MINDEX – The gold revolution?

The Mauritian economy is heavily services oriented. Could it strike gold however with the eventual launch of MINDEX, an ambitious and innovative project submitted to local authorities for regulatory approval. 

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Announced in the 2016-2017 Budget as a government-led initiative, the format of the Mauritius International Derivatives and Commodities Exchange (MINDEX) was reviewed to be a private sectorled project in the Budget 2017- 2018. Licenses are now being awaited from the Financial Services Commission to kick-start operations, which are being led by global technology and business solutions provider GMEX group, in partnership with gold sourcing, refining and trading experts, Five Rings Commodities, along with the sponsorship of the Mauritian government to ensure strong regulatory oversight. The implementation targets are as follows: MINDEX on-site design study as soon as clearance comes through, technology and clearing settlement in place by end 2018 and Golive of MINDEX exchange by first quarter of 2019.

GMEX group Chairman and Chief Executive Officer, Hirander Misra, detailed the high ambitions surrounding this project to Business Magazine during his last trip to Mauritius. Broadly speaking, MINDEX aims to provide a world-class refinery and secure physical vault storage based in Mauritius in the airport area. It will also offer digitalised gold buying and selling on exchange based on firmly physical assets, digitalised gold borrowing and lending against electronic receipts, a regulated derivatives exchange offering derivative contracts on gold, FX and agricultural products as well as a real-time regulated Central Counterparty (CCP) clearing house.

MINDEX exchange expected to go live in Q1 2019

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In this way, MINDEX aims at delivering a whole ecosystem for gold from Mauritius to the various international markets. A $35 million investment has been earmarked for MINDEX which, according to the group’s forecasts, would propel the Gross Domestic Product (GDP) of the Mauritian economy to 4.1 percent. Job creation, up to 312 by end 2019, has also been projected.

“We are being conservative around this but when banks and other services come in, it will benefit not only MINDEX but also other financial services, the Stock Exchange of Mauritius and jewellery services as well,” states Hirander Misra.

Gold, he pursues, is an interesting product to develop in the country because of its power to attract High Net Worth Individuals (HNWI) and institutional business. The price of this commodity has been going up internationally over the years. HNWI, he observes, have around 5 to 10 per cent of their net worth in gold. Similar to other financial centres around the world, it is possible to see a demand-led growth by banks and institutions for gold and gold-related products from Mauritius.

Questioned on the feasibility and cost to value ratio of the project, since refining gold in Mauritius implies heavy imports, Hirander Misra explains that the idea is to leverage on the financial properties of gold. The raw material will be sourced from mines in countries such as Ghana, Zimbabwe, Tanzania, Kenya, Mozambique, Mali and Burkina Faso, where Five Rings Commodities is already present or has partnerships. Moreover, goldproducing African countries need a neutral location to finance their own gold reserves.

Accessible to everyone

“It is very efficient from a tax standpoint as well since Mauritius is a member of the COMESA and SADC and benefits from other Free Trade Agreements and Double tax avoidance agreements (DTAAs),” he adds.

The beauty of Mauritius for the setting up of MINDEX, he further explains, is the good links it shares with India, which houses a huge gold market relying heavily on imports, which has a high impact on their balance of payments.

“It is in our advantage to develop an offshore centre for gold, validating it through Mauritius and thus reducing the tax. 90 per cent of the gold market is speculation but everything we will be doing revolves around gold as a physical product,” adds Hirander Misra.

Questioned on the affordability of MINDEX products not only to HNWI but to the Mauritian population as a whole, who often turn to alternative sources of investment owing to a plummeting savings rate, Hirander Misra elaborates on the rationale to appeal to them. Once the MINDEX refinery under way, it will also engage into refining into smaller units and not just gold bars. The idea is to tie up digitalised gold as an asset along with the retail product that can be sold by institutions. MINDEX will thus be having a buying window accessible to anyone.

Regarding ease of access for sourcing raw materials, since Mauritius is poorly connected to producers, Hirander Misra raises the chicken and egg conflict situation.

“Air Mauritius does not fly more routes because for that, you need to have the demand; it has to be economic and it has to fulfil the freight and traffic clause. I had a meeting with the representatives of the airline last time and they voiced out that they can only expand the network if there is a return on investment,” he highlights.

Same applies for the construction of a second airport terminal. The GMEX group is however looking out to 2023 for a gradual increase of the airline network and potential justification for a second airport terminal. Meanwhile, it intends to tap into the advantage of the private jet terminal, which has the capacity to welcome Boeing 737-size aircrafts. Thus, if demand follows, the private jet terminal would be used to charter the volume.

Probed on MINDEX’s impact on the Mauritian economy, Hirander Misra replies that being located close to the airport implies that revenue generated from its activities do not come onshore. He however foresees much development and collaboration with financial services as a result. The end objective is to position MINDEX as the access point for ethically sourced gold from Africa enabled by a complete ecosystem for gold from the mine to the buyer with a tracking using blockchain technology