Can Mauritius replicate success in financial services into tech?

Mauritius is Africa’s leading financial services hub. The small island houses some of the continent’s leading banks, investment companies, asset managers, and insurance entities. Over the last few years, the country’s tech industry has tried to replicate this success.

Mauritius’s startup ecosystem is nascent at best, with minimal venture capital inflow and only a handful of startups making a regional impact. Innovative entrepreneurs, curious investors and progressive government policies in the country are working to accelerate the ecosystem’s growth to the next level.

A central bank digital currency, a fintech promotion agency and a regulatory sandbox targeting blockchain applications are in the works. The country has the Mauritius Research and Innovation Council looking to fund innovative ideas in robotics, blockchain, AI, and cloud computing and the Mauritius Emerging Technologies Council looking to promote innovation in emerging technologies. Numerous policies are also in place to support innovation in the country. These include the National ICT Policy, Digital Mauritius 2030 Strategic Plan and the Mauritius Artificial Intelligence Strategy.

Peach Payments, a South African fintech startup founded in 2012 and which raised $30 million last year, entered the Mauritius market in 2021. So far, the company has onboarded over 200 merchants in the country and has forged partnerships with some of the leading commercial banks to offer its online payment gateway product. According to Sandeep Chagger, chief operating officer at Peach Payments, Mauritius’ double taxation agreements with numerous countries and ease of exchange controls make business doable for fintechs like Peach Payments. “Mauritius offers international payment processing companies a competitive advantage which you won’t find anywhere else and this makes it a highly conducive market,” Chagger told TechCabal.

Challenges facing local startups

Despite the success enjoyed by international and more established startups like Peach Payments, local startups struggle to make significant traction. According to data by research firm Disrupt Africa, Mauritius startups raised only $1.7 million in venture funding per the latest figures. According to Fabrice Boulle, managing partner at VC firm Equitable Ventures, Mauritius’s status as a small country severely impacts its attraction for VCs. “VC is a game of scale and for startups whose only focus is the Mauritius market, it’s going to be hard for a VC to write a cheque for a business whose market is only 1.7 million at best.”

This point is further reiterated by Suyash Sumaroo, co-founder of Horizon Africa, a blockchain development startup. Although it claims to be one of the first African companies to launch a blockchain solution, it failed to gain traction, a factor Sumaroo partly alludes to the lack of visibility for startups in Mauritius. “It’s an unfortunate cycle because to expand outside the country, you need funding which is rare because investors think Mauritius is too small a market,” Sumaroo told TechCabal.

Understanding the constraints that come with operating in such a small market, several accelerator programs exist in the country to help startups scale beyond the island nation. Some of these include Turbine, La Plage Factory, and Mauritius Startup Incubator. Turbine, based in the capital city of Port Louis, has accelerated more than 150 startups since its inception in 2016. Some of these include Reclyclean, a cleantech startup with a presence in Mauritius and Cape Town, LeanSearch, a martech startup with operations in Mauritius, the UK and Europe, as well as KONEKTWA, a platform allowing influencers to connect with brands directly.

Startups in the Turbine cohorts go through several phases including pre-incubation in which they develop their idea into a business plan; incubation where they have one year to develop an MVP and refine their go-to-market strategies and acceleration where for six months, the startups are taught how to pitch to investors. According to a representative from Turbine, the program has contributed significantly to helping startups scalable businesses. “We take only SDG-focused startups whose innovations address prominent pain points and help improve the lives of people in Mauritius at a significant scale.”

Beyond incubation and acceleration provided by the likes of Turbine, startups in Mauritius also have to be content with ensuring that innovations abide by the country’s regulatory frameworks. Although its friendly regulatory environment in financial services led to much success, in tech, startups have to work with the government to devise friendly regulations from scratch. 

This is where the work of organisations such as the Mauritius Fintech Hub comes into play. Founded in 2018 with a mandate to devise a strategy to promote fintech development in the country, the organisation works with startups and regulators to help them find common ground. This helps promote innovation while also ensuring that ideas and execution stay within the confines of the law and startups are not operating in regulatory grey areas.

According to Benazeer Saidoo, CEO of the Mauritius Fintech Hub, sandboxing initiatives done by the hub in partnership with startups and regulators have seen the creation of enabling regulatory frameworks in the country. “In the last two years, we’ve also seen the introduction of frameworks to regulate virtual assets, which brings more clarity around what’s going on with virtual assets,” Saidoo told TechCabal.

Replicating success in tech

According to Chagger, the country’s liberal regulatory regime, which has spilt over to tech, can contribute to helping the country make significant strides. “Because of the regulatory environment, international players in industries like crypto are looking at Mauritius from an expansion or setup perspective.”

However, for entrepreneurs like Sumaroo, an enabling regulatory environment without the requisite capital is unlikely to yield enough growth to establish Mauritius as a tech hub. “We need to break the cycle of promising companies only lasting for a maximum of 3 years due to running out of funding.” To break that cycle, investors like Boulle believe that it all starts with building VC-investable businesses, a role that incubators and accelerators can play. “I see these organisations like Turbine contributing significantly to building resilient businesses which will transcend the Mauritius’ borders.”

With some of the world’s leading financial institutions residing in the country as well as internet and smartphone penetration rates of 87% and 79% respectively, Mauritius seems to have what it takes to build a strong tech ecosystem. Perhaps most important is the seemingly common goal of innovators, regulators and other ecosystem stakeholders to replicate the success of financial services into tech. Whether the country will eventually achieve this goal, only time will tell.