KWANG POON
Geopolitical Strategist

GLOBAL GEOPOLITICAL CONTEXT

As from the 1st of January 2021, Mauritius and China have ratified and made effective the first Free Trade Agreement (FTA) between an African country and the Middle Kingdom. Other than its objective to boost trade and investment, the FTA has the potential to add more substance to the Mauritius International Financial Centre (IFC).
As things stand, world affairs are dominated by the rivalry between USA and China. The USA is the reigning champion and China poses itself as the challenger breathing down the American neck. After the Trump’s burlesque performance and dubious “America First” policy, some expected that the Biden would bring some sense and sensibility into the G2 relation. However, other than a more refined tone and more dignified vocabulary, the competitive essence of the relationship between the Eagle and the Dragon is not showing any sign of cooling off.

MARITIME HUB

On the 1st of March 2021, during the keynote speech at the opening ceremony of the workshop about the Mauritius-China FTA at Le Méridien Hotel in Mauritius, Hon. Mr Sunil Bholah, Minister of Industrial Development, SME and Cooperatives of Mauritius, boldly stated that Mauritius is a natural node on the Maritime Silk Routes. Historically and geographically, he is perfectly right since back in the 16th century, Mauritius was a strategic outpost along the crucial maritime trade routes from Europe, the Americas and the East Indies. Then, the Dutch also tried to colonize Mauritius and use it as a stopover along the route between Batavia (Indonesia) and the Cape (South Africa). Later on, Mauritius moved to the centre of the contest between Britain and France. Today, Mauritius, due to its enviable location, still finds itself deeply intertwined in the rivalry among superpowers.

In the race for world supremacy, on one hand, the USA is trying to form a united front of states with “shared democratic values.” On the other hand, China is beating the drum to build “a common destiny for humankind.” In that context, Africa finds itself propelled at the forefront of the jostle of influence between superpowers. And, Mauritius finds itself right in the middle as it is geostrategically positioned to be the Maritime Hub between Asia and Africa.

DRAGON MALL

Echoing Mr Bholah, Ambassador Sun Gongyi underlined that Mauritius is the gateway between Asia and Africa and suggested for Mauritius to host China-Africa trade fairs in the future. This concept is nothing new and has been implemented with some degree of success by China in Johannesburg and Dubai. In these places, huge wholesale shopping malls, sometimes referred to as China Malls or Dragon Malls, welcome buyers near and afar looking to make a deal. Although the booths sometimes do retail, the main business focuses on bulk, counted in FCL (Full Container Loads).
By hosting a China-Africa Trade and Investment Expo (CATIE), Mauritius will add a major international expo on its event calendar. Such event will contribute to enhance the MICE segment of the tourism industry. The economic counselor Hu Ming highlighted four major international trade fairs in China, viz, Canton Fair, CIIE, CAETE and CIFTIS. Eventually, CATIE could be added to the list since China believes Mauritius is well-positioned and possesses the necessary attributes to host the China-Africa Trade and Investment Expo.
Indeed. African and Chinese visitors have shown a penchant for Mauritius due to its reputation as a paradise island destination; mixing some business with pleasure would thus add a cherry to the cake.

RMB HUB

The trade volume between China-Africa is about USD 200 billion annually. Although the COVID-19 pandemic had a negative impact, the damage was less than expected. Indeed, in view of the current global geopolitical situation, the China-Africa trade is expected to accelerate and more than double to USD 500 billion within the decade.
The first step towards realizing the RMB Hub is to sign a so-called RMB Swap Agreement. In addition to the basic cross-border settlements at the RMB Clearing Centre, Mauritius could leverage its status as a trusted and mature jurisdiction to push other value-added services such as trade finance, bonds, escrow and other financial instruments.
If Mauritius manages to capture just 0.25% of the USD 200 billion of the China-Africa trade volume, it will earn USD 500 million of additional revenue in a year. Considering that the GDP of Mauritius was USD 14.3 billion in 2019, the injection of USD 500 million would thus add 3.5 percentage points to the economic growth rate.

SWIFT AND/OR CIPS

One of the consequences of being on the grey list of the FATF and blacklisted by the EU is the increased scrutiny over cross-border fund transfers involving the Mauritius jurisdiction. Therefore, as part of the RMB Hub, it is possible to contemplate the implementation of an alternative cross-border settlement system based on CIPS. As the saying goes, if SWIFT closes, CIPS opens. CIPS stands for Cross-Border Interbank Payments System and is sometimes simply referred to as the Chinese International Payment System.
If blacklisting by EU causes SWIFT transactions to slow down or even grind to a halt, CIPS could thus offer an alternative to move funds around. Ambitioning to be the Switzerland of Africa, Mauritius would do well to adopt a neutral stance and make use of different interbank payment systems. In so doing, Mauritius will be able to mitigate geopolitical risk and take advantage of high-potential and fast-growth China-Africa trade corridor on the horizon.

FTA AS KEY INSTRUMENT FOR ECONOMIC DIPLOMACY

We have highlighted how the Mauritius-China FTA can be leveraged for the benefit of Mauritius. 2021 is an exceptional year for FTAs with Mauritius since four FTAs with UK, Africa, China and India has or shall come into effect all within such a short timeframe. The Economic Development Board underscores that the ball is now at the feet of entrepreneurs to fully take advantage of preferential market access and investment opportunities opened up by these FTAs.
It is worth noting that the AGOA with the USA is reaching its term in 2025 and it is not too early to kick off talks and strive for a Mauritius-USA FTA to boost the economic ties between Port Louis and Washington to support the move towards a high-income country by Mauritius.

 

 

« If blacklisting by EU causes SWIFT transactions to slow down or even grind to a halt, CIPS could thus offer an alternative to move funds around. Ambitioning to be the Switzerland of Africa, Mauritius would do well to adopt a neutral stance and make use of different interbank payment systems. In so doing, Mauritius will be able to mitigate geopolitical risk and take advantage of high-potential and fast-growth China-Africa trade corridor on the horizon. »

« It is worth noting that the AGOA with the USA is reaching its term in 2025 and it is not too early to kick off talks and strive for a Mauritius-USA FTA to boost the economic ties between Port Louis and Washington to support the move towards a high-income country by Mauritius »