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Conduits of Capital Onshore Financial Centres and Their Relevance to African Private Equity PRIVATE EQUITY IN AFRICA | LONDON | 28 OCTOBER 2015 Mark Napier Director, FSD Africa [email protected]

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Page 1: Conduits of Capital Onshore Financial Centres and Their Relevance to African Private Equity PRIVATE EQUITY IN AFRICA | LONDON | 28 OCTOBER 2015 Mark Napier

Conduits of CapitalOnshore Financial Centres and Their Relevance to African Private Equity

PRIVATE EQUITY IN AFRICA | LONDON | 28 OCTOBER 2015

M a r k N a p i e rD i r e c t o r , F S D A f r i c aM a r k @ f s d a f r i c a . o r g

Page 2: Conduits of Capital Onshore Financial Centres and Their Relevance to African Private Equity PRIVATE EQUITY IN AFRICA | LONDON | 28 OCTOBER 2015 Mark Napier

Agenda• Why undertake this survey?• Who participated?• What are the key findings? • Discussion

Page 3: Conduits of Capital Onshore Financial Centres and Their Relevance to African Private Equity PRIVATE EQUITY IN AFRICA | LONDON | 28 OCTOBER 2015 Mark Napier

Who participated?RESPONDENTS BY FIRM TYPE RESPONDENTS BY LOCATION

39%

21%

15%

14%

4%7% Sub-Saharan Africa

United States of America

United Kingdom

Western Eu-rope excl. United Kingdom

Asia-Pacific

Other

n = 118 n = 118

Page 4: Conduits of Capital Onshore Financial Centres and Their Relevance to African Private Equity PRIVATE EQUITY IN AFRICA | LONDON | 28 OCTOBER 2015 Mark Napier

Finding 1: Use of offshore jurisdictions is standard practice for SSA’s PE industry

Offshore

Onshore

Page 5: Conduits of Capital Onshore Financial Centres and Their Relevance to African Private Equity PRIVATE EQUITY IN AFRICA | LONDON | 28 OCTOBER 2015 Mark Napier

Finding 2: The prevalence of offshore structures is largely due to tax efficiency

Page 6: Conduits of Capital Onshore Financial Centres and Their Relevance to African Private Equity PRIVATE EQUITY IN AFRICA | LONDON | 28 OCTOBER 2015 Mark Napier

Finding 3: The vast majority of the industry views Mauritius favourably

“South African tax authorities treat Mauritius with suspicion no matter what the tax treaties say.”

“We have concerns over the level of expertise and availability of professionals in private equity.”

“The partnership law remains untested.”

“High overhead costs.”

“The industry has found a very safe model in Mauritius that works and that everybody loves.”

“Mauritius has wholeheartedly embraced FATCA, so it is ahead of other jurisdictions on that front, as well as on money laundering, anti-bribery and other investor protections. Mauritius has really tried to be at the forefront of these issues.”

Page 7: Conduits of Capital Onshore Financial Centres and Their Relevance to African Private Equity PRIVATE EQUITY IN AFRICA | LONDON | 28 OCTOBER 2015 Mark Napier

Finding 4: Concerns about Mauritius appear to be stronger amongst DFIs

Pension Funds*

Funds of Funds

DFIs

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

11%

32%

Does Mauritius raise concerns as a fund domicile?% of LP respondents by type

YesNo

Page 8: Conduits of Capital Onshore Financial Centres and Their Relevance to African Private Equity PRIVATE EQUITY IN AFRICA | LONDON | 28 OCTOBER 2015 Mark Napier

Finding 5: The majority of respondents are open to funds domiciled onshore

GP PERSPECTIVES LP PERSPECTIVES

Page 9: Conduits of Capital Onshore Financial Centres and Their Relevance to African Private Equity PRIVATE EQUITY IN AFRICA | LONDON | 28 OCTOBER 2015 Mark Napier

Finding 6: South Africa is viewed as the most attractive onshore domicile

Page 10: Conduits of Capital Onshore Financial Centres and Their Relevance to African Private Equity PRIVATE EQUITY IN AFRICA | LONDON | 28 OCTOBER 2015 Mark Napier

Finding 7: Legal / regulatory conditions inhibit the use of onshore domiciles

Rank Market Top Factors Inhibiting Greater Use of Domicile (% of Votes)

1

South Africa

2

Kenya

3

Botswana

Page 11: Conduits of Capital Onshore Financial Centres and Their Relevance to African Private Equity PRIVATE EQUITY IN AFRICA | LONDON | 28 OCTOBER 2015 Mark Napier

Finding 8: Third-parties should work to enhance legal & regulatory / tax reforms

Page 12: Conduits of Capital Onshore Financial Centres and Their Relevance to African Private Equity PRIVATE EQUITY IN AFRICA | LONDON | 28 OCTOBER 2015 Mark Napier

Discussion

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