'Now is the time to invest in Zimbabwe'

Last week, Mr James Benoit of AfrAsia spoke to Mauritius magazine on whether Mauritius is getting to know Africa better? Is China good for Africa? How can Mauritius better use its assets to boost ties with the mainland? And why Zimbabwe might be in the place to be. The interview was done by Touria Prayag and below are the  excerpts . . .

TP: I'd like to ask you about AfrAsia Kingdom in Zimbabwe. Is it a storm in a teacup or had a Lehman Brothers-like crisis been avoided in the nick of time?

JB: It can be classified as a storm in a teacup. Our investment in Zimbabwe are limited to US$10 million which is relatively small given our size. So whatever happens concerning the overseas investments won't be a problem that's going to affect us or our customers here.

TP: So where is the smoke coming from?

JB: From one disgruntled customer making comments about the size of his facility and the fact that we recalled his loan and are putting it through an administration process. It's business as usual in the bank in Zimbabwe and there's no effect at all. But is Zimbabwe a wise investment anyway? The country is bankrupt, isn't it? (laughs)

It's probably no worse than most of Europe actually. It's growing and getting a lot of foreign investment. Yes, the economy is fragile but the investor interest in Zimbabwe is amazing and undervalued. Admittedly, Zimbabwe has been through some stress but if you believe in the long-term future, now is the time to invest there.

TP: Aren't there issues of banking regulations? What kind of regulations do you encounter in a country like Zimbabwe?

JB: The banking regulations are actually very thorough in Zimbabwe. A lot of governance procedures are in place. I obviously cannot speak for the whole country but what I can say is that we follow the guidelines and work with the Reserve Bank on a lot of issues. In a recent statement, the governor of the bank said he's very happy with us as shareholders and about the fact that we're keeping them informed.

TP: Presumably you are investing in other African countries as well. Where are your biggest investments?

JB: Our biggest investment, in terms of people, is in South Africa where we have nearly 30 staff placed in corporate finance investment banking in two representative offices in Cape Town and Johannesburg.  We are also looking at other countries in the Common Market for Eastern and Southern Africa and the Southern African Development Community regions as well. But right now, South Africa and Zimbabwe are our biggest investments.

TP: Why Zimbabwe specifically?

JB: It's strategic. It is a resource-rich country, people are educated and there's strong entrepreneurial culture. The infrastructure, even though it's a bit worn out, is very good. We think that as Zimbabwe gradually normalises in terms of political perception, it will start growing rapidly. The other thing we have to realise here in Mauritius is that though we are a prosperous country, we are only a country of 1,3 million, so we have to be very strategic.

TP: Does it make more sense to have partnerships in Sadc or Comesa or is it better to look across Africa?

JB: Well, from our point of view at least, we have chosen to focus on countries with which we have natural trading ties. For example, much like Mauritius is the largest source of Foreign Direct Investment for India, it's the same with Zimbabwe. A lot of the investment that comes from India and China comes through Mauritius and then goes to Zimbabwe. So, obviously, there are already strong strategic links between the countries.

TP: How high are the risks given the kind of regulations in place?

JB: Well, the risks are as normal as in any market. There's business and political risk. I don't deem the risks of investing in Africa to be unacceptable. As you know, six of the 10 fastest-growing economies are in Africa. Governance standards and income levels are increasing, so we think that people tend to overstate the risk. It's a great opportunity.

TP: Forget about the business opportunities in Africa. How safe are its countries?

JB: Look, you go to many Asian countries, like the Philippines for example, and you have to have bodyguards with you. You don't need that in Zimbabwe or Nairobi. When I look at Southern Africa today, it reminds me of South East Asia 20 years ago. When it comes to structuring your risks in a financial perspective, you have to be sensible in terms of diversification and what rights you have as a shareholder or director. We have a very good partnership that way with our partners in Zimbabwe.

TP: Are we as a country doing enough to encourage investment into Africa?

JB: Well, it has started. When we started investing in Africa some 20 years ago, people looked at it in a very strange way, the momentum has really picked up. The African Centre for Business Excellence started and now there is Mauritius Africa Business Club. So Mauritius is seizing the Africa business opportunity.

TP: But apart from business, has our perception of Africa changed or is it just a place for us to make money?

JB: Obviously, making money is important - let's not diminish that - but over the years, many accounting and legal firms have been doing work in Africa and the volume is constantly increasing. I think people are also looking at Africa in a more cultural way.

TP: Do we know Africa than we did five years ago in your opinion?

JB: Yes, we do. I see a lot more official bodies, ministers and governments. We are well plugged into the central banks on the continent. There are a lot more tax treaties being formed. And I know that the number of business people and banks are going into the market is increasing. Our competitors at the Mauritius Commercial Bank host a lot of conferences here for African banks. So yes, our collective knowledge of Africa increased compared to a few years ago.

TP: What is the next step for Mauritius in its relationship with Africa?

JB: Good question. I still think we need to do more in term of air access. It takes a day to get to Zimbabwe and another day to get back. We are going to struggle if we don't decrease the time-costs going into Africa. Aside from that, exchanges of information and tax treaties should be boosted and more institutional arrangements should be made. There is a lot we can do with our Freeport and there is a lot more we can do in terms of our official connectivity with Africa.

TP: The Freeport seems to have been sleeping soundly for a while. Is there any sign that it has woken up?

JB: I think that the Freeport is becoming quite a centrepiece because there's an increased awareness that we can do light manufacturing and have duty-free access into Africa. We can also use our Freeport to make value-added products and ship them to the US under the African Growth and Opportunity Act, so I think people are looking at the Freeport as a strategic asset that needs to be used more.

TP: Aren't the costs prohibitive?

JB: I think the costs and productivity are getting better. My understanding is that the benefits of reduced duties and taxes offset those costs.

TP: When we talk about looking into Africa instead of Europe, don't we need to take into account the purchasing power?

JB: There's a consumer economy growing in Africa. There's an investment in telecoms infrastructure. So my feeling is that Africa is here to stay much like South East Asia was 20 years ago. A lot of people still don't quite believe that, but I can see it. A lot of people who are sceptical about Africa might be missing out on making their retirement portfolios a lot better in the long term. I think we'll look at this period 10 or 20 years from now and wish we had diversified faster away from Europe and India into Africa. We all have to shift our policies and investment decisions.

TP: What is your evaluation of the Chinese presence in Africa?

JB: Africa has changed and it has changed because of the Chinese investment in infrastructure and ports. You know the Chinese came in, took a lot of risks and put Africa out there. Of course, there will be minor issues, and some major ones too, but I think overall, they have been a force for good. Their presence has been a game changer and African governments see Chinese more as a partner than a "coloniser". People appreciate being partnered not lectured to.

TP: With the presence of so many new countries and investments, has the relationship between Africa and Europe changed, economically, politically etc.?

JB: Yes. Though the US, Britain and Europe still have the biggest stock of investments in Africa, with the overall level of investment making them the largest, China has become the fastest-growing source of new investment. So I would say that the relationship has changed and Africa is emerging as a much more serious voice to be heard.

TP: Is it dictating the terms?

JB: I don't know. Each country has its own strengths and weaknesses that it puts forth. Obviously, the fact that the Chinese and Indians are coming in is a healthier thing for Africa. They now have partners from around the world to negotiate with for investment needs.

TP: When you said earlier that we'll look back and wish we had diversified more quickly, what areas are you talking about?

JB: We've got Mauritian companies going into agriculture, sugar, energy, banking, hotels, etc. So as Africa grows, the opportunities for Mauritius as a country are going to be tremendous.

TP: Does Africa have a fat enough purse to afford high-end products?

JB: Africa has pockets of wealth. In Nairobi or Nigeria, there is a demand for luxury goods, but they are becoming more middle-class oriented economies. Mauritius can move to fill that need. Also, what we can do with our Freeport is take a lot of products that are manufactured for the poorer parts of India and China-like small fridges which are used to keep food cool for a day or two and ship them to parts of Africa where there is need for them. A lot of Mauritian companies are looking to take advantage of those opportunities.

TP: We say we want to attract tourists from Africa. What does it take to convince Africans to come as tourists?

JB: (laughs) It doesn't take a lot to convince South Africans. As we move towards becoming a business hub, we will have many visits from Kenyans, Nigerians and Gabonese. Mauritius is a special place with a mature financial and trading centre. It's a lovely place to have a second home and it's a lovely place to use as a base for business. I don't think it takes much; they just have to see it. So all it takes is to go out there and promote the opportunity.

TP: Any role models?

JB: Yes. Look at places like Qatar and Dubai. In the late 1990s, when oil prices were low, a lot of people thought that they would be wiped out because they also had challenging demographics. But they discovered marketing and re-invented themselves as tourist hubs. They spent a lot of money on marketing apart from putting the money into infrastructure. Look where they are today. And I can see us possibly doing that.

TP: How committed are African countries to integration?

JB: Though there may be rivalries between certain countries, as the pie gets bigger and there's more diversification and specialisation, I think people will see the overall benefit. As Sadc and Comesa integrate, Africa will attract more investment because outsiders will see that it's much easier to do business in 10 or 11 countries than in one. So the more they integrate the more they will benefit.

TP: Won't that mean loss of jobs for some?

JB: No, because, for example, there is a big port and railway project coming out of Lamu in Kenya which will require a huge amount of investment in all countries as a means of providing a link. That will create a lot of jobs. We will all benefit from that. Africa is really the place one needs to look at. The question is "how" not "why".

TP: What's your short answer to why?

JB: The fastest-growing economies in the world, a growing middle-class and an emerging consumer economy. It's much more broadly diversified than most people realise.