Mathieu Mandeng: Financial destination, opening a new chapter

Mathieu Mandeng chose the candid way to debrief Standard Chartered’s 15 years of presence in Mauritius. It is time to throw the spotlight on the country’s second most important contributor to GDP: the financial sector, says the CEO of Standard Chartered Bank Mauritius.

BUSINESSMAG. Standard Chartered is celebrating 15 years of presence in Mauritius. How do you look back on this period?

I think we’ve done a lot since inception. Over the last 15 years, we’ve moved from a bank that was initially set up to be an Offshore Booking Location (OBL) to support the business in India to become a full-fledged bank supporting corporates and financial institutions. Our journey could be summarised in three key milestones. First, 2010, when the bank got the go-ahead to set up a full-fledged bank in Mauritius. Since then, we expanded the business to include financial markets, credit origination and client coverage. We also acquired the security services business from Barclays, becoming in this way the security services hub supporting 17 markets within the network in Africa, 40 markets globally and 109 markets through our partners.

The second milestone is 2011, that is, the year we actually launched a standard operating model here with a full-fledged transaction banking operation. Then, in 2013, the franchise launched the liquidity management platform supporting the Mauritius Regional Treasury Centre (RTC) value proposition – the first in Africa.

We are turbo charging the diversification of our business since I’ve been here. The bank was already in the process of diversifying away from the OBL. More important is the strengthening of our partnership with the Mauritian jurisdiction to deliver on its aspiration to become a financial centre of repute and substance.

BUSINESSMAG. Some people are not very optimistic about the island’s capacity to get out of the middle income trap. What is your opinion?

Mauritius has reached a stage of development where it is aspiring to become a high-income economy; something that seems to be challenging to a certain extent. This is why people are asking questions about whether the country is not stuck in the middle income trap. I think that the vision is clear to deliver a GDP of $20 billion by 2025. One of the engines of growth is obviously the financial services sector. Remember that you have been able to move from a poor country to an upper middle-income country just by diversifying your economy.

In order to reach those milestones, the country has really got to do what it takes. In the la-test issue of the Global Financial Centres Index, Mauritius is ran-king 79th out of 87 countries. It is important to know where we are starting and where we are going. In that ranking, it is true that Mauritius is second in Africa but we tend to compare ourselves to the continent only.

We should not only give attention to the economies that are behind us but also to those that are ahead of us. In that ranking, Mauritius is 79th and Johannesburg 59th. Those are the only two financial centres ranked from the continent. Dubai, which is in the EMEA (Europe, Middle East and Africa) league, is ranked 18th. Just for your information, the number one is London, followed by New York. As a global bank, if you are not operating in those top five, you are not a global bank by definition. When you look at the defining criteria of competitiveness, it tells you where the jurisdiction should be acting to move up the ladder.

We are the only global bank bullish on the Africa continent with a presence in Mauritius. We are trying to attract companies to set up their RTCs here for their presence in Africa. We are targeting Asian and Western companies. We are also targeting African international companies for their non-domestic business. Everyone knows Dangote. I would like Dangote to set up business here for their non-Nigerian business.

BUSINESSMAG. Has Mauritius been sleeping on its laurels then?

I have to speak candidly to be of value. I was a bit frustrated until recently because there was some distraction and the economy was not moving at the pace I wished we should have. We’ve had some clarity of late. As an investor, I am happier with the focus being clearly put on economic development. The launching of the Metro Express project is a positive sign for the country.

BUSINESSMAG. Has there been any dialogue between Standard Chartered and government regarding the development of the international financial centre (IFC)?

Absolutely. You need to know that from 2013-2014, Standard Chartered as a bank was part of the international advisory board of this country. It then makes sense to have somebody like Roselyne Renel chairing the risk committee of this franchise. We were engaging with the government but we were not getting the appropriate traction, to be honest. Maybe I am an impatient person but I was not satisfied with the pace of execution in 2016. The engagement with the Bank of Mauritius (BoM) was first class and this is something that I would like to say: here, we have a regulator which is not only good at regulating banking activities that are above financial and monetary stability. It is conscious of the economic development requirements. My engagement with the BoM has been a very positive experience. I want Mauritius to do more to improve its ranking as an IFC. Reputation is important for a financial centre, this is why I approve the steps taken by government to strip off the tax haven tag of the country. Things are happening, like the minimum implementation of the Base Erosion and Profit Shifting.

I would like to add, though, that we need a critical mass of talent in Mauritius. The level of sophistication is such that you cannot find the talent you need to play at that level. You either grow them or you buy them. You need to find a way to attract the best of the world to come and help you develop your own home base.

BUSINESSMAG. You spoke very highly of the BoM. It recently found itself at the heart of the controversy over businessman Alvaro Sobrinho. How do you, as a banker, assess the situation?

I could have said that I do not want to answer this question but I do want and you will be surprised why. First, I actually did my own research and so far, I have not seen any conviction of that man in any way. Second, he is being banked by a lot of global banks. So, I stick to what I see. Anything else is not my call. I am just giving you facts you can verify. Allegations can be put on anybody but it does not mean they are guilty. I am trying to be candid here. This man is holding bank accounts with global banks that are regulated, so anything else is not my call. I am not going to judge my regulator based on a fact like this. Do we have financial stability here? Yes, we do. Do we have monetary stability here? Yes, we do. Anything else is internal cuisine. I crosscheck and “google” a lot at night. If there are internal politics in Mauritius, I don’t want to get there.

BUSINESSMAG. Coming back to RTCs, how successful have you been in attracting international businesses to set up camp here?

We are attracting companies but I also have to be honest with you: not as much as I wish because I am competing with other jurisdictions. I was told that Indian companies prefer Mauritius to Dubai. Then, I learned that two of them – major ones – have gone to Dubai, which means that this is not true. At the end of the day, we need to move up the ladder. Dubai is still giving us a hard time.

There are some aspects that are still not considered by some people. Mauritius needs more public relations (PR) on the tax perspective. Wherever I go, people think of the island as a tourism destination, as only nice beaches. However, I keep telling people that there is much more to Mauritius. The tourism industry represents around 7% of GDP while financial services contribute 11% and manufacturing 16%. How come then people only talk about tourism? It means that there is a PR element missing. London is also a tourism destination but over there, they talk about financial services as well. Balancing the message is very important. We need to market more what is being done in Mauritius in the financial services sector.

BUSINESSMAG. You seem to be quite satisfied with the projects that are kick-starting this year. Will we finally reach the anticipated 4% GDP growth? Why is 4% so important, to start with?

Very good question. Standard Chartered has estimated 3.8% this year. 4% becomes a psychological threshold. 4% + is considered to be the growth rate required for Mauritius to stay on the path to become a high-income country. If you don’t deliver for more, you will not become the high-income economy you are aspiring to. That is the problem. I can tell you: I am confident that with the refocus of the country on the economic agenda, it has a very good chance of crossing this path. We need to recognize the fact that in the past, this country has grown from almost nothing only by playing on human capital. If you can do it once, you can do it twice.

BUSINESSMAG. Is it for this year?

It may not be for this year but it will depend on how fast government and the private sector can execute and how disciplined they will be. Somebody told me that the talks of Metro Express started some 20 years back. We are lucky that in three years, we will see this thing up and running. I think this time is the right one. I would like to believe that things happen. Coming from Africa, I am of the opinion that Mauritius has a lot to do.

BUSINESSMAG. Does a small country like Mauritius really need a Metro Express?

Do you think a small country like Singapore needs a metro? Singapore is a third of the size of Mauritius but the mass transportation system is so developed. My answer is definitely yes. I don’t know how many times each one of us has suffered from traffic jams in Mauritius. Let me tell you, if I were to depart from the country today, I would do so with very good memories but the one cloud on the horizon would be the traffic. The Metro Express will not only create jobs but also alleviate this problem. Traffic jams are slowing down the economy. Mauritius has got a lot of pluses. You just have to mitigate the risk. We have great infrastructure but we need to improve on the connectivity. This is why the air corridor was such a good idea. A few examples showing that connectivity is important are that in Singapore, they have Singapore Airlines, in Hong Kong, Cathay Pacific, in Dubai, Emirates. Even in Johannesburg, they have South African Airways.

BUSINESSMAG. Air Asia X recently stopped its activities on the Mauritius route, due to political lobbies, as reported by international media. Is it not a sign that we are regressing in respect of open air access policy when air carriers are leaving the destination?

I would like to believe that Air Asia stopped coming here for commercial reasons. Singapore and Singaporean media can say what they want to say. I will stick to the official communication of Air Asia.

BUSINESSMAG. Coming back to the offshore sector, two large operators have recently been bought over by international groups. While some would say this is good news, others infer that it is due to the threat of the revised tax treaty with India and a sign that operators are acting out of apprehension. Your comments?

Personally, I look at it from a positive standpoint. I would like to believe that operations like this are signs of the attractiveness of Mauritius as an IFC. That’s the way I read it. Is there an element of treaty shopping? I don’t believe so. Whether we like it or not, once it was known that India would implement the General Anti-Avoidance Rule (GAAR), it is a fact that the Double Taxation Avoidance Agreement (DTAA) would have been renegotiated anyway. I am very factual. Everything comes to an end. Over the last 15 years, India has caught in more than $300 billion of foreign direct investment (FDI). A third of it has transited through Mauritius on the back of the DTAA. It has come to an end, it’s a fact but what I am telling people is that with the capital flows came the technical assistance and the know-how, making Mauritius play a very important role in the economic development of India. That has to be said. People must know that India is where it is today economically partially because of Mauritius.

Due to the occurrence of these changes, people are taking the view that some good game will be played in Africa. In other words, replicating the business model that served them in India now into Africa is one of the future endeavours that will help this country deliver on its aspiration to become a high-income economy. It is very forward-looking and strategic.

BUSINESSMAG. We are a few weeks away from the new Budget. What suggestions has Standard Chartered put forward to the government?

I cannot give you specific recommendations. There is a structured way to engage with the government. What I can tell you is that there is a process to do so and it works here. The government is engaging the industry bodies in the process. We’ve been consulted through the Mauritius Bankers Association (MBA), for example. The bank is sharing its contribution through the normal channel. We are also going through the BoM for the RTC value proposition. We have gone through the central bank because they will use it to try to influence the government through the Budget. We are thus active in dragging thought leadership.

Broadly speaking, all our suggestions are geared towards making sure that government does what it takes to make Mauritius more competitive. What you really want to know perhaps is whether the public-private sector dialogue works. The good functioning of this dialogue determines the speed of development in a country.