Laura van Schalkwyk, Director at FFG Capital

According to research conducted by South African consulting firm Trialogue, South African businesses committed just under R12bn into Corporate Social Responsibility (CSI / CSR) initiatives in 2023. This was up nearly R1bn from the previous year as profits began to recover in a post-COVID world.

It is hard to disagree that South African businesses – and the entrepreneurs behind them – are passionate about tackling the many challenges the country faces. Within our own client base, we regularly see this in action. One of our clients who operates in the coal mining sector has over the years committed to funding uniforms, shoes and kit for 3 schools and 2 soccer teams in his hometown. When you speak to him, you can clearly see his passion for giving back.  The last conversation swiftly however, turned to the volatility of the mining sector and concerns of the sustainability of what he had built.

We debated at length what measures a business can take to mitigate industry volatility, some of which he was already implementing.  His concerns were clear: if his business doesn’t hedge some of its business in US Dollars, he won’t be able to survive if there is any further significant downturn in the South African operations.

He is not the only entrepreneur facing this dilemma of balancing profit and purpose.

Another client we work with has a business with a headcount of over 100 employees. The sector in which they operate is incredibly competitive, is suffering from a weak Rand and dealing with the consequences of loadshedding. He, as the business owner, feels very responsible for ensuring the livelihoods of his staff – at the expense of his own financial position. At the same time, his business is his primary source of wealth and needs to be protected.

To this end, we are having a significant increase in the number of discussions with entrepreneurs who are committed to South Africa as a home market but are expanding into a global marketplace and wanting to hedge their risk exposure.

Popular structures include trusts, Global Business Companies (GBC) and foundations. The corporate tax rate in Mauritius, for example, is 15%, and certain business activities qualify for an 80% tax exemption, resulting in an effective rate of 3%.

The Minister of Finance and Economic Development of Mauritius recently released the Budget for 2024/25 and they have a stated goal of becoming a one trillion Rupee economy by 2030 – essentially quadrupling in size. To achieve this ambitious goal the budget again highlighted the business-friendly approach from policymakers. There were incentives incorporated in the speech including:

• ICT and Business Process Outsourcing was boosted through a refund of 25% on an investment of MUR500 000 in new technologies and equipment, a 90% refund on artificial intelligence training
• Temporary occupation permits for professionals with a minimum of 10 years work experience
• 100% exemption on gains on sales of virtual assets and tokens
• 300% deductions on contributions to Non-Governmental Organisations (NGOs)
• Investment tax credit of 15% over 3 years for qualifying manufacturing businesses

Whether you are looking to externalise your wealth for personal or business purposes, Mauritius offers a number of benefits. This includes low rates of unemployment, political stability and currency stability.

According to the Absa Africa Financial Markets Index (AFMI), Mauritius again retained its second-placed ranking last year. It is ranked in the top 5 across multiple pillars including: Market Depth, Access to Foreign Exchange, Market Transparency and regulatory environment, local investor capacity and lastly “Legal standards and enforceability” where it is in joint first place with South Africa.

Mauritius was also singled out in the AFMI report for innovation from its central bank around developing carbon-credit trading frameworks.

With South Africa playing an increasingly more important role in the global economy, it is clear that it makes sense to de-risk your wealth from both a personal and business perspective. The question we often receive is “at what point is it viable for me to do so?” While each industry is unique and your personal circumstances will differ, we typically begin to answer this question by looking at the costs involved.

At the entry-level, with a minimum recommended investment amount of $200 000, the establishment of a Trust structure offshore will cost around $2000. If the import or export portion of your business leads to a net profit in excess of R1million, a Mauritian entity can be used to handle a portion of this business, leading to increased ease of business and a possible reduction in taxation.

On top of this, there are currently no dividend or Capital Gains Taxes (CGT) in Mauritius – something which makes it an ideal foundation if you are starting to receive dividends from international sources or are expanding your business into the rest of Africa.

In many ways, Mauritius is becoming to Africa what Singapore is to South East Asia.

We know that the majority of entrepreneurs in South Africa are passionate about the country. They want to live here, watch our sports teams punch above their weight, see our democracy evolve and give back to the communities in which they operate. At the same time, they recognise that the global economy offers a myriad of opportunities and they cannot ignore the benefits offered by alternative jurisdictions.

They want to give. They just need to give responsibly.

ENDS