President Danny Faure’s State-of-the-nation Address 2018 |14 March 2018

‘Informative, authoritative and inspiring,’ says SCCI

The Seychelles Chamber of Commerce & Industry (SCCI) is of the view that the State-of-the-nation address (SONA) was a solid presentation representing massive economic and social programmes.  

“An informative, authoritative and inspiring SONA,” says SCCI in its reaction to the nationwide address delivered on March 6 in the National Assembly.  

The SCCI particularly supports the call for public-private participation in all major projects, and the proposed legislation to facilitate this partnership.

The SCCI has raised the ensuing pertinent points for consideration by the Government:

1. 1.        Economic review

The President announces that in 2017 the economy grew by 4.2%. This is mainly attributable to record levels of tourism earnings and sustained import pressures. However, it is worth noting that this is also on the back of decline of export value of tuna on the back of increased tuna production.  This is further exacerbated by rising prices but moderate growth in production levels which may imply lower profit margins in certain sectors. It is also worth mentioning that in December 2017, year on year inflation had moderately increased by 2.9%. Analysis of current data shows this trend is continuing.

The actions taken by the government to increase the take-home pay – 13th month salary, abolition of income tax (below a threshold) and the introduction of progressive income tax, increase in minimum salary -- need to be accompanied by measures to reduce inflationary pressures.  Otherwise the very segment of the population that these measures are intended to help will see that these benefits are lost through increased prices.

In addition the SCCI is concerned about the high increase in the level of borrowing for personal consumption; this will inevitably lead to added pressure on the balance of payments, impacting on the Seychelles rupees exchange rate leading to increased inflation, and pressure on wages as indicated above.

1. 2.        Our elders

We welcome the measure of preserving the dignity of our citizens, especially in their retirement. The government promises that land will be made available to the private sector for them to build and manage such establishments, and they will either pay to use this service or an understanding that elderly care will now be privatised {further clarification of this point is needed}.

On the back of high cost of financing in our local economy, the government must also understand that for such projects to yield positive returns for the private sector that appropriate funding mechanisms must be set in place but we also recognise that the period of 10 years for exemption is fair and applauded. We appreciate that the government has listened to the private sector with regards to a defined period for concessions provided.

In the same spirit, we seek that the government also considers the same application not only for social projects but for other enterprise developments such as the current need to stimulate either Foreign Direct Investments or other export related ventures to increase foreign exchange collection by our country. In conjunction with this point it is also extremely critical that the government de-risk Seychelles as a safe place to do business as it is a national imperative for growth as it drives confidence from the international communities/investors.

It is also imperative that small and medium business communities are encouraged to participate in enhancing local productivity for exports and the local market. This could include measures such as package deals for electricity and water consumptions, specific allocated zones for such small scale production and tax holidays as mentioned above.

The SCCI still stresses the need for government to tackle the issues surrounded around standards and norms. Some imported products do not meet the quality standards appropriate to similar products that are locally manufactured and provide unfair competition to our local companies. In conjunction with this, the SCCI humbly requests the trade division undertake an urgent education of the benefits & implication of us having joined the WTO.

The SCCI is of the view that the government must seriously consider the need for the Seychelles Bureau of Standards (SBS) to become a member of the International Laboratory Accreditation Corporation (ILAC) as of now. In addition it must act and be an independent institution.

1. 3.        Education & Our Youth

The building of the Technical and Vocational School on Ile Soleil, which will be done by the private sector, is a good measure. The private sector recognises that some youth prefer to undertake this route rather than the academic.

We encourage the need for skills development such as entrepreneurship, farming, artisanal, music, carpentry etc.

The SCCI will encourage all its members to work closely with these institutions and professional centres to ensure they develop the unique teaching culture and curriculum approach that help reduce skills mismatch and youth unemployment, while promoting mid-career professional development opportunities.

We will encourage our members to undertake career talks, mentoring and signing of agreements. This will also assist our members to readily identify potential candidates for employment.

We seek that full corporate social responsibility (CSR) approval is provided for all projects, activities and other funding opportunities to these important and critical institutions. We do not see the need that applications to the CSR committee be made for all types of funding opportunities. This is both inefficient and bureaucratic.

The SCCI is of the view that public private partnership could be adopted for the development of innovative & youth centres that can accommodate youth development activities and youth entrepreneurship.  Key facilities such as cafes, production studios, and internet cafes.

This is why the SCCI welcomes, and shares the enthusiasm for, a second submarine fibre cable. We are also of the opinion that the appropriate mechanism could be considered that could include and encourage other potential investors to participate, that the project should have a pure commercial objective.

1. 4.        Sports & activities

In lieu of the problems detailed facing the Seychellois people and communities. Solutions exist within the private sector. Numerous initiatives and projects should be considered that could potentially revolutionise the way communities interact and grow- potentially changing the landscape of community and youth development for the future.
New youth sporting initiatives such as FIBA 3x3 basketball world tours, the development of a new high performance centre, accessible facilities and the refurbishment of existing facilities: and many more can be done.
These initiatives have the potential to not only combat the proliferation of drug abuse and social ills (through the popularisation of positive role models and sporting activities that tie into popular culture) but also ensure that no citizen, district or island is left untouched. The very scale of these projects sees the de-centralisation of activities occur out by default, out of necessity, as they intend on encompassing all of the youth in an effort to increase the number and diversity of activities and participants.
The successful execution of these initiatives will lead into further positive change in the form of sports tourism which could see communities ushered into further development and growth as local businesses will be galvanised by the attention and potential at their doorstep. These initiatives entail not only the participation of athletes in sport but also arts and culture, academia and entertainment, in order to create a holistic and vibrant culture of participation for all in the Seychelles - that is sure to see the demise of drugs and negativity, as they are replaced with positive culture and cooperation, infused and initiated by the private sector.

1. 5.        Alcohol, drug abuse and rehabilitation

The SCCI like the entire nation is disheartened when we hear of the situation with regards to heroin abuse in the Seychelles. We stand together with the entire nation to combat this terrible social ill. In view of the constraints in terms of facility and resources for the treatment and rehabilitation of addicts, we recommend that the government allows the private sector to participate through public private partnership to construct and manage the new rehabilitation centre at Cap Ternay toward the end of this year.

The SCCI is of the view that the private sector must take great care and diligence with regards to the worrying alcohol consumption trend in our small nation. Therefore we strongly advocate that the Seychelles Bureau of Standards reviews its mechanism of the current standards especially more specifically to ready to drink products. Our members strongly advocate for responsible drinking and responsible manufacturing. In addition the SCCI is of the view that the current alcohol policy that will be introduced in July 2018, has not been adequately consulted to all of its members and humbly request that an urgent task force be implemented to review the current state of the policy and incorporate views of the SCCI.

1. 6.        Employment

We concur with the statement made by the President pertaining to the mere fact that we need expatriates to cater for the need of our local development. To this effect we recommend that an urgent review be undertaken to identify opportunities to review the current GOP process from initiation to finalisation. The SCCI is of the view that the minimum waiting time of at least 9 days is far too long. An urgent assessment of the quota system must be done and its applicability in the current business environment. The SCCI seeks to work hand in hand with the government for this urgent analysis and policy direction.

We take note that the government has listen to the SCCI with regards to removal of the 20% non-monetary benefit tax which did not make sense at all for us. We are encouraged that they went even further to extend a 150% allowable deduction. This will encourage the private sector to spend on training and skills development. 

In addition the SCCI proposes that the Guy Morel Institute and the University of Seychelles establish a much more practical and robust curriculum where students can work and study concurrently.

With regards to the Employment Bill, the SCCI proposes another emergency round of consultation with the private sector to discuss certain evolving issues such as sick leave benefits, extension of paternity and maternity leave {which the private sector comprehends its introduction}.

Lastly the SCCI still stands firm to say that we do not agree with the current mechanics of the 13^th month salary. This is not in line with a modern law and also increase of productivity. The SCCI is not advocating for the abolishment but for an adjustment that reflects its intended objective. We urge the executive and politicians to undertake a reflection on its merit in the context of national productivity.

1. 7.        Re-Balancing of tariff and use of LNG

Currently, the Seychelles Petroleum Company (Seypec) is the sole supplier of HFO and LFO to PUC for its power generation plants on Mahé and Praslin. Seypec’s selling prices to PUC are predicated by worldwide prices of petroleum distillates and are revised periodically to reflect the CIF and delivery costs of these products to PUC’s storage facilities on Mahé and Praslin.  Accordingly, PUC’s marginal cost of generation varies in direct proportion to the cost of fuel supplies paid to Seypec.

Currently the marginal cost of generation, calculated in Rupees per kilowatt-hour, is approximately R1.78/kWh. With the added marginal costs of high/low voltage transmission/distribution, direct costs and overheads, the average tariff to the consumer is approximately R4/kWh. Cabinet has recently approved an increase to an average tariff of approximately R4.25/kWh. These tariffs are subsidised to the detriment of a much higher commercial tariff. The current electricity tariff is one of the highest in the world and is a substantial contributor to the high costs of manufacturing or productive enterprise, the tourism and service industry and even retail activity in Seychelles. This is a contributing factor to the cost of doing business which has a direct impact on the cost of living.  We recognise that a complete new mechanism must be in place to reduce the cost of tariff for both commercial enterprises and consumers. Therefore we fully support the concept of an Independent Power Producer through the use of LNG to sell power to PUC. The benefit of lower generation costs could be passed on in a lower average tariff to the consumer.

1. 8.        Tourism industry

We fully support the promotion of our local traditions and Creole culture and while we applaud the availability of land for new Creole restaurants, we should not forget the already established Creole restaurants which for so many years have been flying the flag proudly for our cuisine. Alongside this we need a national programme supported and driven by all stakeholders to drive a great service culture in our country.

Furthermore, we need to recognise that we need to do much more to support our artists, musicians, writers, craftsman, sculptors and other artisanal ventures.

We plea for the urgent availability of land and arenas for the development and fusion of our culture and roots within our tourism industry and more importantly our society. We humbly seek the urgent consideration of the government to provide incentives such as defined tax exemptions for the construction of museums, galleries and infrastructure within our community to support the development of our culture and roots and linkage with the commerce industry. The SCCI also recognises the need to promote and encourage a network for our culture and musical entrepreneurs, and to ensure that we work collaboratively with government organisations.

1. 9.        Fishing & Agriculture industry

The SCCI welcomes the pronouncement pertaining to the timeline given for completion of infrastructure development at Ile du Port, we also seek that partly owned Seychellois strategical assets are initiated as soon as possible. We welcome the intention of development of fishing facilities on Praslin, and we humbly seek the same consideration to be made on La Digue. From an accountability perspective we encourage the government to set a prompt target completion dates for these strategical assets.

The Local Food Producers Association has been putting a lot of emphasis on agriculture in the community, with both the elderly and the youth. More and more we see a growing trend with regards to the youth taking up ventures in farming. The SCCI is of the view that the private sector in collaboration with the government could assist in the facilitating of raw materials and equipment for these famers. We seek the implementation of alternative sources of finance such as finance leases to gain traction in its implementation.

1. 10.     Infrastructure development

Improving the public infrastructure in the long-run has a critical role in the economy as without higher levels of public infrastructure, the economy cannot further develop. We welcome all the measures and projects highlighted. While all the infrastructural projects are praiseworthy we question our economy’s ability to absorb such high level of activity, even if financing is off-budget and secured through other means.

However, the projects earmarked clearly outline the potential opportunities that all enterprises in Seychelles will have. However we do highlight the need for fairness and an inclusive approach of all enterprises albeit, Start-Ups, Micro (SENPA registered), Small, Medium, Large or Foreign Direct Investments.

This is why we are advocating for review of the tender and procurement procedures to ensure that the principles of fairness and transparency are adhered to and the resulting in value for money tender, purchases and cost savings.

A common complaint within the business community is the uncertainty they encounter when selling goods and services to government, especially when answering to tenders.  Whereas there are questions as to whether the projects are sufficiently clearly defined it is the evaluation process that attracts most comment.  The bidders, successful or unsuccessful have little idea on the criteria that have been used for selecting the successful bid. 

Furthermore, the SCCI recommends a push for a percentage of the tenders to be carved out for SME’s and startups similar to the approach taken when tendering for maintenance of air-conditioning units 2 years ago. Also, in the spirit of transparency, the government needs to ensure that projects are not “split” to avoid the thresholds of Procurement Committees and the National Tender Board.

1. 11.     Access to funding

The President talked about a new method of financing projects which will be through a fund. We see the need for the Government to undertake a consultative approach to the development of this fund with the SCCI. For example we are of the view that the fund should offer a structure through which capital from grantors, concessionary loans through bilateral or multilateral agreement and investors can be channeled to, and matched with the suitable projects that meet current and future needs of our country.

With regards to the traditional way of financing, loans, consultation with members of the Seychelles Bankers Association confirms that they stand ready to answer the call to provide financial and economic support to the enhancement of private investment in this partnership.

1. 12.     Ease of doing business

We welcome the introduction of the first local business summit, where with the permission of the President and Minister of Entrepreneurship & Business Development, the SCCI will humbly present a Reform Matrix with clear action and guidelines with regards to ease of starting and doing business for all types of sizes and types of businesses, albeit local or FDI’s.

The SCCI is of the view that an investor looking to invest in Seychelles will look for key indicators such as comparative business tax rates with other similar jurisdictions, ease of licensing and employment procedures, ability to rent space at realistic rentals, incentives in the form of temporary tax relief, GOP discounts etc., anything to attract investment! Obviously we need to have a playing field which is level for all investors whether local or foreign and not have a scenario, like has happened in the past, where 1 or 2 entities have amazing incentives which at the end of the day is financed by the majority of “regular” business in the country - same incentives for everyone! 

1. 13.     Other considerations
   1. a.        Property taxes

It is noted that no mention is made of the tax on foreign owned property and the status of its implementation. Does this mean that there is possibly a delay being considered in its implementation? The SCCI expresses a concern that as it understands this is still with the AG’s office for comment and input and the previously announced deadline for its implementation has already passed, would it therefore not be prudent to rather complete a full assessment of the implications of its proposed implementation before trying to rush this through with what may be unintended consequences of market confusion and negative investor sentiment. While the introduction of some form of property tax seems inevitable and fair as a principle, the rushing through of something that might not stand the test of challenge through the courts is to be avoided at all costs.

1. b.        Cost of living

After recent visits to Praslin and La Digue, various concerns have been raised with regards to the material differences in retail prices of goods for enterprise development and personal consumption. The SCCI proposes that the Ministry of Finance reviews whether there is a possibility of removing duty from fuel and a reduction of port charges for transportation of goods between Mahé and the outer islands. The SCCI humbly requests that we work in collaborative format with the government to explore the possibility of this measure. From the feedback we have obtained from our members on Praslin and La Digue, the introduction of landing fees for both Praslin and La Digue has not been consulted. The SCCI urgently seeks an understanding of whether this mechanism will be discussed with the private sector.

In conclusion the SONA reflects a positive attitude towards a future role for entrepreneurship and private sector participation. The SCCI believes that the President understands that the private sector has a critical role and can only contribute when there is a clear recognition that it needs a transparent and coherent policy framework in which to operate. Furthermore the need for a comprehensive and clearly articulated 5-year growth plan for Seychelles is imperative as this should direct/prioritize where we invest locally.

However we are of the view that appropriate guidance must now be provided to this government on how to effectively implement this huge programme and to find meaningful ways to implement it. Overall we are of the view the emphasis should be on the removal of all impediments that discourage private sector participation and the promotion of the nation that the private sector can and will contribute to our country's economic growth and well-being. We encourage the government to be firm on its pronouncements as we have seen various measures in the past not acted upon or finalised such as the Accountants Bill, Collective Investment Schemes, Securities Act & Company Ordinance 1972.

The SCCI secretariat would like to thank all contributors to the SONA response. We take the opportunity to once more call upon the private sector to unite and collaborate for us to move forward under one umbrella.

Office of the Secretariat

Seychelles Chamber of Commerce & Industry