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Island takes on new challenge

Mauritius is diversifying its economy by investing in IT.

By Lesley Stones
Johannesburg, 29 Feb 2016
The Mauritian government has created economic incentives to attract IT companies to its shores.
The Mauritian government has created economic incentives to attract IT companies to its shores.

The tiny island of Mauritius has ambitious plans to become a major technology hub by developing ten smart cities where IT startups will work alongside global IT giants.

The government is granting licences to developers to build these new cities with facilities to work, live and play. Anchor tenants will hopefully include companies like Cisco, the global wholesaling platform AliBaba.com, Huawei and other Chinese technology leaders. Entrepreneurs from South Africa will also be encouraged to establish businesses on the island, says Ga"etan Siew, chairperson of the State Land Development Company.

"We are an ageing population, with only 9 000 births every year, and if we want to go into new fields of expertise, we have to open up the country. The strategy is to increase our population by ten to 15 percent in the next 15 years, which is not too much for our population of 1.3 million. We want to double foreign direct investment and foreign direct intelligence."

Siew was speaking at a Doing Business in Mauritius forum organised by Air Mauritius and hosted in the Labourdonnais Hotel in Port Louis, which would both be big winners if more companies move to the island.

Relocating could prove very appealing to South African entrepreneurs as well as established businesses, because the island is bristling with perks, including a low tax rate of 15 percent, plus an 80-percent rebate on that tax for income generated offshore. It also has no foreign exchange controls and very little crime, which are other reasons why many South Africans choose to relocate.

Economic incentives

"The government has set up a package of economic incentives to make these projects happen," says Siew. "The objective is to have two or three innovative international companies like Cisco, Siemens and IBM in each cluster, with startups around them. We are going to do ten, but 'cities' is a big word for Mauritius, it's more a smart project," he says.

French IT services company Astek is relocating 1 200 people to develop apps to manage these cities. Another French software developer of cloud services is also assessing the opportunity.

The Smart City Regulations were issued in June 2015, to encourage developers to create hubs across Mauritius, featuring offices, light industrial areas, hotels, residential, retail and entertainment components. They must focus on innovation and sustainability and provide friendly working, living and leisure spaces. They must also generate their own energy from solar or wind farms, be self-sufficient for water, offer state-of-the-art connectivity, provide smart transport systems and use ICT for intelligent urban management.

There is a budget to feed and seed young entrepreneurs.

Ga"etan Siew, State Land Development Company

Some of the cities will be 'technopoles', or centres for high-tech manufacturing, research and development, information based industries and a mandatory innovation cluster.

Although Mauritius has low unemployment, it has about 5 000 young people trained in IT who cannot find suitable jobs in this land of tourism, textiles and sugar.

A great place for business

Everyone agrees that Mauritius is a great place to do business, although some doubt that this latest scheme to position it as an IT hub will fly.
Anyone applying to open a business will be impressed by the efficiency, says Richard Robinson, president of the South African Chamber of Commerce in Mauritius. "It has a fantastic Board of Investment with very empathetic staff members who are knowledgeable. You get help from the government because they want you to be successful."
As well as a lenient tax regime, it has skilled, well-educated workers, and while wages are generally low, that's offset by the low cost of living.
"ICT works here and you have all the IT skills you need to support the creation of a business," says Mike Gray, the regional president of Uniglobe Travel. "Mauritian kids want to move into IT, banking and trading and these are the skills sets they are developing."
But Kamal Taposeea, chairman of Minerva Fiduciary Services, doubts whether the island has enough people to fill all these planned smart cities. Previous attempts to attract hi-tech industries have mainly brought companies at the lower end of the hi-tech spectrum, like call centres.
"You need to make it easy for companies to come in and set up for the development of software in French and English. I'd also advise the government to focus on disaster recovery because we are a safe place," he says.
Jean Humbert, chief corporate affairs officer for Food & Allied Group, says the island's residential development hasn't been very coherent, so smart cities are a welcome proposal. "It will take time, but the concept is badly needed because we need an in-depth review of land use. We need clusters of inclusive developments that will reduce the traffic load because people won't have to travel for their jobs."

That could be solved by an influx of foreign IT companies or startups. Entrepreneurs who apply with a sound business plan will be referred to seed capital funds or companies that could invest in them. "We want young entrepreneurs to come and open a startup here and we will give them seed capital," Siew says. "There is a budget to feed and seed young entrepreneurs and an agency that does that through the Board of Investment."

These entrepreneurs would be based in innovation clusters close to multinational companies in the technopoles, creating an environment where both benefit from the other.

International companies that establish a presence in a smart city will be able to house their expat staff in villas or apartments there. Foreigners who buy a property for more than $500 000 will receive automatic citizenship.

So far, four companies have been granted development licences, and four applications are in the pipeline. Licences went to ENL Property and Ciel, two large Mauritian companies, and two went to Chinese companies. Construction should start in January 2016.

Pushing innovation

Mauritius needs to diversify its economy because its traditional sugar industry is collapsing and tourism cannot provide sufficient income alone. In August 2015, Prime Minister Sir Anerood Jugnauth committed to pushing innovation, technology and communication to the next level. "We have to move towards the provision of high-end activities like software and animation development, big data analytics, disaster recovery and cloud computing, among others," he said. "My government is focusing on establishing a techno entrepreneurship culture. Our youth is full of ideas and dynamism and I see many of them setting up successful enterprises going forward."

To help embed the use of technology in day-to-day life, 350 free WiFi spots would be operational at key public places across the island by the end of the year, he said.

Smart cities should create 100 000 new direct and indirect jobs within five years, with 15 000 of them in ICT. One of the first is a BioPark for pharmaceutical and biotechnology companies near Quatre Bornes. It has 24-hour security, a fibre-optic network, generator backups and a restaurant. When fully completed, it will include sports and entertainment centres and a residential area.

* Lesley Stones visited Mauritius as a guest of Air Mauritius, Indigo Hotels and the Mauritius Tourism Promotion Authority.

This article was first published in the [February 2016] edition of ITWeb Brainstorm magazine. To read more, go to the Brainstorm website.

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