First published 20 August 2023

Having a concentration of mature technology players but very little startup activity is precisely why Mauritius makes my list of interesting technology ecosystems to review.

It is easy to dismiss Mauritius’s technology arena as simply a corporate IT and business process outsourcing world instead of a startup ecosystem. But that perception has too many blindspots. The island nation may house more business process outsourcing firms than what qualifies as a startup. But it is certainly not a laggard. It has just being too concerned with regular business administration, its bread and butter, versus pursuing innovation on its shores. And it knows this.

Hosting some of Africa’s largest IT infrastructure players is a flex, but Mauritius wants more. And it wants this “more” to extend and enable its robust financial services sector.

Mauritius is one of Africa’s richest countries. But it did not start out that way. In a paper published seven years before Mauritius secured independence from colonial Britain, James Meade, the Nobel Prize-winning British Economist described Mauritius as an “outstanding example of a mono-crop economy”.

Like Meade, Trinidadian-British writer Vidiadhar Naipaul saw no prospects for a country where only “sugar cane and sugar cane ending in the sea” was the only source of economic activity.

In order: (1) Painting by Raouf Oderuth showing indentured Indian labourers arrive Mauritius (Licence CC BY-SA 4.0) (2) Painting by Raouf Oderuth (Source: Wikipedia). (3) Port Louis at night (Source Wikipedia – CC BY 2.0)
GIF by Abraham Augustine

In 1968, when it gained independence, Mauritius boasted a stunning per capita income of only $350. The majority of the population were indentured workers who had come from India to work in the plantations after the abolishment of slavery in the 1830s led to a labour shortage. Creoles—mostly descendants of former slaves, Franco-Mauritians (the small class of French-descended land-owners) and a tiny Chinese minority made up the rest of the population. For Naipaul, writing his 1972 essay, The Overcrowded Barracoon, Mauritius was a volatile hodgepodge not destined for greatness or even middling.

Today, the per capita income in Mauritius is just over $10,000 (or about $23,000 in purchasing power parity terms). One of the highest in Africa.

From sugar to “pan-African tech” center

The startup funding amount bellies what is possible. | Infographic: Ayomide Agbaje — TechCabal Insights.

From an economy built on sugar and textiles exports and tourism, Mauritius is now synonymous with financial services. But it also has a strong manufacturing sector (courtesy of aforementioned suger and textile industry) and is a significant business outsourcing hub in addition to hosting a luxury real estate market.

With 87% of the country covered by high-speed internet and a smartphone penetration that rivals that of any other African country at ~80%, the country is clearly not a greenfield. But there is a difference between using technology and creating it—or at least hosting the people that create it.

To this end, there is no shortage of government-run or designed “digital economy” or “digital innovation” programs. There is a central bank digital currency in the works. A fintech promotion agency and a regulatory sandbox targeting blockchain applications. And a revamped research council known as the Mauritius Research and Innovation Council (MRIC) is in a race to fulfil its mandate of searching for and “funding innovative ideas in robotics, blockchain, AI, and cloud computing.” And no, that mandate predated this year’s AI frenzy. This tech ambition is not exactly new. It started in earnest 22 years ago.

In 2001, construction started on Ebène Cybercity, a 64-hectare technology park to serve as the centre of the country’s then fast-growing IT sector. IT in the early 2000s was telecoms, subsea cables, data centres and such like. 22 years ago, the idea of tech hubs or even smart cities as the larger versions are known today, was not in the lexicon of most African governments. But for Mauritius, the home of AFRINIC, the regional internet registry for Africa and the Indian Ocean region, it deserved enough recognition to carve out space just outside Port Louis for.

Even though it was called a cybercity, Ebène was not designed to make Mauritius attractive to a technology ecosystem from across Africa. In 2001 most African countries were just at the beginning of the mobile telephony boom curve. And Mauritius of the 2000s was well on its way to becoming the tax haven we know it as today. So, instead of a tech park, Ebène slowly became the house of many of the financial services firms in Port Louis that struggled with traffic congestion in the capital city. Especially as the financial services sector began to take off and dominate the business profile of the island.

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Today, as a technology ecosystem profile begins to mature in Africa, Mauritius’ leadership and policymakers are seeing an opportunity to redefine the island by making technology one of the country’s economic descriptors.

A few stumbling blocks to clear

Over the years, successive governments in Mauritius have pursued an economic diversification program so that no one economic sector is too much of an Achilles heel. But some of that reform agenda has lost its steam. In addition, the crowded marketplace of business process outsourcing firms is gaining a reputation for bait and switch tactics that is weighing heavily on investor and entrepreneur interest. Especially younger and typically naive investors and entrepreneurs unfamiliar with navigating high finance. This market for fees contrasts sharply with the type of environment that can foster startup activity.

The result is that while the financial services sector is still going strong, it is also losing what competitive appeal—even if only slightly—it might have had years back, to places like Dubai. So much so that even Mauricien corporate services firms are increasingly setting up outside to serve clients through other financial hubs.

Mauritius had an opening in the early 2010s to become a prominent player in shaping Africa’s early stage technology space. But 12 years ago then the growth story of African startups was not as obvious as it is today. Unfortunately, it lost that intial opportunity to integrate itself into the budding startup story of Africa.

That period (the 2010s) was the height of investment activity in IT and telecoms infrastructure as mobile telephony and later mobile money dominated Africa’s digital story. And Mauritius was content to passively handle what came the way of its financial and corporate services sector. Remember, this was also the middle of the Africa rising story and Mauritius was at the height of its investment gateway narrative. So, making Port Louis a hub for building technology startups—at least, as it is today—was understandably not the agenda focus at the time. Serving as the home for the funds that poured into telco investments in uncertain African markets was enough.

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Businesspeople, industry stakeholders and the government still bet big on that financial services appeal. It is a key part of the country’s economic diversification program since at least 2005. And there is little competition anywhere else in Africa. A handful of venture capital funds, telecoms and internet infrastructure companies are still domiciled in Port Louis. But the government is now realising that its 2000s-esque technology leadership in Africa is falling behind the rest of the continent. Especially in technology-enabled financial services, better known as fintech. The result was a flurry of government-supported programs like the Mauritius Africa FinTech Hub.

It is hard to focus on building a local (startup) technology hub for a continental tech ecosystem that is nascent and mostly illiquid. Especially when you have a finely-tuned export-led industrial base, a thriving financial services hub to maintain, and a population that is too small for consumer internet products. But Mauritius is setting its sight on technology for precisely this reason. Tourism is a strong but fickle component. A blue economy miracle is yet to materialise and its appeal as a tax haven has waned.

The island’s journey to wealth was kickstarted by a series of sugar trade preference agreements that helped it build a solid production and processing industry around the sugar farming and export business. Multi Fibre Agreements (MFAs) also gave the nation an edge in textile exports. But in 2004 trade preferences were lost or dismantled thanks to China’s potent entry into global manufacturing and trade. As the island’s leaders did in the 1970s—diversifying from agrarian to mini-industrial. And in the late 1990s to mid-2000s—by diversifying into business facilitation and banking. The island wants to reinvent itself, this time with technology (especially financial technology) at the core, instead of as part of the decor.

After losing preferential trade status for its sugar and textile exports in 2004, Mauritius responded with a series of reforms that lifted the profile of the country’s financial services and business facilitation sector and helped it become the financial powerhouse it is today for Africa, and especially for India. Technology sectors, especially the telecoms and IT infrastructure industry, were also targeted. But the banking and corporate services segment remained a dominant force.

Only in the last few years is technology making a comeback on the agenda on the back of a boom in financial technology startups in Africa and a growing venture investment industry. And there are pockets of opportunities for the taking. Even outside of simply structuring investment funds.

Because of its extensive business and trade facilitation roots (the island is a major transhipment hub), Mauritius can become the quintessential home for B2B tech companies in Africa. It has many of the right ingredients. Mature corporations domicile in or managing operations from the island, a robust financial sector and decades of global business facilitation and the experienced talent that come with having handled business processes across multiple jurisdictions.

The biggest gap is the systemic flaw that favours larger businesses over risky early-stage startups. All the island needs is to put its back behind the talk to make the innovation rhetoric come alive. All the investment promotions in the world will not fix this gap.

But Mauritius has shown that it can do what needs to be done to change and set itself on the right path. It can do it again.

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Abraham Augustine,

Senior Reporter, Business and Insights

The article was updated for clarity in some sections.

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