Finance minister Naadir Hassan delivers Budget Address 2022 |13 November 2021
‘We must remain vigilant and continue to make sacrifices’
By Laura Pillay
“Remain vigilant and continue to make sacrifices,” is the resounding message from Minister for Finance, Economic Planning and Trade Naadir Hassan’s 2022 budget address, delivered before the National Assembly yesterday morning.
The Appropriation Bill 2022 under consideration by the assembly proposes a budget of R10,091,651,146, for the 2022 fiscal year.
Minister Hassan highlighted the hurdles Seychelles faces as it forges ahead towards economic recovery, necessitating policies towards economic sustainability and economic transformation.
“In fact, the economic contraction of 9.9 per cent that was recorded in 2020 is the highest that has been recorded. In addition, as a result of the policies implemented, government debt increased from 58 per cent to 92.2 per cent of our gross domestic product (GDP). In 2021, in spite of the fact that the Covid-19 pandemic was not yet over, we had no choice but to put our economy on a more sustainable path. In addition, we had to apply lessons learnt in the past for a better future for Seychelles,” said Minister Hassan.
“So, in the face of the new reality and even bigger challenges ahead of us, we cannot ignore the effect that our debt levels will have on the future generations. It is for this reason that it is necessary to implement policies that not only bring about a more diversified economy but also take into consideration the need to be more sustainable in everything that we do. To bring about this transformation, we need a more modern and more efficient public service. In simpler language, we have to do more with less,” Minister Hassan stated.
The principal objective of the budget is to continue to make government debt become more sustainable, by consolidating government expenditure, and to make the public service more efficient.
With the aim of ensuring that the budget for wages and salaries remains sustainable in the medium term, the 2022 allocation is projected at R3.10 billion, or 11.2 percent of GDP. As at October 2021, there were 10,849 employees in the public service.
There will be no increases in the salaries of public service employees, long service allowance, the salaries of employees on contracts at the end of their contracts.
The budget also proposes a limit to new recruitments within public service, with R215.8 million appropriated for 733 posts.
Minister Hassan echoed a similar call to last year’s address for public enterprises to “be more efficient in their performance and minimise pressure on the budget”. For 2022, government has allocated R149 million under the subventions for public enterprises, including R8 million to the Postal Services, R28.2 million to the Seychelles Public Transport Corporation (SPTC), R7.3 million to the Parks and Gardens Authority, and R95.5 million to pay the Etihad liabilities owed by Air Seychelles.
A further R169.1 million is allocated as development donations for public enterprises, namely, R46.3 million to SPTC, R60 million to the Public Utilities Corporation (PUC) and R62.8 million to the Property Management Company (PMC).
The largest envelop in the 2022 appropriations is a sum of R1.44 billion for social benefits and programmes under the Agency for Social Protection (ASP). This provides for R820.6 million for retirement benefits, R109.4 million invalidity benefits, R141.8 million disability benefits, R299.4 million for the home carer scheme and R40.7 million as a ‘safety net’.
Minister Hassan also announced the increase in the age of retirement from 63 to 65 years as of 2023. In addition, the Pension Fund will put forward options for retiring at 60 subject to receiving a reduced pension. This is to safeguard the sustainability of the fund.
The Appropriation Bill proposes for a budget allocation of R3.03 billion, or 10.9 percent of GDP to Goods and Services, comparable to 2021 at 12.3 percent of GDP. The education and health sectors alone represent a total of R967.5 million of the total budget in Goods and Services.
The Ministry of Health in 2022 is to receive R579.9 million, an important percentage of the national budget while the Ministry of Education has been allocated R1.03 billion. Government intends to conduct comprehensive exercises to determine means through which to gradually reduce resources allocated to the two sectors.
As explained by Minister Hassan, the transportation sector has received an allocation of R179.0 million in the proposed 2022 budget, to help the sector continue its development plan to improve and resurface some roads. Principal projects and programmes include building a vehicle testing station on Praslin at a cost of R8 million, R38.3 million for road resurfacing, R11.2 million for road repairs, improving the Plaisance roundabout for a sum of R4.8 million and R4 million allocated for the enlarging the Bois De Rose road.
With regards to government’s capital investment programme, the 2022 allocation has a considerable increase of 0.5 percent of GDP from the 2021 budget. A total budget of R1.53 billion is projected for the fiscal year, to facilitate the implementation for the construction of 51 houses, which already started in 2021, and the infrastructure needed for 116 land parcels as part of the land bank project. The 2022 budget also provides for the construction of 37 new houses and 88 new parcels of land.
R3.3 million and R11.6 million is being allocated for the renovation of the Central Police Station and a new police station for La Digue respectively, while the health sector will benefit R53 million for the construction of the new La Digue hospital, and an additional R34.5 million for the construction of a rehabilitation centre.
The renovation of different sports infrastructure has also been accounted for with an allocation of R11 million for major facilities, and an additional R1.5 million for other sports infrastructure.
As compared to the 2021 budget, The Ministry of Local Government and Community Affairs will receive an increase of R9.5 million for 2022, with a total allocation of R20 million for small community projects.
In line with the administration’s strategy towards economic diversification and transformation, government’s primary focus is on five sectors, namely tourism, agriculture, fisheries and blue economy, the digital economy sector and financial sector, to ensure more growth in these sectors in the medium term.
A proposed allocation of R123.4 million applies to the agricultural sector towards improved food security and economically sustainable import substitution, and the creation of avenues to encourage consumption of local products. This includes R13.6 million for the construction of new abattoirs on Mahé and Praslin to raise production level of poultry and pork to above 80 percent of the market share and increase the production of fruits and vegetables that can be produced locally to above 90 per cent.
The priority for the fisheries and blue economy sector is the promotion of value addition and the modernisation of infrastructure, for which R108.1 million has been appropriated. For 2022, agriculture growth as well as fisheries growth is estimated at 3 per cent.
Pertaining to revenue collection, government is expecting to collect a total of R9.7 billion in revenues and donations over the course of 2022. As such, the Seychelles Revenue Commission (SRC) has been allocated a sum of R231.6 million in 2022, compared to R137.2 million in the revised 2021 budget, towards modernising their system and capacity development for employees, in collaboration with international partners.
Furthermore, as announced in the 2021 budget, a new business tax regime is to be implemented by January 2022, with the aim of harmonising various existing taxes in the Business Tax Act and introduce a single regime. Currently, the tax rate is 25 per cent on profits of up to R1 million and 30 per cent on any profit above R1 million. The new tax rate on business profits is 15 percent on profits of up to R1 million, and, 25 percent on profits of above R1 million.
“This new tax proposal will also be applicable to sectors which previously had a preferential rate such as tourism, fisheries, casinos, international corporate service providers, businesses listed on Seychelles Securities Exchange, and businesses linked to medical services. Bearing in mind the government’s objective of developing and expanding our agricultural sector, this sector will obtain a grace period on tax payment for three consecutive years, starting 2021. After this period, there will be a review on the tax modalities that will be implemented,” Minister Hassan explained.
To boost revenue collection in the retail sector, additional licensing conditions for this sector are proposed including a legal obligation to have a cash register, and for every entity to have a point of sale machine to enable bank card payments. In a second phase, government will be working to connect cash registers directly to the SRC system.
The Appropriation Bill (2022) is under consideration by the National Assembly. Debates on the proposed legislation will commence during next week’s sittings.
Meanwhile the full Budget speech is published in our centre pages.