“We should not be sitting on our laurels while expecting traditional bank-based finance to provide the much-needed antidote”

Harvesh Kumar Seegolam, Governor of the Bank of Mauritius, delivered a keynote speech at the Pension Funds and Alternative Investments Africa Conference 2024, marking his second address at the prestigious event, and his first since assuming the role of Governor. The conference, now firmly entrenched in the calendar of Pension Funds and Alternative Investment Managers, drew significant attendance, underscoring its growing importance in the financial landscape.

In his address, Governor Seegolam highlighted the pivotal role of policymakers in shaping the continent’s future, emphasising the need for robust policy implementation to drive economic development. He stressed the importance of deepening capital markets, enhancing financial literacy, and expanding financial access and inclusion as key components of successful reforms.

Drawing from the Mauritian experience, Governor Seegolam outlined two main aspects of his intervention. Firstly, he provided insights into the significance of pension funds and alternative investments within the financial ecosystem. Secondly, he showcased the value proposition of the Mauritian financial system for potential investors.

The IMF stated, inter-alia, that ‘The Mauritian economy has rebounded strongly from the impact of the pandemic’…

Governor Seegolam delved into the fundamental role of finance in societal upliftment, emphasising its function in channelling funds from savers to borrowers and mitigating liquidity-based shocks. He commended efforts across Sub-Saharan Africa to diversify economic structures away from reliance on natural resources, highlighting Mauritius’ proactive approach in developing its financial services sector since the 1980s.

The Governor underscored the pressing need to address Africa’s infrastructure deficit, estimated to require between USD 130 billion and USD 170 billion annually. He stressed the importance of private investment, particularly through Public-Private-Partnership initiatives, in achieving sustainable economic transformation. With innovation and climate change also on the agenda, Governor Seegolam highlighted the role of pension funds and alternative investments as crucial partners in bridging financing gaps.

Citing OECD data, Governor Seegolam noted the significant assets held by pension funds globally, with Africa holding approximately $700 billion. He emphasised the potential for pension funds to contribute to the continent’s long-term financing needs while navigating challenges such as environmental, social, and governance (ESG) considerations.

“For decades, a recurring leitmotiv in debates about Africa has been the pressing need to mobilise finance to address its gargantuan ‘infrastructure deficit’ syndrome. Ostensibly, the development of our continent inevitably requires an adequate and effective infrastructure, be it transport, water, power, telecommunications, ports and airports. The African Development Bank has estimated that Africa needs between USD 130 billion and USD 170 billion of infrastructure spending each year. Our continent is at a critical juncture as it has to ensure that the objectives spelt out in Agenda 2063 are achieved in a financially and environmentally sustainable way, whilst not imperilling macroeconomic imperatives and not jeopardising the public debt dynamics trajectory. This is not an easy task and requires funambulist-like precision whilst walking on the tightrope. It is therefore imperative for governments across the continent to rely heavily on private investment for their economic transformation. Public-Private-Partnership initiatives are the norm of the day. Innovation and the climate change agenda have made ceremonious appearances as supplementary challenges on the table, and will remain mainstays in that venture for quite some time. Thus, with a range of new challenges, we should not be sitting on our laurels while expecting traditional bank-based finance to provide the much-needed antidote. It certainly can. But finance is not just about the ability-capacity duo, but also about the efficiency-effectiveness nexus. Some financing gaps are better addressed by institutions that are more geared towards longer-term goals and with the ability to calibrate and adapt their products, depending on the exigencies of the issue at hand. This is where pension funds and alternative investments become handy as trusted partners to bridge the lacuna,” the Governor stated.

Looking at the Mauritian financial system, Governor Seegolam highlighted the jurisdiction’s resilience, transparency, and efficiency, positioning it as an attractive destination for investors. He noted Mauritius’ adherence to international standards, robust banking sector, and strong regulatory framework, citing accolades from organisations such as Moody’s and the Financial Action Task Force.

Governor Seegolam emphasised Mauritius’ role as a gateway to Africa, with opportunities for pension funds to mobilise capital and invest in the continent’s burgeoning markets. He highlighted the country’s investor-friendly environment, solid banking network, and initiatives such as sustainable finance frameworks and central bank digital currency (CBDC) adoption.

“I cannot, at this time, fail to mention the latest press release of the IMF that was issued less than a week ago following the conclusion of the 2024 Article IV Mission. The IMF stated, inter-alia, that ‘The Mauritian economy has rebounded strongly from the impact of the pandemic, supported by the deployment of pre-pandemic fiscal and external buffers. Real GDP growth reached 8.9 percent in 2022 from rebounding tourism and manufacturing. Rapid growth was sustained in 2023— estimated at 6.9 percent—with output now having exceeded its pre-pandemic level. Vibrant tourism, social housing construction, and continued strong performance of transport and financial services buoyed growth.’ I am sure that the dynamics of growth will be reinforced. Since I assumed Governorship in March 2020, one of my priorities has been to elevate our financial system to new heights through a number of initiatives. The Bank of Mauritius published the ‘Guide for the Issue of Sustainable Bonds in Mauritius’ in June 2021. The Guide acts as a preliminary, yet compulsory consultative document which lays the foundation for the issuance of Green, Blue, Social, Climate, and Sustainability bonds in Mauritius. The Financial Services Commission (FSC) released a Guideline for the issue of Corporate and Green Bonds in Mauritius in December 2021, which broadly aligns on the principles of the Guide issued by the Bank of Mauritius. These documents set out the requirements to be followed by issuers of such bonds,” Harvesh Seegolam highlighted.

Harvesh Seegolam outlined the Bank of Mauritius’ initiatives to elevate the financial system, including sustainable finance guidelines, modernisation of payment systems, and the establishment of a Fintech and innovation hub. He invited attendees to explore Mauritius’ banking sector roadmap and forthcoming banking law reforms, underscoring the Bank’s commitment to a safe, stable, and sound financial system.

The Governor expressed confidence in Mauritius’ economic trajectory and its role as a regional financial hub, reaffirming the Bank’s dedication to supporting Africa’s development journey through seamless financial flows and continued innovation.