Seychelles

• While maintaining a solid performance, GDP growth in the Seychelles will decline slightly in 2012, reaching 4%, due in part to the European financial crisis and subsequent declines in European tourism; it should then redress in 2013.

• In addition to the on-going reforms, government sustained a fiscal policy stance that is in line with its objectives of public debt reduction and will continue to post budget surpluses of 2.8% in 2012 and about 0.8% in 2013.

• Youth unemployment is relatively low in the Seychelles; youth employment promotion programmes are overall successful. However, challenges remain, chiefly the attitude of youth regarding work, as well as the impact of substance abuse on employability.

In 2011, the Seychelles economy, as measured by real growth in gross domestic product (GDP), is estimated to have grown at 5.0%, which, although slower than the GDP growth rate of 6.7% in 2010, is higher than was expected at the beginning of 2011. This stronger than expected performance was due to an 11% rise in tourism numbers and the positive impact of economic reforms. Growth was lower than 2010 due to a decline in foreign direct investment (FDI), as well as the impact of higher food and fuel prices. Tourism will continue to be the main driver of economic growth in 2012/13. As a result, GDP growth is projected to decline further in 2012 to 4%, as the financial crisis in Europe, which accounts for about 70% of tourists, continues. Higher inflation and interest rates, combined with continued fiscal consolidation, will also dampen domestic demand. From 2013, GDP growth is expected to increase to about 5%, due to a more favourable global economic environment, on-going structural reforms, and higher investment and consumption spending.

Following the re-election of President James Michel, the government maintained a fiscal policy aimed at reducing public debt, as per the terms of an International Monetary Fund (IMF) backed reform plan, and will continue to post budget surpluses in 2012 and 2013. The planned introduction of a value-added tax or VAT in 2012 is well on track, and a new public finance bill was approved by the cabinet in late 2011. Progress continues to be made in improving the investment climate regulatory framework. Amendments to the Financial Institutions Act have established the legal basis for new financial products, boosted competition, and reduced the state’s role in the financial sector. Seychelles has recently prepared the new Seychelles Sustainable Development Strategy (SSDS) 2011-2020. A new National Development Plan will be prepared over the course of 2012.

Youth unemployment in the Seychelles is relatively low, as there are generally sufficient jobs on offer; the government provides a number of training programmes to enhance skills, and job-search information is readily available. However, there are still challenges – including the somewhat laissez-faire attitude regarding employment choices of Seychellois youth and the impact of drugs and substance abuse – which translate to reluctance in hiring first-time jobseekers and a preference for expatriates.

In 2011, the Seychelles economy is estimated to have grown at 5.0%, which, although slower than the GDP growth rate of 6.7% in 2010, is higher than expected at the beginning of 2011. This stronger than expected performance was due to an 11% rise in tourism numbers – a new record high with over 190,000 visitors – and the positive impact of economic reforms. In addition, production of canned tuna (the main export product) rose by 7.6% year on year in the first half of 2011. Nevertheless, growth was lower than 2010 due to a decline in FDI, as well as the impact of higher food and fuel prices. Increases in international food and fuel prices, and a slowly depreciating rupee have also had a large impact on the cost of living domestically. Following deflation in 2010, average inflation for 2011 increased to 2.5%. In addition, higher international food and oil prices have also contributed to sustaining a very high current account deficit of 21.8% of GDP in 2011.

Tourism, which accounts for about 25% of GDP and 37% of employment, will continue to be the main driver of economic growth in 2012/13. As a result, GDP growth is projected to decline further in 2012 to about 4%, as the financial crisis is expected to continue in Europe, which accounts for about 3 out of every 4 visitors to the Seychelles. Higher inflation and interest rates, combined with continued fiscal consolidation, will also dampen domestic demand. Tuna canning will also slow down as a result of declining fish stocks and rising insecurity from Somali pirates in the western Indian Ocean. In the first six months of 2011, industrial fishing vessels caught 15% less fish than in the same period of 2010. There was also a 16% reduction in the tonnage of fish that was trans-shipped or offloaded at the Seychelles in 2011. To compound this, local fishermen are reluctant to go fishing due to the risk of being attacked by pirates, which has reduced the tonnage of fish caught by artisanal fishermen and semi-industrial fishing.

In 2013, GDP growth is expected to increase to 5%, as a result of a more favourable global economic environment, on-going structural reforms, and higher investment (e.g. infrastructure) and consumption spending with resources freed up from the successful debt restructuring. In order for Seychelles to safeguard economic growth and manage its vulnerabilities to external economic shocks, it needs to diversify its source markets for tourism. In this regard, Etihad Airways (along with Emirates and Qatar) became the third operator from the Middle East to fly to the Seychelles. Along with other airlines from Asia and Africa, this will help boost visitor numbers from these markets, which already account for 22% of total visitors. Ongoing reforms in the financial sector are critical for improving the competitiveness and range of products available to enhance private sector activity. For example, increasing transparency and competition in the banking sector (e.g. the Seychelles Savings Bank was partially privatised in 2011) are welcome steps to deepen the provision of financial services and diversify the economy. On top of the considerable tourism investments, there are plans to construct a new fuel depot for the fishing industry and develop processing plants to enhance value-addition activities in the fisheries sector. In addition, the submarine fibre optic cable between Seychelles and Tanzania will be completed in 2012; this should significantly help to diversify the economic base and create new avenues for economic growth.

Seychelles continued to implement major reforms in 2011, as per the terms of the IMF-backed programme. The government sustained a fiscal policy stance (a budget surplus of about 3.8% of GDP) that is in line with its objectives of public debt reduction and will continue to post budget surpluses in 2012 and 2013. For example, at the end of September 2011, the total government and government guaranteed debt stock fell to 82% of the country’s GDP, which is in line with the IMF programme forecast of 75% by 2012. The rupee is still freely floated and it has been largely stable, reflecting confidence in the Seychelles reform programme and allowing the rebuilding of foreign-exchange reserves (which were approximately USD 268 million at the end of 2011 and equivalent to about 2.4 months of import cover).

In terms of legislation, the planned introduction of a VAT in mid-2012 is also well on track, and a new Customs Management Act (CMA) has been submitted to the National Assembly. In addition, a new public finance bill, to incorporate reformed budget practices and extended oversight, was approved by the cabinet in 2011. Progress continues to be made in improving the investment climate regulatory framework. The overly complex system of non-discretionary fiscal incentives continues to be eliminated and the investment framework has now been clarified with the promulgation of the Seychelles Investment Act 2010. Amendments to the Financial Institutions Act have established the legal basis for new financial products, boosted competition, cut default risk by establishing a credit bureau, granted the Central Bank of Seychelles (CBS) extra regulatory powers and reduced the state’s role by providing for the restructuring or privatisation of state-owned financial institutions.

Having successfully implemented the second Environmental Management Plan of Seychelles (EMPS), the government has recently prepared and validated a new Seychelles Sustainable Development Strategy (SSDS) 2011-2020. The SSDS is a national instrument, which incorporates national priorities for sustainable development; it comprises 13 thematic areas (including energy and transport, climate change, biodiversity, education for sustainability, and social and human development), and a road map to implement them. Finally, as the government’s national reform priorities focused on macroeconomic stabilisation following the crisis in 2008, the MEFP (Memorandum of Economic and Financial Policies) embodied the core of the government’s development strategy. Now that the government is transitioning out of this crisis recovery, it is going to adopt a more conventional National Development Plan – being prepared over the course of 2012 – which will then drive development priorities going forward.

The government continued to pursue a fiscal policy stance in 2011 that is in line with its objectives of fiscal consolidation and public debt reduction. The 2011 budget surplus was lower than programmed, at about 3.8% of GDP, to accommodate both the establishment of a domestic price Stabilisation Fund (SF) – aimed at shielding households from the impact of international price shocks – and to provide temporary support to Air Seychelles. Disbursements to the SF have been capped for 2011 (at 0.4% of GDP) and support to Air Seychelles (about 0.7% of GDP) will last until the airline restructuring plan is implemented. Both undertakings are being monitored closely to ensure that the budget exposure is contained. It is envisaged that Seychelles will continue to post a budget surplus of 2.8% in 2012 and about 0.8% in 2013, enabling additional debt repayment, but will also increase spending on much-needed infrastructure improvements.

Government expenditure is estimated to be 6% higher than was initially budgeted for in 2011, due to higher spending by ministries and departments, and unexpected transfers such as those to Air Seychelles. However, substantial improvements in the management of arrears payments will contribute to a more credible expenditure budget going forward. Further progress will also be made in treasury management and in the rationalisation of public entities.

Following the introduction of a withholding-based personal income tax in July 2010, the income tax rate has now been harmonised for national and expatriate employees. The planned introduction of a VAT in mid-2012 is also well on track, and a new Customs Management Act (CMA) has been submitted to the National Assembly. A customs reform team was also appointed in April 2011 to ensure successful implementation of the customs reform programme. Combined, these reforms will help to further broaden the tax base, simplify the system and make it fairer and more equitable.

Positive results are already evident: as of August 2011 annual revenue collections were17% greater than in the same period of 2010 and it is expected that overall revenue collection will be 5% higher than initially forecast for 2011. Although revenue growth is expected to slow down over 2012/13, as a result of the extensive tax reforms, these reforms will ultimately encourage economic activity and help place public finances on a more sustainable footing in the medium term.

Inflation accelerated to 2.9% year on year in August 2011, the highest level for almost two years, after returning to positive territory in March 2011. As a result, inflation averaged 2.5% in 2011 and is expected to continue moving upwards in 2012/13, driven by higher food and fuel prices, stronger domestic demand (spurred by tax cuts) and the depreciation of the rupee, which will push up import costs. As a result of the increase in inflation, the CBS increased minimum reserve requirements (MRR) on commercial banks deposits by 300 basis points to 13% on local-currency deposits, from April 1st, and on foreign-currency deposits from June 30th. In addition, social security fund deposits with commercial banks have gradually been transferred to the CBS to help control liquidity. As a consequence, interest rates have moved higher, with the 91-day Treasury-bill rate jumping from 0.4% in March to 5.1% in June, at which level it has stabilised for the remainder of 2011.

Unfortunately, there has been a lot of pressure on the external position of the country – particularly in the second half of 2011. Increased demand for foreign currency has manifested itself through a depreciation of the rupee of 4.7%, 7.9% and 7.4% against the US dollar, euro and the UK pound respectively. The rupee is expected to continue depreciating against major currencies into 2012, although the large currency swings witnessed following its free flotation in October 2008 are unlikely, reflecting confidence in Seychelles reform programme and the rebuilding of foreign-exchange reserves. These are expected to be approximately USD 268 million by the end of 2011, a multi-year high equivalent to about 2.4 months of import cover.

The CBS and the Ministry of Finance are co-ordinating their efforts to improve liquidity management. A calendar of weekly Treasury bill issuances is communicated four weeks in advance, so as to inform the market on the quantity of paper to be issued. This has helped improve the predictability of the securities market and facilitate liquidity management of banks. The authorities remain committed to the floating exchange rate regime. The CBS only intervenes in the foreign exchange market to smooth out excessive volatility, to ensure orderly market conditions, and, if needed, to build up international reserves in line with its programme objectives.

Seychelles belongs to the Common Market of Eastern and Southern Africa (COMESA), the Southern African Development Community (SADC), and the Indian Ocean Commission (IOC). Seychelles took over the chairmanship of the IOC in October 2011. In addition, Seychelles fully supports the setting up of a single integrated market for the 26 countries of COMESA, EAC and SADC. Seychelles is also a member of the Indian Ocean Tuna Commission and a new three-year tuna fisheries agreement between Seychelles and the European Union has now been operationalised. Seychelles continues to spearhead efforts to combat piracy and has established a dedicated UN-backed regional court to prosecute pirates.

The authorities remain committed to a liberal foreign trade policy. The import tariff regime is already quite liberal, with more than 94% of all tariff lines set at zero. For tariff lines not set to zero (e.g. fuel, alcohol, tobacco and motor vehicles), duties have been lowered from an average applied import duty of 28.3% (all products) in 2005 to 8% in 2011. The authorities also remain committed to the World Trade Organization (WTO) accession process.

The main merchandise exports in 2011 continued to be canned tuna (about 95% of the value of exports), fish meal and frozen and fresh fish. Priority markets for canned tuna exports included the UK, France and Italy. The main imports were fuel, machinery and transport equipment, food, live animals and manufactured goods. Priority source countries for imports included the UAE, South Africa, India and the UK. In 2011, the current account deficit as a percentage of GDP is estimated to have fallen to 21.8% from 22.7% in 2010, but is projected to increase in 2012 and 2013, as exports (canned tuna) are expected to decline and tourism arrivals slow down.

The government continued to pursue a fiscal policy stance in 2011 that is in line with its objectives of public debt reduction and will continue to post budget surpluses in 2011-2013 – albeit smaller ones – enabling additional debt repayment as part of its Debt Management Strategy 2010 to 2012. At the end of September 2011, the total government and government guaranteed debt stock stood at USD 798 million(compared to USD 789 million a year earlier). The total debt stock fell marginally to 82% of GDP (compared to 84.3% a year earlier) of the country’s GDP, which is in line with the IMF programme forecast of 75% by 2012. Approximately 57% of this debt is external and 43% domestic.

Furthermore, despite the issuance in 2011 of government guarantees in relation to the domestic loans extended to Air Seychelles and bonds issued locally by the Development Bank of Seychelles, and a less favourable macroeconomic environment, total public debt is still projected to decline to 76.2% of GDP at end-2011. However, one risk to this is that should restructuring of Air Seychelles take longer than planned, and their financial situation deteriorates further, the ensuing quasi-fiscal losses could undermine the authorities’ debt reduction objectives.

External debt restructuring is now close to completion. Seychelles signed an agreement with Germany in April 2011 to restructure debt worth EUR 3.4 million over a period of 49 years, in line with the Paris Club agreement of 2009. China agreed in April 2011 to restructure debt amounting to USD 27 million – to be repaid in 20 years and with a 10-year grace period. The authorities are in the final stages of negotiations for restructuring of the Abu Dhabi loans. India is now the only outstanding official bilateral non-Paris Club creditor where discussions continue regarding outstanding claims. On the commercial side, a bilateral agreement is yet to be finalised with only one creditor (Nedbank South Africa). The credit rating agency, Fitch, upgraded Seychelles’ rating to B with stable outlook in February 2011, mainly reflecting sound implementation of the IMF programme for a second consecutive year, as well as the remarkable progress made with public debt restructuring.

In spite of the measures that the government has recently undertaken to improve the business environment, a number of obstacles still exist. According to the World Bank's 2012 Doing Business report, Seychelles slipped from a rank of 95 in the 2011 Report to a rank of 103 (both out of 183 countries) in the ease of doing business index.

According to the Doing Business 2012 report, the bureaucratic and legal steps to incorporate and register a new firm are long (about 39 days on average) and involve significant costs (about 16% of income per capita on average). Even more difficult is the ability of a firm to get credit, with Seychelles ranked 166 out of 183 economies on this criterion. On the other hand, registering property and getting construction permits are relatively easy and Seychelles ranks much better on these measures (63 and 54 respectively). In addition, the Seychelles Licensing Authority (SLA) recently (effective November 2011) listed major changes in the way licences will be issued. Most business and trading licenses will now be valid for five years, rather than just one year, which will improve confidence. The fees for licenses have also been revised to comply with the provisions of the Licensing Act 2010, and will only cover the administrative costs of issuing licences.

The general competitiveness of the private sector is constrained by various infrastructural bottlenecks including: inadequate information and communication technology (ICT), inadequate water supply and limited/expensive energy supply. Two areas, however, where Seychelles is doing very well are paying taxes and trading across borders (with a rank of 16 and 33 respectively). Several significant tax policy reforms in 2011 continue modernising and broadening the tax system.

Progress continues to be made in improving the investment climate regulatory framework. The excessively complex system of non-discretionary fiscal incentives continues to be streamlined and the investment framework has now been clarified with the promulgation of the Seychelles Investment Act 2010. The procedures for employing and firing workers have also been simplified for local and foreign workers (e.g. the immigration office now acts as a one-stop-shop for the processing of the gainful occupation permit). Work still needs to be done, however, in reducing the number of procedures and duration for enforcement of contracts.

The authorities are adopting a multi-pronged approach to strengthen the financial sector and reduce the role of the state. Amendments to the Financial Institutions Act, approved by cabinet in June 2011, have established the legal basis for new financial products, boosted competition, cut default risk by establishing a credit bureau, and provided for the restructuring or privatisation of state-owned financial institutions. For example, in May 2011 the government embarked on the process of divesting from the Seychelles Savings Bank (SSB) by offering 40% of SSB shares to the public, with priority given to the bank’s account holders and employees. Banking supervision continues to develop further and move toward a risk-based framework. In the context of this approach, the CBS now requires banks to submit business plans on an annual basis by end-2011. Non-bank state financial institutions, including the Development Bank of Seychelles (DBS) and the Housing Finance Company (HFC), are also being more closely supervised and revamped. The CBS is also committed to encouraging a sound and efficient insurance sector that promotes policyholder confidence.

The financial sector continues to be dominated by the banking sector, which consists of six domestic commercial banks. Four of these (Barclays Bank, Mauritius Commercial Bank, Habib Bank and Bank of Baroda) are foreign owned, and the other two are the previously state-owned banks that are being restructured: Nouvobanq (ownership currently 78% government and 22% by Standard Chartered Bank) and SSB. On the contractual savings side there are two insurance companies and a pension fund. The offshore industry consists of 1 domestic bank with an offshore license, 48 corporate service providers and 2 insurance companies. There are no securities companies and mutual funds. The authorities are exploring the development of a stock exchange with a view to developing capital markets and have decided to reintroduce longer-term government bonds in the domestic market. Increasing transparency and competition in the banking sector and developing new long-term instruments are welcome steps to increase the role of the private sector in deepening the provision of financial services.

Seychelles’ strong overall performance in governance is indicated by its high ranking of fourth (out of 53 African countries) in the 2011 Mo Ibrahim Index of African Governance. However, when looking at the sub-category of ‘public management’ it only ranks a poor 35th. This indicates that the government’s public sector reform programme is still to bear fruit.

Public finance management (PFM) continues to be strengthened through the implementation of an ambitious action plan. The recent Public Expenditure and Financial Accountability (PEFA) assessment, concluded in March 2011, shows that the reform efforts of the last three years have significantly strengthened performance in most of the critical dimensions of the PFM system. A new public finance bill, to incorporate reformed budget practices and extended oversight, was approved by cabinet in late 2011. The comprehensiveness of budget documentation, especially for fiscal year 2011, has benefited from the new Budget Strategy and Outlook prepared by the Ministry of Finance. Medium-term policy-based budgeting will be introduced as a pilot in the preparation of the 2012 budget for education and health.

In terms of service delivery, Seychelles seems to be performing well and is ranked in the top 40% of countries in the World Bank’s Worldwide Governance Indicators (2010) for the category ‘Government Effectiveness’. In terms of statistics, the authorities have adopted a strategic plan to achieve compliance with the IMFs Special Data Dissemination Standard (SDDS) and Balance of Payments and International Investment Position Manual (BPM6).

The government continues to pursue a public enterprise reform strategy. In 2011, the key actions to reinforce public enterprise monitoring have included: a revised policy to formalise the selection criteria of board members and to align board remuneration with the level of responsibility and work entailed. Concerns over alleged public sector corruption have focused on the lack of transparency in privatisation and the allocation of government-owned land.

The government’s efforts to conserve the environment are laudable and Seychelles is regarded as a pioneer in environmental protection and conservation. It is a signatory to the United Nations Convention on Biological Diversity (UNCBD). In mid-2011, the government announced that it will declare new protected areas in the archipelago, resulting in half (50.59%) of all Seychelles land being protected by law.

In 1990, the government launched the first Environmental Management Plan of Seychelles (EMPS), covering the period from 1990 to 2000. To support the implementation of the Plan, the Ministry of Environment created an EMPS Co-ordination Unit. This is overseen by a multi-sectoral steering committee. In addition, there are a number of more specialised agencies and authorities, which include: Marine Parks Authority; Seychelles Fishing Authority; and the Public Utilities Corporation (responsible for providing access to water and sanitation services).

In 1994, the government passed the Environment Protection Act, which, amongst other things, makes provisions for Environmental Impact Assessment (EIA) studies and authorisation for particular projects and activities. In 1997 the Ministry of Environment was established, which ensures the consideration of environment issues in decision making by all government bodies.

The government launched a new EMPS for the period 2000 to 2010, to build on previous successes, as well as address new challenges from increased urbanisation of the main granitic islands. Having successfully implemented the second EMPS, Seychelles has recently prepared and validated a new Seychelles Sustainable Development Strategy (SSDS) 2011-2020. The SSDS is a national instrument, which incorporates national priorities for sustainable development, and has 13 thematic areas (including energy and transport, climate change, biodiversity and human development).

Presidential and parliamentary elections were held during the course of 2011. First, the presidential elections in May, found the incumbent, James Michel from the People’s Party (also known as Parti Lepep), re-elected for a second five-year term. President Michel won 55% of the vote compared to 41% for the runner-up, Wavel Ramkalawan, from the Seychelles National Party (SNP).

Second, the parliamentary elections in October saw the People’s Party claim a resounding victory, largely as a result of a boycott by the two main opposition groups – the SNP and the smaller New Democratic Party. The boycott meant that voter turnout dipped to 50.6% from 83.8% in the 2007 elections, and resulted in a complete absence of opposition members in parliament, which undermines democratic legitimacy. In addition, a new party that formed a month before the parliamentary elections by SNP defectors, the Popular Democratic Movement (PDM), failed to cross the necessary 10% voting share threshold (winning just 7.4% of the votes cast) in order to win a seat.

The boycott was called in protest at the membership and objectivity of the country’s first independent electoral commission, which was sworn in on August 2011. This commission was established to strengthen constitutional democracy and promote a more democratic electoral process, following calls from opposition parties that the Presidential election was not free and fair.

With the People’s Party having won both the presidential and parliamentary election, Seychelles is not scheduled to hold elections until 2016.

In Seychelles, education is free and compulsory for 10 years or up to the age of 16. As a result, Seychelles has achieved Millennium Development Goal (MDG) 2 for many years now with a near 100% primary completion rate and about a 94% secondary school enrolment rate. Furthermore, in 2009, the education department embarked on a reform of key aspects of the education system under the Education Reform Action Plan 2009-2010, with the aim of creating a high quality education and human resources development system that is responsive to national development needs. In addition, the government approved the Seychelles Framework for Early Childhood Care and Education (ECCE) in 2011, which is a multi-sectoral policy document for all stakeholders in early childhood care and education.

The Government of Seychelles is the principal health care provider. Its health care provision is inspired by the Constitution of the Republic of Seychelles and the Health Policy Declaration, underscoring the principles of basic human rights: equity, access and ensuring the availability of free basic health services to the entire population. Government health expenditures are normally a large share of the national budget (about 12% in 2011). As a result, Seychelles has achieved impressive health care indicators and is on track to meet the health related MDGs (4 and 5). Immunization coverage in 2006 for tuberculosis (BCG), diphtheria (DPT3), polio (OPV3) and measles was 100%. Due to these high coverage rates, vaccine-preventable diseases have disappeared from the island and the neonatal and infant (under-5) mortality rates were 6.13 and 9.5 per 1000 live births respectively in 2009. It is, thus, one of the better performers in the world for the under-5 mortality rate (well below the global average of 60). Life expectancy in 2009 stood at 73 years (77 for women and 68 for men), which is higher than the global average of 68.

Prevention, treatment, care and support programmes for HIV/AIDS related diseases are national concerns. Figures from the UNAIDS report 2010 show that, of the people needing treatment for TB and HIV in the Seychelles, 100% were treated. The authorities still need to prepare a follow-up strategy to the recently concluded National Strategy on HIV/AIDS (2005-2009).

Since the 1990s, Seychelles has successfully promoted high living standards and social development. In Africa, Seychelles had the second highest GDP per capita (after Equatorial Guinea, an oil exporter) in 2010, is one of nine upper-middle-income countries, and leads in human development. On the Human Development Index (HDI), it was ranked 57th in the United Nations Development Programme’s Human Development Report of 2009, a level comparable to many OECD countries.

The 2011 budget is strongly committed to the social sector and social welfare programmes;  mainly in health, education, social services, housing, community development, the social programmes of central government, benefits and approved programmes of the Social Security Fund (SSF), and transfers to public entities fulfilling social functions. For example, the allocation to the social sectors of health and education constitute about 27% of the budget. As a result, Seychelles has already met the target for most of the eight MDGs. Access to education and health services, safe drinking water and sanitation for all have contributed to poverty alleviation, social integration and a high standard of living. Other key indicators such as life expectancy, adult literacy rate, population growth rate, and gender equality compare favourably with achievements in developed countries.

Given the food and fuel price rises over the last year, the government established a Stabilisation Fund (with initial capital of SCR 120 million). This fund will ensure that, should there be any sudden price fluctuations, the authorities will be able to dampen the effect, adjust prices gradually and shield households from a portion of the impact. In addition, the 2011 budget has allocated SCR 65 million to the social safety net (about 1.5% of the budget). Government has also launched a comprehensive reform of the tax system to broaden the tax base and enhance simplicity and equity.

Seychelles does not have a national poverty line for measuring poverty. However, the latest household income and expenditure survey done in 2006/07 provides some data that can be used as a baseline measure of poverty. According to the survey, the food poverty line (the most basic requirement for survival) is SCR 38.9 per capita per day. Applying this threshold to the household survey data, around 18% of households are estimated to be living below the food poverty line. To counter this, at the end of 2008, the government introduced the Social Welfare Agency (SWA) to support better targeting of expenditure to those most in need (through a new means-tested welfare system). For this to be effective, the government undertook a ‘living conditions survey’ in 2011 to update the true level of poverty and vulnerability. The planned approach is to protect the most vulnerable with monetary assistance and, going beyond financial transfers, also provide assistance in the form of incentive-to-work schemes. The government is already offering training programmes for the unemployed and those exiting the public service (through the voluntary departure scheme).

Despite notable achievements, the trafficking of illegal drugs, drug and alcohol abuse and domestic violence threaten the very fabric of Seychellois society. As a result, at the beginning of 2011, the President initiated a social renaissance programme to address these social problems.

The constitution promotes non-discrimination and guarantees equal rights and protection for both men and women. The country has also signed and ratified the principal conventions related to gender discrimination (e.g. the Convention on the Elimination of all Forms of Discrimination against Women). As a result, government support for women’s empowerment has led to some positive outcomes. For example, gender parity in primary education has been achieved, while girls currently outnumber boys in secondary and tertiary education. The government is, however, concerned about the under-performance of boys in secondary and tertiary education. Concerns also exist over heightened drug and alcohol abuse amongst men, in particular, and a generally lower health status.

Despite legal protection, women continue to be disadvantaged in the home and public life because of social expectations and stereotyping. For example, at 44%, Seychelles still falls below the AU target of 50% representation of women in parliament. There is also a rising trend in domestic and gender-based violence. The Family Tribunal registered a 55% increase in the number of spousal violence cases in 2006-2009. A strong step was taken in April 2010 to stop this trend with the presentation of a two-year national action plan on ending gender-based violence.

Seychellois youth (15-24 year olds) represent about 16% of the total population and almost 80% of youth are either ‘regular wage earners’ or are ‘in education or training’. This occupation status is relatively similar for men and women.

Further exploring the education of ‘regular wage earners’, ‘job seekers’ and those ‘not in employment, education or training’ programmes produces some indicative results. A large majority (60%) of those in regular employment and over 40% of job seekers (in other words unemployed and actively looking) have a vocational qualification, whereas only 24% of those ‘not in employment, education or training’ (unemployed and not actively looking) have a vocational qualification. This indicates the importance of a vocational qualification for employment prospects and also the specific skill demands of the Seychelles economy (i.e. about 35% of employed youth work in the construction or accommodation/food service sectors). Furthermore, there is almost no difference between the percentages of youth in each occupation status with a university level qualification (i.e. about 2% in each).

Seychelles has a number of programmes and initiatives in place to promote youth employment. These include two programmes aimed at placing participants in positions to receive on-the-job training and experience. The first, known as the Skills Acquisition Programme (SAP), is targeted at 15-20 year olds who have dropped out of secondary school, whilst the second, known as the Skills Development Programme (SDP), targets post-secondary students who have dropped out of tertiary education or older job/career changers. Both programmes are managed by the Employment Department in the Ministry of Education, Employment and Human Resources. Participants receive a monthly allowance under both programmes – 100% paid by the government in the SDP and shared 60%/40% by the government and the employer in the SAP. The SAP has shown great success over the last six years, whereas the SDP performed poorly in 2010 (its first year of operation) due to high drop-out rates (45%). In this respect, the government is currently mobilising key partners (i.e. National Youth Council, Social Development Department, local government/community development, private employment agencies, National Human Resource Development Council (NHRDC), and three major employers) to come up with a more effective programme.

The government also has two programmes that target secondary school students and provide opportunities for them to gain a better understanding of employment prospects post-school. These include the Careers Week (managed by the Education Department) and the Holiday Programme (managed by the National Youth Council). The annual Careers Week exposes higher secondary students to prospective careers and employers at a career fair. The Holiday Programme places about 40 to 50 final-year secondary students in different organisations for 10 days during the three holidays of the year. Unfortunately, the Holiday Programme is limited in its reach.

Public schooling and education is free in the Seychelles from primary school to tertiary education (students are paid a monthly allowance during their tertiary education). As a result, less than 0.5% of all Seychellois youth have never been to school, and 47% of all youth have at least completed secondary school and a further 44% have at least a vocational qualification. Although these are impressive numbers, there is concern that there has been insufficient attention given to whether the skills produced are appropriate for the demands of the economy.

As a result, the education system is currently undergoing reforms to: (i) increase the effectiveness of the system and better prepare students for the workplace, and (ii) revamp post-secondary education (especially vocational training) and make it more appropriate for the needs of the economy. A tertiary education bill was recently presented to cabinet and includes the setting up of a commission for post-secondary institutions to manage post-secondary education and work more closely with the Employment Department. It also includes the development of a Labour Market Information System (LMIS), which will centralise and store labour market information from all sources, and will assist in both assessing the gaps in and planning the needs of the labour market. Ultimately, the LMIS is to be connected to the Education Management Information System (EMIS) – which is also being developed – and together these will allow for better alignment between education and the demands of the economy. Finally, from 2012 a technical and vocational training (TVET) stream is to be introduced (following a broad curricula review) for upper secondary school students who can choose to either continue with general education or follow the TVET stream.

Looking to the future, with the new undersea fibre optic cable landing in 2012 and the potential for oil discoveries, a science and technology policy is being prepared that will raise the importance of mathematics and science subjects in the education system.

Youth unemployment in the Seychelles is relatively low, as there are generally sufficient jobs on offer (case in point, about 23% are currently taken by expatriates). Government also provides a number of training programmes to build and enhance skills, and job-search information is readily available through the media and private employment agencies. However, there are still challenges, which revolve primarily around: (i) the attitude and mind frame of Seychellois youth, who are selective about the types of jobs they are prepared to do and can choose to instead rely on family and social welfare, and (ii) the impact of drugs and substance abuse, which makes young people unemployable or not suitable for permanent employment. Both these areas are receiving significant attention through a broad social renaissance programme and a drive to instil greater pride in the youth about working hard for the future of their country.