With growing interest in Africa as an investment destination, the question arises as to which of its major cities are going to emerge as the region’s financial centres. Which cities are going to be able to attract international capital at scale, as well as growing numbers of financial firms and their technically skilled employees?

This research deals with the sometimes controversial topic of offshore and onshore financial centres. Specifically it asks whether there are onshore centres in sub-Saharan Africa that could rival Mauritius as a domicile for fund administration business.  Mauritius has become the default domicile option for funds and other investment vehicles targeting sub-Saharan Africa.  What made it successful at this kind of business? Does Africa need another Mauritius-like centre or is one enough? What do fund managers and institutional investors really think about the perceptions of offshores centres as places that facilitate capital flight from developing countries, are not transparent and are soft on “harmful” tax practices?

But there is a broader question here.  How can donor funding support the broad financial sector and other reforms that African countries need to make in order to become attractive to African and international investors seeking to invest long-term, patient capital in African businesses?  And where do financial centre strategies fit into that?

This research has been carried out in collaboration with the Emerging Markets Private Equity Association (EMPEA), DFID and the UK’s development finance institution, CDC Group plc.  It contains the results of an online survey of fund managers and institutional investors and also five contrasting “position papers” from experts in the field.

The survey reveals a strong preference among fund managers for offshore structures as well as a high degree of satisfaction among fund managers and institutional investors in Mauritius – but also increasing interest in, and use of, onshore centres.

Financial centre strategies are an expression of a country’s economic direction of travel and can be a powerful branding instrument. These strategies symbolise a country’s support for the development of an enabling environment that encourages economic diversification and innovation.

But, as the research suggests, countries also need to “get real” about the challenges involved in setting up credible financial centres.  They need to set proper targets, be accountable for the delivery of these targets and ensure that real political capital is invested.