Continuation of budget Address 2013 by the Minister for Finance, Pierre Laporte, December 4, 2012


27. We need to reform the Structure of Utilities Tariffs
Mr. Speaker, as with SEYPEC it is important for the long-term viability of the Public Utility Company (PUC) that the rate of utility tariffs paid by consumers reflect the cost of operations. In many countries tariffs are set to also cover investment costs. However, in Seychelles, we have thus far limited the tariffs to cover largely operational expenses. PUC’s tariff structure unfortunately does not in all cases reflect that. As such major reforms are still needed to bring PUC’s tariff structures in line with normal practices.

As a first step PUC will in January 2013 adopt a system of tariff indexation such that utility tariffs will be adjusted quarterly in line with movements in key variables that impact the cost of these services such as the exchange rate, international fuel prices, etc. Depending on the movements of these variables, tariffs could either increase or decrease. This will be followed by a gradual removal of cross-subsidization across the various client groups which will begin in July 2013 when PUC will start rebalancing the tariff structure. This rebalancing exercise will be completed gradually over a period of 7 years.

Mr. Speaker, as we have always done, our reforms do not leave behind those who are more vulnerable. To this end, this rebalancing exercise will be accompanied by the introduction of a social tariff.

28. Seychelles Trading Company (STC) Prices to be Adjusted
Mr. Speaker, Government has over the years used STC to anchor prices of basic commodities. However, exogenous events especially price increases on the international markets have exerted extreme pressure on STC’s finances and if nothing is done this will result in trading losses in the coming months.

In light of this STC will in early 2013 adjust prices of a number of its products.
Government has nonetheless requested STC to undertake a comprehensive review of its sourcing strategy with a view to accessing more affordable products which could in turn be passed on to the people.

As we announced earlier this year, Government has requested STC to also enter the market for importation of construction materials. By anchoring prices STC would help reduce construction prices in Seychelles.

29. We will Strengthen the Audit Capacity of the Seychelles Revenue Commission (SRC)
Mr Speaker, an efficient tax administration is crucial for our socio-economic strategy. Our economy still depends largely on tax revenues to fund public projects and programmes.

SRC has faced many challenges in meeting its objectives due to, among other things, the fast evolving business environment. Rapid technological advances have rendered businesses more innovative in their accounting practices, and other new challenges are emerging. With such advances SRC has been unable to catch up with complex practices such as transfer pricing. Our tax authority will be taking several initiatives to beef up its capacity and enhance skills, knowledge and experience to keep pace with these new developments.
The SRC will shortly carry out a technical needs analysis to start a capacity building programme aimed at boosting the capability of its local workforce. We will continue to encourage qualified Seychellois to consider a career within the SRC. Over the short-term, we will complement this initiative with recruitment of a limited number of foreign tax auditors and customs specialists. Nevertheless, Seychellois personnel will continue to lead and remain on the frontline. 

Regarding Customs, significant progress has been achieved over the past two years, including (i) enactment of the new Customs Management Act, (ii) upgrading from Asycuda++ to Asycuda World (which will come into operation in the first quarter of 2013.); (iii) improvement in operations with new procedures; and (iv) increased cooperation with international bodies such as WCO, WTO, IMF and bilateral cooperation with foreign customs administration authorities. 

Mr. Speaker despite these efforts by Customs, of late there has been major concerns expressed by the general public and the business community about the effectiveness of the Seychelles Customs. We want to tell those critics today that we have noted their concerns and will act to address those. Reforming of the Customs division will be accelerated in 2013 and will be one of the priorities of Government. 

I recognize as Finance Minister that whilst these structures represent the foundations of a modern Customs administration, what matters most is how effective they are in delivering services at a level that the people expect. To this end, Mr. Speaker, we will focus our efforts on the operational aspects as well as strategic issues such as delivering the services with more efficiency and in line with international best practices. 

30. Trade Policy and our Integration to the World Economy
Mr. Speaker, under the leadership of President James Michel Seychelles’ reputation as a dynamic island state is today firmly recognized by the international community. 2013 will see a continuation of this. This is particularly true of Seychelles’ campaign for a seat on the United Nations Security Council in 2017.

On the trade front we remain on track for accession to the WTO by 2014. The negotiation is entering an advanced stage and Seychelles has received support from numerous countries. As part of the ongoing accession process, during 2013 Government will continue to review and amend its laws and regulations to bring them in line with WTO standards.

At the regional level Government remains committed to explore, along with the private sector, opportunities for Seychelles’ export and investment in the region through existing agreement with COMESA and its continued negotiations to enter the SADC Free Trade Area.

31. New Measures to assist First Time Home Buyers
Mr. Speaker, access to housing credit remains constrained by such factors as high interest rates and charges, and a general lack of interest by certain banks to give housing loans. Government will, beginning January 2013, implement certain measures to limit the charges that commercial banks charge on housing loans, and increase their lending to this sector.

Firstly, as provided for by the Financial Institutions Act, CBS will shortly issue Regulations that will limit the level of fees charged by banks on housing loans for residential housing and for first time buyers. As noted these Regulations should be in force by early 2013. 

Secondly, Government-owned commercial banks will be required to invest a minimum share of their lending portfolio in any calendar year into housing loans.

32. Adjustment in Fees and Charges for Government Services 
Mr. Speaker, Government periodically finds it necessary to revise the fees and charges for its various services. These various services and the respective changes are presented in the Supplementary Note.

33. We will implement a Salary increase in 2013
Mr. Speaker, the Government recognizes that the situation out there is tough , for the average Seychellois family.  The Seychellois people have made major sacrifices in recent years. However, our ability to give salary increases is constrained by the need to maintain fiscal sustainability, which in turn is critical to ensure the economic future and prosperity of future generations.

Government is constantly exploring possibilities to improve the wellbeing of the people through a better salary. In this regard, Mr. Speaker, we will implement a salary increase in 2013. However, due to budget constraints all salary increases including minimum wage will take effect on July 1, 2013.

The minimum wage will increase by 6%, which is marginally above the forecast inflation rate of 5%. The minimum wage level will increase from SR21.00 to SR22.25 per hour for all workers other than casual. The rate for casual workers will be raised from SR24.20 per hour to SR25.65 per hour.

Salary increase in Government
Effective July 2013 the following wage increases will be implemented:
• Salaries of all employees from SG1 to SG6 will increase by 6%; and
• Salaries of all employees from SG7 onward will increase by 3%.

New Schemes of Service
Several new schemes of service will be implemented in 2013 but in 2 phases, some beginning January whilst others in July. The following ministries, departments and budget agencies will implement their new schemes of service as of January 1, 2013:
• Department of Immigration & Civil Status – Revised Scheme
• Department of Prisons – Revised scheme
• Institute of Early Childhood
• Agency for Social Protection – Processing & Regional Officers

New Schemes of service for the following common cadres across Government will also be implemented in January 2013.
• Stores and Assets Management Cadre
• Policy analysts Cadre
• Housing Officers Cadre

The schemes for following common cadres will be implemented in July 2013:
• Psychologist Cadre
• Office Assistant Cadre
• Research and Project Cadre
The Seychelles Revenue Commission will also implement their new scheme of service as of July 2013, and will be aligned to the wage grid.

Benefits and Approved Programmes of the Agency of Social Protection
As from January, 2013 the following adjustments in benefits will be implemented: 
                                             From   To
                                                       (SR)  (SR)

Orphan Benefit                       1,280  1,360
Invalidity Benefit                     2,440  2,580
Injury Benefit                         2,120  2,250
Survivor (widows) Benefit         2,120  2,250
Sickness Benefit                     2,120  2,250
Maternity Benefit                   2,120  2,250
Retirement Benefits paid ASP   2,550  2,750
Retirement Benefits paid SPF   2,550  2,750

Benefits of Home Carers will increase by 6% per month in line with minimum wage. And as with the case for minimum wage Home Carer benefits will thus also increase as from July 2013.

34. Conclusion
Mr. Speaker, in 2012 we realised further achievements in key areas like human development, improved investment climate, e-Government, good governance and anti-corruption to name a few.   These achievements will put us on a strong footing to remain resilient against harsh global economic conditions in 2013 and over the medium term.Under the leadership of President James Michel our country has shown that it can lead the way in promoting peace and harmony in Seychelles and beyond.

In 2013 we are likely to face the reality of yet another challenging year. This budget puts us in a strong position to face these challenges through a continuation of macro-economic stability that will safeguard the wellbeing of our people, especially the more vulnerable groups, which remain a key priority of this Government.

Mr. Speaker the policies and measures announced in this budget will strengthen the foundations for accelerating economic growth in 2013 and beyond. They provide the conditions for the private sector to drive our economy into the future through an improved investment climate. We have also sought to improve the conditions of our people through a salary increase, improved welfare benefits, and more investment in health, education and infrastructure.
Mr. Speaker, one of the keys to prosperity is improved productivity. More salaries and more welfare benefits are not the answer to a better future. Better working conditions could be achieved through more productive attitudes in our workplaces. I thus appeal to all Ministries and Government agencies to become more efficient in delivery of services; for the private sector to be more innovative and efficient in their operations; and for all workers to become more productive, creative and responsible in their workplaces. These attitudes, Mr. Speaker, are what we should adopt in the new Seychelles.

Before I conclude, I would like to thank President Michel for his guidance and support for the Seychellois people. I want to also acknowledge the support and guidance of Vice-President Faure who during his tenure as Finance Minister has led our reform program with vigour and determination. I also want to thank my colleague ministers and their technical teams for their contributions.

I want to particularly recognize the efforts and dedication of the staff of the Ministry of Finance, Trade and Investment, who have shown great professionalism in delivering their duties.

Mr. Speaker the private sector and civil society have throughout 2012 continued to make important contributions to the development of our country and for this I want to acknowledge their efforts.

I want to recognize the support and contributions of all our international counterparts, including multilateral organizations, and development as well as our bilateral partners. 

I thank all honourable members of the National Assembly, including you, Mr. Speaker, for the support provided to me and my ministry throughout this year.
Finally, Mr. Speaker, I thank the Seychellois people for continuing to support the efforts of our Government in bringing our country forward.

I now commend the Appropriation Bill 2013 for the approval of the National Assembly.

Thank you.