area companies and encourage cross-industry partnerships; and facilitation of entrepreneurship to commercialise concepts so that ideas, and businesses based on them, grow on the island.
It is widely believed that Africa is the continent of the future. Do you share this view?
I am Afro-optimist – I believe that Africa can be the continent of the future if it can optimise the use of its resources – both soft and hard resources. There is a depth of human capital in Africa and there is a future pool of young labour that will be available in the near future.
This can raise excitement as well as some concerns – excitement because there is availability of people to drive the African economy but concern due to its educational delivery and the creation of appropriate skill sets for the growing economy.
Africa has a plethora of natural resources that needs value addition to bring income to the Continent. Africa could rent its natural resources and use the monies to build infrastructure that would not only enhance the provision of services but also make it easier to perform businesses which will boost investments, especially in the rural areas.
What, in your opinion, can be the drivers for growth in 2018?
Mauritius wants to position itself as a financial hub in Africa and it should not be surprising if the country experiences innovations in the financial sphere. Support to SMEs should be extended to financial services companies; consulting companies and to FinTech companies, amongst others. The Government could provide cash grants and equity financing schemes to local start-ups.
It is noticeable that falling sugar production and subdued exports will weigh down on agriculture and manufacturing activity. If I may give a word of caution here with respect to the manufacturing sector, the authorities and our industrialists should take cognizance of the maelstrom that is taking place in that sector globally with the introduction of robotics and artificial intelligence.
Our public and education authorities should revisit their education strategies and understand that our youth is not being prepared to handle the new challenges that they will be facing.