Maya Fisher-French, Mail and Guardian (Johannesburg), August 19, 2007
Mauritius is an increasingly popular destination for wealthy South Africans looking for a contingency plan when developments in South Africa make them nervous, specifically crime and the destabilisation Zimbabwe might bring to the region.
Mauritius is only too happy to oblige these highly skilled workers who are in demand worldwide.
The Mauritian government has introduced a device, called the International Residence Scheme (IRS), which allows foreigners to purchase property and at the same time provide automatic residency and work permits. The scheme is aimed at high net-worth individuals who can afford starting prices of $500 000 (around R3,5-million). The aim is to attract those who will bring their skills or entrepreneurs who will relocate their businesses to Mauritius, with its extremely favourable tax regime of a flat 15% tax for individuals and companies.
Timo Geldenhuys, sales director at Hayes, Matkovich and Associates, which is selling units in Villa Valriche, an upmarket IRS development in the south of the island, says they have been surprised by the level of interest from South Africans.
South Africa was not initially expected to be a major market but, so far, two-thirds of sale reservations have been by South Africans. “The motives are clear; residency is the biggest selling point for South Africans, compared to the European buyers,” says Geldenhuys.
He says some South Africans who have purchased properties plan to move immediately while others have a medium- to long-term plan in place to move to Mauritius in several years’ time. In some cases, South Africans just have excess cash they want to invest—the most expensive property was sold to a South African.
It is a clever strategy for South Africans who want to diversify their investments outside South Africa because they are able to invest in property in other Southern African Development Community (SADC) countries over and above their R2-million investment allowance, and the IRS provides a dollar-denominated investment.
Geldenhuys says interest has increased over the past year because there has been a definite shift in perceptions about South Africa. “People list crime and Zimbabwe as major reasons for concern. They are very worried that South Africa will go the same way—especially as so little has been done about it.”
For Mauritius, this is manna from heaven—so far, there are four IRS projects in development. The first one has been completely sold out. Villa Valriche, which was recently launched, has already sold 60 of its 133 first-phase developments. In total, 22 schemes are being planned, with an average of 300 houses per development. For every unit sold, the developer has to contribute $6 000 towards social development. The buyer has to pay a registration duty of $70 000 plus a 5% transfer fees. On an average price of $800 000 per unit, the Mauritian government will make an estimated $760-million in foreign currency. Every time an IRS unit is resold, a further $50 000 transfer duty is paid by the seller. Mauritius will attract a lot of foreign income and skilled workers, while South Africans will take their wealth and skills out of South Africa, where foreign skills are not encouraged and Parliament debates freezing foreign ownership.
Over the past 20 years, the Mauritian economy has been changing its focus from sugar cane to diversified services. Twenty years ago, the bulk of GDP came from sugar. Today sugar makes up only 8% of GDP, with tourism and financial services now the biggest money-spinners. According to Mark Tunmer, CEO of asset managers Imara, the Mauritian stock market has climbed more than 50% over the past year as the benefits of the macroeconomic changes start to take hold.
To encourage growth in services, the government allows foreigners to work in Mauritius in five main sectors: education, health, financial services, IT and seafood. Foreigners are allowed to work in the country if they earn more than $1 000 (R7 000), ensuring that only skilled workers enter the economy. Mauritius has a 9,1% unemployment rate, and a per capita income of $5 000, the highest in the SADC. The island’s GDP grew 4,7% last year.
Blackriver, a favourite spot for South African expats, has seen rental prices soar as a housing shortage for rental properties develops.