Holding the Door Open for Investors: The Island State of Seychelles Has Been Too Dependent on the Fickle Tourism Industry for a Long Time and It Is Now Seeking Ways of Diversifying the Economy. Recent Changes in Legislation Will Make the Islands More Investor-Friendly. Neil Ford Reports
Ford, Neil, African Business
The government of Seychelles is making a concerted effort to widen its economic base, which is currently dangerously dependent on tourism. Although the sector is currently prospering and continues to fuel economic growth, overreliance on a single industry is never healthy and so the government is attempting to both boost trade with the Southern African Development Community (SADC) and attract inward investment that can target markets around the world.
Seychelles appears to be following in the footsteps of neighbouring Mauritius, which originally relied almost entirely on sugar and tourism, but which quickly developed a sizeable textiles industry and has now moved on to offer itself as an offshore IT hub.
Mauritius' fellow Indian Ocean state has a long way to go before it can match such achievements, but Seychelles took a major step in the right direction in November when it passed new investment legislation which aims to create "a legal environment more conducive to attracting a greater flow of investment into the country".
In a statement, the government announced that the new investment framework "seeks to make provision that will encourage more investments into the country by safeguarding the interests and the rights of potential investors".
Companies interested in investing in the Seychelles at present must apply for various permits from a variety of local and national authorities. However, the Minister for Economic Planning and Employment, Jacquelin Dugasse, has revealed that a single authority will be set up to approve investment applications, so that planning, taxation and environmental assessments can all be considered in concert and their processing coordinated.
In common with many African states, it can often take a long time to launch a new business and potential investors can select the option of a competing country if delays are persistent. Apart from cutting red tape, the government has granted foreign investors the right to take their profits out of the country and to freely exchange local and foreign currencies as required.
Many governments and central banks in developing countries restrict the outflow of both hard currency and profits in order to protect the value of their currencies and, nominally, in order to encourage investors to maintain their investment. In practice, such restrictions generally achieve little apart from discouraging investment.
The World Bank and the United Nations Industrial Development Organisation (UNIDO) recommended these changes for several years and the former incorporated them in its proposals for economic diversification in the country. Indeed, UNIDO helped the Seychelles Investment Bureau (SIB) and the government to draft the new legislation.
Local firms protected
However, while some African investment bodies are purely concerned with attracting lucrative foreign investors, the new Seychelles' investment body will handle applications from Seychellois, other African and non-African investors.
In addition, in order to prevent domestic companies from being overwhelmed by foreign competitors based on their own doorstep, some activities are to be reserved for local firms. These include most small scale tourist ventures, such as taxi companies and small guest houses.
Small scale fishing and farming ventures involving investment of less than SR150,000 (Seychelle rupees), which converts to approx. $28,000, will not need official approval, although, according to the government, "they will need the approval of the Authority if the proposed project is venturing into a new produce or product that has never been or is not commonly done in the country or if it is introducing a new technology never applied before in the country."
All investors in the International Trade Zone are not governed by the new legislation as they struck bespoke agreements with the government when investing. …