Mauritius is right now at crossroads. The Covid19 pandemic has disturbed all plans and forced a different outlook on the future. We cannot rely on usual strategy to sustain the economic life. We cannot expect tourism to have an immediate return as the world dynamics has been completely altered.

Investors surely do not look at the island with the same perspective, mostly when we have been hit with the second wave just when we were getting our heads out of the first one. Looking at the whole situation as an investor / entrepreneur myself, I see opportunities.

While having a deeper look at economic sectors I do not see any single one reaping decent returns on their own. Well, returns can be expected if one is prepared for a long wait. In usual context, a longer wait would generally mean a more interesting return. This equation, unfortunately, does not hold anymore. Placing your bets on a single horse is not the ideal strategy right now.

The investment theory

The basic theory I learned is to check bank interest rates. If they are more attractive than the identified Investment, put your money at the bank. Sadly, bank interests are hitting a low and in foreign currency cases, the rates are in negative. If you want a return on investment, bank is no longer a place to go.

Business Scenario

The domestic business environment is broken down, we know. This situation is not the result of commercial equation or a change in consumer behavior, but because of movement restrictions due to a global pandemic. People have taken habits which are not expected to change so abruptly. In Mauritius, many are waiting like lions in a cage, waiting just a gap to rush out and have their usual coffee or meal at their favorite hang-out place. Some have itching bodies waiting for fitness centers to open their doors again. The beauty parlors are like mirage in the desert for many others. I cannot imagine the rush once this mirage becomes a reality.

Therefore, it sums up to the fact that, at this moment, many businesses are suffering. There is an apparent lack of cash flow as fixed overheads have been creeping over like a dark shadow. These businesses require fresh money to tackle the present crisis. There lies an interesting investment opportunity with expected higher returns than bank deposits.

Market and purchasing power

There is a purchasing power waiting to be unleashed. I have the habit (probably not a good one) to gauge general wealth of a population by looking at the brands of cars on the roads and in parking slots. If you know Mauritius, you will know that the car park says much about purchasing power. Concentrated to few, probably; but few enough to confirm the presence of a certain wealth.  This segment is the market driver (sorry I couldn’t avoid the link with cars). They are more brand conscious. They are frequent travelers and visit duty-free shops quite often, have a wide exposure on international trends and would not hesitate to open their wallet. Now with Covid, traveling is next to impossible, so this market is available if supplied with the right offers.

The second segment is non-negligible. It is composed of the majority of consumers, ranked in the middle-class to upper middle-class range. This constitutes a lesser purchasing power individually but, collectively, represents an important volume. It includes people who have a certain taste of quality and who are quite conscious of their lifestyle. They would still dine in restaurants / food courts, bring their family to shopping, spend time in mall alleys. In brief, they are in touch with the commercial offerings. With the right pitch, they are your customers.

The future

Once the lockdown is lifted, we expect life to be as normal as possible. We have seen that last year. Mauritius being a tiny island, the Covid pandemic is relatively easy to contain. The 2020 experience was revealing in many aspects. We boasted our status of Covid free island and made many envious around the world. Unfortunately, we lowered our guards and had the second wave in uppercut. Mauritius is getting over this too.

The future of certain sectors, mostly those related to international access, does not look bright. We cannot pretend that tourism, for example, will be out of muddy waters soon. Our second wave of Covid has taught us lessons which cannot be disregarded at any cost.

Those operating on domestic retail market are expected to survive, or even do better. I’m particularly referring to the following, as an indication:

• Food: restaurant, fast food, coffee shops, bakeries
• Lifestyle: clothing & accessories, sportswear, jewelry, eyewear / optics.
• Leisure: sports & fitness centers, recreational parks,
• Electronics / technology: mobile phones and accessories, laptops, consumer electronics
• Vacation : short stay rental (hotels and private villas) adapted to the local market
• E-commerce businesses and intermediaries: commerce, inland logistics, payment management, etc.

Operating on an international marketing seems to be more daunting. It depends on the sector and how we adapt to the situation. There has been a boom in e-commerce service providers, IT services and finance-related activities. As long as it does not involve human mobility, it requires a little bit of creativity to keep afloat.

The period of adaptability, which many call the new normal, is a matter of time. We are looking at one single key here : adaptability. Any business, with the right dose of creativity and proper professional guidance will work its way through.

Two facts to retain: the Mauritian consumer market is waiting to bounce back and international market needs a slight change in approach.

How and where to invest

Now that we know banks are not the most interesting place to put your money. The second choice, albeit with some risks, is investment into business. The third choice is keeping your money at home and expecting some miracles for it to grow.

I would never recommend going ‘All-in’ in one particular business or sector. A diversified Portfolio would mitigate risks and ensure a wider range of returns. A portfolio also allows shifting investment weights and counterbalance whenever required. With a single investment, the only choice is withdrawal and in negative scenario, it necessarily means withdrawal with loss.

We are working on a diversified portfolio that takes on board businesses with the following features :

• Pre-Covid healthy situation
• Established relationship with local market (retail businesses)
• Established clientele on the international front (international service providers)
• Product and services
• Medium and long terms prospects
• Strategy and objectives
• Complexity of control

This portfolio, unlike the classic investment schemes, will impose effective control and decision-making participation. The advantage, working with small to mid-size organizations, is that it allows for quicker implementation of strategies, less complex merger / takeover process and has controllable parameters.  The portfolio will be a holding company with a diversified interest leading to a growth, both as an investment and also as an operating entity. The investments will not be passive but allow us to actively participate in operations.

Expected returns on investment

This portfolio being different from classic / passive investment schemes, will allow not only a financial return on investment in the long run but also provide all the features that one would wish for when opening a stand-alone business.

Investors to the portfolio will therefore access many interesting features :

• Possibility to sit on the management or Board of directors
• Investor permit or other residency permits schemes
• Employment for qualified people
• Benefit from an established business and its existing pool of competence
• No fixed investment requirements. Acquire the level of stake you desire
• Dividends
• Disposable interest
• Growth in investment value

Should you be interested in investing in Mauritius, please do contact us on [email protected]

This may be an interesting opportunity to mitigate your investment risks and set a foot on the island without burning your house.

http://www.gibsonandhills.com