ARE THE GLOVES FINALLY COMING OFF OVER THE BUDGET DEBATE IN THE SEYCHELLES?
(Posted 09th January 2015)
Is there trouble brewing in paradise, threatening the previously quit solid alliance presented to the outside world between public and private sector? Recent spats, taken to the newspapers and on to social media platforms suggest that certainly have cracks began to show, after a candid assessment by the Seychelles Hospitality and Tourism Association on one side and the Ministry of Finance, Trade and Investment on the other side.
The year 2014, while successful for the Seychelles’ tourism industry in terms of numbers – a new arrival record was established with just about a one percent rise compared to the previous record year of 2013 – has left the hospitality sector struggling with lower occupancies and reduced revenues as well as the effects of the sliding devaluation of the Seychelles Rupee. The lower than projected growth in arrivals was not able to make up for this opening of the ‘scissor’ and the budget presented and then adopted by the national assembly was blamed for doing too little for the tourism industry in the face of market challenges.
SHTA, in a recent statement, pressed home their criticism of the budget when they said: ‘The SHTA remains steadfast in its quest to persuade government that it must work with the trade to provide the necessary measures to create an enabling and profitable environment for businesses in general and tourism in particular and it is our fervent hope that we can turn the tide early in 2015’.
A report in the ‘Today’ newspaper then stirred things up some more when the following article was published:
Start quote:
‘Discord threatens to make “daunting” year more difficult’
If there’s one thing everyone agrees on is that 2015 is going to be very challenging. Worryingly though, that’s where the agreement ends.
By NR
In his New Year message, the chairman of the Seychelles Chamber of Commerce and Industry (SCCI), Marco Francis, described 2014 as “a tough year” and 2015 as a period that “will bring many challenges and daunting prospects”, thus confirming the Minister of Finance’s recent predictions for the coming year. Indeed, Pierre Laporte took to the Seychelles Broadcasting Corporation (SBC) a little over ten days ago to share his views on the country’s economic situation, warning that inflation will likely rear its ugly head in the months ahead. He also railed against the SCCI and the Seychelles Hospitality and Trade Association (SHTA) for their criticism of his December budget speech, accusing them of not wanting to pay their dues for the economic development of the country.
In his message, Mr Francis chose not to reply to these attacks, opting instead for a more diplomatic tack. “What we need to do is remain focused even if our personal goals and that of our particular organisation may differ. If we keep the greater picture and common good firmly in our sights, then we will definitely continue to breach barriers and broaden our horizons”, he pleaded. For its part, the SHTA issued a statement on December 31 to rebut Minister Laporte’s accusations, on transfer pricing in particular. “We note in particular the allegations of tax avoidance and transfer pricing which have been levied for several years now by the ministry of Finance, Trade and Investment against the industry”, it read.
The industry’s prickliness can in large part be explained by the fact that 2014 was a taxing year for the sector, in more ways than one. Despite arrivals picking up towards the tail end of the year, revenues were down, costs up and the issue of air connectivity remained as intractable as ever. In the meantime, the destination’s competitors improved their offers, air links and marketing strategies. And there is precious little reason to hope that 2015 will be any different. As a result, the association came out strongly against Minister Laporte’s budget, which it accused of handicapping the sector and threatening to render it “ultimately irrelevant”. The allegations made by Minister Laporte on the SBC are unlikely to help clear the air between the two parties.
“Whilst we cannot quite understand how these practices [tax avoidance and transfer pricing] can happen in an environment of declining yields and heightened international competition, bed overcapacity and stagnating growth, our association nonetheless strongly condemns such practices. If indeed the Minister is aware of some specific offenders, our members cannot but be offended that it has been lumped in with the offending parties – and as such, we strongly urge the Minister not to generalise but to take the necessary legal actions against them”, the statement noted caustically. Considering the challenges that lie ahead for what the SHTA termed an “ailing industry”, such bickering hardly appears to be the most constructive course of action.
Over at the Central Bank of Seychelles (CBS), vigilance remained the watchword. In a statement explaining its decision to maintain the tightened monetary policy introduced last September, the CBS warned against the risk of inflation, this despite the fact that international food and oil prices have been decreasing since August. “Given the significant pass-through of the exchange rate to domestic prices, the bank is particularly concerned about the potential second round effects of the weakened rupee. Data from the third release of the Producer Price Index Manufacturing (PPIM) which measures inflation from the perspective of the producers in the manufacturing industry continues to show rising cost pressures”.
End quote
The Ministry of Tourism and Culture has notably remained largely silent over the growing dissent and public disagreement between the SHTA and the Ministry of Finance, and is left in an unenviable position over a range of issues. While Minister St. Ange is widely respected and seen as a flagbearer of the tourism industry in the government and his personal integrity and good intentions are beyond doubt, has it also been acknowledged that he is facing a difficult task to carry the message of his sector into cabinet while at the same time adhering to the collective responsibility of being in government and having to stand by the 2015 budget as it was presented and approved.
‘I know there is a lot of behind the scenes lobbying going on right now. St. Ange has really made good of his promise for dialogue but ultimately, other sections in government prevailed when it came to resource allocation to his sector. There is also the issue of airlines and seats and the Seychelles Airlines problem has not gone away. No matter what people in government say, they cannot fight the perception that the new start up is being delayed intentionally. Government talks of facts, I talk of perception and that is not going to change. In fact, the perception has grown stronger when the budget hit the tourism industry squarely between the eyes. The new year will be one of many challenges, to grow our markets, to raise our revenues again. It is revenues which concerns us most because many top resorts have to put special offers on the market to keep occupancies up. New resorts will open soon and the pressure on occupancies will grow, the temptation to offers special deals will become overwhelming. And I tell you now, and this is the reason I must insist on total anonymity, the eyes of the Seychelles are already turning to the next election. This will make turf wars almost inevitable and for our sake I hope that tourism will prevail in putting in place measures which help our industry grow and prosper’.
Trouble in paradise? Perhaps not quite yet but the debate triggered by the 2015 Budget has shown the emerging red lines in the sand and fault lines, which can open quickly into something wider if no consensus can be reached between politics and business. For now it is Happy New Year to the archipelago’s tourism industry towards another successful year and prosperity for all.
Watch this space.
