Kenya and Mauritius discuss easier ways to do business across borders

A Kenyan company looking for investors in another African market can run into a fairly ordinary problem: the money, tax rules and paperwork are different from home. The same applies to a Mauritian company trying to enter East Africa.

 Kenya and Mauritius are looking at ways to make some of those cross-border transactions easier. The issue was discussed at the Kenya-Mauritius Business Forum in Nairobi on 25 September, where companies and officials from both countries met to discuss investment, financial services, technology and trade. It is not the creation of a new trade bloc or a new financial market.

It is about getting more companies to do business between two countries that already have useful pieces of the puzzle.

Kenya has the companies. Mauritius has the financial industry.

Kenya has a large banking and technology sector and is used by many companies as a base for doing business across East Africa. Mauritius has built a financial-services industry aimed largely at international business. The country's Economic Development Board says financial services account for 12.4% of GDP, while its financial centre has about $130 billion in assets under management.

That makes Mauritius relevant when a company needs an investment fund, financing structure or other financial services for a deal involving several countries. A Kenyan business could potentially use that infrastructure when raising money from investors outside the region. A Mauritian company looking towards East Africa could use Kenya as its operating base. That is the basic idea behind the closer relationship being discussed.

There are already examples

The relationship between Underwriting Africa and Swan Reinsurance PCC is one example.

Underwriting Africa is based in Kenya, while Swan Reinsurance is based in Mauritius. The two work together on insurance and reinsurance for African businesses and projects. Underwriting Africa says the partnership has covered 129 risks in 23 African countries, with a combined sum assured of around $830 million.

It shows how a company in one African market can use a financial institution in another country to take on business elsewhere on the continent.

The technology sector has its own problems

Technology companies are another area where the two markets could do more business. Kenya has a well established fintech and technology sector. Mauritius is trying to attract companies working in fintech, software, cloud computing, cybersecurity and other digital services.

But expanding into another country is not as simple as opening a second website. A company may have to register locally, understand another tax system, obtain licences and work out how money can be moved between its operations.

The forum also raised double taxation and regulatory differences as issues that can make cross-border business more expensive. For a small company, these costs matter. A business with five or ten employees does not necessarily have the money to hire specialists every time it enters another market.

The test is what happens after the forum

Kenya and Mauritius already have regional agreements they can work through. Both are members of COMESA and participate in the African Continental Free Trade Area. The harder part is getting individual companies to use those arrangements.

That could mean more Kenyan companies using Mauritius-based financial services when raising international capital. It could mean Mauritian companies using Kenya when expanding into East Africa. It could also mean more banks, insurers and technology companies working across the two markets. But those deals will only happen if the practical side gets easier. For a small business, the useful outcome would not be another agreement or business forum.

It would be being able to open the account, move the money, meet the tax requirements and operate in the other market without spending more time and money on administration than the deal is worth.