Since the beginning of this century, Africa’s GDP has been growing at two to three percent faster than global GDP. Indeed, the region’s growth trajectory has been the steepest in the world in the last decade and is likely to remain so into the future, with forecasts projecting 6% annual increases over the next 10 years. The main driving factors behind this renaissance are: a growing consumer class; a commodity boom; better infrastructure; a young workforce; improved governance and stability; and increased capital flow.
The financial world is sitting up and taking notice. In September 2014, the Financial Times ran a story about the London Stock Exchange (LSE) launching an aggressive attempt to increase the number of listings of African companies in the UK, following strong interest from institutional investors.
For smaller companies, London’s Alternative Investment Market (AIM) is increasingly emerging as the exchange of choice, particularly for natural resources businesses. Jersey has, for some time, been a key jurisdiction for issuers wishing to apply for a listing on AIM. The market capitalistion of Jersey companies listed on AIM exceeded $4.5 billion at 31 December 2014.
- Jersey is designated as a ‘white listed’ jurisdiction by the OECD (Organisation for Economic Cooperation and Development)
- The International Monetary Fund (IMF) ranks Jersey among the leading international finance centres
- Tax neutrality, particularly where issuers are subject to current UK foreign subsidiary legislation
- Jersey companies (apart from locally regulated financial services companies and utility companies) are, typically, zero rated for income tax and are not subject to capital gains tax within the jurisdiction
- Jersey does not levy any withholding tax on dividends and there is no Jersey stamp duty on share transfers
- Companies can also be incorporated in Jersey but can be resident for tax purposes in another jurisdiction if certain criteria are met
Jersey company law, which is based on English company law and is thus familiar to investors around the world, provides flexibility in terms of:
- Available corporate entity types
- Additional options on dividends, share issues and financial assistance regimes – there is no prohibition on financial assistance in Jersey for either public or private companies
- The share buyback, share redemption and capital reduction regimes – there have been recent amendments to specific provisions for dealing with the redemption and buy-back of depositary receipts, the removal of the prohibition on the issue of shares at a discount and restrictions on commissions, as well as other developments that may assist publicly traded companies
- There is a large pool of legal, accountancy, banking and other financial expertise available in Jersey
- The court system is well developed and is capable of handling the most complex and difficult cases
Compatibility with London markets
- Jersey company shares settle in the same way as UK shares on the London market, removing the need for a depository receipt programme or branch register and associated costs
- The UK Takeover Code, which is highly regarded among many investor circles, now applies to a Jersey company listed on AIM and the main market of the LSE (other than an open-ended investment company), irrespective of where it is managed and controlled
There is no doubt that the economies in a number of Sub-Saharan countries are experiencing a resurgence. Investors searching for the next big market are showing a keen interest and moving to convert that interest into investment and ultimately high returns. Businesses looking to raise capital have responded by seeking international backing by listing on international stock exchanges such as the LSE and AIM. Using a Jersey company as the listed vehicle is an astute choice that makes use of a respected, recognised and tax neutral corporate structure to reap the benefits of the current spotlight on the African market.