In line with a diversification strategy underpinning wealth management as a new alley for growth for the Mauritius international financial centre (IFC), the Overseas Family Office licence was announced in the 2016-2017 Budget Speech. Adding to the country's foundation and trust structures, the licence matches the emergence of a growing ultra-high-net-worth segment (net worth of at least USD 30 million), both locally and in the wider region.
Of late, Mauritius has attracted a number of ultra-high net worth individuals (UHNWIs), mainly from France and South Africa, through investments in dedicated up-market real estate associated with residence permits. The beneficial owners of the 20,000 or so global business companies active in the jurisdiction also constitute a potential pool of highly affluent individuals.
However, Mauritius has a keen eye on the African market. The number of multi-millionaires on the continent is growing at a faster pace than anywhere else in the world. Africa as a whole will see its UHNWI segment grow by 31% to reach close to 2,600 individuals by 2023. Countries like Egypt, Nigeria, South Africa and Kenya are set to be the largest wealth hubs on the continent.
Subsequent to the Budget announcement, amendments in 2016 to the Financial Services Act 2007 introduced both an Overseas Family Office (Single) Licence and an Overseas Family Office (Multiple) Licence. Given the current dynamics of the market, the potential for multi-family offices, with a sharing of administrative costs, might be higher than for single-family offices. As an incentive however, both will benefit from a five year tax holiday under the condition that they meet the substance requirements of the Financial Services Commission. Additionally, each family's asset/estate entrusted to a single or multi-family office should be at least USD five million. Other requirements apply, namely in terms of minimum stated unimpaired capital.
Family offices provide a broad set of services
The classic vehicles to establish a family office are a trust, foundation or limited liability company. Generally, the services provided by a family office are quite broad and fall within the following:
- Trusteeship services
- Wealth and estate/succession planning
- Portfolio management/investment services
- Fund management and advisory performance monitoring
- Tax optimisation and structuring
- Legal services
- Asset protection
- Philanthropy and charitable work coordination
- Family education
- Dedicated concierge services (real estate management, organisation of private events, yacht and aircraft management, etc.)
Typically, family offices are exclusively for family members and family related trusts, foundations, charities and venture capital companies. As a fast growing wealth management segment around the world, they offer a more personalised service than wealth managers and private banks. Single-family offices usually take the form of a private company managing the investments of ultra-wealthy individuals with net assets worth more than USD 100 million, and their extended family. Multiple-family offices cater to families with net worth between USD 30 million and USD 100 million that do not have the economies of scale to establish single-family offices.
Risk mitigation and confidentiality is paramount to African UHNWIs
In spite of a growing number of affluent individuals, Africa remains prone to geopolitical and currency risks, whilst ease-of-doing-business and economic freedom often lag behind the rest of the world. For the continent's 'nouveaux riches', risk mitigation is top of mind, especially due to the family's assets often being located in their country of residence. Together with the quest for safer jurisdictions, confidentiality comes as a bonus when choosing overseas family offices to manage the family's wealth.
There is no single ideal jurisdiction to house a family office. Depending on the needs of UHNWIs, a host of factors come into play, including:
- Low taxation
- No exchange control and free flow of capital
- Sound legal system
- Political stability
- Data protection and confidentiality
- Qualified workforce
- Location and proximity
Africa's hub for private wealth?
Mauritius ticks the box on all of the above attributes. In particular, it satisfies the prospective family office client on the two uppermost criteria of risk mitigation and confidentiality. The Mauritius Data Protection Act of 2017 aligns with international benchmarks. Our legal system, a hybrid of English Common Law and French Code Civil, gives predictability to all, from English-speaking as well as French-speaking Africa. There is also no lack of professionals in Mauritius, whether accountants, lawyers or investment specialists.
Location and proximity are practical considerations that may limit our field of traction relative to Africa, the continent closest to us. Indeed, they bear their weight in the decision process on the principle that family office services are highly personalised. As such, they involve frequent face-to-face meetings between the client and the service provider. With regular air connections with Africa set to expand further, Mauritius scores well on the proximity factor too.
It will take some time for Mauritius to be recognised as a family office destination to the same tune as the most established wealth management jurisdictions of this world. However, if its ambition is regional, it will find in Africa ground to grow.
Our family office service is built on long-term personal relationships founded on a deep understanding of what matters to you now, and in the future. We can support your wealth by acting as an outsourced family office or multi-family office. Find out more here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.