Business Environment in Seychelles

1.1 Introduction

Seychelles, officially known as Republic of Seychelles is an island country which consist 115 islands situated in the Indian Ocean close to the African continent. The main island known as “Mahe”, where the capital is situated. Seychelles’s estimated population is around 86,000. Official languages are English, French and Seychellois Creole. The national currency is the Seychellois Rupee. Seychelles international airport is located in the island of Mahe close to capital city, Victoria. Republic of Seychelles was granted independence from Great Britain in 1976. Seychelles is a member of United Nations, Commonwealth of Nations and Indian Ocean commission.

1.2 Political Environment

Seychelles has multi-party political system. Legislative power is exercised by National Assembly which consist 34 members elected for 05 year term. In year 1964 Seychelles People’s United Party led by France Albert Rene and Seychelles Democratic Party led by James Mancham were formed. James Mancham became the first president after gaining independence from Britain in 1976. However, in 1977 France Albert Rene overthrew the James Mancham’s government and became the president. In year 2004, France Albert Rene retired from the office of president and then vice president James Michel was appointed as President. In year 2011, James Michel was re elected as president. The president of Seychelles is the head of state. The cabinet is appointed by the president. Seychelles has been divided into 25 regions for administrative purpose.

1.3 Social and Cultural Environment

Seychelles has high living standards in compared with the other countries in the region. The Population of Seychelles consist people from different races, ethnic origins and religions.  At different times in its history, people from various parts of the world have migrated to Seychelles. Presently people from African, French, Indian, and Chinese descent are living in Seychelles.

The majority of Seychellois are Christians. However, there are small minorities who practice Hinduism and Islam. The staple food is rice whereas seafood dishes are an integral part of the meal. 

1.4 Economic Environment

1.4.1 Composition of GDP

According to the International Monetary Fund, Gross Domestic Production (GDP) of Seychelles stands at United States Dollars 1.031 billion in terms of current prices as at 2012. However, it is United States Dollars 2.317 billion in terms of Purchasing Power Parity (PPP). Seychelles has one of the highest per capita income in the African Continent US $ 11,226 as at 2012 (In terms of Purchasing Power Parity it is US$ 25,229).

The Agriculture sector account for only 1.3 from the GDP. The main agricultural products are coconuts, cinnamon, vanilla, potatoes, cassava (tapioca) and banana etc. The Manufacturing sector accounts for 7% from the GDP. Seychelles has relatively low unemployment rate which is only 1.8%. Majority of Seychellois are employed in the private sector (73% from the workforce). The inflation rate was recorded a 7.1% during year 2012 due to increase in food and fuel prices.

1.4.2 Tourism

In 1960s and early 70s agriculture was the dominant sector in the economy. However, after 1970s tourism became the main driving force of the economy. From the total workforce around 26% are employed in tourism related sectors. In year 2012, the total tourist arrival recoded as 208,034 which is 7% increase in compared to the 2011. According to the Seychellois central bank report of 2012, the total revenue generated from the tourism sector is around US $ 310 million during year 2012  France, Germany, United Kingdom, Italy and Switzerland are the leading sources of tourist arrivals.

Table 1.1 Tourist Arrivals in Seychelles

As per the above table, it is clear that tourist arrivals to Seychelles have increased during last 05 years. Presently, Seychelles is concentrating on diversification of market for tourism to reduce the dependence on European countries. Seychellois focus on countries such as United Arab Emirates and Australia etc. to attract more tourists.

1.4.3 Fishing Industry

Fishing also is another important sector in the economy. According to the African Economic Outlook (www.africaneconomicoutlook.org) Fishing industry is the most important contributor to export sector which accounts for over 80% of export revenue, although it only represents about 11% of formal employment. Tuna fishing plays important role in the economy of Seychelles. Seychelles Fishing Authority (SFA) which was established in 1984, deal with all matters relating to the fishing. The Seychelles Fishing Authority (SFA) formulates national policy pertaining to the fishing industry and resources as well as the implementation of that policy. During year 2012 European Union (EU) paid Euro 3 million as part of Seychelles/EU Fisheries partnership Agreement. The agreement allows EU registered vessels to engage in fishing in Seychelles waters and in return EU provides financial support for the implementation of Seychelles fisheries and maritime policies apart from licensing fee paid by vessels that engage in fishing in Seychelles territories.

1.4.4 Tax system

The Seychelles Revenue Commission (SRC) has been entrusted with collection of tax revenue. Tax revenue is the main source of income of the government. The Commission introduced Value Added Tax (VAT) which replaced existing Goods and Services Tax (GST) with effect from 1^st January 2013. The applicable rate 15%. Value Added Tax (VAT) is consumption tax levied on the sales of goods and services provided. VAT is levied at the point of entry and charged at the point of sale, except on goods and services exempted in the Value added Tax Act 2010.

1.4.5 International Trade, Investment and Economic Integration

In year 2012, Seychelles has earned US$ 272 million from the export of merchandise. Canned Tuna export is the main export merchandise. Export of canned Tuna fish has earned US$ 242 million in year 2012. Apart from the Tuna fish the main export commodities are Copra, Cinnamon and Vanilla etc.

The main import commodities are Fuel and Food items, Chemicals, Machinery and transport equipment. Fuel accounts for around 30% from the total imports. In year 2012, deficit of the current account stands at US$ 231 as the value of imports exceed the value of export. According to the Central Bank report 2012 of Seychelles, the annual average traded value of the Seychellois Rupee, for the year 2012 was R 13.6944 against the United States dollar, R21.6281 relative to the Great Britain Pound (GBP) and R17.6398 against Euro. During year 2012, Seychellois Rupee depreciated by 11% against US dollar.

The Seychelles International Business Authority (SIBA) was established in 1995 under the Seychelles International Business Authority Act of 1994. The Authority is one stop shop that covers both licensing and regulation of the primary offshore business. It is the registrar for International Business Companies, International Trusts and Limited Partnerships etc. In addition it regulates Free Trade Zone activities in the Seychelles. The Seychelles International Business Authority (SIBA) granted a securities exchange license to Trop – X (Seychelles) Limited, the first securities exchange in Seychelles. The securities exchange provide platform for the growth of financial industry.

According to the Seychellois central bank report of 2012, Seychelles remains active participant in the regional integration initiatives of both the Southern African Development Community (SADC) and the Common Market Eastern and Southern Africa. Both regional blocs continued to underline their commitment to underline their commitment to economic and financial integration despite the concern over viability of EU model on which they are modeled.

Seychelles Investment Bureau was established in 2004 to promote the investment in Seychelles. It is the contact point for all matters relating to investment and business in Seychelles. The value of Foreign Direct Investment inflow to the Seychelles is around US$ 139 million during year 2011. Seychelles government encourages foreign investment through some incentives for investment. The International Trade Act 1995 paves the way for establishment of Free Trade Zone in Seychelles. The Free Trade Zones offer benefits such as zero taxes, fixed license fees and ability to import foreign labour etc. Seychelles has entered into Avoidance of Double Taxation agreements with countries such as Bahrain, Barbados, Botswana, China, Cyprus, Indonesia, Malaysia, Mauritius, Oman, Qatar, South Africa, Thailand, the United Arab Emirates, Vietnam and Zambia.

Seychelles is located in a strategic position on the Europe-India sea route has immense potential for developing tourism industry as well as fishing industry. Moreover, Seychelles can concentrate on improving Victoria harbor and international airport as a transit point for both passengers and cargo.

References

1. Seychellois Central Bank report 2012
2. Seychelles Tourism Board (www.seychelles.travel)
3. African Economic Outlook (www.africaneconomicoutlook.org)
4. Seychelles Revenue Commission (www.src.gov.sc)
5. Seychelles International Business Authority (www.siba.net)
6. Seychelles Investment Bureau (www.sib.gov.sc)
7. Encyclopedia Wikipedia (https://en.wikipedia.org/wiki/Seychelles)‎