International Finance Centres (IFCs) like the British Virgin Islands (BVI) are becoming a major part of discussions on facilitating investment in Africa.
One such discussion took place earlier this month at the AFSIC BVI Finance panel themed, “Leveraging International Finance Centres to support Investment Flows in Africa.” Panelists covered a range of key topics, mainly, investment opportunities, the regulatory environment and collaboration.
IFCs Provide Crucial Benefits
In speaking about how IFCs facilitate global trade, Jeffrey Kirk, Managing Partner - Appleby, said global economic growth is blossoming as a result of using IFCs.
Mr. Kirk said IFCs are crucial for global trade, as evidenced in the study by the Overseas Development Institute, published in 2019. According to Mr. Kirk, the paper - ‘International financial centres and development finance’ looked at how IFCs facilitate financing into developing countries.
Key information highlighted by the Appleby partner include how IFCs facilitated $1.6 trillion into financing of development projects over the ten-year study, which resulted in an increase in GDP to those developing states of $400-billion, and a taxed income of $100 billion.
“This shows the crucial benefit that IFC’s provide internationally,” said Mr. Kirk, adding, “States recognise [IFCs] importance in developing their economies.”
Regarding investors’ preference for IFCs, Matthew Gilbert, Partner - Maples Group, said IFCs allows investors to control risk, as they can “use jurisdictions with familiar legal systems and familiar insolvency laws…if things go wrong, they’ve got recourse to arbitration or commercial courts with independent judges.”
“Ultimately, it’s about the reliability of the structure's efficiency and mitigating the risks.”
Daniel Ngumy, Managing Partner - Anjarwalla & Khanna, opined, “It is important that when discussing benefits of using IFCs, that it is not just about taxes, adding, “When it comes to using IFCs, it is the simple advantage of having a jurisdiction that’s clear with dispute resolution.”
Opportunities
Agnes Gitau, Partner at GBS Africa, highlighted investment opportunities in healthcare, and infrastructure, while noting that FinTech has been attracting huge investment in the continent.
Ms. Gitau said although access to finance has been a major challenge, especially considering rising inflation and the high cost of energy, she remains optimistic about finding creative ways in channeling investment flows in the continent.
Stanley Osuide, Group CEO at the Africa Investment Gateway Group, echoed Ms. Gitau, stating, “As much as there are challenges, there’s vast opportunities across the continent.” In addition to FinTech, Mr. Osuide highlighted the potential of green renewable energy and waste management.
The Regulatory Environment
Wairimu Karanja, Chief Legal Officer and Partner - Persistent Energy Capital LLC said that Environmental and Social Governance (ESG) is a major consideration for investors in the region. In support, Mr. Ngumy referenced Capital Markets Authority in Kenya, who are developing ESG regulations and guidelines from a corporate governance perspective.
Mr. Ngumy said knowing regulatory requirements are key when making investments. This is where an IFC plays an integral role, says Mr. Ngumy. In addition to being able to alleviate the impact of the tax, Mr. Ngumy asserts that using an IFC creates some ‘harmonization’ for investors as it relates to due diligence and tax mitigation.
The Anjarwalla & Khanna partner also said that there is also an increasing need to create an ecosystem of advisors to facilitate investment in the region, and is being implemented in some countries like Kenya.
“Ecosystems make it much more easier to engage with government and to make the investment as smooth as possible.”
Commenting on overall investment in the region, Mr. Ngumy said, “It’s a journey, a work in progress. Where we are today on the African continent is way further ahead than where we were five years ago.”
Kenneth Mohammed, CFO & Senior Advisor - Intelligent Sanctuary, contributed much to the panel discussion in relation to transparency, and risk mitigation. Mr. Mohammed said that both Africa and the Caribbean have to look at how much more they can impact transparency and good governance, by not only meeting, but exceeding regulatory requirements.
Mr. Mohammed also said the regions should, “leverage their influence to directly pressure weak institutions that create opportunities for corruption, ensure countries produce lists for beneficial ownership and politically exposed people, in addition to providing protection for whistleblowers, journalists, civil society, and activists.”
Collaboration
On opportunities for collaboration, Ms. Karanja said IFCs should partner with up and coming IFCs in Africa, in “building capacity to ensure we can work together to attract investment.”
She added that “IFCs are really proactive and push their agenda when it comes to governments harmonizing laws or changing laws,” which will further help investment in the region.
Mr. Kirk said it’s important that established IFC’s do not see collaboration as competition, but rather working together. “The idea is to bring up the economy and the standard of living throughout the world,” he said.
In referencing a development project that used two corporate structures in two separate jurisdictions, Jeff said each entity has a different purpose.
He explained, “You may often see a BVI entity imposed in a structure above a Mauritius entity. Why? In using a BVI company, the lender knows that there’s a system of public and private registration in security interests against assets of a BVI company…the lender knows that if you are publicly registered, it gives more security.”
The October 10 panel in London was moderated by BVI Finance Chief Executive Officer, Elise Donovan.
Donovan also moderated a similar panel on IFCs and Investment in Africa at the Nigerian Trade & Investment Summit, 20 to 21st October.
The AFSIC - Investing in Africa event focuses on profiling Africa’s most attractive business and investment propositions, and where relevant, matching these with investment firms and like-minded businesses through a variety of dynamic content streams, enhanced networking, and online dashboards.
According to Rupert McCammon, AFSIC Managing Director, the event has become the most important conduit of investment into Africa.
For further information please contact:
Adrianna Soverall
Marketing and Media Relations Coordinator
asoverall@bvifinance.vg |Tel: 284-852-1957