Mauritius - An investment destination of choice

Making an investment in Africa is considered to be tricky business, with political instability and economic uncertainty two hurdles that can trip up the unwary. However, Mauritius – Africa’s shining beacon of social and economic stability tops several polls as the safest place to put your finances.

It’s not just the beautiful scenery and balmy tropical sunshine that are persuading entrepreneurs and wealthy foreigners to relocate their businesses or add a villa in Mauritius to their portfolios, but the Ibrahim Index of African Governance hails it as the best run country in Africa the World Bank’s survey of the Best Countries for Doing Business ranked it as the 1st in Africa and 20^th globally in 2014.

These economic accolades are backed up by a 92.9% employment rate and 89.9% literacy rate, a 15% corporate and personal tax rateand blissfully little crime. The beautiful beaches, top-notch healthcare system, good flight connections and widely spoken English and French also make Mauritius an easy emigration option.

For businessmen used to dealing with bureaucracy, the Mauritian approach is a breeze. Applications for Occupation Permits or Residence Permits are made through the Board of Investment and are issued within five working days.

These efforts to open Mauritius up to foreign investors were essential after the country’s sugar industry slumped. Sugar now contributes only 1% of GDP, down from 75% in the 1970s.

Further to Sachin Mohabeer, assistant  director at the Board of Investment: “Without investment there won’t be growth or job creation so our strategy is to diversify the economy want to have more investors and high calibre professionals working in the country and more retirees living in the country.”

The strategy to broaden the economy includes capitalising on the natural beauty of the island by allowing high net worth individuals to buy properties in specifically designated areas. Foreigners can invest in property under the Integrated Resort Scheme (IRS), designed to attract wealthy foreigners and their hard currencies.

The government grants residency to investors who spend at least $500,000 on an IRS home and they can also apply for permission to start a business or find a job. Rob Hudson, MD of South African property development and sales company Hayes, Matkovich & Associates, says South Africans account for 40% to 50% of IRS sales and are often businessmen who want to take some money offshore.

Hayes, Matkovich & Associates is marketing two upmarket IRS resorts, La Balise Marina and Villas Valriche. Villas Valriche boasts the attractive combination of being both a beach resort and a golf estate, with 288 villas. With 146 units, La Balise Marina at Black River is the only IRS resort to feature waterfront access and a marina, making it ideal for wealthy water babies.

Both La Balise Marina and Villas Valriche are developed by the ENL Group, a family-run company listed on the Mauritian Stock Exchange.

Hudson says the IRS policy is incredibly successful in helping to diversify the economy and is also proving a solid investment for the buyers. “You are investing in a stable country with a very low crime rate, an economy that’s doing well and a lifestyle that is hard to match anywhere in the world,” he says.

The first IRS properties to have been resold notched up an average 35% return on investment. Where other international ‘second home’ real estate markets have collapsed in recent years during the financial crisis, Mauritius has stood out with positive growth and continued returns on investment.  With around 40% of investors coming from Europe, this performance in the ‘hard times’ bodes well for when the European investment markets recover.  That said, Hudson does emphasize that Mauritius is a niche market opportunity but not a speculative one and investors should adopt a medium to long term outlook.

Owners can also put their villas into a rental pool, giving them a holiday home of their own that generates a steady income too.

While many South Africans are investing in Mauritius for a holiday home, as a long-term retirement plan, or to base their business there, others see it as a safety net in case South Africa takes a turn for the worse. “It’s a contingency plan for many people,” Hudson says. “You have a wonderful holiday home to enjoy but you also have the option of going to work in Mauritius or running your business interests from Mauritius, where there is an extremely attractive tax rate of 15%.”

The recent slide in the rand has made dollar-denominated foreign homes more expensive, but conversely it is prompting people to take money offshore in case of further deterioration.

And a property in paradise is about as safe an investment as you can make. The Mauritian property laws are strongly in favour of home owners, while the IRS scheme will let you buy a plot now and hold it for up to five years before you build, to fit in with your cash flow.

Prices at Villa Valriche start at $670,000 for a 2-bedroom villa and $800,000 for a 4-bedroom villa, going up to $2.7m. At La Balise Marina, prices start at $700 000 for a 2-bedroom apartment, going up to $3.3m for 5-bedroom villa, all taxes and fees included. Still at La Balise Marina, Duplexes that cost $600,000 to build have already been resold for $800,000.

Mauritius has never been a cheap destination, but with good reason, Hudson says. “It’s a small island and they are not making any more of them,” he says.

* Figures from the Mauritian Ministry of Education