In the National Assembly Finance minister addresses STC, Children’s Special Fund and fuel exemptions among others |04 August 2021
Minister for Finance, Economic Planning and Trade Naadir Hassan yesterday addressed the National Assembly’s questions related to matters under his portfolio, and the country’s financial matters.
STC restructuring
The minister was joined by chairman of the Seychelles Trading Company (STC) board Imtiaz Umarji to address Hon. Waven William’s question regarding the restructuring of the Seychelles Trading Company (STC).
He reminded the assembly of STC’s primary mandate to import, stock and distribute essential commodities and to ensure that there is always a supply of provisions on the local market, at a competitive price.
STC imports 14 essential commodities. Of the 14, 10 are categorised as dry goods, namely sunflower oil, rice, sugar, milk, lentils, salt, margarine, flour, toilet paper and infant formula. STC should be able to assure sufficient stock of these goods for at least six months. The second category of goods, perishables, includes onions, potatoes, apples and oranges, for which they should have stocks lasting up to one month.
The new STC board was appointed on February 1, 2021. The board with six members and Mr Umarji as chairperson has a mandate to review STC’s mandate, eliminate wastage and ensure that the price of commodities is more affordable.As per Minister Hassan, government decided to appoint a new board upon the realisation that STC was not fulfilling its principal mandate to lower the cost of living.
As per the company’s 2019 financial records, revenues amounted to R1.1 billion, with profit after tax at a mere R23 million.
“The most major expenses for the organisation, other than purchasing essential goods, are electricity and water at R28.8 million, rental at R15 million, and staff benefits at R131 million. Before the new board was appointed, STC was making a loss of R1 million weekly in its operations. But with the restructuring that is already in place, STC is no longer making these kinds of losses,” Minister Hassan noted.
Among the measures in place as part of the restructuring are the closures of four STC retail outlets in April, leaving only the Hypermarket at Bois de Rose. With this, STC has no rent obligations, which amounted to over R13 million annually. Additionally, STC is no longer obligated to pay rental fees at the STC Builders Depot, a further savings of R5 million yearly, and therefore a total savings of R18 million annually on rental costs.
Minister Hassan went on to note that the losses incurred by the retail outlets were substantial and contributing directly towards raised operational costs for the organisation, thereby STC was falling short of its mandate as a key player in addressing high cost of living.
Going on, the minister noted that STC has 25 contracts which he termed as “complicated” with middle-men, both locally and internationally. He noted that the new board is engaged in an exercise to review all contracts, review all operations towards a business-oriented approach, and to eliminate middle-men, so as to purchase directly from producers, resulting in a cost-benefit.
The minister also added that no employees have been made to lose their jobs in the restructuring, unless in exceptional circumstances. Among the other matters which the board is to address are staff performance, career development, and others aimed at lowering the price of essential commodities to deliver on its mandate.
Again, in relation to retailers and the price at which they sell essential goods to consumers, Minister Hassan noted STC’s engagement with the retailers association, and the recently introduced recommended retail price (RRP), which he says works to the benefit of both retailers and consumers. On the other hand, in a free market economy, retailers are free to charge any price they decide.
In concluding the question, chairman Umarji provided an example, using sunflower oil, which presently retails at just under R23 per litre. Prior to the new board being appointed, STC was buying through a middle man, and making a loss of around R7 per litre. At present, STC buys directly from a producer, and although it doesn’t make a huge profit, it certainly does not make a loss on the product, Mr Umarji added.
Children’s special fund
In relation to the Children’s special fund which was established in 1980, Minister Hassan, after providing a brief background of the fund, said that as of January 1982, money was transferred by Treasury to a special account set up upon the request of late former President France Albert Rene, based on the approved budget. As such, he concludes that “the children’s fund expenses were a budget line and all the levy was coming in as government revenue”.
According to Minister Hassan, based on bank statements from Baroda Bank, it is clear that the Treasury was transferring the majority of the funds into the account, with some sponsors by individuals or businesses, although there is no indication that proceeds from Seychelles BreweriesLtd. were going into the account. Rather, Seychelles Breweries Ltd. was paying off all its taxes and levies directly to the government, and then government established the line as expense.
Over the years, there have been amendments to the 1980 Order, namely the Children’s Special Fund Amendment Order 1994, which allows for the Auditor General to conduct an audit. The auditor has provided his reports as to the accounts from 1994 to 2019, and the 2020 accounts have been submitted to the Auditor General, and an audit is ongoing.
The minister went on to note that a board was appointed in February 2018, following the Children’s Special Fund Amendment Notice 2017, to create a board to administer and approve payments under the fund, instead of the President of the Republic. The mandate of the board came to an end in February this year. As per the minister, when the board was first created, it maintained the commercial account, before finally closing it and the balance of R1.267 million to the government account with the Central Bank of Seychelles (CBS). The Ministry of Finance closed the suspense account this year, as per the minister, with a balance of R321,553.65.
“Since 2018, expenses under the fund have been the responsibility of the board, and it has been spent directly under the budget. If the budgeted sum is not used up, the money is not carried forward. It is important to note that even if each year the government made budget provisions for the Children’s fund, not every year was the money transferred, nor the sum transferred to the commercial account when it operated under the Fund,” said Minister Hassan.
“Over the last 10 years, there has been a total expense of R60.1 million which has been made under the fund, and the expenses under the fund are categorised as national projects. For 2021, we made provisions for R7 million under the budget, for the fund,” Minister Hassan stated.
The board is to be recreated later this year, and will fall under the portfolio of the Ministry of Employment and Social Affairs.
Road towards achieving sustainable development goals (SDGs)
In relation to the 17 sustainable development goals (SDGs), with 169 targets and 225 indicators applicable to Seychelles, Minister Hassan said the country is making good progress towards achieving theSDGs, although there remains a lot to be done to ensure the progress is sustained.
He noted that Seychelles in 2020 submitted its first voluntary national report to the United Nations, reporting on its progress towards achieving these objectives, although Seychelles had already achieved certain indicators prior to 2018.
Among the challenges however, are the country’s ability to collect and report data and statistics. With the Covid-19 pandemic, dependence on tourism, dependence on imports which is not sustainable, the effects on the education system, and what it means for human capacity development in future. Other challenges include climate change, maintain social stability all the while maintaining a responsible budget, addressing poverty through job creation, and ensuring the health of the nation by tackling substance abuse, among others.
“Government needs to maintain its engagement towards the objectives of sustainable development, and for the nation, this means we need to find ways to do more with less financial resources. For instance, despite Covid-19 where government’s resources have been really limited, government has in fact increased resources directed towards health by establishing the Covid-19 fund, and other financial sources have been collected, asides from just the national budget,” Minister Hassan said.
CBS’ directive to stop dividend payments
In response to Hon. Kelly Samynadin, Linyon Demokratik Seselwa (LDS) member for Au Cap, Minister Hassan noted that the directive issued by the CBS to financial institutions and the Seychelles Credit Union (SCU) to not pay dividends applied to the financial period ending December 31, 2020. Those same institutions were directed to transfer profits recorded after audit, both for 2019 and 2020, as retained earnings, and that the measures were implemented to ensure the institutions remain resilient, and increase their financial ability to be able to navigate the uncertainties resulting from the pandemic. A decision is to be announced soon with regards to payments of dividends for this year.
Fuel refunds by the Seychelles Revenue Commission (SRC)
As per the Excise Tax Fuel Exemption Concession Regulations 2018, the organisations who benefit from exemptions and concessions to offer a public service are: projects approved by the state through different agreements for which 100 percent concession applies, the Seychelles Public Transport Corporation (SPTC) who also benefits from 100 percent concession, the Islands Development Company (IDS) who benefits from 50 percent concession for the transportation of staff, materials, and equipment for island management for both airline and boats, as well as domestic airline operators, who are eligible for 50 percent concession.
Accommodation operators who require generators to operate, local cargo boats for transportation of materials for approved government projects also benefit from 50 percent.
“However, the total reimbursements for 2018 amounted to R108.6 million, R141 million in 2019, and R127 million in 2020,” Minister Hassan stated.
Verification of containers outside ports of entry
Minister Hassan, in response to a question regarding the verification of containers on business premises instead of ports of entry, informed the assembly that presently, only in exceptional circumstances is this permitted.
As per his explanation, the SRC affords clients this service, based on the nature of the cargo imported, for instance if it consists of breakable items such as glass bottles and jars and glass panels. In such instances, an administrative fee applies, he said, at R1,500 for a 20ft container and R2,000 for verification outside ports, for 40ft containers.
From the start of the year up until yesterday, customs conducted verifications outside of the port for three companies, and one individual, he added, for seven Bills of Entry. Due to Covid-19, SRC is discouraging verifications outside of the port.
Sky-high price of construction on La Digue
In responding to a question regarding the increasing price of construction on La Digue, Minister Hassan acknowledged that construction costs are at least 200 percent higher than on Mahe, and that now that the rate of foreign exchange is stabilising, there should be a reduction in the price of construction materials imported into the country.
“Considering the situation on those two islands, I want to add that the housing subsidy scheme for those applying for their first house, the rate applicable on construction per square metre (sqm) is as follows:R8,500 per sqm on Mahe, R9,500 per sqm on Praslin, and R12,500 per sqm on La Digue. In addition the Housing Finance Company (HFC) obliges individuals on Mahe to contribute a minimum of 7.5 percent in the housing savings scheme, as compared to a 5 percent rate for individuals from Praslin and La Digue,” the minister said.
He also informed the assembly that his ministry is conducting a review and will upon conclusion of the review draft relevant policies geared towards reducing the price of construction on the inner islands.
Capital projects, economic reforms and SPTC projects
Minister Hassan, in concluding, confirmed the provision of R63.5 million under the Development Grants for the Seychelles Public Transport Corporation (SPTC) to purchase 55 buses.
The project is to be financed by the Exim Bank of India, and is advancing well. The contract is expected to be signed towards the end of the year, and the buses to arrive in 2022.
Laura Pillay