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Interview by Gafoor Yakub with SBC TV | 29 May 2020

Interview by Gafoor Yakub with SBC TV

Gafoor Yakub

‘The cost of living will vary from one person or one household to another’


Following the live TV interview conducted on the Bonzour Sesel programme by SBC presenter Barbara Hoareau, people have said they found the explanations given by Gafoor Yakub, businessman and chairman of Nouvobanq, to be clear and concise, and they would like to hear or read them again.

The following is an extract or a summary of some of the points made by Mr Yakub during the Q&A session.


Q: Why is the cost of living so high in Seychelles?

A: Two main reasons come to mind for Seychelles: (i) our heavy reliance on imports and (ii) the prevailing exchange rate. Around 80 to 90 percent of what we consume in Seychelles is imported. When we rely on imports, we are actually importing inflation from abroad. Furthermore, the exchange rate used by the Seychelles Revenue Commission’s customs at the point of entry and by the commercial banks when paying for the imported goods has a huge bearing on the cost of living.

Other factors contributing to the high cost of living in any country are:

  • the cost of local produce, utilities, transportation,
  • cost of housing/rent,
  • medical costs,
  • insurance,
  • cost of child care – and basically the sort of things we spend our living wage on.


Q: What can be done to reduce the cost of living?

A: The government has started to put in place a number of measures to curb the cost of living:

  • The government has removed value added tax (Vat) on some essential commodities (mostly food items) but it could have gone further. 
  • It has reduced tax on rental properties from 15 percent to 3 percent making it cheaper for Seychellois who are working and renting a property.
  • Workers earning up to R8550.50 do not have to pay personal income tax.
  • Parents in employment with children at day care, and who qualify for assistance can benefit from a day care scheme. The government makes a payment of R750 and the parents have to pay the balance.

But a few of the measures are farcical and not serious. For example, the government announced there’ll be no tax on imported clothes. In my view, this zero-tax policy should be applied on more essential items, not on clothing.


Q: How can I lower my cost of living as an individual?

A: We must appreciate that the cost of living will vary from one person or one household to another because people make different life choices depending on their earnings or net disposable income. For example, let us take you and I: We are two different persons. We buy cheese for our household. (Question from Yakub): What cheese would you choose for your household? (Answer from Barbara): Usually Kraft processed cheese. (Yakub): I prefer buying Boursin or Camembert cheese usually. That means I have a higher cost of living, as opposed to you or another person who may prefer a relatively cheaper brand.

To lower the cost of living:

  1. The very first step you should take is to get on a strict personal budget.
  2. Try to get out of debt or reduce the level of debt you are in.
  3. Reduce the frequency of dining out; and stop relying too much on take-away food; it’s not always a healthy option and it’s costly.
  4. Make use of left-overs, avoid wastage. Do a tasty fricassée for instance.
  5. Stop upgrading your phone or buying the latest mobile phone. This is a time for us to be conservative and prudent.
  6. In short, let us spend less on non-essential items

I also think that this period of difficulty that our country is going through should be an opportune time for us to educate and promote the ‘savings habit’ which is very much lacking in our society. The concept of saving for a rainy day needs to start at home with the family unit and then reinforced in schools at an early age.

The Central Bank of Seychelles (CBS) Governor (Caroline Abel) has tried to be ‘pro-active’ in promoting the savings habit last year, but with limited success. This is probably because the past governments of (Albert) Rene and (James) Michel were too intent on promoting a ‘hand-out’ or an entitlement philosophy instead of a more effective ‘hands-up’ policy where you show the person how to fish or how to grow his crop rather than just throw money at him/her or at a problem.

I’d also like to see the size of the government cut as some of our public services are bloated and they ultimately depend on us, taxpayers, to pay their salaries and other charges. What if tax revenue decreases over time under COVID-19? How will we pay for those expenditures? As a nation, we have to be prepared for anything.


Q: The arrival of COVID-19 has seen the depreciation of the rupee which is reflected in the price of commodities. Do you think the local merchants are abusing the situation?

A: Yes, there are a few cases of abuse. But we cannot blame all the merchants or the retailers association for a few rotten apples. Let me give you an example: Before COVID-19 and before the sharp rupee depreciation, imported plum or peeled tomatoes in cans cost between R10 to R15 maximum depending on its country of origin and freight cost. One retailer has been selling its canned tomatoes at R26 per can. This is almost 50% higher. That’s exorbitant and unreasonable. When I confronted the merchant, he said it was imported from Italy. I said but my own Chaka Brothers shop also imports canned tomatoes produced in Italy and yet we manage to sell them between R10 and R13 per can, depending on the exchange rate. This was before the COVID-19 pandemic.

What we should do is simply not buy from that shop or boycott it. Another thing we can do is to first investigate, meet that merchant and verify the facts before choosing to “name and shame” him on social media. As a small island nation where almost everyone knows each other, we need to be decent, respectful and civilised towards each other.


Q: What can the CBS do to prevent the rupee from sliding further and further so that commodities are more affordable in the shops?

A: CBS can help on the supply side by injecting forex in the economy to stabilise the exchange rate, but if it keeps doing that, then we as a country can easily run out of foreign currency for us to procure essential items. We’ll have to keep on borrowing in foreign currency and create a new cycle of external debt. So, let us be careful please.

If you talk to people and businesses in town they say that this rupee depreciation is because the banks or CBS has allowed it to happen. That is not quite true. It is a question of supply and demand. The banks will tell you they are “mediators”. I think they could be a bit more “humane” in their lending terms and conditions rather than being so focussed on profit generation. Of course, the best one to assist in stabilising or containing the situation would be the CBS but as I’ve just explained, there are serious risks of a quick depletion of our forex reserves. As Governor Abel has said, we want the forex reserves to last as long as we can and we must try to stretch our forex resources. The best way to prevent the rupee from sliding is to have more forex inflows than outflows. So, we have to put our heads together and brainstorm on how we can earn more from exports. That will of course take time. And we are running out of time and forex as we still rely too much on imports.

I’d like to call on both the private sector and the public sector to not just import anything. Be reasonable and responsible please. We are all in this together, as President (Danny) Faure said: Let us not waste our forex on unnecessary imports e.g. importing bottled water of 500ml and sugary coconut drinks in cans imported from Thailand should be banned; the same goes for canned tuna from RSA and UK. There are many more examples. We have to explain to our people and make them realise that whatever forex reserves we have is finite not infinite!


Q: Do you support the idea of introducing price control?

A: No, because it’s difficult to administer. Different overseas suppliers offer us different prices. Freight rates can vary depending on where it comes from and if it’s a LCL (groupage) or a FCL (full container load). Also the exchange rate being used by SRC Customs will affect the price. But the most important point is the fact that introducing price control will be a violation of the Fair Competition Act under the Fair Trading Commission. I have to thank my office manager at Chaka, Veronique Julienne, for reminding me of this on Saturday. The law states that a wholesaler cannot dictate the price at which a retailer can sell and vice versa. That’s because the wholesaler cannot claim to know the costs of the retailer.


Q: What about introducing import permit? How will that help the forex situation?

A: As a temporary measure between June and December 2020, I think the government should assess the merits of re-introducing import permits as an administrative, non-tariff measure. It is not difficult to implement but it does involve a lot of monitoring and analysis of goods coming in.

For example, we have a company producing yoghurt in Seychelles and we have people producing local honey, tomato ketchup and so on. Why not restrict or limit the importation of these products for a while until the forex situation improves? It’s only a temporary measure. That will help conserve the forex or stretch it a bit further.


Q: There has been a lot of suggestions about increasing local production. How can this help to make life better?

A: Yes, that’s a good suggestion. I’m in favour of local agriculture. Let us also encourage people to grow their own food in their backyard, if they have one. So, go for backyard farming and potted plants for certain spices and even ‘safran’. I am doing it on a small scale at home and it works. Where it is too hilly to grow, why don’t we try ‘terraced farming’ and get advice from Vietnam or Indonesia if necessary.

Local production is not just about agriculture but also about other local manufacturing activities and bottling of value-added products. Local honey and coconut oil should be made more affordable, if we are to restrict their importation from abroad. Those local producers should review their costings and stop charging those exorbitant prices. Sometimes, it seems like everyone wants to get rich quick. We need a shift in thinking or a change in mindset.

Let us diversify our economy and not just rely on the two pillars of tourism and fishing. Let’s see if it’s feasible to reintroduce the cash crops like copra, cinnamon, vanilla, patchouli on a larger scale using both the inner and outer islands. North Island used to produce a large quantity of coconut oil, copra, various vegetable crops, as well as beef and pork before it was sold off and converted to an exclusive island resort. Take Silhouette Island, a portion of the island currently has a tourism resort but there’s another side which is fairly flat and a portion of that land can be demarcated for producing fruit and vegetables on a large scale. Perhaps we can invite a local producer or investor.


Mr Yakub’s concluding remarks to Seychelles NATION: The immediate challenges ahead of us are great: there’s a risk of hyper-inflation or cost-push inflation, general price increases in the shops, unemployment and a gradual depletion of our foreign exchange reserves. We are entering a period when many tourism-related businesses may have to contemplate job redundancies.

But looking at the structure of our economy, I think tourism must continue to be a primary economic activity. However, it will help to diversify and venture into other lines of business that can generate income and create employment, including skills retraining, for our people at a time when it’s most needed. All this will probably take time but it’s never too late for us to review our current economic model.


There were other issues that were discussed during the live interview. Seychelles NATION will try and continue the summary coverage of Mr Yakub’s recent interview on SBC TV on another occasion.

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