seychelles infrastructure action plan · to do business.” engaging the private sector and...

Seychelles Infrastructure Action Plan

May, 2015

African Development Bank

African Development Bank


May, 2015

ii

AFRICAN DEVELOPMENT BANK - Seychelles Infrastructure Action Plan

Table of ContentsTable of Acronyms ..................................................................................................................................................... iv

Table of Unit Abbreviations ........................................................................................................................................ v

Executive Summary ....................................................................................................................................................1

1. Introduction ..........................................................................................................................................................5

2. Country Profile and Development Agenda .............................................................................................................72.1 PoliticalContext ................................................................................................................................................ 7

2.2 TheSocialContext ............................................................................................................................................ 8

2.3 EconomicContext ............................................................................................................................................. 9

2.3.1 RealGrowth ....................................................................................................................................... 10

2.3.2 FiscalPerformance ............................................................................................................................ 13

2.3.3 MonetaryPolicy ................................................................................................................................. 14

2.3.4 ExternalSector .................................................................................................................................. 14

2.4 ThePrivateSectorinSeychelles ..................................................................................................................... 16

2.4.1 SeychellesBusinessEnvironmentRatingintheRegion ..................................................................... 17

2.4.2 GoSObjectivesforthePrivateSector ................................................................................................ 18

2.4.3 PotentiallyAttractiveSectorsNotConsideredintheDraftMTNDS .................................................. 18

2.5 TheSeychellesGovernment’sCapacitytoImplementPPPs ........................................................................... 18

2.5.1 PPPRequirements ............................................................................................................................. 19

2.5.2 GoSScorecardforImplementingPPP ................................................................................................ 20

2.6 ThePublicSectorinSeychelles ....................................................................................................................... 21

2.7: TheEvolvingSeychellesDevelopmentAgenda ............................................................................................... 21

3. Current Infrastructure ......................................................................................................................................... 253.1 TheUtilitiesSector .......................................................................................................................................... 25

3.1.1 KeyEntities ........................................................................................................................................ 25

3.1.2 ElectricitySector ................................................................................................................................ 26

3.2 Transport......................................................................................................................................................... 33

3.2.1 GeneralOperationalPoliciesintheTransportSector ........................................................................ 34

3.2.2 TheLandTransportationPlanningandRegulatoryFramework ......................................................... 34

3.2.3 Roads ................................................................................................................................................. 35

3.2.4 PublicTransport(Buses) .................................................................................................................... 37

3.2.5 Aviation .............................................................................................................................................. 38

3.2.6 MarineTransport ............................................................................................................................... 40

3.2.7 FutureTransportDemandProjections .............................................................................................. 43

3.2.8 ConclusionsforTransportSector ....................................................................................................... 45

4. Infrastructure Action Plan for the Seychelles .......................................................................................................474.1 PrioritizationMechanism ................................................................................................................................ 47

4.2 ActionPlanfortheElectricitySector .............................................................................................................. 47

4.2.1 ProjectsPlannedbyPUC.................................................................................................................... 47

4.2.2 PriorityPowerGenerationProjects ................................................................................................... 49

4.2.3 Electricity-ProjectPrioritization ....................................................................................................... 51

4.2.4 SustainableDevelopmentandEnvironmentalAspects ..................................................................... 52

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Contents

4.3 ActionPlanfortheTransportSector ............................................................................................................... 53

4.3.1 OverallRequirementsfortheTransportSector ................................................................................. 53

4.3.2 PotentialTransportProjects .............................................................................................................. 53

4.3.4 PrioritizationofTransportationProjects ............................................................................................ 55

4.3.5 ScreeningBasedonFinancialPerformance ....................................................................................... 55

4.3.6 PotentialProjectPhasing ................................................................................................................... 56

4.4 CombinedRankingofUtilitiesandTransportSectorProjects ........................................................................ 56

4.4.1 NewandHigh-GrowthPotentialProjectsNotIdentified: .................................................................. 60

4.5 FinancingtheInfrastructureActionPlan ........................................................................................................ 60

4.5.1 FundingGapandFinancingOptions .................................................................................................. 60

4.5.2 GuidelinesforSelectingtheAppropriateProjectFinancingStructure .............................................. 62

4.5.3 TypeofInfrastructureAssets ............................................................................................................. 62

4.5.4 TypeofPPPFramework ..................................................................................................................... 62

4.5.5 SourcesofFinancing .......................................................................................................................... 62

4.5.5 FinancialProductsOfferedbyAfricanDevelopmentBank ................................................................ 64

4.5.6 TimingandSequencingofProjects.................................................................................................... 66

5. Facilitating Implementation of a Systematic Infrastructure Action Plan ................................................................ 695.1 ActionsbyTheGovernmentofSeychelles ...................................................................................................... 69

5.1.1 ImmediateActions ............................................................................................................................. 69

5.1.2 TechnicalAssistanceandStudies ....................................................................................................... 69

5.2 ActionsbyDevelopmentPartners .................................................................................................................. 70

5.3 TechnicalSupport/ConsultingServicesRequired............................................................................................ 71

Conclusion ................................................................................................................................................... 71

ANNEXA: FinancialAnalysisforPowerProjects .......................................................................................................... 751. FinancialModel:AdditionalGenerationCapacityatRocheCaiman ...................................................... 75

2. FinancialModel:NewPowerStation,Praslin ........................................................................................ 76

3. FinancialModel:NewPowerStation,Mahé .......................................................................................... 76

ANNEXB: FinancialAnalysisforBusReplacementProject–SPTC ............................................................................... 78

ANNEXC: FinancialAnalysisforAirportTerminalRehabilitationProject–SCAA ........................................................ 79

ANNEXD: FinancialAnalysisforExpansionoftheVictoriaPortProject–SPA ............................................................. 80

ANNEXE: TermsofReferenceforTransportationMasterPlan .................................................................................... 81

ANNEXF: InfrastructureandUtilitiesinthe2015Budget ........................................................................................... 83

ANNEXG: CurrentInitiativesUnderwayasofDecember2014 .................................................................................... 84

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AfDB AfricanDevelopmentBankAT&C AggregateTechnicalandCommercial(losses)BADEA ArabBankforEconomicDevelopmentinAfrica

(Khartoum)BRT BusRapidTransitCAGR CompoundAnnualGrowthRateCBD ConventiononBiologicalDiversityCBS CentralBankoftheSeychellesCFL CompactFluorescentLampCOMESA Common Market for Eastern and Southern

AfricaDBS DevelopmentBankoftheSeychellesDoT DepartmentofTransport(Seychelles)EBITDA EarningsbeforeInterest,Tax,Depreciationand

AmortizationEIB EuropeaninvestmentBankEDF EuropeanDevelopmentFundEMPSI EnvironmentalManagementPlanofSeychelles,

1990-1999EMPSII EnvironmentalManagementPlanofSeychelles,

2000-2010EO (UNDP)EvaluationOfficeEU EuropeanUnionFAO Food and Agriculture Organization (of the

UnitedNations)FIRR FinancialInternalRateofReturnGDP GrossDomesticProductGEF GlobalEnvironmentFacilityGFC GlobalFinancialCrisisGNI GrossNationalIncomeGONGO Government-Organized (or Controlled) Non-

GovernmentalOrganizationGoS GovernmentofSeychellesHASO HIV/AIDSSupportOrganizationHDI HumanDevelopmentIndexHIV/AIDS Human Immunodeficiency Virus/Acquired

ImmunodeficiencySyndromeHOT HighOccupationTolllanes,reservedforvehicles

occupiedbytwoormoreHOV High Occupancy Vehicle lanes, reserved for

vehiclesoccupiedbytwoormoreIDC IslandsDevelopmentCompanyLtd.IEA InternationalEnergyAgencyIMF InternationalMonetaryFundIOC Indian Ocean Commission/Commission de

l’OcéanIndienIRR InternalRateofReturnIPP IndependentPowerProducerICT Information&CommunicationTechnologyIT InformationTechnology

Table of AcronymsLPG LiquefiedPetroleumGasLUNGOS LiaisonUnitofNon-GovernmentalOrganizations

ofSeychellesMDG MillenniumDevelopmentGoalMERP Macro Economic Reform Programme (of the

GovernmentofSeychelles)MIC MiddleIncomeCountryMOE MinistryofEnvironmentandEnergy(Seychelles)MOF Ministry of Finance, Trade and Development

(Seychelles)MoFA MinistryofForeignAffairsMoU MemorandumofUnderstandingMTNDS MediumTermNationalDevelopmentStrategyNBS NationalBureauofStatistics(Seychelles)NCC NetContributingCountryNCSA NationalCapacitySelf-AssessmentNGO Non-GovernmentalOrganizationNMT Non-MotorizedTrafficNPV NetPresentValueNSA Non-StateActorsO&M OperationsandMaintenancePCU ProjectCoordinationUnitPMU ProjectManagementUnitPPA PowerPurchaseAgreementPPP PurchasingPowerParityPSIP PublicSectorInvestmentProgrammePUC PublicUtilitiesCorporation(Seychelles)PV Photo-VoltaicQUANGO Quasi-Non-GovernmentalOrganizationRO ReverseOsmosisRTC RoadTransportCommissioner(Seychelles)SADC SouthernAfricaDevelopmentCommunitySCAA SeychellesCivilAviationAuthoritySCCI SeychellesChamberofCommerceandIndustrySEB SeychellesEnergyBoardSEC SeychellesEnergyCommissionSEYPEC SeychellesPetroleumCompanySEZ International identifier for Seychelles

InternationalAirport,MahéSFA SeychellesFishingAuthoritySIDS SmallIslandDevelopingStatesSIB SeychellesInvestmentBoardSIM SeychellesInstituteofManagementSLM SustainableLandManagementSLTA SeychellesLandTransportAuthoritySPA SeychellesPortAuthoritySPTC SeychellesPublicTransportCorporationSR SeychellesRupeeSTB SeychellesTourismBoard

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Contents

Table of Unit Abbreviations

SWOT Strengths, Weaknesses, Opportunities andThreats(Analysis)

T&D TransmissionandDistributionTDM TransportationDemandManagementTHC TerminalHandlingChargeTMP TransportationMasterPlanToR TermsofReferenceTPEC TotalPrimaryEnergyConsumption

GWh Gigawatthourkl Kilolitrekm KilometerkW KilowattkWh KilowattHourkWp KilowattPeakkV KilovoltkVA KilovoltAmperem Meterm2 SquareMeter

UN UnitedNationsUNDAF United Nations Development Assistance

FrameworkUNDP UnitedNationsDevelopmentProgrammeUSD UnitedStatesDollarWHO WorldHealthOrganization(oftheUN)WTP WaterTreatmentPlant

m3 CubicMetermn MillionMT MetricTonMVA MegavoltAmperesq.km SquareKilometerMW MegawattTEU Twenty-FootEquivalenttoe TonofOilEquivalentW WattWp WattPeak

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Executive Summary

1

Executive Summary

Asanisolatedislandstatewithasmallpopulation,ahighpercapitaincomeandafragilephysicalenvironment,Seychelles faces development challenges and

infrastructurelimitationssimilartoneighbouringIndianOceanislands. During the Global Financial Crisis (GFC) of 2008,unsustainablefiscalandmonetarypoliciesandamismatchedtradeandexchangeratepolicyresultedinSeychellesdefaultingonamajorforeigndebtrepayment.

In a remarkable turnaround since then, Seychelles hastransformed and stabilized its economy, trade and balanceof payments through prudent fiscal, economic and socialtransformation.

However, the size of the country, its geographic isolation,limited resources and concentration of markets with a fewlarge trading partners leaves it extremely vulnerable tofutureeconomicshocks.Toreducevulnerabilityandcontinuesustainable economic growth, Seychelles must diversify itseconomyandmarkets,whilestrengtheningtheinfrastructurebackbone essential to support growth. Among other areasthatrequireattention,Seychellesmustaddressproblemsandcritical issuesinthetransportandenergysectors,whichwillrequiresignificantinfrastructureinvestments.

Toprepareitselftobecompetitiveintheglobaleconomyofthefuture,insulateitselfagainstfuturecrisisandmaintainandgrowitscurrenteconomicandsocialwell-being,standingandsize,Seychellesmustdiversifyandinvestinitsinfrastructure,capacitybuildingandenhanceitsbrandingasan“easyplacetodobusiness.” Engaging theprivate sector andharnessingprivatecapitalwillbecriticalintheseareas.

While the draft Medium Term National DevelopmentStrategy (MTNDS)emphasizesGoS’ intention to significantlyincrease private sector participation in Public PrivatePartnership(PPP)projects,improvethebusinessenvironmentfor SMEs and build its institutional and regulatory capacity,PPPsinSeychellesarelimited.Anassessmentoftheessentialcriteria critical for success inPPPs shows thatonall criteriaexcept the proposed investments in physical infrastructure,Seychelles is not yet ready to effectively implement them.Muchneedstobedone,asshownbelow.

qThe Government’s policy framework, while outlinedin draft MTNDS and other documents, has conflictingstatements about encouraging PPPs, and maintaining“strategic” controlover theprivatebusiness sectormaysendthewrongsignalsandcreateconcernintheprivatesector.

qThe Government does not yet have the necessaryinstitutional capacity, and has acknowledged that, foralmostallsectors,ithaslimitedinstitutionalcapacity.

qThe Government has not announced any significantinvestment in PPP projects, and neither has anyimplementationplanbeenconfirmed.

qThelegalandregulatoryframeworkisbeingdraftedandawaitinglegislativeapproval.TheGovernmentismovingtowardsdevelopingtheregulatoryframeworkforPPPstoenhancetheinstitutionalcapacity.

qInvestmentinpublicinfrastructurehasbeenannounced,butisawaitingfunding.

TheGovernment,throughitsdraftMTNDShasconfirmedits intention to invest$520million inphysical infrastructureandeconomicdevelopmentprojectsoverthenextfiveyears,

Executive Summary

Critical Success Factor for PPP Seychelles’ Current Position Seychelles’ PPP Readiness Score

1.PolicyFramework Outlined in draft MTNDS and other documents, butGoSconflictingstatementsaboutencouragingPPPsandmaintaining“strategic”controlovertheprivatebusinesssectormaysendthewrongsignals&createconcern.

Conflictingmessages

2.Legal&Regulatory Source documents not available, but energy sectordraftedandawaitinglegislativeapproval.AfDBhasbeenrequested toprovide support indeveloping regulatoryframeworkforPPPs.

Underway?

3.InstitutionalCapacity GoS acknowledges that for almost all sectors it has“limited institutionalcapacityandexpertise.” WBmayprovidetechnicalassistanceforcapacitybuilding.

NotReady

4.Investment-PublicInfrastructure Announcedandonschedule,awaitingfunding Good

5.Investment–PPPProjects No significant new projects announced, but GoS canapply the experience gained from air transport, port& ICT projects. General PPP regulations need to bedeveloped.

NotReady

6.ImplementationPlan Notannouncedyet,butcurrentlyunderpreparation NotReady

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andthisIAPreportproposesamechanismforprioritizingtheGoS infrastructure projects against the country’s economicandsocialgoalsandobjectives.However,themajorityoftheseproposed investments are in mature sectors with indirectand protracted business impact and slow growth. There ispotentiallyagreaterscopeforhighergrowthanddiversificationinnew,butpresentlysmallerbusinessopportunities.

This report therefore also proposes an additional set ofcriteriafortheGoStoidentifyandprioritizenew,innovative,“bluesky,”high-growthpotentialbusinesssectoropportunitiesthatwillpropeltheeconomytothenextlevel.Thesewillbeeconomicopportunitiesthatmaybesmallbuthaveagapintheir potential for growthand canachieve gains reasonablyquickly,comparedwiththematuresectors.

Additionally, Seychelles’ infrastructure investment plancurrently facesa fundinggapof$215million,allof it in theports, roads and energy sectors, and ideally this should befinancedwhenfeasiblebytheprivatesector.Additionalequity,debtandgapfinancingwithgrantsmaypotentiallybesoughtfromMFI,commercialandsovereignfundlendersasfollows:

qAfDB, the World Bank Group, and other MFIs willcontinue to be a major source of donor funding andmost importantly, to insure the project against politicaland business risks. Some AfDB–managed funds whichSeychellesmayconsideraccessingwouldbe:

• AfDB’s Africa Climate Change Fund (ACCF), whichis a bilateral thematic trust fund to support Africancountries in their transition to climate-resilient andlow-carbondevelopment.

• The $7.6 billion Climate Investment Funds (CIF) andisexpectedtochannel$1billion—morethanathirdofallCIFinvestmentinAfrica—to17Africannations,withtheAfDBEnergy,EnvironmentandClimateChangeDepartment(ONEC)leadingtheinstitutionalcharge.

• The Sustainable Energy Fund for Africa (SEFA) is amulti-donortrustfund–anchoredinacommitmentofUSD60millionby theGovernmentsofDenmarkandthe United States – to support small- and medium-scaleRenewableEnergy(RE)andEnergyEfficiency(EE)projectsinAfrica.

• TheAfricaGrowingTogetherFund(AGTF)isa$2billionfund co-financed by AfDB and the People’s Bank ofChinaover 10 years, to support “sovereign andnon-sovereignguaranteeddevelopmentprojects” totaling$200m(£119m)annually.

qNEPADInfrastructureProjectPreparationFacilityprovidesfundingupto$10m

qEU-Africa InfrastructureTrustFund,canprovide fundingupto$40.5m

qChina,SouthKorea,IndiaandtheArabcountryinstitutionaland sovereign funds are increasingly becoming animportantsourceofprojectfinancingintheregion.

qProject bonds and non-bank lending could provide aflowofsuitablehighly-ratedassetsdirecttoinstitutionalinvestors suchas sovereign-wealth funds,pensionplansandlifeinsurancecompanies.

qCommercial bank lending is still available, but withreduced liquidity, as themarket has becomemore risk-averse toprojectfinancing.The largecommercialbanksthat used to lendmoney for infrastructure projects arereducing their exposure as Basel III capital rules makelendingmuchlessattractive.

TohelptheGovernmentachieveincreasedeconomicgrowththrough private sector participation, this report, in additionto prioritizing and sequencing infrastructure investments,proposes the following Priority Actions needed from theGovernmentanditdevelopmentpartners:

TheGovernmentofSeychellesneedsto(a)provideSECwithregulationsinfinalformthatwilldefineatransparentprocessforevaluatingIPPproposals;and(b)expandthemandatetotheCommitteetaskedwithoverseeinglargeprojectsfirstbyevaluating each new project within a standard framework,suchastheonedevelopedinthisreport.Itshouldthenupdatetheframeworkovertime,whenappropriate.

Seychelles’ Development Partners may help by providing(a)technicalassistanceindevelopingaTransportMasterPlanwithIntegratedPublicTransitPlan(TMP/IPT);and(b)technicalassistanceinevaluatingtheappropriatenessofdevelopmentof alternative sources of energy in the unique physical andeconomicenvironmentoftheSeychelles,toreducegrowthinthetraditionalpetroleum-basedpowergeneration.

TheAfDBMissionreportofDecember2014andthe2015Budgetspeechdiscussthecurrent infrastructureandenergyinitiativesplannedandunderway,andthesearesummarizedintheannexes.

In conclusion, this report provides Seychelles’ policyanddecision-makers, as well as development partners, witha sound strategic and analytical basis to make informeddecisionsforlong-terminfrastructureinvestmentstosupportSeychelles’overallsocio-economicdevelopment.

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Chapter

5

Introduction

The African Development Bank re-engaged indevelopmentcooperationwiththeSeychellesin2009,afteralongabsenceoccasionedbytheimpositionof

sanctions.1.Atthetime,itwasrecognizedthatthecountrywasata crossroads in itsdevelopmentagenda,having launchedacomprehensivereformprogram.TheAfricanDevelopmentBank(theBank),however,initiallylimitedthisre-engagementtoprovisionofmuch-neededbudgetsupportandassistancefordebtrestructuring.

Several grants were subsequently offered by the Bankto provide technical assistance to help underpin a moresubstantialengagementbytheBankinthemediumandlongerterm. Among the areas identified for immediate supportthroughgrantresourceswerethepreparationofaSeychellesWater Development Plan (WDP), and a Detailed FeasibilityStudy (DFS)andEnvironmentandSocial ImpactAssessmentStudy (EASIAS) for the Seychelles Submarine Cable Project.UndertheAfricanWaterFacility(AWF),theWDPcoveringtheperiod2008to2030waspreparedbytheGovernmentwithsupport from the Bank. TheWDP has proved instrumentalto the Government in mobilizing funding and coordinatinginterventions by development partners in the water sector.Under the Bank’s Middle Income Countries (MIC) Fund, astudywasapprovedinFebruary2009toundertakeafeasibilityassessment of a Submarine Cable System to link SeychelleswithEastAfrica.Thestudywassuccessfullyimplementedandit informed the preparationof the Submarine Cable Projectthatwasapproved inApril2011, jointly fundedbytheBankandtheEuropeanInvestmentBank.TheSeychellesEastAfricaSubmarine(SEAS)cablebeganoperationin2012.

Acknowledgingtheimportanceofphysicalinfrastructurefortheoveralldevelopmentofthecountry,Seychellesauthoritiesrequested the Bank to undertake additional analyticalworkintheremainingkeyinfrastructuresub-sectorsofenergyandtransport, which are particularly important for the country,givenitsgeographicinsularity.

1 SeychelleswasundersanctionsduetoitsarrearswiththeBankGroupfrom2002-2006.

The request for an infrastructure action plan is fullyalignedwith the Bank’s Country Strategy Paper (CSP) 2011-15 for the Seychelles, which is articulated around a singlepillar - “Strengthening Private Sector Development andEconomicCompetitiveness”-thatencompassesinfrastructuredevelopment as one of the three key sub-components. Therequest is also in line with the Bank’s Regional IntegrationStrategyPaper (RISP)2011-15 forEastAfrica,which focuseson regional infrastructure, as well as with the Bank’s Long-TermStrategy(LTS)2013-22thatputsparticularemphasisoninfrastructuredevelopmentasoneofitscoreareasoffocus.TherequestalsoconformstotheBank’sStrategicFrameworkforenhancingsupporttoMICs,whichunderscorestheneedtoinvestmoreinboth‘hard’and‘soft’infrastructure.Therequestis also in line with the Seychelles’ national developmentstrategyasoutlinedin“Seychelles2017”,whichwaspreparedin 2007 and identifies infrastructure development as a keyrequirement.2Finally,therequestisconsistentwiththemorerecent“MediumTermNationalDevelopmentStrategy2013-2017”(MTNDS),issuedindraftforminmid-2013.

TheInfrastructureActionPlan(IAP)isdesignedtocloseananalyticalgapintheSeychelles;nosuchcomprehensiveplancurrently exists. Development/expansion plans do exist forthe international gateways (port and airport), and a trafficmanagement plan for Victoria is in the process of beingimplemented.HoweverthereisnoexplicitmechanisminuseinSeychellesforrankingorprioritizinginfrastructureprojects.This SIAP is intended to provide the Government with aclearerideaofinfrastructuregaps,deficitsandopportunities,andrecommendationsforpriorityinfrastructureinvestmentswithin the subsectors mentioned above, allowing it toaddressthecountry’sinfrastructureneedsinasystematicandcoordinated manner. A High-Level Committee (PermanentSecretaryLevel)hasbeenproposedtooverseeimplementationofalllargecapitalprojects(largerthanSR25million).Thismayprovide an appropriate ongoing mechanism for reviewingthe priorities proposed by the present study, which can beregularlyupdatedthroughthemechanismproposedhereforestablishingpriorities).

2 MinistryofFinanceconfirmedthatthisdocument,preparedin2007-08,wasintendedtoprovideanoverallvision,withoutsettingpriorities.

1. Introduction

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Chapter

7

Country Profile And Development Agenda

The Republic of Seychelles is a small, undiversified,service-based, isolated, middle-income island-stateeconomy with a Gross Domestic Product (GDP in

currentprices)percapitaof$12,783(20123)andanestimatedpopulation of 88,3034 (2010). Its GDP per capita is amongthehighestoftheMiddleIncomeCountries(MICs)inAfrica.Seychelles comprises approximately 115 tropical islandsspread over 1.4 million square kilometers in the westernIndianOcean,withonly455.3squarekilometersinlandarea.Permanenthabitationislimitedto10oftheislands,with90%ofthepopulationlivingonthelargestisland,Mahé,wherethecapital,Victoria,islocated.TheAldabraAtoll,themostdistantclusterofislands,ismorethan1,000kmfromMahé.

Over 80% of Mahé is forested, on steep granitic slopessurroundedbyanarrowcoastalplain,andlimitedlandspaceimposessevererestrictionsonbotharableandhabitableland.Much of the infrastructure, such as the road network, theairport,theport,thedistributionnetworksforelectricityandwater,hotels,residentialhousingandcommercialbuildingsarelocatedprimarilyonthe lower lyingcoastalplain,subjectingthemtosignificantriskofdamageifthesealevelrises.LimiteddomesticcapitalandhumanresourcesalsorestrictSeychelles’abilitytobenefitfromeconomiesofscale inproductionandeconomic diversification. Seychelles relies on imports foralmost all rawmaterials, products, and specialized services.Tourism is the largest sector of the country’s economy,accountingfor26%ofGDPandcurrentlyoverone-thirdofthecountry’s totalworkforce is employed in this sector. This isfollowedbyfisheries,whichisamajorforeigncurrencyearner.

ThebasicissuesfortheSeychelles-isolation,limitstoarablelandandavailabilityofyear-roundwater,asmallpopulation,auniqueandpristinebut fragilephysical environment - aredefiningcharacteristicsofthecountry. Continuedgrowthofthekeysectors–tourismandfisheries–isinfactdependentonacontinuationofthelowlevelsofairandwaterpollution

3 NBS,StatisticalBulletin,National Accounts Estimates 2004-2012,October20134 NBSwebsite:Vitalstatistics-Population-Update2012

thatresultfromtheisolation,continuednatureconservation,inparticularpreservingboth interior forests (particularlyonMahé)andthecoralatollsthatconstitutetheouterislands,andasmallpopulationaswellasapolicythatlimitsdevelopmenttonarrownaturalandman-madecoastalstrips.

The balance of this section places the political, economicandsocialdevelopmentoftheSeychelleswithinthecontextof development of Indian Ocean neighbours, Africa, andworlddevelopment,andoutlinestheshortandmedium-termdevelopmentprioritiesoftheGovernment.

2.1 Political ContextPresidential elections were held in May 2011 and

Parliamentary elections in September 2012. During theseelections, President James Michel, representing theSeychelles People’s Progressive Front (SPPF) (later renamedthePeople’sParty),emergedvictorious,with55percentofthevotes(comparedwith54%inthepreviouselectionin2007).Legislativeelectionsin2007and2012providedsimilarresults.Inspiteofthepoliticalcontinuity,animportantdevelopmentonthepoliticalfrontremainsthatthetwomainpartiessharebroad similarities in political ideology, largely due to thepost-2008 economic liberalization and reforms. The rulingparty embraced economic liberalization over the last sevenyears,whichhadbeentheOpposition’spolicystanceinpastelections.Giventhisscenario,significantcontroversialpolicyshiftsarenotexpectedinthenearfuture.

Intermsof‘governance’broadlydefined,includingperceivedcorruption and press freedom, Seychelles ranks betterthanmost regional neighbours. Based on the Transparency International Corruption Index,Seychellesranksinthetopthirdof 175 countriesworldwide,withminor changes in rankingsince2008.WithinAfrica,Botswanarankshighest,followedby Cape Verde and Seychelles. Seychelles also ranks betterthanfellowmembersoftheIOC(IndianOceanCommission)anditsEastAfricanregionalneighbours.

2. Country Profile and Development Agenda

Figure 2.1: Seychelles Map

Figure 2.2: Corruption Perception IndexCountry 2013 2012 2011 2010 2008

Seychelles 47 51 50 49 55

Botswana 30 30 32 33 36

Cape Verde 41 39 41 45 47

Mauritius 52 43 46 39 47

Madagascar 127 118 100 123 85

Comoros 127 133 143 154 134

Kenya 136 139 154 154 147

Tanzania 111 102 100 116 102

Ranking, with 1 as highestSource: Transparency International

8


IntermsoftheIbrahimIndexofAfricanGovernance(IIAG),Seychellesrankssomewhathigher–forthepastthreeyears,4thoverall,afterMauritius,CapeVerde,andBotswana.

In spite of good rankings in other areas of governance,Seychellesdoesnotperformaswellintermsofpressfreedom,either relative to the current position of other membersof the IOCor in termsof a positionovertime.A change inmethodology for calculation of the Press Freedom Indexeffective2013,however,limitsthevalueofcomparisonswithearlieryears.

2.2 The Social ContextTheHumanDevelopmentIndex(HDI),developedbyUNDP,

provides an international comparison of social well-being,aggregatingmeasuresof lifeexpectancy, levelsofeducation,and per capita income. According to the 2014 HumanDevelopment Report (HDR), in 2013, Seychelles ranked 71st out of 187 in the world, one of only five African countriesin the top 100 nations globally identified with very highdevelopment.

Figure 2.6 illustrates the longer-term evolution of lifeexpectancyatbirth forSeychelles relative to itsneighbours.AswithIndianOceanneighboursandotherMICsinAfrica,lifeexpectancy inSeychelleshascontinuedto increaseover thelastdecade. In termsofpurchasingpower, Seychelles is thehighestincomecountryoftheregionandsimilarcountries.

A review of the Seychelles Millennium DevelopmentGoals StatusReport2013makes it clear that Seychelleshasalreadymetmostofthe2015MDGs,especiallythoserelatedto education, health and social development. The reporthowevernotedconcernsinsomehealthareas,includingtheincreased prevalence of non-communicable diseases linkedtolifestyle.Thereportalsonotedchallenges,whichincludedthe need for improved data gathering and dissemination,the limitedcapacity toundertakesustainedmonitoringovertime,thecountry’slimitedpoolofqualifiedandexperiencedprofessionals within a small labour force versus the levelof socio-economic development, and the importance of

Figure 2.3: Ibrahim Index of African GovernanceCountry 2013 2012 2011 2010 2008

Seychelles 4 3 4 2 2

Botswana 2 2 3 3 4

Cape Verde 3 6 2 4 3

Mauritius 1 1 1 1 1

Madagascar 37 29 33 29 16

Comoros 32 50 31 30 14

Kenya 21 18 23 27 17

Tanzania 17 24 13 15 15

Ranking, with 1 as highestSource: Ibrahim Foundation Website

Figure 2.4: Press Freedom IndexCountry 2014 2013 2011-12 2010 2008

Seychelles 103 93 73 65 74

Botswana 41 40 42 62 66

Cape Verde 24 25 9 26 36

Mauritius 70 62 54 65 47

Madagascar 81 88 84 116 94

Comoros 54 51 45 70 89

Kenya 90 71 84 70 97

Tanzania 69 70 34 41 70

Ranking – with 1 as best Source: Reporters without Borders website

Figure 2.5: Human Development IndexCountry 2014 2013 2007/8 2000

Seychelles 71 46 50 53

Botswana 109 119 124 122

Cape Verde 123 132 102 105

Mauritius 63 80 65 71

Madagascar 155 151 143 141

Comoros 159 169 134 137

Kenya 149 145 148 138

Tanzania 159 152 159 156

(Ranking Worldwide with 1 highest)

Figure 2.6: Life Expectancy at Birth (years)Country 2013 2007/8 2000

Seychelles 73.2 72.7 71

Botswana 64.4 48.1 46.2

Cape Verde 75.1 71 69.2

Mauritius 73.6 72.4 71.6

Madagascar 64.7 58.4 57.9

Comoros 60.9 64.1 59.2

Kenya 61.7 52.1 51.3

Tanzania 61.5 51 47.9Source: UNDP (HDRs)

Figure 2.7: GDP per capita US$ (PPP)Country 2014 2013 2007/8 2000

Seychelles 23,152 23,172 16,106 10,600

Botswana 14,443 12,939 12,387 6,103

Cape Verde 6,311 3,616 5,803 3,233

Mauritius 16,194 12,737 12,715 8,312

Madagascar 1,378 853 923 756

Comoros 1,493 980 1,993 1,398

Kenya 2,109 1,507 1,240 980

Tanzania 1,654 1,334 744 480Source: UNDP HDRs

9


addressing human development in terms of sustainabledevelopment. Going forward, the countrywould like to seemoreofaconvergencebetweentheconcernsofSmallIslandDevelopmentStates(SIDs)andsustainabledevelopmentgoalsinthepost-2015agenda.

2.3 Economic ContextThemajorcommercialsectors inSeychellesremaintourism

and thefisheries,particularly tunacanning.Theperformanceofthetourismsector,whichisalsotheislands’mainemployer,ishighlydependenton,andlinkedto,economicperformancein European countries. Figure 2.8 shows steady increasesin air arrivals5 for 2009-2012, following growth from 2000through2007andadeclinefrom2007through2009duringtheinternationalfinancialcrises.Despitethedecline, thetourismsector avoided a major crash and rebounded with growthof 46% between 2009 and 2013 (representing higher recentannualgrowththanwasexperiencedbetween2001and2007).

5 ThisisthebestsinglepublishedmeasureoftourismactivityforanisolatedlocationsuchasSeychelles,sincemorethan99%oftouristsarriveanddepartbyair.

As part of its efforts to diversify its tourist markets, thecountryhaslaunchedmassivemarketingoutsideitstraditionalmarkets, which has led to a significant increase in non-Europeanarrivals,particularlyinthelasttwoyears.

Incontrast, thefisheriessectorshowedalmostnogrowthin volume from 2007 through 2012, apparently becauseof a combinationof the impactof increased regional piracyactivitythroughouttheSeychellesEEZandareportedpossibledecline in fish stocks. Artisanal or non-commercial fishingalso continued to decline during this period. Despite thislackofgrowth thesectorcontinues tocontributesignificantforeign exchange to the Country due to the numerousfisheriesagreementsthecountryhas,includingtheFisheriesPartnershipAgreements(FPAs)undertheEUarrangement.

Anewfisheriessectorpolicythataimstoincreasethevaluefrom the sector (aqua- and mariculture) is currently beingdeveloped.Inadditioninfrastructuredevelopmentisregardedas critical to future growth of fisheries activity. Therefore

0

50,000

100,000

150,000

200,000

250,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Vistor arrivals

Figure 2.8: Passenger Arrivals at Seychelles International Airport (SEZ)Source: - Seychelles in Figures 2012 (National Bureau of Statistics), NBS Bulletin for 2013

0

20002001

20022003

20042005

20062007

20082009

20102011

20122013

10,00020,00030,00040,00050,000

Canned tuna (commercial deep sea fishing)

Fish landed (artesenal/non–commercial fishing)

Figure 2.9: Fishing Activity (Tons)Source: - Seychelles in Figures 2012, 2013 ((National Bureau of Statistics Bulletin for 2013)

Figure 2.10: New Fishing Quay at Victoria Port(Picture taken February 2014)

10


facilities such as the new fishing quay nearing completionat Port Victoria, by the Seychelles Port Authority (SPA) andSeychelles Fisheries Agency (SFA), will provide the neededfisheries-related facilities. Other facilities are also beingdevelopedtoimproveinfrastructureforartisanalfishery.

2.3.1 Real GrowthBefore 2009, recurrent expansionary fiscal and monetary

policies coupled with mismatched trade and exchange ratepolicy produced serious macroeconomic imbalances. Theeconomybecamesofragilethat,attheendof2008Seychellesdefaultedonamajor componentof foreigndebt repayment.Thismarkedthebeginningofacomprehensivereformprogram.ThereformswhichbeganinOctober2008,focusedon

(i) debtreductionandrescheduling inordertoreversetheprimarydeficits;

(ii) liberalizationoftheforeignexchangemarket;(iii) implementationofanewmarket-drivenmonetarypolicy;(iv) reduction in the state’s role in the economy andmove

towardsamarket-driveneconomy;(v) reductioninuniversalsubsidiesand(vii)reduction in public expenditure including reducing the

sizeofthepublicservice.Governmenteffortssupported

by major Development Partners including the AfricanDevelopment Bank, the BrettonWoods Institutions andthe European Union have seen the economy record asignificant turnaround. Over this period, the countryimproveditscreditworthinessanddemonstratedagoodtrackrecordonreforms.Table2-11below,summarizestheevolutionofabroadseriesofmacroeconomicindicatorspriorandpost-2008.

This clearly shows the financial collapse of 2008 and theslow recovery. After 9-10% GDP growth between 2005 and2007,theeconomywasstagnantin2008-09.Growthslowedto -1.3% and 0.7% in 2008 and 2009, respectively, due toexternalshocks,lowertourismearnings,andthepersistenceof structural constraints reflected in a rising debt burdenandforeignexchangeshortages6. Thecurrentaccountdeficitfor the four years ending in 2008 hovered around 20% ofGDP,whilepublicdebtclimbedashighas150%ofGDPandinternationalreservesshranktolessthanamonthofimports.In2008,whentheexchangeratewasfloated,theratejumpedfromlessthanSR7perdollartomorethan16.Since2009,theratehasremainedintherangeof12to13tothedollar.

6 MichiganStateUniversity,http://globaledge.msu.edu/countries/seychelles/economy

Figure 2- 11: Key Macroeconomic Indicators 2005-2015

Item 2005 2006 2007 2008 2009 2010 2011 2012 Prel

2013 Est

2014 Proj.

2015 Proj

Real GDP growth 7.5 9.4 10.1 -1.3 0.7 5.6 7.9 2.9 3.5 3.7 3.8

Inflation rate (CPI, annual average) 0.8 0.7 -1.8 63.3 37 0.4 2.6 7.1 4.3 3.6 2.9

Fiscal balance ( % of GDP) 7.3 -0.6 -2.3 3.7 14.3 2.5 2.5 1.8 1.7 2.8 2

Total revenue excluding grants 41.1 42 35.9 31.5 33.1 34.1 35.3 34.4 32.4 31 30.9

Total expenditure and net lending 40.4 49.6 46 38.3 32 32.8 35.2 36.2 36.6 33.1 32.2

Capital expenditure 5.3 8 5.1 5.4 5.3 8.7 8 10.4 9.5 6.4 5.8

Domestically financed 5.6 5.6 2.5 3.7 3.7

Foreign financed 2.4 4.8 4.4 2.7 2.1

External current account balance (% of GDP) -19.7 -13.9 -23.4 -20.3 -9.8 32.5 -27.4 -25.2 -16.9 -18.5 -17.7

Imports (% of GDP at current prices) 73.40 74.00 80.50 99.40 104.80 101.80 109.00 104.00 90.00 91.00 88.00

Domestic Exports (% of GDP at current prices) n.a. n.a. 0.20 0.24 0.28 0.23 0.25 n.a. n.a. n.a. n.a.

Exports including re-exports (% of GDP at current prices) n.a. n.a. 42.90 59.40 72.60 0.41 88.00 83.00 80.00 76.00 76.00

Exchange rate (SCR/U.S. dollar) period average 5.5 5.8 8 8 13.6 12.1 12.4 13.7 12.1 n.a n.a

International reserves (in months of imports). 0.7 1.3 0.1 0.2 2 2.4 2.8 3 3.8 4 4.1

Total public debt (% of GDP) 147.1 139.5 146 151.3 124.4 82.5 73.2 77.5 65.3 64.5 61

Public external debt 46.6 53.7 77.9 97.8 90.5 49.7 45.6 45.3 37.6 37.2 36.5

Public domestic debt (including T-bills) 100.5 85.8 74.1 53.5 33.9 32.8 27.7 32.2 27.7 27.3 24.6

Sources: Seychelles in Figures (NBS), IMF website

11


Capitalexpenditure,whichwas in the rangeof35-40%ofGDPduringthefouryearsuptothecollapse,thenfelltolessthan 3% and has slowly returned to 8-11% of GDP. This isprobablythemostcriticalelementforpurposesofthepresentreviewof infrastructure.Allmajorcapitalexpenditureswerefinanceddirectly byGovernmentup to 2008.7Theeconomiccollapseexperiencedin2008ledtoavirtualfreezeoncapitalexpenditure by government. Utility networks (electricity,water and sewage) and major entry facilities (SeychellesInternationalAirport,PortofVictoria)receivedveryrestrictedcapital funding post-collapse, but have nowdeveloped veryambitiousexpansionandmodernizationprogrammes.Giventhe limitations on expenditure due to the ongoing debtreduction programme, the government’s main economicanchor until 2018, mechanisms permitting ‘project finance’solutionsnotinvolvinggovernmentguaranteeswillthereforeneedtobefound.8

Projectionsfor2014and2015showamarkedimprovementinoveralleconomicconditionsandindicateconfidenceinthefuture stability of the economy. GDP growth is expected togrowtonearly4%by2015;inflationwillremainsingledigitsand below the 4% set in the new CBS strategic plan, whileinternationalreservesareexpectedtogrowtoapproximately4monthsofimportcover.

IntermsofGDPcomposition,figures2-12and2-13belowshow the evolution of the sectorial composition of theSeychelles economy from 2008 through 2012. The primarysector (principally fishing and agriculture) remains relatively

7 AllutilitieswereandcontinuetobeownedandoperatedbyGovernmententities.8 MoFnowrequiresindividualpublicentitiestoobtainauthoritytosignloan

agreementsthatprovideanexplicitorimplicitguaranteebytheGovernment.Projectfinancing,whereloanrepaymentiscoveredbyexpectednetincomeafteroperatingexpenses,doesnotrequireapproval.

small, with GDP dominated by Tertiary activities at SR 10.9billion(largelytheservicesector).AccommodationandfoodservicesaccountforSR3.1billionor29%ofthetertiarysector.Modest growth has occurred in all areas, including ‘taxeslesssubsidies’ofSR2.4billion,or22%ofGDP(ineffectthecontributionofgovernmenttoGDP).

Figure 2-13 presents the sectorial composition of GDP inpercentageterms,andshowsthatdespiteincreasesinvalue,thepercentcontributionofeachsectortoGDPhasremainedessentiallyunchangedsince2008.

Figures2-14through2-15summarizetherecentstructuralevolutionwithineachofthethreesectors.There isnoclearshiftwithintheprimarysector,whichalthoughsmall,remainsdominatedbyagriculture.Thesector isonasmall scalebutisstillanimportantsourceofincomeforthoseinvolvedinit.

Thesecondarysectorwasdominatedbyanincreaseintherelative importanceof constructionactivityandadecline inmanufacturingthrough2011,butthisreversedin2012,whenmanufacturingincreasedandconstructiondeclined.

Thetertiarysectorshowsasteady increase intherelativeimportance of accommodation & food service, real estateactivities,andowner-occupieddwellings,alongwithadeclineinpublicadministration&defense,wholesale&retailtrade,andtransport&storage.Thisisexplainedbytheresilienceofthetourismsectorandancillaryactivities,aswellasgrowthintheconstructionofhousingestatesduringthisperiod.Thedeclineinpublicadministrationanddefensecanbeexplainedatleastinpartbythepost-2008reductioninthepublicservice,whereasthedeclineintherelativeimportanceofbothtrade

Figure 2.12: Sectorial Composition of GDP – Current SR (millions)

Current SR Million

2008 2009 2010 2011 2012

Primary 235 260 265 293 296

Secondary 1,430 1,618 1,641 1,914 2,181

Tertiary 6,373 8,112 8,016 9,023 10,903

Imputed Bank Charges

(188) (225) (182) (205) (275)

Taxes less Subsidies

1,298 1,768 1,966 2,280 2,363

Total 9,147 11,533 11,705 13,305 15,469Source: Seychelles in Figures, 2013

Figure 2.13: Sectorial Composition of GDP – Current SR (%)

Sector 2008 2009 2010 2011 2012

Primary 3% 2% 2% 2% 2%

Secondary 16% 14% 14% 14% 14%

Tertiary 70% 70% 68% 68% 70%

Imputed Bank Charges

-2% -2% -2% -2% -2%

Taxes less Subsidies 14% 15% 17% 17% 15%

Total 100% 100% 100% 100% 100%Source: Seychelles in Figures, 2013


IAP Final Report December 27, 2014 P a g e | 15

Figure 2-14: Composition of Primary Sector of GDP – Current SR (%)

Source: NBS, National Accounts Statistical Bulletin (October 2013)

The secondary sector was dominated by an increase in the relative importance of construction activity and a decline in manufacturing through 2011, but this reversed in 2012, when manufacturing increased and construction declined.

Figure 2-15: Composition of Secondary Sector of GDP – Current SR and % Sector 2008 2009 2010 2011 2012 Secondary SR Million 1,429.70 1,617.80 1,640.70 1,914.10 2,181.00 Manufacturing 850.1 902.3 940.1 938.9 1,293.00 Electricity, gas, aircon 28.5 70.4 71.6 85.1 146.5 Water, sewage, waste mgmt 64.9 76.6 95 102.5 107 Construction 486.2 568.5 534 787.6 634.5

Sector 2008 2009 2010 2011 2012 Secondary Total Percent 100% 100% 100% 100% 100% Manufacturing 59% 56% 57% 49% 59% Electricity, gas, aircon 2% 4% 4% 4% 7% Water, sewage, waste mgmt

5% 5% 6% 5% 5%

Construction 34% 35% 33% 41% 29% Source: Seychelles in Figures, 2013

The tertiary sector shows a steady increase in the relative importance of accommodation & food service, real estate activities, and owner-occupied dwellings, along with a decline in public administration & defense, wholesale & retail trade, and transport & storage. This is explained by the resilience of the tourism sector and ancillary activities, as well as growth in the construction of housing estates during this period. The decline in public administration and defense can be explained at least in part by the post-2008 reduction in the public service, whereas the decline in the relative importance of both trade and transport activities could be due to the opening up of the retail industry and subsequent reduction in role of government as a player. Transport, particularly on the sea, reduced in the post-crisis period when piracy increased.

0%

50%

100%

2007 2008 2009 2010 2011 2012

Fishing

Agriculture

Figure 2.14: Composition of Primary Sector of GDP – Current SR (%)Source: NBS, National Accounts Statistical Bulletin (October 2013)

12


Figure 2.15: Composition of Secondary Sector of GDP – Current SR and %Sector 2008 2009 2010 2011 2012

Secondary SR Million 1,429.70 1,617.80 1,640.70 1,914.10 2,181.00

Manufacturing 850.1 902.3 940.1 938.9 1,293.00

Electricity, gas, aircon 28.5 70.4 71.6 85.1 146.5

Water, sewage, waste mgmt 64.9 76.6 95 102.5 107

Construction 486.2 568.5 534 787.6 634.5

Sector 2008 2009 2010 2011 2012

Secondary Total Percent 100% 100% 100% 100% 100%

Manufacturing 59% 56% 57% 49% 59%

Electricity, gas, aircon 2% 4% 4% 4% 7%

Water, sewage, waste mgmt 5% 5% 6% 5% 5%

Construction 34% 35% 33% 41% 29%Source: Seychelles in Figures, 2013

Figure 2.16: Composition of Tertiary Sector of GDP – Current SR Million and %Sector 2008 2009 2010 2011 2012

Tertiary Total SR Million 6,372.80 8,112.00 8,016.40 9,022.80 10,903.00

Wholesale & Retail 762.6 1,000.70 863.5 847.4 911.5

Transportation & Storage 907 1,105.50 891.3 960.9 939.2

Accommodation & Food Service 1,501.00 1,954.70 1,924.30 2,323.70 3,147.60

Information & Communication 275.9 347.6 377.8 431.2 522.1

Financial & Insurance 424.5 560 526.2 585.1 709.7

Real Estate 314.7 556.2 623.3 692.3 916.4

Owner Occupied Dwellings 690.9 1,028.00 1,079.20 1,147.50 1,339.80

Professional, Scientific & Tech 155 164.5 234.8 265.9 289.5

Administrative & Support Svcs 211.5 310.1 334.3 380.3 445.9

Public Admin & Defense 622 558.8 604.5 707.2 868

Education 257.8 243.5 261 326.5 384.7

Human Health & Social 156.8 161.4 170.2 208.7 249.5

Art, Entertainment, Rec. 55.6 65.3 67.9 78.7 96.5

Other Service 37.3 55.8 58 67.3 82.4

Sector 2008 2009 2010 2011 2012

Tertiary Total Percentage 100% 100% 100% 100% 100%

Wholesale & Retail 12% 12% 11% 9% 8%

Transportation & Storage 14% 14% 11% 11% 9%

Accommodation & Food Service 24% 24% 24% 26% 29%

Information & Communication 4% 4% 5% 5% 5%

Financial & Insurance 7% 7% 7% 6% 7%

Real Estate 5% 7% 8% 8% 8%

Owner Occupied Dwellings 11% 13% 13% 13% 12%

Professional, Scientific & Tech 2% 2% 3% 3% 3%

Administrative & Support Svcs 3% 4% 4% 4% 4%

Public Admin & Defense 10% 7% 8% 8% 8%

Education 4% 3% 3% 4% 4%

Human Health & Social 2% 2% 2% 2% 2%

Art, Entertainment, Rec. 1% 1% 1% 1% 1%

Other Service 1% 1% 1% 1% 1%Source: Seychelles in Figures, 2013

13


andtransportactivitiescouldbeduetotheopeningupoftheretailindustryandsubsequentreductioninroleofgovernmentasaplayer.Transport,particularlyonthesea,reducedinthepost-crisisperiodwhenpiracyincreased.

2.3.2 Fiscal PerformanceSince the 2008 reforms, the fiscal program has changed

dramatically, with a focus on expenditure rationalizationand debt reduction. The program has been supported bydevelopment partners, in particular the IMF, AfDB, EU andWorldBank9,aswellasbilateralpartners.Themainprogramobjectiveshavebeentoensurefiscalsustainabilitybyreducingpublic debt, increasing reserves, expenditure rationalizationand control and undertaking structural reforms to enhancepublicsectorefficiency.

Fiveyearsalong,thereformshaveyieldedpositiveresults,as Figure 2-13 above shows. Debt restructuring has beencompleted and the government is on track to meet itsobjectiveofbringingpublicdebtto50%ofGDPby2018.Thecountry’s’ reservesarebeing rebuiltwith thegoalofhavingreservesabove4monthsof import coverby2015. Inflationhas been maintained at low levels, and efforts to increasedomesticrevenuearebeingimplemented.Despitethepositiveresults,much needs to be done tomake the countrymoreresilient to external shocks and improve its diversification.Whilecontinuedeffortstofinalizeongoingstructuralreformsare being undertaken, efforts need to be taken to increaseinvestment spending. 10 Reforms to reduce fiscal risks arebeingimplemented,includingacomprehensivePublicFinanceManagementActionPlan (2012-2014).ThecountryhasalsodesignedaPublicInvestmentManagement(PIM)Plan2013-

9 TheIMFprovidedaStandbyArrangementin2008thatunderpinnedtheeconomicreformprogramsandenabledebtrestructuring,followedbyanExtendedFundFacility(EFF)Arrangementfrom2009to2013.TheAfDBprovidedaBudgetsupportloanfollowedbyaPolicy-basedPartialCreditGuaranteetosupportdebtreschedulingandrestructuring.TheWorldBankprovidedaBudgetsupportloanin2009.

10 SeeIMFwebsite,March2014.

2015 toensureeffective investmentplanning,appraisal andevaluation.

Figures2-17and2-18illustratethepatternofGovernmentExpenditure, now in excess of SR6billion (more than$500million) annually. While growth of current expenditure hasbeenmodestinabsolutetermsandnegligibleinrelativeterms,capital expenditurehasgrown inboth relativeandabsoluteterms,possiblyaspublicdebtinterestdeclinedbecauseofre-structuringofthedebt.

Currentexpenditurehas remained in the rangeof60%oftotalgovernmentexpenditure,whilecapitalexpenditurehasincreasedfromapproximately10%ofexpenditurein2007to24%in2012.

Figure2-19illustratesthecompositionofcapitalexpenditurebetween 2008 and 2013. The Public Utilities Corporation(PUC) and theMinistry of Environment and Energy accountforover50%ofcapitalexpenditureineachyear.Figure2-22providesabreakdownofgovernmentcapitalexpenditurefor2008 through 2013, showing the split between the energyandtransportsectorsconsideredinthisreport(includingtheministryresponsibleforEnergyandPUCandtheDepartmentof Transport and Seychelles Public Transport Corporation -SPTC,Seychelles LandTransportAuthority - SLTA,SeychellesPortAuthority - SPAand SeychellesCivil AviationAuthority-SCAA).Energyandtransporthaveneveraccountedformorethan35%oftotalgovernmentcapitalexpenditureduringtheperiod.MaximumannualallocationtoEnergyandTransportin2013wasSR381million,orlessthan$35million.

Increasingcapitalexpenditure intheenergyandtransportsectorswhile,reducingthedebtloadandadjustingutilitypricestoapproachfullcostrecovery,suggeststhatthereislikelytobeacontinuingdependenceongrantsorprojectfinanceloans



Current expenditure has remained in the range of 60% of total government expenditure, while capital expenditure has increased from approximately 10% of expenditure in 2007 to 24% in 2012.

Figure 2-18: Government Expenditure – Current SR (millions)

Source: Seychelles in Figures 2012, 2013

Figure 2-19 illustrates the composition of capital expenditure between 2008 and 2013. The Public Utilities Corporation (PUC) and the Ministry of Environment and Energy account for over 50% of capital expenditure in each year. Figure 2-22 provides a breakdown of government capital expenditure for 2008 through 2013, showing the split between the energy and transport sectors considered in this report (including the ministry responsible for Energy and PUC and the Department of Transport and Seychelles Public Transport Corporation - SPTC, Seychelles Land Transport Authority - SLTA, Seychelles Port Authority - SPA and Seychelles Civil Aviation Authority- SCAA). Energy and transport have never accounted for more than 35% of total government capital expenditure during the period. Maximum annual allocation to Energy and Transport in 2013 was SR 381 million, or less than $35 million.

Figure 2-19: Government Capital Expenditure

Source: Ministry of Finance Budget Summaries

0% 20% 40% 60% 80%

100%

2007 2008 2009 2010 2011 2012

Other

Interest on Public Debt

Capital Expenditure

Current Expenditure

0%

50%

100%

2008 2009 2010 2011 2012 2013

PUC

Ministry of Energy

SCCA

SPA

SLTA

Figure 2.18: Government Expenditure – Current SR (millions)Source: Seychelles in Figures 2012, 2013



2.3.2 Fiscal Performance Since the 2008 reforms, the fiscal program has changed dramatically, with a focus on expenditure rationalization and debt reduction. The program has been supported by development partners, in particular the IMF, AfDB, EU and World Bank10, as well as bilateral partners. The main program objectives have been to ensure fiscal sustainability by reducing public debt, increasing reserves, expenditure rationalization and control and undertaking structural reforms to enhance public sector efficiency.

Five years along, the reforms have yielded positive results, as Figure 2-13 above shows. Debt restructuring has been completed and the government is on track to meet its objective of bringing public debt to 50% of GDP by 2018. The country’s’ reserves are being rebuilt with the goal of having reserves above 4 months of import cover by 2015. Inflation has been maintained at low levels, and efforts to increase domestic revenue are being implemented. Despite the positive results, much needs to be done to make the country more resilient to external shocks and improve its diversification. While continued efforts to finalize ongoing structural reforms are being undertaken, efforts need to be taken to increase investment spending. 11 Reforms to reduce fiscal risks are being implemented, including a comprehensive Public Finance Management Action Plan (2012-2014). The country has also designed a Public Investment Management (PIM) Plan 2013-2015 to ensure effective investment planning, appraisal and evaluation.

Figures 2-17 and 2-18 illustrate the pattern of Government Expenditure, now in excess of SR 6 billion (more than $500 million) annually. While growth of current expenditure has been modest in absolute terms and negligible in relative terms, capital expenditure has grown in both relative and absolute terms, possibly as public debt interest declined because of re-structuring of the debt.



10 The IMF provided a Stand by Arrangement in 2008 that underpinned the economic reform programs and enable debt restructuring, followed by an Extended Fund Facility (EFF) Arrangement from 2009 to 2013. The AfDB provided a Budget support loan followed by a Policy- based Partial Credit Guarantee to support debt rescheduling and restructuring. The World Bank provided a Budget support loan in 2009. 11 See IMF website, March 2014.

0

2000

4000

6000

8000

2007 2008 2009 2010 2011 2012

Other


Capital Expenditure

Current Expenditure

Figure 2.17: Government Expenditure – Current SR (millions)Source: Seychelles in Figures 2012, 2013

14


(directlysupportedbyenterpriserevenuestreams)tosupportcapitalexpenditure.Itwillbecriticaltoprioritizeandstrictlycontrol capital expenditure in the public sector, which stillincludesallaspectsoftraditionalinfrastructureprovision.

2.3.3 Monetary PolicyThe currency has floated freely since the commencement

of the reform program in 2008 (prior to that itwas peggedagainstabasketofcurrencies).Domesticpricestabilityremainsa primary objective of monetary policy, particularly as theSeychelles economy remains very sensitive to internationalshiftsincommodityprices,especiallypetroleumandfoodstuffs(themainimports).Theauthoritieshavemanagedtomaintainstability since 2008, with average inflation reducing from63%in2008to4.3%in2013.Exchangeratestabilityhasalsobeenattainedwiththerupeetradingatapproximately12perdollarsince2009.ThefollowingtwofiguresshowthemonthlyaveragebidratefortheSRagainsttheEuroandthedollarforJanuary2005throughthe2ndquarterof2013.Thestabilityup

toearly2007underthepeg,thesteadyincreasethrough2007as support becamemore difficult, and the collapse in 2008are all clear, as is the relative stability post-2009.To ensuretransparency and support consistency, the Central Bank ofSeychelles (CBS) recently unveiled its 5-Year Strategic Plan(2014-2018).Thestrategyhighlightstwomainobjectives,withtheprimarygoalbeingtopromotedomesticpricestabilityandthesecondbeingtopromoteasoundfinancialsystem.Withthisaim,theCBSannounceditwouldnowtargetannualinflationofnomorethan5%andGrossInternationalReserves(GIR)ofnotlessthan4.5monthsof importcoverperyear.Absentmajorchangesinexternalinfluences,pricestabilitywithlowinflationandastablerupeeisexpectedintheshortterm.

2.3.4 External SectorSeychelles is a highly import-dependent economy. More

than90%ofitsgoodsandservicesareimported.Seychelles’mainimportsarepetroleumproducts(25percent),machinery(24percent)andmanufacturedgoods(24percent).Seychelles



Current expenditure has remained in the range of 60% of total government expenditure, while capital expenditure has increased from approximately 10% of expenditure in 2007 to 24% in 2012.



Figure 2-19 illustrates the composition of capital expenditure between 2008 and 2013. The Public Utilities Corporation (PUC) and the Ministry of Environment and Energy account for over 50% of capital expenditure in each year. Figure 2-22 provides a breakdown of government capital expenditure for 2008 through 2013, showing the split between the energy and transport sectors considered in this report (including the ministry responsible for Energy and PUC and the Department of Transport and Seychelles Public Transport Corporation - SPTC, Seychelles Land Transport Authority - SLTA, Seychelles Port Authority - SPA and Seychelles Civil Aviation Authority- SCAA). Energy and transport have never accounted for more than 35% of total government capital expenditure during the period. Maximum annual allocation to Energy and Transport in 2013 was SR 381 million, or less than $35 million.

Figure 2-19: Government Capital Expenditure


0% 20% 40% 60% 80%

100%

2007 2008 2009 2010 2011 2012

Other


Capital Expenditure

Current Expenditure

0%

50%

100%

2008 2009 2010 2011 2012 2013

PUC

Ministry of Energy

SCCA

SPA

SLTA

Figure 2.19: Government Capital Expenditure Source: Ministry of Finance Budget Summaries





Increasing capital expenditure in the energy and transport sectors while, reducing the debt load and adjusting utility prices to approach full cost recovery, suggests that there is likely to be a continuing dependence on grants or project finance loans (directly supported by enterprise revenue streams) to support capital expenditure. It will be critical to prioritize and strictly control capital expenditure in the public sector, which still includes all aspects of traditional infrastructure provision.

2.3.3 Monetary Policy The currency has floated freely since the commencement of the reform program in 2008 (prior to that it was pegged against a basket of currencies). Domestic price stability remains a primary objective of monetary policy, particularly as the Seychelles economy remains very sensitive to international shifts in commodity prices, especially petroleum and foodstuffs (the main imports). The authorities have managed to maintain stability since 2008, with average inflation reducing from 63% in 2008 to 4.3% in 2013. Exchange rate stability has also been attained with the rupee trading at approximately 12 per dollar since 2009. The following two figures show the monthly average bid rate for the SR against the Euro and the dollar for January 2005 through the 2nd quarter of 2013. The stability up to early 2007 under the peg, the steady increase through 2007 as support became more difficult, and the collapse in 2008 are all clear, as is the relative stability post-2009.

Figure 2-21: Exchange Rate (SR per Euro) Monthly average bid rate

Source: OANDA database

Figure 2-22: Exchange Rate (SR per USD) Monthly average bid rate

Source: OANDA database

0

500

1,000

1,500

2,000

2008 2009 2010 2011 2012 2013

Other

Energy & Transport

Figure 2.20: Government Expenditure – Current SR (millions)Source: Ministry of Finance Budget Summaries

Figure 2.21: Exchange Rate (SR per Euro)Monthly average bid rateSource: OANDA database

Figure 2.22: Exchange Rate (SR per USD)Monthly average bid rateSource: OANDA database

15


mainimportpartnerisSaudiArabia,followedbySouthAfrica,FranceandSpain.

Seychelles exports are heavily dependent on the fishingindustry (90percentof total exports). As a result, themainexported products are: tuna (50 percent of total exports),prawnsandotherfish. Seychelles’mainexportpartnersareFrance and the United Kingdom. Others include Italy, theNetherlands,SouthAfrica,JapanandGermany.

The export pattern illustrates the highly concentratedpatternofSeychellesdomesticexportsdominatedincreasinglybyFranceand,toaslightlylesserextent,theUKasgeographicmarkets,andbycannedtunaasproduct.Giventhe isolatedlocation and small scale of the fishing/processing industryrelative to competitors, Seychelles will continue to havedifficultyexpandingintonewexportmarketsforcannedtuna.

Seychelles is currently a member of the Indian OceanCommission (IOC), the Common Market for Eastern andSouthernAfrica(COMESA),theSouthernAfricaDevelopment

Community(SADC)andmorerecently,theIndianOceanRimandAssociationofRegionalCooperation(IOR-ARC).Regionalcommodity trade is generally small and imbalanced, withimports exceeding exports by at least five to one. Figures2-28 through 2-30 show trade with members of the threekeyregionalorganizations, ineachofwhichSeychelles isanactiveparticipant (COMESA,SADC,andthe IOC).11 Howevertheonlysignificant`regional’tradingpartner,particularlyforimports, is SouthAfrica, amember of SADC. In 2012 SouthAfrica accounted for 56% of Seychelles imports from SADC,downfrom59%in2011and66%in2007.

With theexceptionof2009, theproportionof total tradewith regional partners has been stagnant and unchangedat around14%of Seychelles’ total external trade, as shownbelow.

11 Thereisconsiderableoverlapbetweenthesethreegroupsofcountries.InadditiontoSeychelles,COMESAincludesBurundi,Comoros,D.R.Congo,Djibouti,Egypt,Eritrea,Ethiopia,Kenya,Libya,Madagascar,Malawi,Mauritius,Rwanda,Swaziland,Uganda,Zambia,andZimbabwe;SADCincludesAngola,Botswana,D.R.Congo,Lesotho,Malawi,Mauritius,Mozambique,Namibia,SouthAfrica,Swaziland,Tanzania,ZambiaandZimbabwe.;IOCincludes,Comoros,Madagascar,Mauritius,andRéunion(France).



To ensure transparency and support consistency, the Central Bank of Seychelles (CBS) recently unveiled its 5-Year Strategic Plan (2014-2018). The strategy highlights two main objectives, with the primary goal being to promote domestic price stability and the second being to promote a sound financial system. With this aim, the CBS announced it would now target annual inflation of no more than 5% and Gross International Reserves (GIR) of not less than 4.5 months of import cover per year. Absent major changes in external influences, price stability with low inflation and a stable rupee is expected in the short term.

2.3.4 External Sector Seychelles is a highly import-dependent economy. More than 90% of its goods and services are imported. Seychelles’ main imports are petroleum products (25 percent), machinery (24 percent) and manufactured goods (24 percent). Seychelles main import partner is Saudi Arabia, followed by South Africa, France and Spain.

Figure 2-23: Imports by Country (million SR)

Source: -‐ Seychelles in Figures 2012, 2013 (National Bureau of Statistics)

Seychelles exports are heavily dependent on the fishing industry (90 percent of total exports). As a result, the main exported products are: tuna (50 percent of total exports), prawns and other fish. Seychelles’ main export partners are France and the United Kingdom. Others include Italy, the Netherlands, South Africa, Japan and Germany.

Figure 2-24: Domestic Exports by Destination (million SR)


0 1,000 2,000 3,000 4,000 5,000 6,000

France Italy United Kingdom

Singapore South Africa Spain United Arab Emirates

2007

2008

2009

2010

2011

2012

0

500

1,000

1,500

2,000 2007

2008

2009

2010

2011

2012

Figure 2.23: Imports by Country (million SR)Source: - Seychelles in Figures 2012, 2013 (National Bureau of Statistics)



To ensure transparency and support consistency, the Central Bank of Seychelles (CBS) recently unveiled its 5-Year Strategic Plan (2014-2018). The strategy highlights two main objectives, with the primary goal being to promote domestic price stability and the second being to promote a sound financial system. With this aim, the CBS announced it would now target annual inflation of no more than 5% and Gross International Reserves (GIR) of not less than 4.5 months of import cover per year. Absent major changes in external influences, price stability with low inflation and a stable rupee is expected in the short term.

2.3.4 External Sector Seychelles is a highly import-dependent economy. More than 90% of its goods and services are imported. Seychelles’ main imports are petroleum products (25 percent), machinery (24 percent) and manufactured goods (24 percent). Seychelles main import partner is Saudi Arabia, followed by South Africa, France and Spain.

Figure 2-23: Imports by Country (million SR)


Seychelles exports are heavily dependent on the fishing industry (90 percent of total exports). As a result, the main exported products are: tuna (50 percent of total exports), prawns and other fish. Seychelles’ main export partners are France and the United Kingdom. Others include Italy, the Netherlands, South Africa, Japan and Germany.

Figure 2-24: Domestic Exports by Destination (million SR)


0 1,000 2,000 3,000 4,000 5,000 6,000

France Italy United Kingdom

Singapore South Africa Spain United Arab Emirates

2007

2008

2009

2010

2011

2012

0

500

1,000

1,500

2,000 2007

2008

2009

2010

2011

2012

Figure 2.24: Domestic Exports by Destination (million SR)Source: - Seychelles in Figures 2012, 2013 (National Bureau of Statistics)



The export pattern illustrates the highly concentrated pattern of Seychelles domestic exports dominated increasingly by France and, to a slightly lesser extent, the UK as geographic markets, and by canned tuna as product. Given the isolated location and small scale of the fishing/processing industry relative to competitors, Seychelles will continue to have difficulty expanding into new export markets for canned tuna.

Seychelles is currently a member of the Indian Ocean Commission (IOC), the Common Market for Eastern and Southern Africa (COMESA), the Southern Africa Development Community (SADC) and more recently, the Indian Ocean Rim and Association of Regional Cooperation (IOR-ARC). Regional commodity trade is generally small and imbalanced, with imports exceeding exports by at least five to one. Figures 2-28 through 2-30 show trade with members of the three key regional organizations, in each of which Seychelles is an active participant (COMESA, SADC, and the IOC). 12 However the only significant `regional’ trading partner, particularly for imports, is South Africa, a member of SADC. In 2012 South Africa accounted for 56% of Seychelles imports from SADC, down from 59% in 2011 and 66% in 2007.

Figure 2-25: Trade with COMESA Members (million SR)

Source: -‐ Seychelles in Figures 2012, 2013 (National Bureau of Statistics) Figure 2-26: Trade with SADC Members (million SR)


12There is considerable overlap between these three groups of countries. In addition to Seychelles, COMESA includes Burundi, Comoros, D.R. Congo, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Libya, Madagascar, Malawi, Mauritius, Rwanda, Swaziland, Uganda, Zambia, and Zimbabwe; SADC includes Angola, Botswana, D.R. Congo, Lesotho, Malawi, Mauritius, Mozambique, Namibia, South Africa, Swaziland, Tanzania, Zambia and Zimbabwe.; IOC includes, Comoros, Madagascar, Mauritius, and Réunion (France).

0 200 400 600 800

1000 1200 1400 1600

2007 2008 2009 2010 2011 2012

Exports to member states

Imports from member states

0 200 400 600 800

1000 1200 1400 1600

2007 2008 2009 2010 2011 2012



Figure 2.25: Trade with COMESA Members (million SR)Source: - Seychelles in Figures 2012, 2013 (National Bureau of Statistics)

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Despitetherelativegrowth,regionaltraderemainsverylow.Whileoveralltotalexportsgrewfromover3.3billionSRin2007to5.3billionSRin2011,regionalexportswerelessthan3%ofthe value,with the largestmarket SouthAfrica (thebiggestregional tradingpartner) during theperiodnever exceedingSR18million.Importsareevenmoreconcentratedintermsofproductandtradingpartner,dominatedbypetroleumproductimportsfromtheGulf.Thesmallmarketandisolatedlocationofthecountrymakesexpansionofregionaltradeverydifficult.

2.4 The Private Sector in SeychellesPreviously a largely public sector-driven economy, the

government has since 2008 reduced its role to that of afacilitatorinsteadofaneconomicdriver.Asaresult,theprivatesectorinSeychellesappearstogrowingfasterthanthepublicsector, measured by national employment and monetaryassets, and is at least tenacious in spite of the economicdownturnof2008.Since2008,privatesectoremploymenthasgrownby50%andconstitutes73%oftotalemployment,whilethe sector has increased its wealth by 26%, accounting for

60% of the total monetary assets in 2012. As part of theeconomic reforms, the government’s policy of reducing itsroleineconomiclifeincludedtrimmingthenumberofpublicsectoremployeesandprovidingamoreenablingenvironmentforprivatesectorgrowth.

Interestinglyhowever,salariesintheprivatesectorareandhavealwaysbeensignificantlylowerthanthepublicsector,insomecasesupto50%lower,asshownoverleaf.

Additional sectorial data is required to determine thecauses, but such amarked incomedifference in the privatesectorsuggestsapredominanceof lower-skilledlabor inthehospitality and similar service industries, the retail sectorandSMEs.Infact,thedraftMTNDSestimatesthattherearearound6,000registeredsmallbusinessesinSeychelles,mostlyin the tourism,hospitalityandrelated industries,and in theretail and other services sector. These private sector SMEsnumericallydominatetheeconomy.



The export pattern illustrates the highly concentrated pattern of Seychelles domestic exports dominated increasingly by France and, to a slightly lesser extent, the UK as geographic markets, and by canned tuna as product. Given the isolated location and small scale of the fishing/processing industry relative to competitors, Seychelles will continue to have difficulty expanding into new export markets for canned tuna.

Seychelles is currently a member of the Indian Ocean Commission (IOC), the Common Market for Eastern and Southern Africa (COMESA), the Southern Africa Development Community (SADC) and more recently, the Indian Ocean Rim and Association of Regional Cooperation (IOR-ARC). Regional commodity trade is generally small and imbalanced, with imports exceeding exports by at least five to one. Figures 2-28 through 2-30 show trade with members of the three key regional organizations, in each of which Seychelles is an active participant (COMESA, SADC, and the IOC). 12 However the only significant `regional’ trading partner, particularly for imports, is South Africa, a member of SADC. In 2012 South Africa accounted for 56% of Seychelles imports from SADC, down from 59% in 2011 and 66% in 2007.

Figure 2-25: Trade with COMESA Members (million SR)

Source: -‐ Seychelles in Figures 2012, 2013 (National Bureau of Statistics) Figure 2-26: Trade with SADC Members (million SR)


12There is considerable overlap between these three groups of countries. In addition to Seychelles, COMESA includes Burundi, Comoros, D.R. Congo, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Libya, Madagascar, Malawi, Mauritius, Rwanda, Swaziland, Uganda, Zambia, and Zimbabwe; SADC includes Angola, Botswana, D.R. Congo, Lesotho, Malawi, Mauritius, Mozambique, Namibia, South Africa, Swaziland, Tanzania, Zambia and Zimbabwe.; IOC includes, Comoros, Madagascar, Mauritius, and Réunion (France).

0 200 400 600 800 1000 1200 1400 1600

2007 2008 2009 2010 2011 2012



0 200 400 600 800

1000 1200 1400 1600

2007 2008 2009 2010 2011 2012



Figure 2.26: Trade with SADC Members (million SR)Source: - Seychelles in Figures 2012, 2013 (National Bureau of Statistics)



Figure 2-27: Trade with IOC Members (million SR)

Source: -‐ Seychelles in Figures 2012, 2013 (National Bureau of Statistics) With the exception of 2009, the proportion of total trade with regional partners has been stagnant and unchanged at around 14% of Seychelles’ total external trade, as shown below.

Figure 2-28 Regional Trade

Regional Trade with COMESA, SADC, IOC

2008 2009 2010 2011 2012

Seychelles Total External Trade (R Million)

12,521 16,132 16,699 18,696 21,352

Regional Trade Exports (f.o.b. value in R Million) 51 172 32 24 50 Imports (c.i.f. value in R Million) 1,663 2,802 2,285 2,687 2,797 Regional Trade Total (R Million) 1,714 2,974 2,317 2,711 2,847 As Percentage of Total External Trade

Exports 1.2% 3.2% 0.7% 0.4% 0.7% Imports 19.7% 26.0% 19.2% 21.0% 19.2%

Total Regional Trade Percentage 13.7% 18.4% 13.9% 14.5% 13.3% Source: National Bureau of Statistics. Seychelles in Figures 2013. Note: 2010 to 2012 are provisional.

Despite the relative growth, regional trade remains very low. While overall total exports grew from over 3.3 billion SR in 2007 to 5.3 billion SR in 2011, regional exports were less than 3% of the value, with the largest market South Africa (the biggest regional trading partner) during the period never exceeding SR18 million. Imports are even more concentrated in terms of product and trading partner, dominated by petroleum product imports from the Gulf. The small market and isolated location of the country makes expansion of regional trade very difficult.

2.4 THE PRIVATE SECTOR IN SEYCHELLES

Previously a largely public sector-driven economy, the government has since 2008 reduced its role to that of a facilitator instead of an economic driver. As a result, the private sector in Seychelles appears to growing faster than the public sector, measured by national employment and monetary assets, and is at least tenacious in spite of the economic downturn of 2008. Since 2008, private sector employment has grown by 50% and constitutes 73% of total employment,

0 200 400 600 800

1000 1200 1400 1600

2007 2008 2009 2010 2011 2012



Figure 2.27: Trade with IOC Members (million SR)Source: - Seychelles in Figures 2012, 2013 (National Bureau of Statistics)

Figure 2.28 Regional TradeRegional Trade with COMESA, SADC, IOC 2008 2009 2010 2011 2012

Seychelles Total External Trade (R Million) 12,521 16,132 16,699 18,696 21,352

Regional Trade

Exports (f.o.b. value in R Million) 51 172 32 24 50

Imports (c.i.f. value in R Million) 1,663 2,802 2,285 2,687 2,797

Regional Trade Total (R Million) 1,714 2,974 2,317 2,711 2,847

As Percentage of Total External Trade

Exports 1.2% 3.2% 0.7% 0.4% 0.7%

Imports 19.7% 26.0% 19.2% 21.0% 19.2%

Total Regional Trade Percentage 13.7% 18.4% 13.9% 14.5% 13.3%Source: National Bureau of Statistics. Seychelles in Figures 2013. Note: 2010 to 2012 are provisional.

17


Prior to the 2008 crisis, the domestic private sector inSeychelleswas essentially limited to SME retail activity andminority interest incommercialbanking. 12Theexpansionoftheprivatesectorsince2008hasbeenprimarily intheSMEhealthcare, education, and transportation logistics sectors,whilelargerinvestmentshavebeenmadebydomesticaswellasforeigninvestorsinthetelecommunications,fisheries,andtoamuchlesserextent,inthebankingsector.

2.4.1 Seychelles Business Environment Rating in the Region

In terms of the business environment Seychelles rankshigher than itsneighboursother thanMauritius,andhigherthanmost of sub-Saharan Africa, as theWorld Bank’s EaseofDoingBusiness Index in Figure 2-31 shows.However thecountryisnotfarabovethe50thpercentileofthe185countriesevaluatedworldwideandisthusnotyetcompetingeffectivelyininternationaltermsforprivatesectordirectinvestment.

Overall, Seychelles does relativelywell in terms of payingtaxes(19th)andthecostoftradingacrossborders(29thdespitethe relative physical isolation of the Seychelles). Ranking isparticularlylowintermsofeaseofstartingabusiness(118th-involving10proceduresover39days),gettingelectricity(147th –takesnearly5months)andparticularly,gettingcredit(170th-inpartareflectionoftheconservativenatureofthefinancialsector).

12 TheSeychellesChamberofCommerceandIndustry(SCCI),representingabout60%oftheprivatesector,estimatesthatpriorto2008,70%oftheeconomywasdirectlymanagedbygovernment,whileasof2014,70%oftheeconomyisinprivatehands.

A broadly similar picture is presented by the Global Competitive Index,developedbytheWorld Economic Forum (Figure2-32).

This approach defines competitiveness as “the set ofinstitutions, policies, and factors that determine the levelofproductivityofacountry.” WhileSeychelles rankshigherthan ranked regional neighbours except Mauritius, thecountry remains in the bottom half of the 148 countriesranked. Seychelles ranked 52nd in terms of provision ofbasic requirements (institutions, infrastructure, and macro-economicenvironment)and62nd in termsof innovationand

Figure 2.29: Private Sector in SeychellesTotal Employment 2008 2009 2010 2011 2012

All Sectors 41,342 41,891 44,159 49,891 51,426

Government &Parastatal 16,509 14,170 13,652 13,975 14,107

Private 24,833 27,721 30,508 35,916 37,319

Private as Percent of Total 60% 66% 69% 72% 73%

Assets (million Rupees) 2008 2009 2010 2011 2012

Domestic Assets 5,979 5,000 5,836 5,815 5,478

Claims on Private Sector 2,588 2,347 2,788 2,936 3,266

Private as Percent of Total 43% 47% 48% 50% 60%Source: - National Bureau of Statistics. Seychelles in Figures 2013



while the sector has increased its wealth by 26%, accounting for 60% of the total monetary assets in 2012. As part of the economic reforms, the government’s policy of reducing its role in economic life included trimming the number of public sector employees and providing a more enabling environment for private sector growth.

Figure 2-29: Private Sector in Seychelles

Total Employment 2008 2009 2010 2011 2012 All Sectors 41,342 41,891 44,159 49,891 51,426 Government &Parastatal 16,509 14,170 13,652 13,975 14,107 Private 24,833 27,721 30,508 35,916 37,319 Private as Percent of Total 60% 66% 69% 72% 73% Assets (million Rupees) 2008 2009 2010 2011 2012 Domestic Assets 5,979 5,000 5,836 5,815 5,478 Claims on Private Sector 2,588 2,347 2,788 2,936 3,266 Private as Percent of Total 43% 47% 48% 50% 60% Source: -‐ National Bureau of Statistics. Seychelles in Figures 2013

Interestingly however, salaries in the private sector are and have always been significantly lower than the public sector, in some cases up to 50% lower, as shown below.

Figure 2-30: Average Monthly Earnings

Source: -‐ National Bureau of Statistics. Seychelles in Figures 2013

Additional sectorial data is required to determine the causes, but such a marked income difference in the private sector suggests a predominance of lower-skilled labor in the hospitality and similar service industries, the retail sector and SMEs. In fact, the draft MTNDS estimates that there are around 6,000 registered small businesses in Seychelles, mostly in the tourism,

5,781

7,365

8,959

10,907 10,531

4,387

5,915 6,693

7,409 8,450

2008 2009 2010 2011 2012

Average Monthly Earnings (Rupees)

Parastatal Government Private Figure 2.30: Average Monthly EarningsSource: - National Bureau of Statistics. Seychelles in Figures 2013

Figure 2.31: Ease of Doing Business IndexCountry 2014 2013 2012 2011 2008

Seychelles 80 74 103 109 90

Botswana 56 59 54 52 51

Cape Verde 121 122 119 129 132

Mauritius 20 19 23 21 27

Madagascar 148 142 137 144 149

Comoros 158 158 157 156 147

Kenya 129 121 109 106 72

Tanzania 145 134 127 125 130

Ranking-1 is best.*2011 ratings were adjusted in DBR 2012 rankingsSource: World Bank – Ease of Doing Business Index website

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sophistication (business innovation and sophistication) but95thintermsofefficiencyenhancers(goodsandlabourmarketefficiency, financial market development, market size). Agovernmentledmulti-sectorialcommitteehasbeensetuptoaddresstheseweakareasandimproveallfactorsnotinherentinitsgeographicalandphysicalcontext.

2.4.2 GoS Objectives for the Private SectorConsidering thechallenges facedbySMEsandtheprivate

sector in obtaining financing and operating a business inSeychelles(asdiscussedabove)andfullyacknowledgingthatprivate sector growth is crucial to achieving high economicgrowth, draftMedium TermNational Development Strategy(MTNDS2013-2017)isclearthatthegovernment’sobjectivesinenablingtheprivatesectorare:

qTopromoteprivatesectorled-growthqTofurtherimprovethecountry’sinvestmentclimateand

privatesectordevelopmentqToincreasePublicPrivatePartnershipqToencouragethecreationanddevelopmentofbusinesses

GoShasbeguntoundertakeeffortstofacilitateprivatesectoractivity, including institutional and legal reforms to improvethe business environment. These have included simplifyingbusiness registration and tax payment systems, establishinga one-stop shop for business-related procedures, creatinginstitutions to support small businesses, improve access tofinanceandacceleratingtheresolutionofcommercialcases.

2.4.3 Potentially Attractive Sectors Not Considered in the Draft MTNDS

The draft MTNDS identifies Tourism and Fisheries as themain sectors of the economy. Other sectors of importanceidentifiedarefinancialservices,ICT,tradeandtransportation,to the extent to which they support and complement thegrowthofthetwokeysectors.Ofallthesectorstargetedforgrowth, tourism will continue to have the most economicimpact, if Seychelles can combine increased volumewith apricingstructurethatis,toanextent,insulatedfromeconomicdownturns. During the global crisis, the Seychelles tourismindustry held its own, indicating that the demand for thecomparatively high-value, high-end nature of Seychelles

tourism is relatively price inelastic. The draft MTNDS putsforwardthepolicythatinadditiontomarketingSeychellesasa luxury, high-end, environmentally sustainable destination,an “affordable Seychelles” market segment should also betargeted.Giventhesizeof the tourismsector’scontributionthe economy, clearly this sector must be made a priorityand expanded. However because of the size, competitionand internal limitations, it is unlikely that this sector willexperience above-average growth in the near future, andSeychelles must look for other areas for growth. Similarly,above-averagegrowthforthematurefisheriessectorwillbedifficulttoachieve.

ThereforewhileSeychellesmustcontinuetoexpandsectorswithbigeconomicclout,liketourismandfisheries,itmustalsoexploresmallersectorswhichhaveagapinthepotentialforgrowth,andenableeconomicdiversitytobalancetheriskofadownturnintheprimarysectors.Onewaywouldbetoexplorebusinessventuresthatcurrentlymaynotbelarge,butmaybeabletoleveragetheresourcepotentialinSeychellestogrowexponentially.Examplesfromtheregionshouldbeexplored,particularlyMauritius.Thatnationhasdonethissuccessfullywithvalue-addedmanufacturinginExportProcessingZones,diversified financial services, diversified ICT services andmost interestingly,harvestingtheoceaneconomy.Mauritiusisexploring thepotential forharvesting theoceaneconomyforinnovativeandpotentiallyhigh-growth,highvalue-addedareas such as commercial seaweed culture, pearl cultureandaquaculture,andispositioningitselffordeepseawaterexploitation,bio-pharmacy,renewableenergyandcosmetics.

Current efforts underway for the development of amari-and aquaculture strategy should therefore explore optionsfromotherSmallIslandDevelopingStates(SIDs)successes.Inaddition,theongoingdiscussionofa“blue”economyshouldthereforebetargetedatharnessinghigh-value,ocean-derivedproducts.ItissuggestedthatSeychellesmayuse,inadditionto its current criteria, the following additional criteria forfinding and selecting new, smaller high-growth business forinvestment:

qAddressesagapinpotentialqEnableseconomicdiversityqEngagesprivatesectorqAchievesgainsreasonablyquickly

2.5 The Seychelles Government’s Capacity to Implement PPPs

While the draftMTNDS repeatedly emphasizes increasedprivatesector investmentandPPPasameansto jump-startthe economy, it is important to evaluate howwell the GoSis prepared to implement effective PPPs. The draftMTNDSidentifies the following three overarching developmentgoals for the period 2013-2017, which are inextricablyinterconnectedandrequireabalancedapproachtochange:

qStrengtheningthefoundationsforeconomicgrowth;i) Maintainstablemacroeconomicenvironmentii) Improve the legal and regulatory framework and

Figure 2.32: Global Competitive Index

Country 2013/14 2012/13

Seychelles 80 76

Botswana 74 79

Cape Verde 122 122

Mauritius 45 54

Madagascar 132 130

Comoros n.a n.a

Kenya 96 106

Tanzania 125 120Ranking-1 is bestSource: World Economic Forum website

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infrastructureandpromotePPPinfisheries&marineresources

iii) Develop institutional, regulatory and “hard”infrastructure for greater private sector and SMEinvestment in agriculture, fisheries and financialservices

qImprovingthequalityoflifeqEnsuringenvironmentsustainability

The Draft MTNDS has identified four policy interventionareas to achieve these national development goals, andprivatesectorvitalizationisprioritizedasthenumberonearearequiringinstitutionalandregulatorysupportandinvestment:

qVitalizingtheprivatesectorqStrengtheninggoodgovernanceandsecurityqAddressingsocialissuesqDevelopingthegreenandblueeconomies

Apartfromfull investmentsinsomeactivities,thecountryhasafewPublicPrivatePartnerships(PPPs)operatinginsomesectors.

Transport: There have been two PPPs in transportation.EtihadAirwaysacquireda40%shareinAirSeychellesinoneof themajor PPP transactions in the country, and the portoperationsareconcessionedout toaprivateoperator, LandMarineTransportAgency(LMTA).GoSislikelytoallowmoreengagement of the private sector in future developmentsthroughPPPsattheVictoriaPort.

ICT: TheSeychellesCableSystemCo.Ltd isaverysuccessfulpublic-private-partnership(PPP)betweentheGoS,AIRTELandCable &Wireless for a submarine cable system connectingSeychelles with the rest of the world via the East Africancoast. This has the potential to create new opportunitiesfor e-commerce, business and technological innovation,and a newhigh-growth, export-driven service sector. GoS’sobjectives for this sector are to promote increased privatesectorparticipationandcompetition,todeliverlowerprices,aswellasimprovedqualityandspeedofservices.Torevitalizethe sector, the GoS has committed to create an enablinglegal and regulatory environment to ensure growth anddevelopment of ICT, and develop institutional capacity andcompetencies.

Energy: PUC controls the entire chain of generation,transmission and distribution of power in Seychelles, butthismaychangeinthefuture.Aseparateregulatorhasbeencreated, theSeychellesEnergyCommission (SEC),and thereis legislativeprovision for3rdpartypowergeneration tobedistributed through thePUCnetwork.While theEnergy Act 2012 hasbeenpassed,theimplementingregulationsarenotyetinplace.Theseneedtobeinplacetosupportnewentrantsintothemarket.PPPPotentialexists inthissector,basedonpreliminaryinterestshownbypotentialinvestors.

Therefore,while the intent tovitalise theprivatesector isclearly stated, it is important to evaluatewhether the draft

MTNDShascommittedtheresourcesandhastheinstitutionalandregulatorycapacityforimplementingreformtoenabletheprivatesectortobecomeakeyengineforeconomicgrowthinthecountry.GoSmustaskitselfthefollowingquestions,andaddressthegaps,ifany:

qWhat are PPP requirements: policy, legal, regulatory,institutional,infrastructure,funding?

qHow does the GoS measure up in its capabilities toeffectivelyattractastrongPPPresponse?

qWherearethegapsthatGoSneedstobridge?Arethereanybindingconstraints?

qDoes GoS have a formal process to consult with theprivatesectorabouteconomicreforms?

Anevaluationof the readinessof the country against theabovecriteriaismadeinthenextsection.

2.5.1 PPP RequirementsA Public Private Partnership (PPP) is a contract for a

defined period between the public and private sector forspecificprojects.WhilethereareseveralformsofPPPs,onecommonandoftenpreferred formofPPP forcash-strappedgovernments requires theprivatesector tofinance,developand operate the infrastructure for a specific project, andprovideservicestothegovernmentorthepublic. It involvesacapital investmentandprovisionofservicesbytheprivatesectoratapricethatissupposedtodeliverabettervalueformoneythanifdonebythepublicsector.Ataminimum,itisexpectedthatthePPPwillimproveefficiencyandproductivity,andmayresultinreducedcostsbeingpassedontotheend-user.Thebasicpublicinfrastructurethatiscommonlyrequiredtooperatetheproject,suchassupplyofenergy,utilitiesandtransportationaccessistypicallyprovidedbythepublicsector.

Since the early 1990’s International Financial Institutions(IFI)havehadconsiderableexperienceassistingwithPPPsindevelopingcountries,andasaresult,somebroadguidelinesand key success factors have emerged for successful PPPs,whicharediscussedbelow.Thereisadequatehistoricalandempirical evidence that for a PPP program to be successfuland generate a strong response from qualified and well-fundedplayers, it requires thepublic sector todevelopandcommunicate a clear PPP policy, supported by sound legal,regulatory and investment frameworks,13 and institutionalcapacity,asoutlinedbelow.

qPolicy Framework: Establish and clarify the policyframework,sothattheprivatesectorclearlyunderstandshowdeeplythegovernmentiscommittedtotheproject.Clearlydemonstratedpoliticalwillandhigh-levelpoliticalsupportarerequiredforcredibility.

qLegal and Regulatory Framework: Establishaclearlegalandregulatoryframework,sothattheprivatesectorhasconfidencethatcontractsareeffectiveandenforceable.

qInstitutional Capacity: Strengthen the institutionalcapacitytoenablethegovernmenttoeffectivelyperform

13 WorldBank,2011PPPinEmergingMarkets,byEdwardFarquharson;ClemenciaTorresdeMästle;E.R.Yescombe;JavierEncinas

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the specialized functions for managing successfulPPP programs. Build, transfer or engage the relevantcommercial and legal skills needed to support policymakersandpublicbodiessponsoringtheprojects.

qInvestment Framework for Infrastructure: This shouldinclude the government’s own long-term investmentplansandbudgetforprovidingthebasicinfrastructuretoenablethePPPprojects.

qInvestment Framework for PPP Projects: Draw up long-term investment plans, to indicate a commitment tocurrentandfutureprojects,andtoshowhowtheyfitintonationaleconomicplans.

qImplementation Framework: Establish a clear PPPimplementation plan, including quality assurance andapprovalsprocesses.

Inaddition,itisasimportantforthegovernmenttoengageandconsultwiththeprivatesectorearlyonatthepolicyandregulatorydevelopmentstage,andsubsequentlythroughoutthedevelopmentofthePPPprogram.

2.5.2 GoS Scorecard for Implementing PPPDrawingfromthedraftMTNDSandareviewofotherreadily

available but limited GoS sources, a simple evaluation ofGoS’s institutionalandeconomiccapabilities forsuccessfullyimplementingPPPsisattemptedhere.

Totheextentthattheprivatesector is involved/consultedin the many private sector reforms that Government isundertaking,thedraftMTNDShasannounceditsintentiontostrengthencivilsocietythroughgreaterparticipationinamoreinclusive/integratedpolicydecision-making,sothat“private sector and the public will both increase trust and transparency in Seychelles’ governance and reinforce Seychelles’ credibility on the local and international scene.“

The GoS has established a Strategic Planning and PolicyCommittee comprising of public and private partners tomonitortheimplementationofthedraftMTNDSstrategy,butthereappearstohavebeennodialoguewiththeprivatesectorduringtheinceptionstagesofdevelopingthepolicesleadingto implementation. TheGoS should consider implementinga formal process or mechanism for inclusive public-privatesector dialogue on economic reforms and meaningfulengagementwith the private sector in a timelymanner onsubstantivepolicy,regulatoryandPPPissues.

Of the six criteria against which Seychelles’ readiness forPPPtransactions ismeasured,GoShasmadesomeprogressin planning the construction of additional “hard’ publicinfrastructure.ThedraftMTNDSlistsaroundSR5.4billionforpublic infrastructure investments,andanotherSR1.1billionforeconomic,socialandenvironmentalprojectstosupporttheinfrastructure investments, as shown in the following table.To thisextent,while the sourcesof fundingarenotentirelydetermined, it isassumedthatGoS isat leastcommittedtomaking the basic infrastructure investments required forenablingPPP.

The sources and potential for funding will be discussedlater inthisreport,and iftheamountoffundingrequired isnot supportedby theeconomic fundamentals inSeychelles,thiswouldbea criticalandbinding constrainton successfulimplementationofPPPinSeychelles.

For the other five criteria, Seychelles is, at best, not yetentirelyreadyforeffectivePPPimplementation,andatworst,maybeunintentionallysendingthewrongsignalswithsomeofthepolicystatementspresentedinthedraftMTNDS.Thesearelikelytocausesomeconfusionandconcernintheprivatesector.Thisshouldbeamatter forconcern,as itmaysignal

Figure 2.3.3: PPP Scorecard for Seychelles

Critical Success Factors for PPP Seychelles’ Current Position Seychelles’ PPP Readiness Score

1. Policy Framework

Outlined in draft MTNDS and other documents, butGoSconflictingstatementsaboutencouragingPPPsandmaintaining“strategic”controlovertheprivatebusinesssectormaysendwrongsignals&causeconcern.

Conflictingmessages

2. Legal & Regulatory

Source documents not available, but energy sectordraftedandawaitinglegislativeapproval.AfDBhasbeenrequested to provide support in developing regulatoryframeworkforPPP.

Underway

3. Institutional Capacity

GoS acknowledges that for almost all sectors it has“limited institutional capacity and expertise”. MFI’sotherthanAfDB(WB)mayprovidetechnicalassistanceforcapacitybuilding.

NotReady

4. Invest- Public Infrastructure Announcedandonschedule,awaitingfunding Good

5. Investment – PPP ProjectsNo significant new projects announced, but GoS canapplytheexperiencegainedwithairtransport,port&ICTprojects.GeneralPPPregulationsneedtobedeveloped.

NotReady

6. Implementation Plan Notannouncedyet,butcurrentlyunderpreparation. NotReady

21


thattheGoSmaynothavereachedpoliticalconsensusonhowtoimplementeconomicandprivatesectorreform.Inour(TheCornell Group, Inc.) experience with PPP and privatizationin South Africa, Russia, Venezuela, and other developingcountries, the lack of political will and of an unequivocalcommitment to economic reform has been the singlemostcommonandcriticalfactorforbotched,shelvedorfailedPPPprojects.

2.6 The Public Sector in SeychellesFigure 2-35 illustrates the official current structure14 of

ministries, agencies, commissions and other public sectorentities inSeychelles.Under this structure, theentitieswithsubstantial capital budget expectations or requirementsrelatedtoinfrastructureoverthenextdecadereportprimarilythrough theMinister of Home Affairs and Transport (SCAA,SPA, SLTA, and SPTA) or the Minister of Environment andEnergy(PUC).Historically,non-budgetoperatingentitieshavebeenself-regulating.Asnotedabove,anEnergyCommissionhas already been created, and there is a plan to separateregulationfromoperationsinboththeSPA(PortofVictoria)andSCCA(SeychellesInternationalAirportandPraslinairstrip).Again,itisnotcleartowhatextentpermissivelegislationwillattractprivateinvestmentintothesesectorswherehistoricallyboth development and operations were entirely in publichands. In the short term, the separation of operations andregulationwillcreatenewentities,sothecomplexstructureshownbelowmaybecomeevenlarger.

2.7: The Evolving Seychelles Development Agenda

TheSeychelles 2017 document,preparedin2007-08,basedonhistoricaldatathrough2006,providedavisionofdoublingofGDPby2017,basedonmajorgrowthoftourismandthefisheries.While Seychellesavoidedamajor collapse inboth

14 Asofmid-2013

tourismandthefisheriesduringtherecentinternationalcrisis,thethen-anticipatedmajorgrowthintourismofthefirsthalfoftheperiodhasnotyetinfactoccurred.15

TheSeychelles 2012-2020 Tourism Master Plan,completedinlate2011,providesamoremodestvisionoffuturetourismgrowth. According to projections of the World Travel and Tourism Council, by 2021 Seychelles is expected to be the3rdmost tourism-dependent country in theworld, in termsof direct contribution of tourism to GDP, and the 4thmostdependent in terms of contribution to employment andshareofcapitalinvestmentintourismrelativetototalcapitalinvestment. The spillovers from tourism growth to generalinfrastructure requirementscanbesignificant– forexamplewater consumption per bed is estimated to be twice thatof thedomesticpopulation for small hotels, andmore than3timeshigherforlargerhotels(inpartbecauseoftheneedfor the latter to maintain extensive gardens). The baselinetourismforecastprovidedintheTourism Master Planindicatesthattouristarrivalscouldincreasefromjustunder200,000tomorethan300,000by2020.Mostarrivalswillcontinuetobebyair,withimplicationsforairportdevelopment,aswellasforwater,sewageandelectricitydemand.

Since2013,thePublicUtilitiesCommission(PUC)hasbeenimplementingaplanfocusedrebalancingofelectricitytariffstoeliminatecross-subsidizationbetweenelectricityusersovera seven-year period, along with introduction of automaticquarterlyindexingagainstchangesinmajorcostcomponents,such as fuel.While there will also be some re-balancing intariffsforwaterandsewage,theseserviceswillcontinuetobecross-subsidizedbyPUCfromelectricityrevenues.Moreover,subsidiestoSeychellesPublicTransportCommission(SPTC)toprovidebustransportonMahéandPraslinwillbemaintainedat least through the end of 2014 (cash to cover the gapbetweenprojectedoperating costs andexpected revenues).Present subsidies to SPTC are discussed in greater detail inSection3below.

In mid-2013 Government of Seychelles issued a draftMedium Term National Development Strategy 2013-2017 (draftMTNDS).Thisreinforcestheviewthat“ThetwomainpillarsoftheSeychelleseconomyaretourismandfisheries”16 with the proviso that increasing efforts are being made togeographicallydiversify themarkets for travel toSeychelles,traditionallycenteredinEurope.ThedraftMTNDSispositionedas a comprehensive, holistic and coherent roadmap for thenextfiveyears,anddefines the threenationaldevelopmentgoalsas:

qStrengtheningthefoundationsofeconomicgrowth:• Maintainingastablemacro-economicframework• Improvingtheperformanceofthefisheriessector• TransformingthestructureoftheSeychelleseconomy

to allow for a greater role for agriculture, fisheries,financialservicesormanagementservices

qImprovingthequalityoflife:

15 SeeFigure2-11aboveforvisitorarrivals.Whilegrowthhasbeensteady,ithasnotoccurredattherateenvisagedin2007-08.

16 MTNDS,p.17.

Figure 2.34: Planned Public Infrastructure Investments (draft MTNDS)

Project Economic Infrastructure SR (‘ 000)

Roads 155,622

Port 1,205,000

Airport 1,896,000

Fiber Optic Cables 1,359

Energy & Wind Power 391,794

Water & Utilities 1,781,652

Total Economic Infrastructure 5,431,427

Project Economic Sector SR (‘000)Dams & Water Treatment 13,200Fishing Quay TBDTotal Economic Sector 13,200Total Environment Sector 554,484Total Social Sector 498,936

TotalAllSectors 6,498,047

Est.USDollars(million) $520

22


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• Improvingaccesstocleanwaterandsanitation• Investinginhumancapital• Providingamorerobustsocialsafetynet

qEnsuringenvironmentalsustainability:• Developingandimplementingsolidwasteprogrammes• Institutingenvironmentalimpactassessmenttoolsinto

thedevelopmentplanningandcontrolprocess• Committing to global environmental partnerships

via bilateral cooperation programmes, multilateralenvironmental agreements and intergovernmentalsustainabledevelopmentgovernanceprocesses

While the report discusses challenges, objectives andstrategiesrelatedtoeachgoal,thefinallistofpriorityprojects,totalingmorethanSR7billion(inexcessof$US600million)providesnoguidanceonitsprioritization.

ThecurrentdraftSeychellesstrategicframeworkidentifiespresentandpotentialgrowthareasandproposesreasonable

changes togovernmentpolicy to facilitategrowth, includinggrowthoftheprivatesectorandtheeliminationofsubsidizedpricesfor ‘utilities,’whicharedefinedbroadly.However,thetimeline, the explicit actions to be taken, or the expectedresultsarenotspelledout.ExperienceelsewhereinAfrica17 confirmsthatthisgapbetweendevelopmentofareasonable,broadplanandtimelyimplementationtypicallyresultsfromacombinationof:

qLimitations in the technical aspects of planning andmonitoringwithinthepublicservice

qLimitedexperienceindefining,quantifyingandmonitoringindicators that would permit appropriate performancemonitoring

qLimitedITsystemstopermittimelymonitoringoffollow-throughviaappropriateperformanceindicators

17 SeeSSATP:Sub-SaharanAfricaTransportPolicyPerformanceReview(Phase1),preparedforSSATPbyCPCS,2013.

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Chapter

25

Current Infrastructure

Seychellescannotberegardedasbeinginanimmediatecrisissituationwithrespecttoinfrastructure,particularlycomparedwithothercountriesinAfrica18orwithother

smallstates19.InfactSeychellesconsistentlyranksfirstontheAfrican Infrastructure Development Index (AIDI), mostrecentlyupdated in 2012. AIDI is a comparative index and considersper capita availability of electricity, telephone connections,paved roads, access to water, and access to sewage. TheIndexisscaledagainstthehighest-scoringcountry,whichisinfact Seychelles. Figure 3-1 illustrates the recent positionofSeychellesrelativetoitsfellowmembersoftheIOCorcoastalneighbours.

Intermsofportsofentry,particularlycriticaltoanisolatedislandeconomy,thePortofVictoriahasadequatecapacityatpresent, but there arepreviously expressed concerns aboutits inability to handle larger vessels (particularly containercarriers) in future. The airport has more than adequaterunwaycapacity,althoughthe40-year-oldterminalissubjecttocrowdingwhenhandlingthearrivalofmorethanonewide-bodied aircraft at a time. 20The trend toward increasing useofwide-bodied aircraft (Airbus 330 and 340 series) reducesrunwayoccupancy, although there remains a strategic issuethatclosureofthesinglerunwaybecauseofanincidentwouldhaveacatastrophicshort-termimpactontourism.

However, the initial overall impression of an absence ofimmediateproblems is somewhatmisleading – fieldwork inSeychelles during April 2013 and February 2014 confirmedthat problems have begun to appear in the utility sector.Rotatingpowercutsarebecomingmorefrequent,particularly

18 SeeTheAfricaInfrastructureDevelopmentIndex,AfDBEconomicBrief,Vol.1Issue1,25April2011.

19 SeeStatisticsforSmallStates:ASupplementtotheWorldDevelopmentIndicators2011,WorldBank

20 Annualairportcapacityislimitedbybotha)thenumberofaircrafttake-offsandlandingsthatcanbehandledduringapeakhourandb)thenumberofpassengersthatcanbeprocessedthroughtheterminalduringapeakhour.Largeraircraftreducerunwayutilization,(sincealargernumberofpassengersarehandledpertake-offorlanding),butincreasethepeakingofactivityattheterminal.Aircraftcurrentlyoperatingintheregionrangefrom250+passengersforanAirbus330or340,presentlyoperatingregularlytoSeychelles,upto500forthelatestAirbus380,operatingregularlyintoDubaiandAbuDhabibutnotyetoperatingintoSeychelles.

onPraslin.ThePUChasdiscouragedconnectionofsomenewhotelprojects to thepowergrid,encouragingdevelopers toprovide their own generation capacity.Water shortages arealso becoming more common onMahé. 21 Traffic levels onkeyroadslinkingVictoriatootherpointsonMahéapproachsaturationwithincreasingfrequency.MorefrequentbreaksinwaterandsewagepipesonMahé,generallylocatedbeneathpaved roads, are reported to be damaging the road sub-structure. This problem is being exacerbated by a growingnumberofheavyvehicles(someofwhicharealmostcertainlyoverweight)onMahéroads.WhileallvehiclesareregisteredintermsofmaximumallowableGrossVehicleWeight(GVW),andthereisaregulationlimitingtruckstoamaximumof10tonsperaxle,itisnotuncommonforasix-axlevehicletocarrymorethan60tonsduetoalackofenforcement.

Thebalanceofthissectiondiscussesthecurrentsituationwithin the two key sectors or budget envelopes consideredin this report: Utilities (electricity, under the Public UtilitiesCommission plus the budget envelope of the Ministry ofEnvironmentandEnergy),andTransport(roads,bustransport,aviationandports;plusthebudgetenvelopeoftheTransportDepartment,currentlyundertheMinistryofHomeAffairsandTransport).Thisreportdoesnotfocusonwaterorsanitation.

3.1 The Utilities Sector

3.1.1 Key Entities

3.1 1.1 The Public Utilities Corporation of Seychelles (PUC)

Formed in 1986, the PUC is a government-owned bodyresponsible for providing electricity, water and sewerageservices within the country. The PUC was formed throughthemergeroftheSeychelles Water AuthorityandSeychelles Electricity Corporation Ltd.TheprincipalactivitiesundertakenbyPUCare:

qGenerationanddistributionofelectricityqStorage,treatmentanddistributionofpotablewaterqCollection,treatmentanddisposalofsewage

TheElectricityDivisionofthePUCismadeupoftwomainsections: the Generation Section and the Transmission &Distribution Section. The Generation Section is responsiblefor the safe and continuous production of electricity fromthreegeneratingstations.Allthesestationsconsistofdiesel-based generators and are situated on the islands of Mahéand Praslin. The Transmission & Distribution Section isresponsible for transmission and distribution of electricitywithin Seychelles (specifically, within the central islands ofMahé.Praslin,andLaDigue).TheWaterDivisionofthePUCcomprisessubsectionsincludingsupply,distribution,planninganddesign, and constructionandoperations. TheSewerage

21 MorethanhalfofthewaterenteringthedistributionsystemonMahébecomesNRW(non-revenuewater)

3. Current Infrastructure

Figure 3.1: African Infrastructure Development IndexCountry 2009 2006

Seychelles 100.00 100.00

Mauritius 90.44 92.45

Madagascar 7.05 5.66

Comoros 43.39 38.19

Maldives n.a. n.a.

Kenya 21.40 19.06

Tanzania 12.10 12.84

Somalia 3.96 0.34

Source: African Infrastructure Development Index 2011 website

26


Division is responsible for the operation and maintenanceofallsewagetreatmentworks,pumpstationsandcollectionsystems.

ThePUCidentifiesthekeyprojectsrequiredineachsectorand seeks internal approvals from thePUCBoard.After theBoard approves these projects, they are then submitted totheMinistry of Finance for approval and funding. The PUCconfirmed thatMoF has to date been very supportive andcooperative in providing necessary approvals and adequatefundingforrequiredprojects.

3.1.1.2 Seychelles Energy CommissionThe Seychelles Energy Commission (SEC) was established

under the Energy Act 2012 to regulate electricity-relatedactivitiesforadequate,reliable,cost-effectiveandaffordableelectricitywhileprotectingandconservingtheenvironment.TheSECisanindependentbodyandnotsubjecttodirectionor control of any authority in its day-to-day management.Asperthe Energy Act 2012,thePUChasnowbeenbroughtunderthesupervisionoftheSEC.

ThekeyfunctionsoftheSECarementionedbelow:

qmaintain an efficient structure for electricity sector andensureitseconomicfeasibility

qencourageinvestmentintheelectricitysectorqensuresufficientsupplyofelectricitybylicenseesandthe

PUCtoconsumersqensuresaleofelectricityatreasonablepricesqensureprovisionofsafe,secure,reliableandhighquality

servicesrelatedtoelectricitysectorqpromoteuseofrenewableenergysourcesqpromoteenergyefficiencyqensure all undertakings in energy sector comply with

applicableenvironmentprotectionstandardsandgeneralpublicsafetyconditions

The SEC’s mandate to set energy policy is very broad,coveringthepetroleumsector(SEYPACandPetroSeychelles)aswellaselectricity,but its regulatorymandate is currentlylimitedtothePUC.

3.1.1.3 Seychelles Energy BoardThe Seychelles Energy Board (SEB),alsoestablishedunder

theEnergy Act 2012,consistsofrepresentativesfromMoEandMoF, plus fourexperiencedmembers in theenergydomainandachiefexecutiveofficer.

TheobjectivesoftheSEBareto:

qissue, renew, modify, suspend or revoke licenses forelectricityactivities, inconsultationwithotherstatutoryauthorities

qapprovepricesforthesaleandpurchaseofelectricityqapprove prices for connection and use of transmission

anddistributionnetworksqestablishproceduresforsettingandreviewingtariffsqpropose and approve standard power purchase

agreements (PPAs)andnetworkconnectionagreementsintheelectricitysector

qreview laws related to the energy sector and makerecommendations

3.1.2 Electricity SectorSeychelles has no indigenous sources of fossil fuel, so it

depends heavily on oil imports to satisfy its energy needs.Petroleum products currently constitute around 25% of thetotal imports by Seychelles22. This dependenceon importedfuelmakestheeconomygenerally,andthePUCinparticular,extremelyvulnerabletoworldenergypricefluctuations.

3.1.2.1 History of Electricity in SeychellesThe first power station in Seychelles was constructed in

1926atHuteauLaneinthecapitalcityofVictoria.TheinitialcapacityoftheHuteauLanepowerstationwas30kWofDCelectricity,whichwasincreasedto300kWby1940.In1970,theHuteauLanepowerstationwasupgradedtoaccommodateACgeneratorsandthecapacitywasincreasedto3.3MW.TheHuteauLanepowerstationceasedoperationsin2000.

ThenextpowerstationinSeychelleswascommissionedin1972atNewPort,withaninstalledcapacityof7.5MW.Therehave been subsequent capacity additions to the New Portpowerstationandcurrentinstalledcapacityis16MW.A2MWpowerstationwasconstructedatPraslinin1981;thecapacityof the power station at Praslin was subsequently increasedto 14MW. In 1999, construction of another power stationbegan,atRocheCaimanonMahéIsland.Thatstationbecameoperationalinyear2000,withinstalledcapacityof43.5MW.In2011,16MWcapacitywasadded inMahéviaadditionalgeneratorsetsinVictoria.

3.1.2.2 Power GenerationGeneration CapacityThreepowerplantsareoperatinginSeychellestoday–two

inMahé (New Port and Roche Caiman) and one in Praslin.Total installedcapacity inSeychellescurrentlystandsat79.3MW,accordingtothePUCFinancialPlan.23

WhiletotalpowergenerationcapacityinSeychellesstandsat79.3MW,safegenerationcapacityisonly52.4MW.24ThepowerstationsatMahéoperateonheavyfueloil,whilePraslinuseslightcrudeoil.ThecapacityissufficientinMahétocatertopeakdemand.However, thepeakdemandof 7.4MW in

22 Seychelles in Figures 2012,NationalBureauofStatistics23 PUCprovidedadetailedfinancialmodel,dated19thApril2013.Throughoutthis

Report,thefinancialmodelsharedisreferredtoasthe“PUCFinancialPlan”.24 Theterm‘SafeGenerationCapacity’isusedbythePUCtorefertocapacity

availableforelectricitygeneration.Safegenerationcapacity,asdefinedinthePUCfinancialmodel,isequaltoinstalledcapacitymultipliedbyplantloadfactor,whereinstalledcapacityreferstomaximumcapacityavailable.Inreality,theplantisnotalwaysexpectedtooperateatfullcapacity(duetooutages,maintenance,lowdemand,etc.);loadfactorcapturesthisratioofaverageloadtomaximumcapacityinaperiod.AsperthePUCFinancialPlan,theaverageplantloadfactorforpowerplantsinSeychellesin2012was74.9%AlldocumentsprovidedbythePUC(includingreports,financialplan,etc.)refertosafegenerationcapacityanditformsthekeydriverbehindPUCcalculationsforelectricitygeneration.However,whiletheterm“safegenerationcapacity”isregularlyusedbythePUC,thereisinfactnostandardinternationallyacceptedterminologyfortheproductofinstalledcapacityandloadfactor.

27


Praslinishigherthanthesafegenerationcapacityof4.4MWinPraslin,signifyinganimmediateneedforadditionalcapacitythere.

Competition in the provision of electricity services iscurrently non-existent, despite provision in the new Energy Act 2012 for electricity generation by independent powerproducers (IPPs). According to the PUC, there would beflexibilityinselectingIPPs,basedeitheroncompetitivebiddingor through negotiated deals, depending on the prevailingmarketconditions.

Figure 3-3 provides details of the evolution of installedcapacity, safe generation capacity and electricity output(millionsofKWH)producedoverthelastfiveyears.

Performance of Existing PlantsFigure3-4showsthatpowerstationavailabilityatNewPort

andPraslindeclinedfrom2010to2012,duetoanincreaseinforcedoutages.UtilizationofthepowerstationsatNewPortandPraslinhasremainedlow,despitetheirbeingavailable.25 PUCplanstoconstructanewpowerstationatPraslin,withaninstalledcapacityof7.5MW.ThedetailsofthisnewprojectandproposedcostsaredescribedinSection4below.

3.1.2.3 Transmission and DistributionThe transmission network in Seychelles includes a 33 kV

linethattransmitselectricityfromthepowerstationsinMahétothe33kVsub-station,wherethevoltageissteppeddownto the11 kVneeded for thedistribution system. The11 kVsupply is further stepped down to a lower voltage throughdistributionsubstationsandsuppliedtoendusersthroughthelowvoltagenetwork.

Seychelleshasawell-establishedpowerdistributionnetworkandalmost100%ofthepopulationhasaccesstoelectricity.Thetransmissionanddistributionnetwork inSeychellescoversatotalof395km.PUChasstartedworkona33kVundergroundlinerunningsouthfromthepowerstationinRocheCaimantotheairport,tostrengthentheexistingtransmissionnetwork.The transmission and distribution network contracts areundertakenthroughcompetitivebidding.

25 Thisoccursbecauseanumberofthesmallerunitsarerequiredonlyduringpeakhours.Forexample,thepowerstationatPraslinconsistsof9differentgeneratorsets,withatotalsafegenerationcapacityof4.4MW.Eventhoughmostoftheseunitsareavailable,theaverageutilizationatPraslinislowbecausethesmallergeneratorsetsarecalledononlyforpeakloadhours.

Figure 3.2: Installed capacity in Seychelles (2012)Power Station

Installed Capacity (MW)

Safe Generation Capacity (MW)

Peak Demand (MW)

Mahé 69.5 48.0 46.0

Praslin 9.8 4.4 7.4

Total 79.3 52.4 53.4Source: PUC Financial Plan

Figure 3.3: Installed Capacity and Electricity Generation (2007 – 2011)Item Unit 2008 2009 2010 2011 2012

Installed Capacity MW 63.3 63.3 63.3 79.3 79.3

Safe Generation Capacity MW 45.9 45.9 45.9 52.4 52.4

Units Generated GWH 266.9 274.6 300.2 323.6 332.5Source: PUC Financial Plan

Figure 3.4: Performance of Power PlantsItem 2010 2011 2012 2010 2011 2012 2010 2011 2012

Roche Caiman New Port Praslin

Availability 93.0% 94.7% 94.0% 85.8% 75.8% 58.7% 86.2% 80.2% 76.3%

Utilization 75.1% 74.0% 71.8% 33.9% 18.8% 11.6% 34.9% 33.0% 36.9%

Load Factor 69.7% 65.9% 60.9% 45.6% 38.0% 24.7% 57.2% 47.6% 51.4%Source: Electricity Generation Data provided by PUC

Figure 3.5: Electricity Consumption (2007 – 2012)Category (values in GWh) 2007 2008 2009 2010 2011 2012 CAGR

Domestic 76.8 75.6 75.9 81.7 84.0 86.2 2.3%

Commercial/ Industrial 105.2 102.1 106.0 118.3 137.6 165.4 9.5%

Government 40.0 32.2 32.9 35.5 33.2 36.9 -1.6%

Street Lighting 0.9 0.8 1.0 1.1 1.1 1.1 4.1%

Export Oriented 9.5 22.5 22.7 23.6 23.9 24.0 20.4%

Total 232.4 233.2 238.5 260.2 279.8 313.6 6.2%Source: National Bureau of Statistics, Seychelles

28


3.1.2.4 Electricity ConsumptionElectricityconsumptioninSeychellesgrewat6.2%peryear

over the6yearperiod from2007to2012.Theevolutionofelectricity consumption by consumer category in the last6years isprovided inFigure3-5,whileFigure3-6 illustratesthe breakdown for 201226. The PUC Financial Plan projectselectricityconsumptiongrowthatanannualrateof3%overthenextdecade,reaching380millionkWhby2022.

Number of Consumers Thedomesticcategoryhasthelargestnumberofconsumer

accounts,accountingforalmost85%of thetotalconsumers(accounts)inSeychellesin2012.Thecategory-wisebreakdownofelectricityconsumersisasbelow.

Although the Commercial/ Industrial category constitutesonly13%ofthetotalnumberofconsumers,itaccountedfor57%oftheelectricityconsumedinSeychellesin2012.

26 The‘export-oriented’category(processingoftunaforexport)experiencedthehighestgrowthduringtheperiod(20.4%CAGR).AccordingtoPUC,thiscategorywouldbedeletedfromthetariffstructurein2013;tunaexporterswouldnowbeincludedunderthecommercialcategory.

Average Electricity ConsumptionPercapitaelectricityconsumption inSeychelleswas2,899

kWh in2010,closeto theglobalaverage 27of2,892kWh in2010. Per capita consumption in Seychelles increased from2,733 kWh in 2007 to 3,551 kWh in 2012, a year-on-yeargrowth of 5.4%, driven primarily by increased consumptionbytheindustrial/commercialsegment.Theaverageelectricityconsumptionforthedomesticcategoryin2012was3,137kWhperconsumerwhiletheaverageconsumptionfor industrial/commercialcategorywas40,809kWhperconsumer.28Detailsof electricity consumption per consumer by category areprovidedinFigure3-9.

3.1.2.5 Transmission and Distribution LossesDespitethegrowthinnumberofconsumersandincreased

consumption by the commercial/ industrial category, whichareoftensuppliedathighervoltagelevels,reportedAggregateTechnicalandCommerciallosses(AT&C)increasedfrom9.5%in 2008 to 10.8% in 2012. AT&C losses are defined as the

27 KeyWorldEnergyStatistics,2012(InternationalEnergyAgency)28 Notethateach“consumer”(householdorbusiness)generallyincludesseveral

people,soaverageconsumptionper“consumer”willalwaysexceedaverageconsumptionpercapita.



Figure 3-6: Electricity consumption (GWH), 2012

Source: National Bureau of Statistics, Seychelles

Number of Consumers

The domestic category has the largest number of consumer accounts, accounting for almost 85% of the total consumers (accounts) in Seychelles in 2012. The category-wise breakdown of electricity consumers is as below.

Figure 3-7: Number of Electricity Consumers by Category (2007 – 2012)

Category 2007 2008 2009 2010 2011 2012 Domestic 25,585 25,454 26,149 26,632 26,694 27,476 Commercial/Industrial 3,274 3,466 3,474 3,812 3,926 4,053 Government 501 510 507 498 481 482 Street Lighting 0 0 210 221 218 221 Export Oriented 17 16 17 15 15 15 Others 472 463 305 265 64 197 Total 29,849 29,909 30,662 31,443 31,398 32,444 Source: National Bureau of Statistics, Seychelles

Domes&c 86.2 30%

Commercial/ Industrial 165.4 57%

Government 36.9 13%

Street Ligh&ng 1.1 0%

Figure 3.6: Electricity consumption (GWH), 2012Source: National Bureau of Statistics, Seychelles



Figure 3-8: Number of Electricity Consumers by Category, 2012


Although the Commercial/ Industrial category constitutes only 13% of the total number of consumers, it accounted for 57% of the electricity consumed in Seychelles in 2012.

Average Electricity Consumption

Per capita electricity consumption in Seychelles was 2,899 kWh in 2010, close to the global average 28 of 2,892 kWh in 2010. Per capita consumption in Seychelles increased from 2,733 kWh in 2007 to 3,551 kWh in 2012, a year-on-year growth of 5.4%, driven primarily by increased consumption by the industrial/commercial segment. The average electricity consumption for the domestic category in 2012 was 3,137 kWh per consumer while the average consumption for industrial/commercial category was 40,809 kWh per consumer.29Details of electricity consumption per consumer by category are provided in Figure 3-9.

Figure 3-9: Average Electricity Consumption (2007 – 2012)

(Values in kWh/ consumer)

2007 2008 2009 2010 2011 2012 CAGR

Domestic 3,002 2,970 2,903 3,068 3,147 3,137 0.9% Commercial/ Industrial

32,132 29,458 30,512 31,034 35,048 40,809 4.9%

Government 79,840 63,137 64,892 71,285 69,023 76,556 -0.8% Street Lighting NA NA 4,762 4,977 5,046 4,977 NA Export Oriented 558,824 1,406,25

0 1,335,294

1,573,333

1,593,333

1,600,000

23.4%

Overall Average 7,786 7,797 7,778 8,275 8,911 9,666 4.4%

28Key World Energy Statistics, 2012 (International Energy Agency) 29Note that each “consumer” (household or business) generally includes several people, so average consumption per “consumer” will always exceed average consumption per capita.

Domes(c, 27,476 , 85%

Commercial/ Industrial, 4,053 , 13%

Government, 482 , 1%

Figure 3.8: Number of Electricity Consumers by Category, 2012Source: National Bureau of Statistics, Seychelles

Figure 3.7: Number of Electricity Consumers by Category (2007 – 2012)Category 2007 2008 2009 2010 2011 2012Commercial/Industrial 3,274 3,466 3,474 3,812 3,926 4,053Government 501 510 507 498 481 482Street Lighting 0 0 210 221 218 221Export Oriented 17 16 17 15 15 15Others 472 463 305 265 64 197Total 29,849 29,909 30,662 31,443 31,398 32,444


Figure 3.9: Average Electricity Consumption (2007 – 2012)(Values in kWh/ consumer) 2007 2008 2009 2010 2011 2012 CAGRDomestic 3,002 2,970 2,903 3,068 3,147 3,137 0.9%Commercial/ Industrial 32,132 29,458 30,512 31,034 35,048 40,809 4.9%Government 79,840 63,137 64,892 71,285 69,023 76,556 -0.8%Street Lighting NA NA 4,762 4,977 5,046 4,977 NAExport Oriented 558,824 1,406,250 1,335,294 1,573,333 1,593,333 1,600,000 23.4%Overall Average 7,786 7,797 7,778 8,275 8,911 9,666 4.4%


29


difference between electricity sent out from the generatingstationstothenetworkandelectricitysales.

AccordingtoPUC,timingdifferencesmayaccountforpartofthefluctuationinreportedAT&Closses.PUChasaccuraterecordsforelectricitysentout,butelectricitysalesaresubjectto estimations and there could be a potential mismatchbetween actual electricity sales and estimated sales. PUCestimates that out of total AT&C losses of 10.8% in 2012,T&D (technical and distribution) loss accounts for 9.8% andcommerciallossto1.0%29.

3.1.2.6 Tariff StructureElectricity tariffs in Seychelles vary across consumer

categories – domestic, commercial/ industrial, government,etc.Seychellesusesmanualmeterreading,withahandhelddevicetorecordusageandgeneratebillsforconsumers.

Domestic Consumers For domestic consumers, a telescopic tariff structure is

followed and the tariff varies from 1.4 SR/kWh to 4.5 SR/kWh, basedon the total amount of electricity consumed ineach billing period. There is no power demand charge fordomestic consumers with power demand of less than 2.4kVA (i.e. no recovery of fixed costs for consumerswith lowusages.) The unit energy charge for domestic consumers (0to 300 kWh) is also on the low side, comparedwith tariffsforcommercial/industrialtariffs,asdescribedbelow.SuchareducedtariffforthepoorestsectionofthesocietyisinlinewithbothgenerallyadoptedpracticesindevelopingcountriesandtheSeychellesstrategicvision,butdoesmeanthatthereis cross-subsidization of one group of electricity consumersbyanother,notgenerallyregardedasthemosteconomicallyefficientmechanismfordeliveryofsubsidies.

Commercial/ Industrial Consumers Atelescopictariffstructureexistsforcommercial/industrial

consumers,whereintheactualtariffvariesfrom3.89SR/kWhto4.82SR/kWhdependingontotalenergyconsumptioninthebillingperiod.AccordingtothePUC,commercialandindustrialconsumers are themost regular inmakingtimelypaymentsand have shown the lowest default rate among consumercategories.Thetariffstructureforotherconsumercategoriesisnon-telescopic,comprisingapowerdemandchargeandacommonunitenergycharge,irrespectiveofusage.

29 PUCconfirmedthatwhileestimatedcommerciallossesremainrelativelyconstant,ariseintechnicallossesistobeexpected.Withafixeddistributionnetwork,linelossescanbeexpectedtoincreaseaccordingtothesquareofthecurrentflow,sohigherdemandmeanshigherlosses,bothabsoluteandrelative.

Until2011,electricitytariffsinSeychelleswereinsufficienttocover theoperatingexpensesof theelectricitysectionofthePUC. It reliedongovernmentbudgetsupport tofinancetheresultingoperatingdeficitandcarryoperations.Changesintariffswerenotdirectlylinkedwithchangesininputcosts(mainly fuel),norwas thereamechanismtopassonhigherinput costs to customers. The PUC thus remained directlyexposedtofluctuationsinbothinternationalpricesofrefinedpetroleumproductsandexchangeratevariations.Theaverageelectricitytariffwasincreasedby31%in2012,resultinginfullcostrecoveryfortheelectricitydivisionofthePUCthatyear.

In the Letter of Intent datedMay 22, 2012, submitted totheInternationalMonetaryFundbytheMoF,thegovernment

Figure 3.10: Aggregate Technical and Commercial losses (2008 – 2012)

Particulars 2008 2009 2010 2011

Electricity Sent Out (GWh)

257.7 264.7 291.0 313.7

Electricity Sales (GWh) 233.2 238.5 260.2 279.8

AT&C Loss (GWh) 24.5 26.2 30.8 33.9

AT&C Loss (%) 9.5% 9.9% 10.6% 10.8%Source: PUC Financial Plan and National Bureau of Statistics, Seychelles

Figure 3.11: Electricity Tariff (Domestic) – Effective 1st Oct 2014

Tariff ComponentDemand <= 2.4 kVA

Demand > 2.4 KVA and < 9.6 kVA

Demand >= 9.6 kVA

Power Demand Charge (SR/ kVA)

0.00 4.90 9.85

Energy Charge (SR/ kWh)

0 to 200 kWh 1.40 1.40 1.40

201 to 300 kWh 1.66 1.66 1.66

301 to 400 kWh 3.48 3.48 3.48

401 to 500 kWh 3.80 3.80 3.80

Above 500 kWh 4.50 4.50 4.50Source: PUC Data

Figure 3.12: Electricity Tariff (Commercial / Industrial) - Effective 1st Oct 2014

Tariff Component Amount

Power Demand Charge (SR/ kVA) - Consumption <= 200 kWh

9.60

Power Demand Charge (SR/ kVA) - Consumption > 200 kWh

16.65


0 to 200 kWh 3.89

0 to 500 kWh 3.89

501 to 1000 kWh 4.25

Above1000 kWh 4.82Source: PUC Data

Figure 3.13: Electricity Tariff (Other Categories) - Effective 1st Oct 2014

Tariff Component

Government Exports Street Lighting

BBC

Power Demand Charge (SR/ kVA)

28.85 85.25 140.70 0.00


5.17 4.53 to4.82

5.17 4.53

Source: PUC Data

30


committed to a study of the optimal tariff structure. Basedonthatstudy,thegovernmentplanstoadoptarevisedtariffstructurewiththefollowingobjectives:

qlimitingcross-subsidizationacrossproductsandconsumersegments/categories

qreducingthePUC’sneedfordebtfinancingqadjusting tariffs regularly as needed in response to

changesininputcosts

The proposal to increase electricity tariffs was approvedinOct2013.Theelectricitytariffsarenowbeingadjustedona quarterly basis to reflect changes in fuel costs. The tablebelow depicts projections for electricity tariff for domesticconsumers,asprovidedbythePUC:

3.1.2.7 Demand Side ManagementIn order to promote energy efficiency and effectively

manage demand, the government had embarked on a CFL(compactfluorescent lamp)exchangeprogram,wherebytheconsumersbringtheirincandescentlampsforreplacementbyCFLbulbs.30TheMinisterforEnvironmentandEnergyrecentlyannouncedthatthegovernmentwouldembarkonaprogramto increase electricity tariffs so that the PUC can directlyfinancemajorinvestmentprojectsoverthenext10years.Aspertheannouncement,electricityconsumersusinglessthan400 units per month would not be affected by these tariffreadjustmentsforaninitialperiodoftwoyears.Itisexpectedthatthisgraceperiodwouldgiveconsumersenoughtimetoreview theways they use electricity and adopt appropriatemeanstoreduceconsumption.MoEisintalkswiththeMoFtoencouragecommercialbankstoputinplacecreditfacilitiestohelp consumers acquire energy-saving equipment to reducetheirconsumption.Thegovernment isalsoworking throughtheSEConeducationalprogramsforconsumers.

3.1.2.8 Regulatory FrameworkSeychelles Energy Policy for 2010-2030 The policy was developed in 2010 and recommends

sustainable development of the energy sector, focusingon energy efficiency, renewable energy and reduction ofdependenceonoiltoimproveenergysecurity.Diversificationof the energy supply is targeted, with a share of 5% fromrenewableenergyby2020and15%by2030.The long-term

30 CFL bulbs are more energy efficient than incandescent bulbs, as they consume much less energy to produce the same amount of light. CFL bulbs also last much longer than incandescent bulbs, reducing the problem of disposal of used bulbs.

visionfortheenergysectoristohave100%ofenergysupplybasedonrenewabletechnology.However,oilwillundoubtedlycontinue to be the predominant source of energy for sometime. To achieve the target of 5% energy from renewablesourcesby2020,theSECisreviewingthepolicydirectionandisexpectedtodevelopanimplementationplanin2014.

Energy Act 2012The EnergyAct 2012was enacted tomodernize the legal

frameworkfortheproductionofelectricityandimprovetheenergy efficiencyover the longer runby introducing energystandards and promoting renewable energy sources. ThisAct repealed the Seychelles Energy Commission Act 2010.TheSeychellesElectricityCommissionandSeychellesEnergyBoard wereestablishedwithinanewsetofparametersandfunctions under the Energy Act 2012. In addition, the PUCwasbroughtunder thesupervisionof theSeychellesEnergyCommission.TheEnergyAct2012 eliminatedthemonopolyofthePUCintheelectricitysector,providingforprivateplayerstoproduceelectricitybyallowingindependentpowerproducers(IPPs) tobuild, ownandoperategeneration facilities. TheseIPPscanenterintoPowerPurchaseAgreements(PPAs)forthesaleofelectricitygeneratedfromrenewableenergysources,andwouldbeprovidedaccesstothePUC’stransmissionanddistributionnetwork.Theactalsosetsthebasicprinciplesoftariff, which can help the PUC and other operators achieveeconomic and financial sustainability. The act provides thefollowingtariffguidelines:

qallowancefortariffadjustmentsandpricestabilityqtariffsforsupplyoftransmissionanddistributionservices

to allow recovery of costs including those of expansionandfinancing

qtariff structure to define user categories and chargesreflectingcostofserviceforeachcategory

TheSECiscurrentlyworkingonestablishingtheproceduresandframingrulesforregisteringtheIPPsandlicensingthem.TheSECisalsoplanningtohireconsultants(withthehelpofa grant from theWorld Bank) to advise on the action planto enable IPP participation in Seychelles. However, for themoment thePUC remains thesoleproduceranddistributorofelectricpower.

3.1.2.9 Renewable Energy in SeychellesSeychelles is largely dependenton imported fuel tomeet

its energy needs. However, there is potential in Seychelles

Figure 3.14: Electricity Tariff Projections for Domestic Consumers (SR/kWh)2014 2015 2016 2017 2018 2019 2020 2021 2022

0 to 200 kWh 1.40 1.60 1.79 1.99 2.19 2.38 2.58 2.77 2.97201 to 300 kWh 1.66 1.88 2.11 2.33 2.55 2.78 3.00 3.22 3.44301 to 400 kWh 3.48 3.53 3.58 3.63 3.69 3.74 3.79 3.84 3.89401 to 500 kWh 3.86 3.93 3.99 4.06 4.12 4.19 4.25 4.25 4.25501 to 600 kWh 3.86 3.93 3.99 4.06 4.12 4.19 4.25 4.25 4.25Above 600 kWh 4.54 4.59 4.64 4.68 4.73 4.77 4.82 4.82 4.82

Source: PUC Data

31


for renewable energy generation and a number of stepshave been taken to exploit this potential and increase thegenerationfromrenewableenergysources.

Solar EnergySeychellesisatropicalcountry,withanaverageof6.9hours

sunshineperdayandanaverage irradianceof5.8kWh/m2/day.Hence,thereisapotentialtodevelopsolarprojects,whichcouldreplace/augmenttheexistinggenerationinthecountry.Oneopportunitywithpotentialhigheconomic,financialandenvironmentalviabilityistheimplementationofrooftopgrid-connected PV (photo-voltaic) systems. At present, the onlyactive grid-connected PV system in the Country is a 700W(4-panel)PVsysteminstalledbythePUC.

Inaddition,arooftopgrid-connectedPVprojectdevelopedby the SEC and the PUC is in the development stage. Theproject envisages three systems, with total capacity of 250kWp.ThefirstsystemwillbelocatedinMahéandwouldhavean installed capacity of 200 kWp (using individual panels of100KWp),producing280,000kWhofelectricityperannum.Thesecondsystemwillbe located inPraslin,andshallhavean installed capacity of 48 kWp, producing 67,200 kWh ofelectricityannually, tobefed intothegrid for the islandsofPraslinandLaDigue (the latterviaanewsubmarinecable).Thethirdsystemwillbea2kWpsystemontheouterislandofAldabra,producing2,800kWhperyear.TheAldabraprojectisexpectedtobecommissionedbytheendof2014,producingatotalof350,000kWhofelectricityperannum.Thiswouldrepresent 0.1% of the total expected national electricityproductionof363mnkWhin2015,butamuchhighershareof consumption at this isolated location. Apart from thegrid-connectedPVsystemproject,PUChasnootherspecificprojectsplannedforsolarenergy.

The indicative unit cost of electricity generation throughsolartechnologyisSR2.82/kWh,accordingtodataprovidedby thePUC.This is 11% lower than the currentunit costofelectricity production in Seychelles (SR 3.16/kWh in 2012).Consideringthehugepotentialforsolarenergy,expectedcostsavingsand reduceddependenceon imported fuel, theSECispreparingregulations,rulesandproceduresforrenewableenergy,with themain focuson increasedPV technology forenergygeneration.

Wind EnergySeychelles also has the potential to support wind-based

power generation. The Government of Seychelles signed aMemorandumofUnderstandingin2009withMasdarCapital(an Abu Dhabi based renewable energy firm) to investigaterenewableenergyopportunities.Initialstudiesindicatedthatwindenergy isviableonthemain islandofMahé.Basedonpreliminaryinvestigations,fourpotentialsiteswereidentifiedwithaveragewind speedsof6.9-7.5m/s; the installationof70meterwindmeasurementmastsenabledawindresourceassessmentandfinalsitingofthewindfarm.Thefirstphaseoftheprojectwasa6MWdevelopment,utilizing750KWto1MWclasswind turbines at two sites in PortVictoria. Theprojecthasbeenincommercialoperationsincelate2013,and

is expected to reduce carbon emissions by 10,000 tons perannumand to lead topotentialdiesel savingsof3.5millionliterseachyear.

Thiswindproject is thefirst large-scale renewableenergyproject developed in Seychelles. The total project cost was$24million,financedthroughagrantreceivedfromtheAbuDhabiFundforDevelopment,31 AsperthePUC,thelevelizedcostofelectricity(LCOE)forthewindprojectis33.5USCents/kWh.ThisismuchhigherwhencomparedwithLCOEforwindprojects across the globe. The LCOEof typical newonshorewind farms in 2010 was between 6 to 14 US Cents/kWh32 (Source:RenewableEnergyTechnologies:CostAnalysisSeriesbyIRENA).AspertheU.S.EnergyInformationAdministration,theLCOEforwindprojectsexpectedtocomeonlineintheUSAin2019is8USCents/kWh.

Theelectricitygeneratedfromthewindprojectis8millionkWhperannum.Consideringtheaveragefuelcostforpowergenerated in 2012of 2.86 SR/kWh, thewind projectwouldresultinfuelcostsavingsofSR22.8millionperannum.

Biomass EnergySome studies have been conducted into the potential

for biomass energy in Seychelles. There are preliminarydiscussionstoconsidersmallpowerplantsbasedonbiomassgasification/combustion technology. La Digue Island isconsidered as good location for biomass generation, as theislandhasagoodsupplyofcoconutshells,frondsandotherforestresidues,mainlyfromcasuarinasandothertreespecies.Asof2011,theSEChadreceivedfiveIPPproposalsforwaste-to-energy projects at the existing landfill sight in Mahé,including an incinerator, twobiogas plants, awaste gasifier,andalandfillgasplant,butnodecisionhasbeenmadeonthenextsteps.33TheChinesegovernment,inpartnershipwiththeSeychellesAgriculturalAgency(MinistryofNaturalResources&Industry),iscurrentlyfinancingpilotbiogasprojectsatfouranimalfarmsinthecountry.

HydropowerSeychellesdoesnothaveanyinstalledhydropowercapacity,

andhas no plans for its development. There is very limitedpotentialforhydropowergenerationinSeychelles,duetotheerraticnatureofthewaterresources.

3.1.2.10 Performance of the Seychelles Energy SectorFigures 3-15 and 3-16 compare key parameters for

Seychellesandanumberofothercountries,inordertogaugeperformanceoftheenergysectorinSeychelles.Twogroupsofcountrieswerechosenforcomparison:

qGroup A: Advanced economies34 amongst SIDS (SmallIslandDevelopingStates)

31 Unison,aSouthKoreanwindturbinemanufacturer,wasawardedthecontracttobuildthewindfarm.Forthefirsttwoyearsfromthecommercialoperationsdate,UnisonwilloperatetheprojectincollaborationwiththePUC,aspartofaprogressivehandover.UnisonwillalsotraintheemployeesofthePUC,whowouldthenoperatetheplantaftertheendoftheinitialtwoyearperiod.

32 Assumingcostofcapitalof10%33 Asoflate2013.34 AdvancedinthiscontextmeansthecountrieswiththehighestpercapitaGDP

32


qGroupB:Regionalpeers(islandcountriesinproximitytoSeychelles)

Anumberofinferencescanbedrawnfromthesetwosetsofcomparisons:

qSeychelles is highly dependent on oil imports to meetits energy requirements, in line with most other SIDScountries(exceptBahrainandTrinidad&Tobago,bothofwhomhavedomesticpetroleumresources)

qAlthoughSeychellesismarginallyabovetheworldaverageintermsofpercapitaelectricityconsumption,itismuchlowerwhencomparedwithadvancedislandeconomies.Only the British Virgin Islands have lower per capitaelectricityconsumptionthanSeychellesinGroupA

qTransmissionandDelivery(T&D)lossesinSeychellesare

35 TotalPrimaryEnergyConsumption:Totalenergyconsumptioninprimaryform(thatis,nottransformedafterextraction)

36 Representsthelowestvariabletarifffordomestic/residentialcustomers37 TheunittariffinBarbadoskeepsonvaryingdependingonthefuelprice,sothere

isnobenchmarktariff.38 Representsthelowestvariabletarifffordomestic/residentialcustomers39 2005estimate

onthehighersidewhencomparedwithothercountriesin Group AA, based on International Energy Statistics(byEIA)data. Ifweuseestimates fromNationalBureauof Statistics (Seychelles) and PUC data, T&D Losses inSeychelleswere9.6%in2010

qTariffs for domestic customers in Seychelles are higherthanBahrainandTrinidad&Tobago,butmuchlowerthaninSingaporeandtheBritishVirginIslands

Seychelleshasperformedbetter thanmostof its regionalpeers:

qSeychelleshasthehighesttotalpercapitaprimaryenergyconsumption (TPEC) and highest per capita electricityconsumption;

qT&D losses in Seychelles are comparable with othercountriesinGroupB.PleasenotethatT&DlossesintheabovefigurearebasedonInternationalEnergyStatistics(EIA) data. If we use estimates from National Bureauof Statistics (Seychelles) and PUC data, T&D Losses inSeychelleswere9.6%in2010

qTariffsareinthelowerrangeofaveragetariffs

Figure 3.15: Performance of Energy Sector for Group A

Country Population Area GDP per capita

TPEC35 per capita

Energy supply through imports

Electricity consumption per capita

T&D losses

Electricity Tariff36

Mn sq.km USD/capita toe/capita % kWh/capita % US Cents/kWh

Singapore 5.14 700 57,791 16.53 99.7% 7,903 7.3% 20.6British Virgin Islands

0.03 151 42,300 1.68 100.0% 1,567 6.0% 24.0

Bahamas 0.31 10,010 31,166 3.98 100.0% 5,790 7.0% 11.0Trinidad &Tobago

1.23 5,130 25,669 19.19 0.0% 6,172 5.2% 4.1

Bahrain 1.18 760 23,645 11.92 1.6% 9,840 6.6% 0.1Barbados 0.29 430 19,320 1.67 84.2% 3,448 4.9% NA37

Seychelles 0.09 460 24,309 3.72 100.0% 2,899 7.1% 9.7Source: International Energy Statistics by EIA and World Bank data, 2010

Figure 3.16: Performance of Energy Sector for Group B

Country Population AreaGDP per capita (PPP)

TPEC per capita

Energy supply met through imports

Electricity consumption per capita

T&D losses

Electricity Tariff38

mn sq.km USD/capita toe/capita % kWh/capita % US Cents/kWh

Mauritius 1.29 2030 13,607 1.30 91.0% 1,822 7.0% 10.6

Maldives 0.40 300 8,182 0.95 100.0% 707 7.0% 14.7

Reunion 0.83 2,512 6,20039 1.58 82.7% 2,277 7.0% Data notAvailable

Madagascar 20.85 581,540 963 0.04 78.8% 54 7.0% 6.5

Seychelles 0.09 460 24,309 3.72 100.0% 2,899 7.1% 9.7Source: International Energy Statistics by EIA and World Bank data, 2010

33


3.1.2.11 Other Sources of Energy Apart from using electricity, households and industrial

consumers inSeychellesalsousekeroseneandLPGtomeettheir energy requirements.40 The Government of SeychellesencouragestheuseofLPGoverkeroseneforcookingpurposesand therehavebeen schemes in thepast for consumers toexchangekerosenestovesforanLPGcylinderandstoveset.SEYPEC introduced LPG as a source for cooking in themid-1990s, in order to replace the then-prevalent kerosene forcooking purposes. As a result, kerosene sales in Seychellesdeclinedsignificantly, from3,270MT in1996toonly84MTin2012.Givenbothsafetyandeconomicaspects,LPGquicklyreplacedkeroseneasapreferredfuelforcooking.

LPG is distributed in gas cylinders to domestic consumersandthroughLPGtrucks(inbulk)forindustrialandcommercialconsumers, including hotels. Significant investments havebeen made to enhance the storage capacity for LPG, withcurrentcapacitybeingsufficienttocaterfor6monthsofLPGdemand.TheLPGcostisSeychelleswasfixedatSR15/kgfrom2008 to2012.Asper the latestavailabledata, LPGcosthasincreasedtoSR23/kginJune2013.

3.1.2.12 Conclusion for Electricity SectorSeychelleshasawell-developedelectricitysector,withper

capita electricity consumption of 2,899 kWh in 2010. PUC

40 Thecommercialsectorrepresentsabout1/3rdoftheLPGconsumptioninSeychelles

estimatesthat96%41ofthepopulationhasaccesstoelectricity.This is a significant achievement for an archipelago nationspread over 115 islands. However, most of the electricitygenerationisbasedonfossilsfuels,whichmustbeimported;this heavy dependence of imported fuel continues tomakeSeychellesextremelyvulnerabletofluctuationsinglobalfuelprices.

Figure 3.18 provides a SWOT analysis of the Seychellesenergysector:

Inorder toaddress the issueofdependenceon importedfuel, the government is actively working to increase theproportion of energy from renewable sources,mainly solarand wind. The government views expansion of renewableenergy sources as central to its long-term developmentprospects. The Seychelles Energy Policy 2010-2030 set atarget of energy from renewable sources at 5% by 2020and 15% by 2030. Preliminary studies and reports indicateconsiderablepotentialforenergygenerationfromrenewablesources.ThePUCalongwiththeSECaredevelopingarooftopgrid-connected PV project. The wind power project beingdeveloped in cooperation with Masdar was commissionedinJune2013.There issomepotentialforenergyfromotherrenewablesourceslikebiomassandtidalwaves,butdetailedresource assessments for these sources have not yet takenplace.

Thenewenergylaw(SeychellesEnergyAct2012)providesfor IPPs to generate energy from traditional or renewablesources, operating alongside the PUC. The IPPs would beprovidedaccesstothetransmissionanddistributionnetworkofthePUC. Inordertosuccessfullyrealizethetargetsset intheSeychellesEnergyPolicy2010-2030 and furtherdeveloptheenergysectorinSeychelles,thestakeholdersincludingthePUC,theSECandthegovernmentwillneedto focusonthefollowingkeyactivities:

qCarrying out a detailed and comprehensive resourceassessment study to further understand the potentialand feasibility of generating energy from renewablesources.Onesuchcomprehensivereportexistsforwindenergy,butthereisnodetailedstudyconductedforotherrenewablesourcesofenergy

qDeveloping rules and guidelines for registeringIndependent Power Producers for renewable energy;draftandframemodelpowerpurchaseagreement(PPA)forengaging IPPswhileensuring thenewstructureandguidelinesaremutuallybeneficialtoallstakeholders

qDevelopingmethodologyforfeed-intariffsforrenewableenergyproducers to supply electricity to themain grid.Theapproachshouldensurecostbasedcompensationtopowerproducersandprovideinvestorswiththepotentialforareasonablereturnontheircapital.

3.2 TransportThetransportsectorfallsundertheDepartmentofTransport

(DoT),withintheMinistryofHomeAffairsandTransport.DoT

41 SeychellesBriefProfilebyFAO

Figure 3.17: Historical Sales of LPG and Kerosene in Seychelles

Values in MTMT 2008 2009 2010 2011 2012 CAGR

Kerosene 143 120 127 95 84 (12.5%)LPG 3,762 3,569 4,110 4,251 4,302 3.4%Total Sales

3,905 3,689 4,237 4,346 4,386 2.9%

Source: SEC Data

F igure 3.18: Seychelles Energy Sector – SWOT AnalysisStrengths

• The PUC has more than30 years of experience inelectricityoperations

• Effectively managedcapacityadditionstomeetelectricity demand overtheyears

Opportunities• Potential for

electricity generationthrough renewableenergy sources,especially solar andwindenergy

Weaknesses• Until2011,tariffswerenot

sufficienttocoverthecostofoperationsandthePUChadtorelyongovernmentsupport to carry onoperations.

• Tarifffortheretailcategorylower than the marginalcostoffuel

Threats• Heavy dependence

on imported fuel forelectricitygeneration

34


isgenerallyresponsibleforpoliciesforallmodesoftransport(aviation, marine and surface transport, including provisionandmaintenanceof roads). Itsmandate isprovisionof safeandefficienttravelforgoodsandserviceswhilesafeguardingthecriticalentrypoints(airportandseaport)intotheislands.TheSeychelles Internationalairportand thePortofVictoriaarethecountry’slifeline,providingtheonlygatewaysforthetwomost important economic elements (tourism and tunaexports).

3.2.1 General Operational Policies in the Transport Sector

ResponsibilitiesofthekeyauthoritiesandbodieswithinDoTareasfollows:

qThe Road Transport Commissioner (RTC) is responsiblefor preparing regulations relating to traffic andtransport, reviewing enforcement of regulations andtheir effectiveness, and dealing with overall transportdevelopment–roads,trafficmanagementetc.

qThe Seychelles Civil Aviation Authority (SCAA) isresponsiblefortheoperationsandpolicyoftheaviationsector. It operates the Seychelles International Airport(SEZ) and the domestic airstrip on Praslin and areresponsibleforplannedexpansions.

qThe Seychelles Land Transport Authority (SLTA) isresponsiblefortheoperationandmaintenanceofroads,bridges,culverts,retainingstructure,drainageworksandfootpathsroadsandbridgesinMahé,PraslinandLaDigue

qThe Seychelles Ports Authority (SPA) oversees marinetransportandisresponsibleforthePortofVictoria,Mahéaswell aspassenger terminalsonMahé,Praslin and LaDigue(stevedoringandothercargohandlingservicesareprovided by Land Marine Limited, a private company,underamulti-yearexclusiveconcession).TheSeychellesMaritime Safety Administrationwas recently created toserveastheregulatoryarmofmarinetransport,therebyseparatingoperationsandregulations

qTheSeychellesPublicTransitCorporation(SPTC)managespublictransportservices(buses),primarilyonMahé but alsoonPraslinnow

TheDepartmentofTransport(DoT)isgenerallyresponsiblefor policy development and implementation for all sub-sectors.PoliciesgoverningtheroadsectorspecificallyaretheresponsibilityoftheDoT.Itisalsoresponsiblefortransportationplanning.TheSCAAandSPAarecurrentlyresponsiblefortheirownoperationalregulation.

OperationsofthesectoraregovernedbyactsofParliament,includingtheRoadTransportActandRoadActthatprovidethebasicroadandtransportregulations.Vehiclelicensingisbasedonmaximum registeredgross vehicleweight. Therearenoweighscalesfordeterminingtheactualweightofaparticularvehicleonanygivenday,eitheroverallorbyaxle.Thereareportableweighscaleswhichareusedbytrafficwardensandalso,whentheneedarises,theweighbridgesforSTAR,UCPSandCCCLareused.

DoT does not currently have a Transportation Master Plan or indeed any strategic planning tool for infrastructure.Mostprojectsare identifiedyearbyyear,through liaisonwiththe27localdistricts,withoutanyquantitativeevaluationtoassessand prioritize them. However, many individual projects dorequireperformanceindicatorsforimplementation,topermitpost-constructionperformanceevaluationbythegovernmentauditteam.Historically,roadnetworkexpansionhasnotbeenfinancedbyloanandtheGoSremainsreluctanttouseloansforroadconstruction,sincethereisnodirectsourceofrevenuetoensurerepayment.Nevertheless,externalfinancingwillstillberequiredinthetransportsector.

3.2.2 The Land Transportation Planning and Regulatory Framework

Overall transportationplanning is theresponsibilityof thePrincipalSecretary(PS),whoreportsdirectlytotheMinisterof Home Affairs and Transport. The Acting RTC is reportingtothePSforTransportfornow.Planningshouldbeoperatedindependentlyasacommission.TheRTC’smandatesincluderegulatory oversight for traffic and transport, review ofenforcement of regulations and their effectiveness, revisionandpreparationofnewregulations.ThePSoverseestheoverallroad transport development – roads, traffic management,etc. The regulatory mandate of the RTC includes vehiclesizeandaxle load restrictions, sinceexcess loads contributematerially to pavement deterioration. In addition, the RTCis also responsible for interagencyoperational coordination,streamlining operations in such a way as to ameliorateconflicts.While some of the policies have been developed,otheressentialonesarestilloutstanding.42

AlthoughthereisnoTransportationMasterPlan(TMP)atthistime,DoTiscognizantoftheneedforone.ATMPisrequiredtogovern the transportationdevelopmentsand investments inboththesupplyanddemandsidesinanoverarchingmanner.43Astraveldemandincreaseswithpopulationandeconomicgrowth, coherentpolicies arenecessary toboth control thegrowthofdemandaswellasguidethesupplyside.Thiswillincludeinvestmentsintransportationsystemsinvolvingbothroads and public transport. Demandmanagement schemesshould also be included, and consideration given to thepossibilityoftransit-supportiveTravelDemandManagementinitiatives,includingpark-and-ridefacilitiesattheperipheriesofVictoria.Those initiativeswouldacttobothreducetraveldemands (number of trips made) and encourage the useof public transport. For example when a park-and-ride lotis constructed, patrons park their vehicles and continuetheir journeyonpublic transit.Thiswould reduce the traveldemands within the city while increasing transit usage.ConstructionofHOV(HighOccupancyVehiclelanesreservedforvehiclesoccupiedbytwoormorepersons)andHOT(HighOccupationTolllanes,similartoHOVbutwhichrequiretolls)mayalsobeconsideredastransit-supporting.

42 OneexampleofafrequentinteragencyconflictrelatestotheneedtodiguproadstolayPUCpipes.Theprocessofpipe-layingandthefrequentleakagesfromoldpipescontributeasmuchas50%topavementdamage.AlthoughnewpolicieshavebeenintroducedtoensurethatthePUCpipesarelaidbesideandnotundertheroadways,theyneedtobeenforcedtoensureeffectiveness.

43 ThisisdiscussedfurtherinSection5below.

35


There is broad agreement on the need to provide morepublic transport to discourage greater ownership (in asurvey done some time back, almost all young Seychelloisaspire toownacar.)Theonlyway todiscourage theuseofprivatevehicleswillbetoraisetheparkingfeesintheCentralBusinessDistrict(CBD)andintroduceatolltoentertheCBD,inrecognitionofthependingchallengesinprovidingadditionalroadwaycapacity.Itisrecognizedthatanumberofkeyexistingroads cannot be widened, since the rights-of-way are fullyoccupied to theedgeofpavementbybuildingsor retainingwalls on steep slopes. Although theDoTmentioned a long-termvisiontoconstructatunnelbetweenVictoriaandBeauVallon or to construct some elevated highways, the currentcost-effectivenessofsuchplansisindoubt.

Much work still needs to be undertaken by the DoT, butthe lack of capacity and qualifiedprofessional staff remainsamajorlimitation.Toaddresstheseissues,thereisneedforcapacitybuildingwithin thedepartment,especially in trafficand highway engineering. Such capacity building can beachievedthroughtheframeworkofaTechnicalAssistance(TA)programme,whichshouldencompassthedevelopmentofaTransportationMaster Plan to assess project requirements,programmingandfundinginamoredetailedmanner.44 This would also govern investments in the transportation sectorand strike a suitable balance between private and publictransportation.

3.2.3 RoadsTheroadnetworkinSeychellesincludesprimary,secondary,

feeder and estate roads. There are approximately 508 kmof roads, of which 250 km are primary roads, 150 km aresecondary roads, andmore than 100 km are feeder roads.ThebulkofthisroadnetworkisonMahé.Theprimaryroadnetwork connects themain economic centers and also thedifferentdistrictsofthecountryonthethreemainislandsof

44 ThisisdiscussedfurtherinSection5.2.2below

Mahé,PraslinandLaDigue.Thesecondaryandfeederroadsprovide connectivity to the primary road network and alsogivemotorableaccesstosmallerruralcommunitiesincludinghousingestates.

ConnectivitywithintheislandofMahéissatisfactory,witharingroadaroundmostsectionsoftheisland(exceptforasmallsection at the north-west tip between Bel Ombre and BaieTernay)andsixroadconnectionsacrosstheisland.Althoughthereisonlyasparseroadwaynetworkacrosstheisland,thecentralsectionislargelyuninhabited,duetothemountainousterrain (graniticmountainsrisetonearly1,000mabovesealevel)whichisprotectedasareserve.ThenetworkonPraslinis for themostpart similar,although lessdense,witha lessmountainouscentralcore.

The roadnetwork translates toadensityof less than110km/100km2. Over 96% of the roads are surfaced. The roaddensity has remained essentially constant in recent years,with little new construction except links to new housingdevelopments. A comparison of the road density withneighbouringorcomparablecountriesshowsthatSeychellesranksaboveseveralcountriesintheEastAfrica/IndianOceanregionbutwellbelowotherislandstates:

Between2007and2011,vehicleregistrationsincreasedby34%from11,853to15,853,implyingannualgrowthaveraging8.5%.Preliminarydatashowsthatmotorvehicleregistrationsstoodat16,570in2012.Motorvehicledrivinglicenseshavehas also increased steadily, at a rate of approximately 10%peryear,standingat10,037in2011.Figure3-19summarizesthesetrends.

Road traffic accidents have increased in tandem withthe number of registered vehicles. From 2007 to 2011, thenumberofaccidentsincreasedfrom1,409to1,581,anoverallincrease of 12%. However the accident rate has remainedrelatively stable at between 0.16 and 0.19 accidents per100,000population,andshownaminorreductionrelativetothefleetofregisteredvehicles.

A comparison of road traffic accident fatalities withneighbouringcountriesorthosewithcomparableincomesisprovidedinFigure3.20.Thisshowsthatamongthemediumincomecountries,Seychelleshasarelativelyhighnumberoffatalities per 100,000 population; only Trinidad and Tobagohasahigherfatalityrate.

Seychellesisworkingtowardfullcompliancewiththeglobalroad safety initiative, which requires national legislation on

Figure 3.18: Comparison of Road Density

Country Population Total Road network (km)

Road Density (km/100 km2)

Seychelles 87,400 508 110

Barbados 273,925 1,600 372

Bahrain 1,323,535 4,122 542

Mauritius 1,286,051 2,066 101

Madagascar 21,315,135 37,476 6

Kenya 41,609,728 61,947 11Source: National Bureau of Statistics (Seychelles) and World Bank data, 2010

Figure 3.19: Motor Vehicle Registrations (2007 to 2011)Type 2007 2008 2009 2010 2011 2012

Private 7,375 8,337 8,339 10,146 9,974 10,559

Commercial 2,524 2,796 2,886 2,878 3,105 2,885

Others 1,954 2,295 2,367 2,292 2,774 3,122

ALL 11,853 13,428 13,592 15,316 15,853 16,570Source: National Bureau of Statistics, Seychelles

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thefivekeyroadsafetyriskfactors:

i) drinkinganddrivingii) speedingiii) useofmotorcyclehelmetsiv) useofseat-belts,andv) useofchildrestraints.45

Seychelleshaspreparedlegislationonallfivekeyareasbutadditionaleffortsare still required to sealoutstandinggaps.Whilethereislegislationlimitingurbanspeedsto50km/horless,thereisnodemeritpointsysteminplaceforoffenders.In addition, enforcement levels for speeding, drinking anddriving, or failure to use seat belts are reportedly relativelylow. Figure 3.21 provides a comparison of the fatalities inselectedcountries.

TheSeychellesLandTransportAuthority(SLTA)isresponsibleforroadoperations,includingmaintenanceofroads,bridges,culverts, retaining structure, drainage works and footpathsroadsandbridgesinMahé,PraslinandLaDigue.ApartfromsidewalksalongthestreetswithinVictoria,dedicatedfacilitiesfor non-motorized traffic are not provided in the country.However such facilities would be the responsibility of theSLTA,whichisexpectedtoplan,constructandmanagethem.Planning is undertaken in consultation with the DoT. Theyshouldbeplannedtoprovideconnectivityandsupportpublictransportationontheisland.

Much of the current work of the SLTA involves eitherpavement maintenance or rehabilitation of the country’sroads. There is a SR 30.1 million recurrent expenditure forroad maintenance, while the revenue collected to date forroad tax amounted to SR 55.5million for the financial year2013.Theroadsappeartobeinfairlygoodconditionoverall,although damage of pavement caused by heavy goods

45 TheGlobalStatusReportonRoadSafety,2013-WorldHealthOrganization

vehicles, believed to often exceed the allowable maximumaxleload,isreportedtobecommon,butcannotbeconfirmed,asaxleloadmonitoringisnotineffect.Itisworthnotingthatcertain roadswere not designed to take the loads they arenowexperiencing.

SLTA does not have an asset management program inplace,butreliesonregularinspectionstokeepmanagementinformedon the statusof thebridgesandculverts. 46Whilethis enables identification of problems as they emerge, itdoesnotallowforlong-termplanningtoprogrambudgetingand replacement of the assets on a systematic basis. Assuch,anassetmanagementsystemor,ataminimum,aroadmanagement mechanism is required to better manage theprocess.

SLTA was created as an autonomous body but is nowbudget-dependent,sinceithaslittleornopotentialrevenuegeneratingactivities.47 Capitalexpendituresarefinancedbythegovernmentandthereisalsoaneedtofinancethecapitalequipment used in pavement rehabilitation operations,especiallythemillingmachinesusedintheremovalofexistingpavementbeforerepaving,whicharerequiredforbothMahéandPraslin.

Theprivatesectormightbeabletoachievebetterefficienciesat provision of asphalt to SLTA, if allowed cost-recoveringtariffs.However,SLTAwillneedtofullyevaluatetheavailableoptionstoensurethatanyPPPwouldinfactimproveoverallmaintenanceoperationsandprovideasphaltcost-effectively.SLTA has submitted a plant requisition application for theconsiderationoftheMinistryofFinance.

46 ThereisaGIS-basedroadinventoryinplace,butthisprovidesinformationonlyonroadlocationandwidth,notsurfaceorsubgradecondition.

47 Whilevehiclesarerequiredtopayforaroadfundlicense,thefundsreceivedaredepositeddirectlyintothegovernment’saccount.ThereisnodirectlinkbetweenthesefundsandtheannualallocationstoSLTAforroadmaintenanceandconstruction.Thereisthusno‘RoadFund’inthetraditionalsense.

Figure 3.20: Road Traffic Accidents (2007 – 2012)Type 2007 2008 2009 2010 2011 2012

Number of Accidents 1409 1627 1439 1531 1581 906

Rate (per 100,000 population) 1,658 1,870 1,648 1,707 1,809 1,026

Rate (per 100,000 motor vehicles) 11,887 12,116 10,587 9,996 9,973 5,468Source: National Bureau of Statistics, Seychelles

Figure 3.21: Comparison of Traffic Fatalities in Various CountriesCountry Population Per Capita GNI, US$ Fatalities Fatalities per 100,000 population

Seychelles 87,400 10,460 13 15.0

Barbados 273,925 12,660 19 7.3

Maldives 315,885 6,150 6 1.9

Bahrain 1,323,535 15,920 73 10.5

Mauritius 1,286,051 7,780 158 12.2

Trinidad and Tobago 1,341,465 15,840 200 16.7

Madagascar 21,315,135 430 422 18.4

Kenya 41,609,728 810 2966 20.9Source: World Health Organization data, 2013

37


It would also be beneficial to plan and implement non-motorized transport (NMT) facilities, to reduce private cardependency and support public transportation onMahé. Aplanningstudyisnecessarytodefineanapproachandinitialnetwork; it is estimated that an initial skeletal network ofmulti-usepathwaysand/orbicyclepathscouldbe10to20kmlong.

3.2.4 Public Transport (Buses)Provision of public transport (bus service) ismanaged by

a parastatal corporation, the Seychelles Public TransportCorporation (SPTC), providing services primarily on Mahéand Praslin. Allowing well-regulated private operators toparticipateinthesectorhasbeenconsideredbutnodecisionhasbeenmadetodate.Established in1977,theSPTChasafleetof250buses,with capacities ranging from30 tomorethan50passengers.Duringthepeakperiods,upto85%ofthebusesareinoperationon39primaryroutes,withadditionalsub-routestoenhanceaccessibility.

SPTC buses transport as many as 60,000 residents andvisitorsdaily,averagingbetween1.0and1.5millionpassengersmonthly. Over600bus tripsaremadedailyonMahé,withservices running from5:30 am to 8:30 pm. In addition, theSPTCprovidesspecialhireandcharterservicesthataccountforupto6%oftotalrevenues.BustripsareestimatedbySPTCto representapproximately20 to25%ofall the tripsmade,assuming that the population aged 15 and above make atleast three tofive tripsonadailybasis.TheSPTCestimatesthat the buses are accessible to the majority of the islandresidents,withmostofthepopulationlivingwithin10to15minutesofthenearestbusstop.Somehouseholds,especiallyinthenewresidentialdevelopments,arenotasaccessible,sooutsourcingofconnectingservicesisbeingconsideredasanoptiontoimproveaccessibility.

Mostof theSPTCfleetbusesweremanufacturedbyTata,which makes maintenance operations more efficient. Theaveragefleetageis8years,butsomebusesareupto15yearsoldandcouldbeassociatedwithhighermaintenancecosts.Theaverage totalbusmaintenancecostwas reportedasSR25,807 per month. The SPTC has a fleet replacement planthat targetsanaveragefleetageof5yearsor less.Externalfinancingwillberequired.

The system operates on a flat-rate tariff of SR 5 per trip,which is less than the marginal operating cost of one trip,

currently estimated to be at least SR 7. 48 As a result, SPTCruns a deficit and relies on direct government subsidies tomeet itsannualoperationalcosts.Fortheyear2013,atotaloperating budget of SR 139 Million is expected with totalrevenues of SR 118 million, resulting in a deficit of SR 22millionbeforedepreciation,whichhastobecoveredbydirectgrants.Thedeficitisexpectedtogrow,withSPTCprojectionsindicatingadeficitof34%annuallybytheyear2015.Capitalexpendituresareusuallydirectlyfundedbythegovernment.The combination of themountainous terrain onMahé, andthe limited right-of-wayavailableonmany roads inVictoria,meansthatconstructionpossibilitiesforadditionalroadwaysto expand capacity will be limited. As both population andvehicleownershipratesincreaseontheisland,publictransitwill thus need to play a much more prominent role, sincehighertraveldemandswillleadtoexistingroadwaysbecomingevenmorecongested.

TrendsinbusridershipareillustratedinFigure3-22.In2008,therewerejustover20millionriders,butthatdroppedtojustover16million in2009.The reasons for thatdrophavenotbeenestablished.Since2009,ridership increasedslowlybutsteadily,reachingover18millionin2012(anoverallincreaseof12%overthethreeyearsornearly4%growthperyear).Given that the population registered negligible growth overthesametime,itwouldappearthattheincreaseispartofanoveralltrendtowardincreasedtransitdemand.

SPTCregardsthegreatestchallengefacingpublictransportas the replacement of the bus fleet, lowering the averageagewith the aim of reducing annualmaintenance costs. Inaddition,thetransitterminalsandbusdepotsarebecomingmorecongestedandbothadditionalterminalsandexpansionofexistingoneswillberequired.Finallyexternalfundingwillbe required to facilitate thegradual introductionof greenerbuses,giventhatsuchaninvestmentwouldnototherwisebeeconomicallyviable.ThecostofasinglegreenbusisestimatedbytheSPTCtobethreetimesthatofaregularbus.

There is a pressing need to encourage public transit andplace itonapedestal as the logical transportationmodeofchoice for thecountry’s future.Amyriadofmeasurescouldbe considered, but the final recommendations should notbe undertaken in isolation. Rather, they should be started

48 Afewyearsagoapoliticaldecisionwastakentoreducebusfares.Figure3-32indicatesthatthisdidnotleadtoanimmediateincreaseintraffic,suggestingthatdemandisnothighlyprice-elastic,sothereislittleriskoftrafficorrevenuelossfromincreasingthefare.



Figure 3-22: Trends in Bus Ridership

SPTC regards the greatest challenge facing public transport as the replacement of the bus fleet, lowering the average age with the aim of reducing annual maintenance costs. In addition, the transit terminals and bus depots are becoming more congested and both additional terminals and expansion of existing ones will be required. Finally external funding will be required to facilitate the gradual introduction of greener buses, given that such an investment would not otherwise be economically viable. The cost of a single green bus is estimated by the SPTC to be three times that of a regular bus.

There is a pressing need to encourage public transit and place it on a pedestal as the logical transportation mode of choice for the country’s future. A myriad of measures could be considered, but the final recommendations should not be undertaken in isolation. Rather, they should be started within a coherent set of policies and initiatives derived from the framework of a Transportation Master Plan that considers all modes and actively supports public transit. An integrated transportation study focusing on public transit should go hand in hand with the TMP study. The immediate needs of the SPTC can be addressed by investment in the bus replacement program, although other projects have also been proposed.

3.2.5 Aviation The aviation sector is overseen by the Seychelles Civil Aviation Authority (SCCA) and operates under the Airport Regulation Act (1974) together with the Airport Government Regulations (2002). SCCA is responsible for operations of the Seychelles International Airport at Mahé (SEZ), as well as the airstrip on Praslin.

Some ground services at SEZ 50 are provided by private companies, while development and maintenance of landing strips on other islands and resorts generally falls under the jurisdiction of

50Seychelles International Airport, located near Victoria on Mahé Island.

15.0 16.0 17.0 18.0 19.0 20.0 21.0

2008 2009 2010 2011 2012

Bus Ridership Trends [In Millions]

Figure 3.22: Trends in Bus Ridership

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withinacoherentsetofpoliciesandinitiativesderivedfromtheframeworkofaTransportationMasterPlanthatconsidersallmodesandactivelysupportspublictransit.An integratedtransportationstudyfocusingonpublictransitshouldgohandin hand with the TMP study. The immediate needs of theSPTCcanbeaddressedbyinvestmentinthebusreplacementprogram,althoughotherprojectshavealsobeenproposed.

3.2.5 AviationThe aviation sector is overseen by the Seychelles Civil

Aviation Authority (SCCA) and operates under the AirportRegulationAct(1974)togetherwiththeAirportGovernmentRegulations(2002).SCCAisresponsibleforoperationsoftheSeychellesInternationalAirportatMahé(SEZ),aswellastheairstriponPraslin.

Some ground services at SEZ 49 are provided by privatecompanies,while development andmaintenanceof landingstrips on other islands and resorts generally falls under thejurisdictionoftheIslandsDevelopmentCompany(IDC)whichisresponsibleforthedevelopmentandmanagementofmostairstripsupto1,500m.50Figure3-23describestheairstrips

49 SeychellesInternationalAirport,locatednearVictoriaonMahéIsland.50 TheoverallmissionoftheIDCistoensurethattheouterislandscontribute

tothesocio-economicdevelopmentoftheSeychelleswhileadheringtothehighestenvironmentalstandards,bypromotinglow-impactandeco-friendlydevelopmentontheislands.TheIDCisaparastatalcompany,createdbythegovernmentin1980.TheprincipalmandateoftheIDCistoadministeratotalof13islandgroupsleasedfromgovernmentforaperiodof99years.Ofthese,theIDChasapermanentpresenceononly10groups.Inaddition,theIDCmanagestheislandofCoetivyonbehalfofgovernment.TheIDChaspurchasedislands,vesselsandaircraftsusingGoSgrants.Forthepast5yearshasbeenself-sustainingandpaiddividendstothegovernment.Ithasacomplementof500full-timestaffandoperatestwosupplyvesselsandthreeaircrafttoislandsthathaveresort/guesthouses.

onPraslinandtheouterislands.Becauseoflimitedland,themajorityof thoseairstrips cannotbeexpanded, as they runfromcoasttocoast,asillustratedinFigure3-24forDesroches.Atpresent, international landingsarepermittedonlyatSEZ,but inanyevent,noneof theotherstripsexceeds1,500m,so the physical realities of commercial aircraft 51 limit thepotentialforinternationalcommercialflightstoflydirectlytotheouterislands.

SEZ currently handles approximately 8,000 tons of cargoper year and close to 500,000 passengers annually, mostlyinternational.Therehasbeensustainedgrowthinthesectorwith aircraft movements, the number of passengers andamountofcargofreightshowingbetween10%and27%growthduring the period 2007 to 2011 (Figure 3-25). However thenumberofdomesticpassengershandledatSEZhasrecordeda steady decline, amounting to 34% over the same period.Thedeclinemaybeattributedinparttotherecentpiracyintheregion,whichledtoasignificantreductioninrecreationalmarine activities (yacht charters), with a correspondingreduction in air travel (local) demand to locations of suchactivities.AnotherpossibleexplanationforthereductionisashiftofpassengersfromairtotheimprovedcatamaranservicetoPraslinandLaDigue.52

SEZ operates efficiently from the point-of-view of aircarriersutilizingtheairport,withminimalreportedairtrafficdelays.However,passengerdelaysdooccur regularlyat theimmigrationprocessingpoints,asaresultofpeakingoftrafficinthemorningsandevenings,whenmostflightsfromtheGulf

51 Therearepresentlynomedium-capacitycommercialaircraftlicensedtolandonandthentakeofffroma1,500mstripunderfullloadthatcanalsonavigate3+hoursineachdirectionoveropenwater.

52 Air SeychelleshasexclusiverightsbetweenMahéandPraslin.ThereisnoairstriponLaDigue,whichisservedonlybycatamaranfromPraslin(orfromMahéviaPraslin).

Figure 3.24 Desroches Airstrip

Figure 3.23: List of Airstrips in SeychellesIsland Runway Operator

Alphonse1,214x12m,concrete IDC

Assumption1,208x12.5m,concrete IDC

Bird 920x23m,grass BirdIslandLodge

Coetivy 915x17m,grass IDC

Denis 845x23m,grass DenisIslandResort

D’Arros 1,000x23m,grass D’ArrosDevelopment

Desroches1,380x10m,concrete

Desroches IslandLodge

Farquhar1,179x12.5,concrete IDC

Frégaste 599x23m,grass FrégateIslandResort

Marie Louise 540x9m,concrete IDC

Platte1,400x24m,concrete IDC

Praslin 1,405x23m,asphalt SCAA

Remire 478x10m,concrete IDC

39


currentlyarrive.53Theairporthasanexcellentsafetyrecord,withnomajor incident since it becameoperational over40yearsago.ThisisattributedinparttothestringentregulationthattheSCAAhasputinplace.

Air Seychellesoperates twoAirbus330-200aircraft for itsinternationalroutesandhascodesharingwithEtihadofAbuDhabi, which has facilitated access tomarkets in Asia. 54AirSeychelleshasalsorecentlysignedacodesharingagreementwith South African Airways. For local flights, Air Seychelles operates two DH-6 Twin Otter 300 aircraft, with scheduledflights to Praslin and other locations. Private operators ofhelicopterservicesandcharteredflightsalsousetheairport,toservePraslin,LaDigueandresortsonotherislands.Thereare no scheduled cargo flights at SEZ; all shipments arehandledthroughbellycargo.

Theexistingrunwayis2,987mlongandisregardedbytheSCCA to be limiting to themodern larger aircraft, althoughlarger aircraft such as the Airbus 340 were observed to beregularlyusingtheairportinApril2013.Majorrehabilitationof the terminalwilleventuallybe required toaccommodatethepeaks inpassengerarrivals resulting from increaseduseoflargeraircraft.

Asecondrunwaymayeventuallyberequired,notprimarilybecause of capacity limitations reasons but for strategicreasons: to ensure the country remains accessible inemergency situations. If an accidentwere tooccurblockingthesinglerunway,Seychelleswouldbevirtuallyinaccessible,anditcouldtakeuptoamonthtobringinheavy-liftequipmentfromEuropeorSingaporebyshiptoclearaseverelydamagedaircraft.Moreoverthenearestairports(Mombasa,Mauritius,or Antananarivo/Madagascar) are 2.5 to 3 hours away, sodiverting flights there in emergency situations results inoperationalcomplexityandadditionalcoststoairlines.

In consideration of the above, the SCAA prepared aDevelopmentMaster Plan showing desirable improvementsat theairport.Thecurrentconceptplan,55firstdeveloped in1999,wasupdatedin2009.Theplanisintwophases:

qPhase1coversupto10yearsandincludesimprovementsto the passenger terminal and parking for aircraft andvehicles.

53 SincethediscontinuanceofAirSeychellesservicetoandfromEuropeanairports,almostallEuropeantraffichasbeenroutedthroughAbuDhabi(Etihad)orDubai(Emirates),withatleastdailyservice.EthiopianAirlinesalsoprovidesserviceviaAddisAbaba,butonlyservesSeychellesthreetimesaweek.

54 Eithadnowowns40%ofthesharesofAir Seychellesandhasanagreementtoprovidetechnicalsupport.

55 Theplanremainsessentiallyanarchitecturalconcept,unsupportedbytrafficforecastsorfinancialanalysis.

qPhase 2 is longer-term and covers construction of asecond(3,000m56)runwayonreclaimedland,210meastoftheexistingone(whichwillbeusedasataxiwayorfordomesticoperations).Withthatconfiguration,theairfieldwillmeetCode4Airportcategorystandards,andcanservethe ultra-large aircraft (Boeing 747 or Airbus 380) andprovideflexibility,includingthepossibilityofsimultaneousoperations on both runways. Further extension of theterminalsandparkingfacilities,anexpandedcargoareatoaccommodatetheforecastedfutureloadsandacquisitionofadditionalexpensiveequipmentarealsoplanned.

Theparametersadopted in theSCAAMasterPlan includeexpansiontopassengercapacityof1.5millionpassengersbytheyear202257and3.6millionby2037.Thepeakhourcapacitywasplannedtobe980and1,800passengersperhourduringthetwohorizons(Figure3-26).

Theoverallplanwasestimatedtocost$60Millionin1999whenitwasfirstprepared,butthecost isnowestimatedtohaverisento$150-200million. Intheshortterm,theSCAAwill need at least $13million for renovation/refurbishing ofthe airport terminal and adding increased cargo handlingcapacity.AlthoughtheSCAAgeneratesanoperationalsurplusand thuspaysmodest dividends to the government, capital

56 Effectivelyduplicatingbutnotextendingthepresent2,987mrunway57 ThisissubstantiallymoretrafficthanisproposedinthecurrentTourismMaster

Plan,discussedinSection2.6;300,000touristsperyearprojectedthereimplieswellunder1millionpassengersatSEZ,includingbothinternationalarrivalsanddeparturesanddomestictraffic.

Figure 3.25: Goods and Passengers at Seychelles International Airport (Mahé)2007 2008 2009 2010 2011 2012

Aircraft Movements 3,582 3,382 3,751 4,800 4,470 4,843

International Passengers (‘000) 437 424 415 458 495 517

Domestic Passengers (‘000) 274 234 169 182 186 118

International Freight (tons) 8,300 6,204 5,630 6,886 6,918 5,943

Figure 3.26: Planning Parameters for the Airport Master Plan

ParameterPlanning Horizon

Phase1Year2022

Phase2Year2037

International Terminal

Annual Passenger Capacity 1,500,000 3,600,000

Peak Hour Passengers 980 1,800

Aircraft Parking Stand Requirements

5 10

Domestic Terminal

Annual Passenger Capacity 500,000 900,000

Peak Hour Passengers 210 400

Aircraft Parking Stand Requirements

6 10

Total Annual Passenger Capacity 2,000,000 4,500,000Source: Airport Master Plan Review Study - 2009

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improvementswould necessitate external funding. TheGoSis currently negotiating an MOU with Abu Dhabi AirportCompany(ADAC),intendedtoleadtoaduediligencereviewoftheproposedterminal/runwayproject.

The SCAA is considering several funding approaches,includingPPP,providedthattheconditionsareacceptabletoGoS.Thepotentialforthisstrategywillbeconstrainedbothby the strategic significanceof theairport and the fact thattheinvestmentsproposedmaynotalwaysbeofacommercialnature.Followingfromthediscussionsabove,potentialAviationTransportSectorinvestmentswouldincluderehabilitationandrefurbishment of the Seychelles International Airport in theshort term and building a second runway in the long term.Security improvements includingsurveillance, screeningandmonitoring have also been proposed to ensure continuingcompliancewithICAO-recommendedpractices.

3.2.6 Marine TransportMarine transport is overseen by the Seychelles Ports

Authority(SPA),whichisresponsibleforthePortofVictoria,Mahé, as well as for passenger (catamaran) terminals onMahé,PraslinandLaDigue.TheSPAhasafleetofthreetugsandpresentlygeneratesanoperatingsurplus,payingannualdividendstothegovernment.(SR27Millionin2011).58

Theporthandledover6milliontonsoffreightin2011,mostofwhichwasfromtunaexports.Whileexportsincreasedby54% in the last fouryears, importshavedeclinedbyalmost14%.Transshipmentoftunahasremainedvirtuallyunchanged.

Importedgoodshandledattheportincludemanufacturedgoods, fuels, minerals, food and live animals, chemicals,machinery and transport equipment. Manufactured goodsandminerals/fuels/lubricants together comprised over 50%ofthegoodshandledin2011.

The number of port calls has seen a steady decline, asshowninFigure3-28.Fromapeakof1,340visitsintheyear2006, port calls fell to just over 800 in the year 2011. Thereduction,concentratedinfishingandreefervessels(motherships)aswellascruiseshipsandyachts, isattributedbytheSPApredominantlytothepiracywhichhasbeenprevalentinthe EastAfrican region. However, thenumberof containervessels calling in Mahé over the last number of years has

58 TheGovernmentalsoreceivesoverhalfoftheTHC(terminalhandlingcharge)collectedbyLandMarineLtd.,whoprovidestevedoringandothercargohandlingserviceswithintheport.

declinedsincethepeaklevelin2006(Figure3-28).

Fishing and reefer vessels, carrying perishable foodstuffs,comprise up to 50% of the annual calls, while containerandgeneral cargo typically constitute20%of the total calls.Currently UAFL/DAL and CMA CGM/DELMAS are using +/-1,750 twenty-foot equivalent container units (TEU) gearedvesselswhereasMaerskisusing+/-2,400TEUgearedvessels.Accordingtolocalagentsofthelines,theseworldwidecarriersoperateintoVictoriaaspartofthefollowingservices:

qUAFLisafeederservicethathastwomajorservices-onelooploads/feedersfromIndia,Pakistan&JebelAli(UAE)into the islands as well as into East & Southern Africa,whiletheotherloads/feedersfromDurbanintotheIndianOceanislandsandEastAfrica

qCMA/CGM/Delmasloads/feedersfromMundra&KhorAlFakkanintotheIndianOceanislands

qMaerskloads/feedersfromMumbai,Pakistan,andSalalahtoMombasaandMahé

According to SPA, the port has a maximum containerthroughputcapacityof25,000TEUsperyear.Fromtheyear2008 to 2011, container throughput (import plus exportplus transshipment) handled increased from approximately15,000 TEU to 20,000. The containers include refrigeratedunitsfortunaexport(theporthandles80%oftunafromthenearbytunaprocessingplant,oneofitsmajorstakeholders).Containertrafficattheporthasthusbeenincreasingsteadily,although part of this increase is almost certainly due toincreased containerization of general cargo imports. If thistrendcontinues,another5,000TEUwillbeaddedinfiveyearsand the port will reach its nominal sustainable capacity of25,000TEUatcurrentnominalhandlingproductivity.59

Cargovesselsareoffloadedusing ship’s gear,operatedbyLandMarineLimited60,aprivatecompany.ATerminalHandlingCharge(THC)ofSR2,500perTEUiscurrentlyassessed(fixedsince1994),ofwhichSR900isretainedbythecompanyandSR1,600 returned to GoS. Land Marine currently employsabout250permanentstaffand150casualworkers.However,anongoing shortageof specialized labour remainsan issue;the roster currently includes about 40 foreign workers andLandMarine anticipates recruiting an additional 40 foreignworkersintheverynearfuture.

59 SPAconfirmedthattheportoperates365daysperyear,24hoursperday.Soifthethroughputlimitof25,000TEUisdeterminedbystoragelimitsthissuggestsaveragedwelltimeof25,000/2,500=0.1yearorabout36days,whichwouldbehighrelativetootherregionalports.Areductionindwelltimewouldincreasetheeffectivestoragecapacityproportionally.Dwelltimewithintheportcouldbereducedbyacombinationofanacceleratedtariffrelatedtotimewithintheportanddevelopmentofoff-sitestoragecapacityinCustoms-securecontainerfreightstationsorinlandclearancedepots.

60 LandMarineLtd.wascreatedin1994,whengovernmentdecidedtobringtheprivatesectorintoportoperations(stevedoring),initiallyundera10-yearagreement.In2006,a15-yearextensionwassigned,whichcurrentlyrunsthrough2021.Initially,GoSheldonto40%oftheshares,withthebalanceheldprimarilybymajorshippingagentsinSeychelleslinesservingtheport.InJune1997,GoSsoldhalfofitsholdingsinLandMarine.GoSstillholds14%.Thecompanyhasundertakentherequiredinvestmentinallhandlingequipmentwithintheport(some$10millioninhandlingequipmentoverthepastdecade),andhasundertakentoprovidethenecessaryinvestmentinshore-basedcraneswhenthegearedvesselscurrentlyservingtheportarereplacedbylargergearlessvessels,makingfewerbutbiggercallsperyear.

Figure 3.27: Port Throughput (2007 – 2011)Category 2007 2008 2009 2010 2011

Imports (in 1,000 metric tons)

526 530 435 404 406

Exports (in TEU) 3,814 4,069 5,008 5,879 5,877

Transshipment (tuna-in 1,000 metric tons)

154 177 158 164 153


41


In addition to container traffic, Land Marine currentlyhandles stevedoring for theFrenchfishingfleetand loadingfortheSpanishfleet,aswellasthestuffingoffrozenfishintoreefercontainersforboththeSpanishandFrenchfleets.

SPA indicates that vessels wait an average of 2 hours toberth and take an average of 12 hours at berth for off/on-loading. 61The existing quay at Victoria is only 370 metreslongandwasbuiltinthe1970s.Subsidenceofthepavingonthe deck is apparent, and the SPA reports some structural

61 ObservationsaroundMahéislandinApril2013showedseveralvesselswaitingtoberth

damagetothestructurebelow,althoughbeamsandcolumnsappear structurally sound.Delaysoftenoccurduring repairsof damaged components. Although there is no dedicatedcontainer quay, the existing quay can accommodate twocontainer vessels simultaneously,with one overhanging thequay (Figure3-41).However thismeans that if amilitaryorothervesselisberthedthenonlyonecontainervesselcanbeservedatatime.Thereisnocapacitytohandleoversizeandheavyloads.

Figures3-30and3-31showthatwhilethenumberofcallshas been reduced, the number of container units and the



Figure 3-28: Calls at Victoria Port

Source: Seychelles Port Authority

Fishing and reefer vessels, carrying perishable foodstuffs, comprise up to 50% of the annual calls, while container and general cargo typically constitute 20% of the total calls. Currently UAFL/DAL and CMA CGM/DELMAS are using +/- 1,750 twenty-foot equivalent container units (TEU) geared vessels whereas Maersk is using +/- 2,400 TEU geared vessels. According to local agents of the lines, these worldwide carriers operate into Victoria as part of the following services:

• UAFL is a feeder service that has two major services - one loop loads/feeders from India, Pakistan & Jebel Ali (UAE) into the islands as well as into East & Southern Africa, while the other loads/feeders from Durban into the Indian Ocean islands and East Africa

• CMA/CGM/Delmas loads/feeders from Mundra & Khor Al Fakkan into the Indian Ocean islands

• Maersk loads/feeders from Mumbai, Pakistan, and Salalah to Mombasa and Mahé

According to SPA, the port has a maximum container throughput capacity of 25,000 TEUs per year. From the year 2008 to 2011, container throughput (import plus export plus transshipment) handled increased from approximately 15,000 TEU to 20,000. The containers include refrigerated units for tuna export (the port handles 80% of tuna from the nearby tuna processing plant, one of its major stakeholders). Container traffic at the port has thus been increasing steadily, although part of this increase is almost certainly due to increased containerization of general cargo imports. If this trend continues, another 5,000 TEU will be added in five years and the port will reach its nominal sustainable capacity of 25,000 TEU at current nominal handling productivity. 60

60 SPA confirmed that the port operates 365 days per year, 24 hours per day. So if the throughput limit of 25,000 TEU is determined by storage limits this suggests average dwell time of 25,000/2,500 = 0.1 year or about 36 days, which would be high relative to other regional ports. A reduction in dwell time would increase the effective storage capacity proportionally. Dwell time within the port could be reduced by a combination of an accelerated tariff

0

500

1000

1500

2005 2006 2007 2008 2009 2010 2011

Port Calls

Year

Others

Tug & Supply Vessels

Naval

Fishing & Reefer Vessels

Tankers (Oil & Others)

Figure 3.28: Calls at Victoria PortSource: Seychelles Port Authority

Figure 3.29: Second Container Vessel Overhanging Quay (February 4, 2014)



Figure 3-29: Second Container Vessel Overhanging Quay (February 4, 2014)

Figures 3-30 and 3-31 show that while the number of calls has been reduced, the number of container units and the tonnage of goods handled have steadily increased, implying larger average calls. 63

Figure 3-30: Containers Handled (Import + Export + Transshipment)

Source: Seychelles Port Authority Data

63 At 100-150 TEU per average call, activity remains low by international standards, suggesting limited immediate commercial pressure for the use of larger vessels.

10,000

15,000

20,000

25,000

2005 2006 2007 2008 2009 2010 2011

TEU Han

dled

Year

Figure 3.30: Containers Handled (Import + Export + Transshipment)Source: Seychelles Port Authority Data

42


tonnageof goodshandledhave steadily increased, implyinglargeraveragecalls.62

Domestic marine traffic is dominated by passengertransportbetweenMahé,PraslinandLaDigueandthesupplyvesselsoperatedbyIslandsDevelopmentCompanyLtd.(IDC),servingasmallnumberofouter islands.There isaseparatedomestic passenger terminal in Victoria, fromwhichmotorboats(catamarans)providethreescheduledservicesperdaytoPraslin, someofwhichcontinueon toLaDigue.The twoprivate catamaranoperators together handle some800,000passengersperyear,witheachvesselcarrying150-350people.The passenger terminal in La Digue was built in 2006. TheSPAisplanningtobuildanewtransitterminalinVictoriaforarrivingtouristsproceedingtotheotherislands.Internationalpassengerswouldtransfertheredirectlyfromtheairportandrefresh thereprior toboarding thevessel to theirhotelsonPraslinandLaDigue.

Securityisamajorconcerntotheshippingindustry,inviewof the recent piracy activity throughout the region (basedprimarilyontheSomalicoast).Piracyimpactedbothtourismandshippingactivitiesinthecountry.TheGoSresponsetothepiracy was to provide additional security, including greatersurveillanceandarmedescortofcommercialvesselsarrivingor departing from the islands. Piracy had major economicimpacts,withasignificantdropinthenumberofcruiseshipsand `super-yachts’ coming to theport. 63 Thedirectcosts toGoS of traffic reduction were exacerbated by indirect coststhat increased, including additional security, fuel surcharges(for longerroutesnowusedbyvesselsservingVictoria)andinsurance surcharges on cargo. On a positive note (fromthe point of view of port revenues) bunkering of foreign-registeredmilitaryvesselsattheporthasincreased,butthatisconsideredasashort-termwindfallbenefittotheportwhichwillnotbesustainedinthefuture.

TheGovernmentof Seychelles took a decision in 2004 tomodernizetheport,withthevisionofmakingVictoriaastagingportfortransshipmenttootherportsintheregion.Itisnot

62 At100-150TEUperaveragecall,activityremainslowbyinternationalstandards,suggestinglimitedimmediatecommercialpressurefortheuseoflargervessels.

63 Thenumberofcruiseshipsdroppedfrom60vesselsperyearduringthepeaktoonly10vesselsin2012.

clearhowtransshipmentatVictoriawouldfitwithcurrentshiproutings,sinceVictoriaiscurrentlyservedprimarilybyvesselsoflessthan2,500TEUcapacitythatpresentlyalsoservetheEastAfricanand IndianOceanportson the samevoyage. 64 Forvesseloperators,thecostofintermediatetransshipmentwouldneedtobeoffsetbyoperatingsavingselsewhereinthelogistics chain. For domestic traffic, delays at Victoria couldbe minimized through a combination of electronic filing ofcustoms documents and provision for off-site inspections.ImprovementsplannedbytheSPAincludeextensionofquay,expansion and dredging to accommodate larger ships andconstructionofanewtouristpassenger facility.Theexistingquaydepthis9.5to11.0malthoughupto15mdepthwouldberequiredforlargerships.A200mquaywallisrequiredtoaccommodatefishingvessels.Themainquayshouldbebuilton firm ground to better accommodate fixed and rubber-wheeledcranes.

ThecostofplannedimprovementsisestimatedbytheSPAtobe70millionEuros($87.5million);theSPAwillneedfinancialsupport to implement them. The EU has expressed interestinfinancingpartof that (particularlycomponents related tothefishingquay)andafundingagreementisapparentlybeingnegotiated.EUfundingislikelytofocusontherequirementsof tunafishing vessels andwouldnot cover thebulkof thework.TheEUhassentadelegationofspecialiststoundertakefeasibilitystudies.

To ensure that the container handling capacity remainsand to facilitate the growthmomentum, some investmentswillberequiredattheport.However,investmentsongantrycranes for container handling are unlikely to be justified atexpectedtrafficlevels.Onesource informallyestimatedthatVictoria would need to handle a minimum of 100,000 TEUannually to justify investing in multiple gantry cranes forunloading gearless container vessels (a single crane wouldhavemorethanenoughannualcapacitybut isnotregardedas operationally viable, since it is subject to the risk ofbreakdown). TheSPAidentifiestheexpansionoftheVictoriaPort,includingaquayextensionbyupto300manddredgingto12-13m,asitspriorityprojects.

64 Throughtheirlocalagent(ashareholderinLandMarineLtd.),Maerskhasnotifiedtheterminaloperatoroftheirintenttomovetolargergearlessvesselsatsomepoint.



Figure 3-31: Trends in Port Usage

Source: Seychelles Port Authority Data

Domestic marine traffic is dominated by passenger transport between Mahé, Praslin and La Digue and the supply vessels operated by Islands Development Company Ltd. (IDC), serving a small number of outer islands. There is a separate domestic passenger terminal in Victoria, from which motor boats (catamarans) provide three scheduled services per day to Praslin, some of which continue on to La Digue. The two private catamaran operators together handle some 800,000 passengers per year, with each vessel carrying 150-350 people. The passenger terminal in La Digue was built in 2006. The SPA is planning to build a new transit terminal in Victoria for arriving tourists proceeding to the other islands. International passengers would transfer there directly from the airport and refresh there prior to boarding the vessel to their hotels on Praslin and La Digue.

Security is a major concern to the shipping industry, in view of the recent piracy activity throughout the region (based primarily on the Somali coast). Piracy impacted both tourism and shipping activities in the country. The GoS response to the piracy was to provide additional security, including greater surveillance and armed escort of commercial vessels arriving or departing from the islands. Piracy had major economic impacts, with a significant drop in the number of cruise ships and `super-yachts’ coming to the port. 64 The direct costs to GoS of traffic reduction were exacerbated by indirect costs that increased, including additional security, fuel surcharges (for longer routes now used by vessels serving Victoria) and insurance surcharges on cargo. On a positive note (from the point of view of port revenues) bunkering of foreign-registered military vessels at the port has increased, but that is considered as a short-term windfall benefit to the port which will not be sustained in the future.

64 The number of cruise ships dropped from 60 vessels per year during the peak to only 10 vessels in 2012.

0.0

1.0

2.0

3.0

2005 2006 2007 2008 2009 2010 2011

In Com

parison

to th

e Ye

ar

2005

[1.0]

Trends in Port Usage

No. of Calls Tonnage of Goods Landed Containers (TEU)

Figure 3.31: Trends in Port UsageSource: Seychelles Port Authority Data

43


3.2.7 Future Transport Demand Projections

Land Transportation and TransitA range of population and vehicle growth scenarios are

presentedinFigure3-32.Overthelastfiveyearsthepopulationhas grown at approximately 0.7% while the vehicle growthratewas8.4%.Thelatterrateisrelativelyhighanditisunlikelyto bemaintainedover a longer period of time. In future, itisexpectedthatthepopulationgrowthcouldbemaintainedand/orincreasedto2.0%peryear.Extrapolationof2011rateswouldresultinapopulationincreaseof27%bytheyear2030andafive-foldincreaseinthenumberofvehiclesontheroad.

Basedonthesepopulationandeconomicgrowthrates,low-,medium-andhigh-growthscenariosof2.0%,5.2%and8.4%arethusproposed.ExistingtrafficvolumesonroadwayswithinVictoriarangefrom300toover900vehiclesperhourduringthepeakperiods.Volume to capacity ratioswereestimatedalongcriticalnorth-southscreenlinesandwerefoundtobeashighas0.69to0.82.Furthermore,roadwaydensityatcapacity

wouldbeequivalentto24vehiclesper lanekm,assumingaspeedof33km/handalaneflowcapacityof800vehiclesperhour for urban arterial operations. Future vehicle demandswereprojectedtoyear2030,consideringvolumetocapacityratiosatcriticalscreenlines.Roadwaycapacitiesanddensitieswere then projected assuming medium and high vehiclegrowthrates.

Traffic demand will reach existing screen line capacitiesbetween2015and2016.Demandisexpectedtoreachoverallnetworkcapacities in2019 to2023, resulting inwidespreadcongestion, unless interventions that would reduce trafficgrowthare introduced.By theyear2030, roadwaydensitieswouldrangefrom35to60vehiclesperlane-km.65

These projections indicate thatmeasures that target onlythe supplyof road capacitywill notbe sufficient toaddresstraffic demands in the future. Moreover, it is not in factphysicallypossible todouble the roadway capacityover theentire network (that is, it is likely not physically possibleto construct 500 km of additional lanes in Seychelles)withoutmassiveenvironmental impactsandmassive capitalexpenditure.Basedontheterrainandlimitedrights-of-way,averypreliminaryestimateisthatfuturecapacityimprovementswouldbelimitedtoa20%increaseorless(thatisup100kmofadditionalroadwaylanes).Furthertraveldemandsbeyondthathavetobeaccommodatedontransit.

Bus ridership has shown a steady but modest increasesince 2009. The growth rate has averaged 4%per year, butthatratecannotbemaintainedoracceleratedunlessprojects

65 Thisimpliesthateveniftheroadwaycapacitiesweredoubledthroughoutthenetwork(from24to48vehicles/lane-km),expectedvehicletrafficcouldnotbeaccommodated.

Figure 3.32: Population and Vehicle Growth ScenariosItem 2011 2030 2030 2030

Low Medium High

Population Growth Rate

0.7% 0.7% 1.4% 2.0%

Population (‘1000) 87.4 99.9 114.1 126.8

Vehicle Growth rate

8.4% 2.0% 5.2% 8.4%

Vehicles 11,853 17,192 31,092 55,230

Vehicles per 1,000 population

136 172 273 436

10.00

20.00

30.00

40.00

50.00

60.00

70.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Road

way

Den

sity

[veh

/lan

e_km

]

Volu

me

to C

apac

ity ra

tio [v

/c]

Traffic Projection Scenarios

v/c_Med v/c_High Density_Med Density_High

ScreenLine

Capacity

NetworkCapacity24veh/lane km

Figure 3.33: Traffic Projection Scenarios

44


are implemented that not only increase the capacity of thesystem,butalsoincreaseitsmodalshare.Theneedforsuchprojects is critical, given that transit is expected to take thebulkof the futuregrowth in traveldemands. It is thereforeimportant to position transit by increasing its frequency orcapacity,reliabilityandcomfort,sothatagreaterproportionofthepopulationwouldoptforitastheirpreferredmodeoftravel.

Aviation SectorAs noted previously, modest but continual growth was

recorded in the aviation sector for the years 2007 to 2012.Aircraftmovements,thenumberof internationalpassengersandvolumeofcargo freight increasedbybetween10%and27%duringthatperiod,althoughtherewasadecline inthenumberofdomesticpassengers.Forfutureyears,theaviationsector is expected to record a growth generally between5% and 7% (Figure 3-34), although internal freight and thenumber of overflying aircrafts are expected to have lowergrowthrates.

While the runway can accommodate at least 10 aircraftmovementsperhour(landingsortake-offs),assuming3to5minuteheadways,thereispresentlyalimitationonthenumberof passengers that can be handled at the terminal in peakhours.Theannualcapacityoftheterminalisestimatedtobeapproximatelyonemillionpassengersperyear,whichwouldbeexceededbytheyear2020atthegrowthratesprojected

bytheSATC.66Thatcapacityassumeseffectiveuniformserviceperiodsof10to12hoursperday.Mostinternationalaircraftmovementspresentlyoccurovershortperiodsinthemorningsandevenings, socongestion isalreadybeingexperiencedatthe terminal, and this is expected to worsen in the future.Therefore under existing conditions, hourly capacities areroutinelybeingexceeded inpeakperiods, leading todelays,althoughthiscouldbemanagedtosomeextentthroughslotallocation.

Projects thatwouldexpand thepassengerprocessingandhandlingcapacityattheairportwillberequiredinthemediumterm (5-15 years). This assessment justifies themaster planproposals for Phase 1 projectswhich cover up to 10 years,includingboth improvementstothepassengerterminalandparkingforaircraftandvehicles67.

Marine SectorTheannualgrowth in thenumberofTEUshandledat the

VictoriaPortvariedfrom10%to23%between2005and2011,averaging 12%over that time. Between 2009 and 2011 theannualgrowthratewasbetween4and5%.Basedonthisrange,low-,medium- andhigh-growth scenarioswere established,

66 Althoughseveralyearslateratthegrowthratesprojectedinthe2011Tourism Master Plan

67 It should be noted that extension of the arrival lounge, departure lounge, concourse and upgrading of the domestic terminal as well as extension of the cargo terminal are already underway and are expected to be completed in 2015, at a cost of approximately SR 55 Million. These will alleviate the terminal capacity problems in the short term, and probably for at least 10 years into the future.

Figure 3.34: Future Aviation Demand

Activity Actual 2012

Estimate 2013

Forecast Growth rate (Annual)

2016 2020 2024 2012 - 2016

2016 -2020

2020 - 2024

Passenger throughput

- Domestic 196,000 208,295 247,883 312,610 394,239 6% 6% 6%

- International 517,542 538,244 592,661 695,494 816,170 4% 4% 4%

- Total 713,542 746,539 840,544 1,008,104 1,210,409 4% 5% 5%

Freight (‘00 metric ton)

- International 6,077 8,204 9,112 9,918 10,724 11% 2% 2%

Aircraft movements (‘00) 30,183 32,834 38,608 47,917 59,469 7% 6% 6%

Over-flying aircraft (‘00) 15,388 15,743 16,323 17,096 17,869 1% 1% 1%

Figure 3.35: Future Container Growth Scenarios at the Victoria Port

Item Observed Volume

Growth Scenarios

2030 TEU Forecast

Year When 25,000* TEU Capacity is reached

2007 TEUs 11,7312011 TEUs 19,906Actual Growth (2007 to 2011) 70%Average annual Growth(2007 to 2011) 12%Future Growth Rate - Low Scenario 5% 52,895 2016Future Growth Rate - Medium Scenario 8% 92,911 2014Future Growth Rate - High Scenario 12% 160,575 2013

*25,000 TEU Capacity provided by SPA could not be verified independently

45


generatingforecastsoffutureTEUsandestimatingwhentheportwillreachitscontainerhandlingcapacity.TheresultsareshowninFigure3-35.

Basedonthelowestofthethreegrowthscenarios,theportwillreachitsnominalcapacitybytheyear2016.Bytheyear2030, thevolumeofcargohandledcouldbeat least52,000or as high as 160,000 based on the low and high growthscenariosrespectively.Thatvolumeofcargocontainerswouldeventually require expanded and probably more advancedhandling facilities, possibly including shore-based containercranesinthelongrun.

3.2.8 Conclusions for Transport SectorKey issues surrounding the transport sector have been

identified through the analysis above including assessmentofspecificgapswithintherespectivesubsectorsoftransportplanning, roads and public transport, aviation and marinetransport.

At the general planning level, the lack of capacity andqualified professional staff remains a major limitation todevelopment goals. There is need for capacity buildingwithintheDepartmentofTransporttogetherwithassociatedtechnical support both ofwhich can be achieved through aframework of a Technical Assistance (TA) programme andmaster planning processes governing developments in theroadsandpublictransportsectors.

For the roads subsector covering highways as well publictransport systems,agingof the infrastructureanda steadilyincreasing demand are key issues that need attention.Essential equipmentnecessary formaintenanceof the roadinfrastructure is now old and requires replacement and acoherent asset management program is necessary to allow

long-termplanningof roadmaintenanceactivities. It is alsoestimatedthattrafficdemandswouldreachexistingscreenlinecapacitieswithinthenext5to10years.However,constructionofadditional roadways to increaseavailablecapacitywillbeseverelylimitedbecauseofthemountainousterrainonMahé,and the right-of-way constraints in Victoria. Consequentlypublictransitisexpectedtotakethebulkofthefuturegrowthinland-basedtraveldemands.

Emerging trends in transit ridership point to that fact.Transitridershiphasbeen increasingsteadilyat4%annuallyover the last several years. To support and accelerate thattrend,targetedprojectsthatwouldincreasesystemcapacityandaccessibilityaswellasitsmodalsharewillbenecessary.

Both the marine and aviation subsectors are strategicgateways to the island and play pivotal roles in supportingfisheriesandtourism,thetwopillarsoftheeconomy.Tourismgrew by 46% with a corresponding increase in aircraftmovements and passenger arrivals, which rose by between10% and 27% in the period between 2009 and 2013. Toaccommodate increased tourism activities and associatedpeaks in passenger arrivals from larger aircraft, terminalrehabilitationwillbenecessary.Inaddition,asecondrunwaymayberequired,moresoforstrategicreasons-toensurethecountryremainsaccessibleinemergencysituations-thanforcapacitylimitations.Inaddition,themarinesectorisbadlyinneed of capacity enhancements and vital modernization toaccommodatelargervesselswithdeeperberths.

Without an action plan with suitable transport sectorprojects thatcanaddressthekey issues, thefuturemobilityneeds of the islandwill not bemet,with potential adverseimpactsontheeconomyandsocialdevelopment.

446


Chapter

47

Infrastructure Action Plan for The Seychelles

Thissectionprovidesaninventoryofprojectsproposedwithin Seychelles and those reported to be in the‘pipeline’fortheAfDB,EU,etc.,forwhichinformation

isavailable. Itprioritizes theseprojectsbasedonevaluationcriteria and budgets identified explicitly or implicitly by theGovernmentofSeychellesinthedocumentsindicatedearlierinthisreport,anddevelopsactionsplansforthepowerandtransport sectorprojects. It is important toalsounderstandthe sector-wise investment budgets developed by thegovernmentasaninputtoprojectprioritization(anumberofthePUCpriorityprojectsarealreadybeingdirectlyfinancedthroughthe2013GovernmentofSeychellesbudget.)

4.1 Prioritization MechanismTheapproachhasbeen tofirst apply abasic screening to

‘utilities’ and ‘transport’ separately. This is based on thefollowing eight evaluation criteria, identified explicitly orimplicitly by Government of Seychelles in the documentsdiscussedinSection2.6above.Thesecriteriarelatenotonlyexplicitlytotourismandfisheries,identifiedascurrentprioritysectors, but also to support of economic transformation(broadeningthebaseoftheeconomy),improvingthequalityof life, ‘Green growth’ (environmental sustainability), andsupportingpossiblefuturegrowthareas(suchasoffshoreoilandgasdevelopment).

Therankingcriteriaareasfollows:

qSupportingtheFisheriessectorqSupportingtheTourismsectorqSupportingtheOffshorePetroleumsector68

qSupportingstructuraleconomictransformation69

qImprovingthequalityoflifeqPromotingenvironmentalsustainability/greengrowthqPromotinginclusivegrowthand(youth)employmentqPromotingregionalintegrationandtrade

TheapproachtakenistorankwithineachsectorthatisthefocusoftheIAP(energyandtransport),basedontheseeightcriteria, then to rank based on these criteria plus FinancialInternalRateofReturn(FIRR)70withineachsector,andfinallytorankacrosssectors,withoutandthenwithFIRR.Wheretheentitiesinvolvedhavesettheirownprioritieswesummarizethosepriorities,forinformation.Thescoreforeachoftheninecriteriarangesfrom0through3,onthefollowingscale:

0 noimpact1 minorimpact2 moderateimpact3 majorimpact

Financial models have been prepared for those projectswhere it is possible to reasonably estimate both revenues

68 Regardedasthemostlikelytotallynewsectortodevelopoverthenextdecade69 Emphasishasbeenplacedondevelopmentofagricultureandmanufacturing

(servingprimarilydomesticmarkets,throughimportsubstitution),andfinancialservices(servingprimarilyoffshoremarkets)

70 LimitedtothelimitednumberofprojectswhereFIRRcanbecalculated.

and operating costs. Based on the financialmodels, projectand equity returns have been calculated and the projectsarerankedonthebasisofFIRR(equityreturns).71 Financialreturnsarethenscoredonthefollowingscale:

1. 0>FIRR<5%2. 5>FIRR<15%3. FIRR>15%

4.2 Action Plan for the Electricity Sector

4.2.1 Projects Planned by PUCThetablesbelowsummarizetheinfrastructureinvestments

which are proposed or planned for the electricity sub-sector by PUC, including annual budget estimations, basedon the PUC Financial Plan. The financial plan was createdin 2011 and provides estimates of proposed investmentsfrom 2011 to 2035. The table below summarizes proposedannual expenditure from 2012 to 2018, including expectedinvestmentsin2012and2013,astheyappearinthefinancialplan.Someoftheprojectsareproposedtohaveinvestmentsbeyond2018,whicharenotcapturedinthetable:

A brief description of each of these projects is providedbelow:

1. Additional Generation Capacity in Roche Caiman: InordertocatertogrowingelectricitydemandinMahé,thePUCisplanningtoaddadditionalgenerationcapacity inRocheCaimanpowerstation.Theproject isexpectedtoadd 16MWof installed capacity. The overall estimatedcost is $13.4million for a phased investment over twoyears.

2. New Power Station, Mahé: The new power generationproject at Mahé, with capacity of 40 MW, is expectedto start in2018.Theprojectwould involve settingup4newgeneratorsetswith10MWcapacityeach.Thetotalprojectcostisexpectedtobe$73.3mn,phasedover2018to2020.

3. Additional Generation Capacity, Praslin: GenerationcapacityinPraslinisproposedtobeincreasedby2.6MWwithaninvestmentof$5.0million.Theprojectisexpectedtobecompletedintwoyears.

4. New Power Station in Praslin: Thecurrentpeakdemandin Praslin (7.4MW) is greater than the safe generationcapacityof4.4MW.Praslinpowerstationhas9generatorsets,outofwhich4setshaveclockedmorethan100,000running hours. These sets are being used beyond theiruseful economic life in order to cater to increasingelectricity demand. The existing power station is alsolocated inanarea surroundedby residents.Asa result,noise pollution arising from the station is a seriousconcerntotheresidents.Therefore,thePUCisplanninganewpowerplantinPraslinatamoresuitablelocation.Theproject isexpected toadd7.5MWof installed capacity

71 DetailsoftheassumptionsineachcaseareprovidedinAnnexesAthroughD.

4. Infrastructure Action Plan for the Seychelles

48


and5.4MWofsafegenerationcapacity.ThetotalprojectcostisexpectedtobeSR364mn($32.6mn).

5. Transmission Network (33 kV from Roche Caiman to Airport): The transmission network project from RocheCaiman to Airport is being developed at a cost of $3.8mn.TheprojectisfundedbyadevelopmentgrantofSR45mn. Three-fourths of the cable installationwork hasbeen completed and the project was expected to becommissionedinlate2013orearly2014.

6. Transmission Network (33 kV from Airport): Thetransmission network project from Airport is expectedto cost $9.1 mn. This project is an extension of thetransmission network project being implemented fromRocheCaimantoAirport.

7. Transmission Network (33 kV ): Thetransmissionnetworkproject from Anse Boileau to Baie Lazare is expectedto cost $6.4 mn. The project would involve two newcircuitsof33kVtransmissionlineswithundergroundandoverheadconfigurations.Thetransmissionprojectwould

Figure 4.1: Summary of Projects Planned by PUC (All Amounts in USD mn)S. No.

Project Project Cost

Proposed Investment

2011 2012 2013 2014 2015 2016 2017 2018

A. Power Generation Projects

1 AdditionalGeneration,RocheCaiman(Capacity–16MW)

13.4 0.0 0.0 0.0 6.7 6.7 NA72 NA NA

2 NewpowerStation,Mahé(Capacity–40MW)74 73.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 40.7

3 Additional Generation, Praslin (Capacity – 2.6MW)

5.0 0.0 0.0 0.0 2.5 2.5 NA NA NA

4 NewPowerStation,Praslin(Capacity–7.5MW) 32.6 0.0 0.0 8.1 0.0 0.0 NA 24.0 NA

B. Transmission and Distribution Projects

5 33kVTransmissionNetwork–RocheCaimantoAirport

3.8 0.5 0.7 2.7 NA NA NA NA NA

6 33 kVTransmissionNetwork–Airport toAnseBoileau

9.1 0.0 0.0 9.1 NA NA NA NA NA

7 TransmissionNetwork–toBaieLazare 6.4 0.0 0.0 0.0 6.4 NA NA NA NA

8 Transmission Network – Turtle Bay To AnseRoyale

3.1 0.0 0.0 0.0 0.0 3.1 NA NA NA

9 TransmissionNetwork–AnseRoyalToTakamaka 5.8 0.0 0.0 0.0 0.0 0.0 5.8 NA NA

10 TransmissionNetwork–TakamakaTo 1.3 0.0 0.0 0.0 0.0 0.0 0.0 1.3 NA

11 33kVTransmissionNetwork–Huteau Lane toBeauVallon

10.7 0.0 0.0 0.0 2.7 0.0 4.0 4.0 NA

12 System Improvement to increase transfercapacity

3.1 0.0 0.0 0.0 3.1 NA NA NA NA

13 Undersea Cable to Long Island & Other InnerIslands

0.7 0.0 0.0 0.0 0.0 0.7 NA NA NA

14 NorthMahéSystemReinforcement 0.4 0.0 0.0 0.4 NA NA NA NA NA

15 IleAuroreNetworkDevelopment 2.7 0.0 0.0 0.0 0.0 1.3 1.3 NA NA

16 IleDuPortNetworkDevelopment 0.9 0.0 0.0 0.4 0.4 NA NA NA NA

17 ProvidenceNetworkDevelopment 0.8 0.0 0.0 0.3 0.3 0.3 NA NA NA

18 IleSoleilNetworkDevelopment 2.2 0.0 0.0 0.0 0.9 1.3 NA NA NA

19 MahéDistributionNetwork 11.2 0.5 0.4 0.4 0.4 0.4 0.4 0.4 0.4

20 PraslinDistributionNetwork 4.1 0.0 0.0 0.2 0.2 0.2 0.2 0.2 0.2

21 LaDigueDistributionNetwork 2.1 0.0 0.0 0.1 0.1 0.1 0.1 0.1 0.1

22 PrivateDevelopmentsonPraslin&LaDigue 1.0 0.0 0.0 0.04 0.04 0.04 0.04 0.04 0.04

23 SubmarineCablenetworkinLaDigue 4.5 0.0 0.0 2.2 2.2 NA NA NA NA

24 Efficiencyimprovementofallpowerstations 5.4 0.0 0.0 0.0 1.8 0.9 0.9 0.9 0.9

TOTALELECTRICITYPROJECTS 203.6 1.0 1.1 25.94 27.74 23.9 12.8 31.0 42.4

72 NAimpliesthattheprojectisexpectedtobecompletedandnofurtherfundingisrequired73 Theprojectisexpectedtostartin2018andbecommissionedin2020

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helptoconnecttoadditionalcustomersandatthesametimeleadtoreductioninT&Dlossesaswellasrepairandmaintenanceexpenses.

8. Transmission Network (Turtle Bay to Anse Royale): Thetransmission network project from Turtle Bay to AnseRoyale is expected to cost $3.1mn. The project wouldallowconnectiontoadditionalcustomersandatthesametime lead to reduction in T&D losses and reduction inrepairsandmaintenanceexpenses.

9. Transmission Network (Anse Royale to Takamaka): The transmission network project from Anse Royale toTakamakaisexpectedtocost$5.8mn.Theprojectwouldallowconnectiontoadditionalcustomersandatthesametime lead to reduction in T&D losses and reduction inrepairsandmaintenanceexpenses.

10. Transmission Network (Takamaka to): The transmissionnetwork project from Takamaka to is expected to cost$1.3mn.Theprojectwouldallowconnectiontoadditionalcustomers and at the same time lead to reduction inT&D losses and reduction in repairs and maintenanceexpenses.

11. Transmission Network (33 kV from Huteau Lane to Beau Vallon): The transmission network project fromHuteau Lane to Beau Vallon is expected to cost $10.7mn.Theproject isexpectedtohavetwonewcircuitsof33kVtransmissionlineswithundergroundandoverheadconfiguration. The transmission project would help toconnect to additional customers and at the same timelead to reduction in T&D losses as well as repairs andmaintenanceexpenses.

12. System Improvement to Increase Transfer Capacity: The proposed project involves improvement in step-up transformers, switchgears and accessories at RocheCaiman Power station and Huteau Lane substation inVictoria.Theprojectcostisexpectedtobe$3.1mn.

13. Undersea Cable to Long Island and other Inner Islands: Theprojectenvisagesanew11kVunderseacablefromMahé to Long Island and other inner islands to caterto additional load. The project cost is expected to be$700,000.

14. North Mahé Distribution System Reinforcement: The project involves reinforcement of existing 11 kVdistribution network in north Mahé to cater to Savoyhotelandotheradditional loads,atanexpectedcostof$400,000.

15. Ile Aurore Network Development: The project involves11/0.415kVnetworkdevelopmenttocatertoadditionalloadinIleAuroreincludinghotels,schoolsandhospitals.Thetotalprojectcostisexpectedtobe$2.7mn.

16. Ile Du Port Network Development: Theproject involves11/0.415kVnetworkdevelopmenttocatertoadditionalindustrial load in Ile Du Port. The total project cost isexpectedtobe$900,000.

17. Providence Network Development: Theprojectinvolves11/0.415kVnetworkdevelopmenttocatertoadditionalindustrial load in Providence. The total project cost isexpectedtobe$800,000.

18. Ile Soleoil Network Development: The project involves33/11/0.415 kV network development to cater to

additionalloadinIleSoleoilincludinghotels,schoolsandhospitals.Thetotalprojectcostisexpectedtobe$2.2mn.

19. Mahé Distribution Network: The project involvesdistributionnetworkdevelopmenttocatertoadditionalload inMahé. The total project cost is expected to be$11.2mn.

20. Praslin Distribution Network: The project involves11/0.415 kV distribution network development to caterto additional load in Praslin. The total project cost isexpectedtobe$4.1mn.

21. La Digue Distribution Network: The project involvesdistributionnetworkdevelopmenttocatertoadditionalloadinLaDigue.Thetotalprojectcostisexpectedtobe$2.1mn.

22. Private Developments in Praslin and La Digue: Theprojectinvolvesnetworkdevelopmenttocatertoadditionalload.Thetotalprojectcostisexpectedtobe$1.0mn.

23. Submarine Cable Network in La Digue: Electricity in LaDigue is supplied from Praslin via two undersea cablelinks. The cable link 1 was installed in 1984 and has apowertransfercapacityof1MVA.Theroutelengthofthiscable is 8.5 kms. The cable link 2was installed in 2008andhasapowertransfercapacityof3MVA.Thepresentpeak power demand in La Digue is 2MVA. Both thesecable links areprone to frequentbreakdowns, resultingin inadequate or erratic supply of electricity. The PUCthereforeplans toadda thirdcable link fromPraslin toLaDigue,consistingofarobuststeelwirearmoredcable,ensuringthatitcanwithstandthehostileenvironmentontheseafloor.Thetransfercapacityof theproposed linkwould be 5MVA; the increased capacity would ensurethatreliablepowersupplyisavailableinLaDigueformanymoreyearstocome.Thetotalprojectcostisexpectedtobe$4.5mn.

24. Efficiency improvement of all power stations: Theprojectinvolves improvement in all power stations in order toincrease efficiency. The worn-out parts of these powerstationswouldbereplacedbynewcomponentsatacostof$5.4mn.

The PUC is also exploring the option of developing anElectricity Master Plan encompassing all the projects beingplannedintheelectricitysector.EIBisreportedtohaveshownan interest in funding the Electricity Master Plan, but thisproposalisstillinaveryearlystage,sofewdetailsareavailable.

4.2.2 Priority Power Generation ProjectsPeakdemandforelectricityandinstalledcapacityofpower

generationinSeychelles,asin2012,arepresentedinFigure4-2:

CurrentpeakdemandinMahéisbelowthesafegenerationcapacity,butthesituationisTHEoppositeinPraslin,wherethesafegenerationcapacityisnowlessthan60%ofpeakdemand.Thepower stationatPraslin serveselectricitydemand frombothPraslinandLaDigueIslands.74AsperthePUCFinancialPlan, electricity demand in Seychelles is expected to grow

74 TherearetwounderseacablelinkstotransferelectricityfromPraslintoLaDigue,sopeakdemandforPraslininfactrepresentscombinedpeakdemandinPraslinandLaDigue.

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Figure 4.5: Projected Peak Demand and Safe Generation Capacity with Option 1Item 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Peak Demand (MW)

Mahé 46.0 47.4 48.8 50.3 51.8 53.3 54.9 56.6 58.3 60.0

Praslin 7.4 7.6 7.9 8.1 8.3 8.6 8.8 9.1 9.4 9.7

Total Peak Demand 53.4 55.0 56.7 58.4 60.1 61.9 63.8 65.7 67.6 69.7


Mahé 48.0 52.376 52.3 52.3 52.3 52.3 52.3 52.3 52.3 52.3

Praslin 4.4 4.4 4.4 9.8 9.8 9.8 9.8 9.8 9.8 9.8

Total Safe Generation Capacity 52.4 56.7 56.7 62.1 62.1 62.1 62.1 62.1 62.1 62.1

76 Anadditional4.3MWofsafegenerationcapacityisprovidedbythewindpowerproject,whichwascommissionedinJune2013.Thetotalinstalledcapacityofthewindprojectis6MW.

atanannualrateof3%.TheprojectionsforpeakdemandinSeychellesareprovidedinFigure4-3.

TherearefourgenerationprojectsplannedbythePUC,asmentioned above. Out of these, the new power project inMahé(40MW)isproposedtostartconstructiononlyin2018.This is because of limited requirement of such additionalcapacity in Mahé over the next 3 to 4 years. The capacityenhancementproject inPraslin isexpectedto increasetotalcapacitybyamarginal2.6MW.

Figure 4.2: Safe Generation Capacity and Peak Demand in Seychelles (2012)

Power Station Safe Generation Capacity (MW)

Peak Demand (MW)

Mahé 48.0 46.0

Praslin 4.4 7.4

Total 52.4 53.4Source: PUC Financial Plan

Figure 4.3: Projected Peak Demand in SeychellesPeak Demand (MW) 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022Mahé 46.0 47.4 48.8 50.3 51.8 53.3 54.9 56.6 58.3 60.0Praslin 7.4 7.6 7.9 8.1 8.3 8.6 8.8 9.1 9.4 9.7Total 53.4 55.0 56.7 58.4 60.1 61.9 63.8 65.7 67.6 69.7

Source: PUC Financial Plan

Figure 4.4: Proposed Generation Projects in SeychellesItem Option 1 Option 2

Project NewPowerStation,Praslin AdditionalCapacity,RocheCaiman

Project Cost USDmn 32.6 13.4

Capacity MW 7.5 16.0

Project Cost per unit Capacity USD/W 4.3475 0.83

Safe Generation Capacity MW 5.4 11.5Source: PUC Financial Plan

75 TheunitcostforPraslinpowerprojectismuchhigherwhencompartedtoadditionalcapacityprojectinRocheCaiman.ThisisbecausethePraslinProjectinvolvesconstructionofacompletenewPowerStation,alongwithrelatedinfrastructure(buildings,fuelstoragetank,etc.)whichcouldhouseuptosixgenerators.TheprojectatRocheCaimanincludesonlythecostforsupplyandinstallationoftwoadditionalgeneratorsof8MWtobelocatedwithintheexistingpowerstation.

Figure 4.6: Projected Peak Demand and Safe Generation Capacity with Option 2Item 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Peak Demand (MW)

Mahé 46.0 47.4 48.8 50.3 51.8 53.3 54.9 56.6 58.3 60.0

Praslin 7.4 7.6 7.9 8.1 8.3 8.6 8.8 9.1 9.4 9.7

Total Peak Demand 53.4 55.0 56.7 58.4 60.1 61.9 63.8 65.7 67.6 69.7


Mahé 48.0 52.3 52.3 63.8 63.8 63.8 63.8 63.8 63.8 63.8

Praslin 4.4 4.4 4.4 4.4 4.4 4.4 4.4 4.4 4.4 4.4

Total Safe Generation Capacity 52.4 56.7 56.7 68.2 68.2 68.2 68.2 68.2 68.2 68.2

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Theothertwogenerationprojects(AdditionalGenerationinRocheCaimanandNewPowerStationinPraslin)areplannedasprioritiesbythePUC.AccordingtothePUCfinancialplan,boththeseprojectsareexpectedtostartoperationsin2016.

Given projected demand growth of 3% per year, currentinstalledcapacity inMahéissufficienttocaterforprojectedpeakdemanduntil2017.However,sincethecurrentinstalledcapacity in Praslin is inadequate tomeet current electricitydemand,theshortfallwouldonlyincreasewiththeincreaseindemandexpectedbythePUC.Hence,constructionofanewpowerstationinPraslinisaPUCpriority.

4.2.3 Electricity - Project PrioritizationAllprojectsdescribedearlierhavebeenrankedbasedonthe

criteriadiscussedinSection4.1.1above,exceptforproject5fromthatlist,whichisalreadycompletedandproject3,whichwasaddedbythePUCrecentlyinthelistofprojects.Hence,nofurtherprojectinformationisavailableforanalysis.

The highest-ranking project is clearly power stationreplacement on Praslin, followed closely by generatingefficiency improvement and capacity additiononMahé andanupgradedlinkbetweenPraslinandLaDigue.

Of the 22 projects identified in the above table, three ofthemhaveapositiveFinancialInternalRateofReturn(FIRR),whichwillbeusedanadditionalprioritizationcriteria in theanalysispresentedinfigure4-8below.

The expected returns (project and equity IRR) for eachprojectforwhichrevenueestimatesareavailablehavebeendetermined using the financial models for the projects. 77 Financialmodelshavenotbeenpreparedforthesubmarinecablenetwork.A recent studyhasestimatedoverall returnstothe33KVnetworkextension(projects5through11above)

77 DataisnotavailablethatwouldpermitcalculationofFIRRforthesubmarinecablenetwork.

Figure 4.7: Ranking of Electricity Sector Projects – Development Criteria

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NewPowerStation,Praslin 1 2 0 1 3 2 2 0 x 11 1

EfficiencyImprovementofall3PowerStations 1 1 0 1 1 2 1 0 x 7 2

SubmarineCableNetworkinLaDigue 2 1 0 1 2 0 1 0 x 7 2

MahéDistributionNetwork 2 2 0 1 1 0 1 0 x 7 2

AdditionalGenerationCapacity,RocheCaiman 1 1 0 1 1 1 1 0 x 6 5

NorthMahéSystemReinforcement 1 2 0 1 1 0 1 0 x 6 5

PraslinDistributionNetwork 1 1 0 1 2 0 1 0 x 6 5

LaDigueDistributionNetwork 1 1 0 1 2 0 1 0 x 6 5

IleAuroreNetworkDevelopment 1 2 0 1 1 0 1 0 x 6 5

IleDuPortNetworkDevelopment 3 0 0 1 1 0 1 0 x 6 5

IleSoleilNetworkDevelopment 1 1 0 1 1 1 1 0 x 6 5

NewPowerStation,Mahé(40MW) 1 1 0 1 1 0 1 0 x 5 12

TransmissionNetwork(AiporttoAnseBoileau) 1 1 0 1 1 0 1 0 x 5 12

TransmissionNetwork(AnseBoileautoBaieLazare) 1 1 0 1 1 0 1 0 x 5 12

TransmissionNetwork(TurtleBaytoAnseRoyale) 1 1 0 1 1 0 1 0 x 5 12

TransmissionNetwork(AnseRoyaletoTakamaka) 1 1 0 1 1 0 1 0 x 5 12

TransmissionNetwork(TakamakatoBaieLazare) 1 1 0 1 1 0 1 0 x 5 12

TransmissionNetwork(HuteauLanetoBeauVallon) 1 1 0 1 1 0 1 0 x 5 12

SystemImprovementtoincreasetransfercapacity 1 1 0 1 1 0 1 0 x 5 12

UnderseaCabletoLongIsland&OtherInnerIslands 1 1 0 0 1 0 2 0 x 5 12

PrivateDevelopmentsonPraslin&LaDigue 0 1 0 1 1 0 1 0 x 4 21

ProvidenceNetworkDevelopment 0 1 0 1 1 0 1 0 x 4 21

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to be between 12.5% and 19.3%. 78 While the detailedmethodology is not fully described, the estimate, includingboth an increase in the customer base and reduction intechnicallosses,appearsbroadlyreasonable.Thegenerationproject at Roche Caiman has higher returns comparedwithPraslin, due to lower capital expenditure per unit capacityrequired for the Roche Caiman Project. 79 Even though thenewpowerstationprojectatPraslinhasalowerIRRthantheadditionalgenerationcapacityprojectatRocheCaiman, thePraslinproject isexpectedtohavehigherutility,as itwouldaddressthecapacitydeficitrequirementsatPraslinandalsohelp in reducing noise pollution. Not only can FIRR cancalculatedforeachgenerationproject,butthereturnisinfact

78 Al-HabshiconsultantofficeinassociationwithECOMconsult,Technical and Economic Feasibility Study for the project of Enhancing the Electricity Network for S. MAHE Island, Executive Summary: January 1 2014.

79 ThePraslinProjectinvolvesconstructionofacompletenewPowerStation,alongwithrelatedinfrastructure(buildings,fuelstoragetank,etc.)whichcouldhouseupto6generators.TheprojectatRocheCaimanincludesonlythecostforsupplyandinstallationofthreeadditionalgeneratorsof8MWtobelocatedwithintheexistingpowerstation.

high,sofourofthefivehighest-rankedprojectsinvolvepowergeneration.

Adding this additional criterion does not change therelative rankingof the three generationprojects, since theyachievedthesamefinancialscore.PraslinremainsatthetopofthelistprovidedinFigure4-8,butthehighfinancialscoresmean that it would be followed immediately by additionalcapacityonMahé,includinganewpowerstation,andthenbyimprovementstotheMahédistributionnetworkifFIRRwereconsideredintheoverallprioritization.

4.2.4 Sustainable Development and Environmental Aspects

Based on the current status of the electricity sector inSeychelles and analysis carriedout, the following importantissuescanbehighlightedregardingenvironmentaspectsandsustainabledevelopment:

Figure 4.8: Ranking of Electricity Sector Projects – Development Criteria + Project FIRR

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NewPowerStation,Praslin 1 2 0 1 3 2 2 0 3 14 1

AdditionalGenerationCapacity,RocheCaiman 1 1 0 1 1 1 1 0 3 9 2

NewPowerStation,Mahé(40MW) 1 1 0 1 1 0 1 0 3 8 3

EfficiencyImprovementofall3PowerStations 1 1 0 1 1 2 1 0 x 7 4

SubmarineCableNetworkinLaDigue 2 1 0 1 2 0 1 0 x 7 4

MahéDistributionNetwork 2 2 0 1 1 0 1 0 x 7 4

NorthMahéSystemReinforcement 1 2 0 1 1 0 1 0 x 6 7

PraslinDistributionNetwork 1 1 0 1 2 0 1 0 x 6 7

LaDigueDistributionNetwork 1 1 0 1 2 0 1 0 x 6 7

IleAuroreNetworkDevelopment 1 2 0 1 1 0 1 0 x 6 7

IleDuPortNetworkDevelopment 3 0 0 1 1 0 1 0 x 6 7

IleSoleilNetworkDevelopment 1 1 0 1 1 1 1 0 x 6 7

TransmissionNetwork(AiporttoAnseBoileau) 1 1 0 1 1 0 1 0 x 5 13

TransmissionNetwork(AnseBoileautoBaieLazare) 1 1 0 1 1 0 1 0 x 5 13

TransmissionNetwork(TurtleBaytoAnseRoyale) 1 1 0 1 1 0 1 0 x 5 13

TransmissionNetwork(AnseRoyaletoTakamaka) 1 1 0 1 1 0 1 0 x 5 13

TransmissionNetwork(TakamakatoBaieLazare) 1 1 0 1 1 0 1 0 x 5 13

TransmissionNetwork(HuteauLanetoBeauVallon) 1 1 0 1 1 0 1 0 x 5 13

SystemImprovementtoincreasetransfercapacity 1 1 0 1 1 0 1 0 x 5 13

UnderseaCabletoLongIsland&OtherInnerIslands 1 1 0 0 1 0 2 0 x 5 13

PrivateDevelopmentsonPraslin&LaDigue 0 1 0 1 1 0 1 0 x 4 21

ProvidenceNetworkDevelopment 0 1 0 1 1 0 1 0 x 4 21

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qSeychelles has the potential to generate electricityfrom renewable sources and some projects are beingconsidered to harness renewable energy, as discussedabove.Apart frombeingenvironmentally friendly, theseprojectsmaywellbeabletoproduceelectricityatcostsatorevenslightlybelowpresentcosts,whicharehighinSeychelles becauseof both isolation and scale (and aresubject to escalation if fuel price increases). AccordingtothePUC,theunitelectricitycostinSeychelleswasSR3.16/kWhin2012.Fuelaccountsformorethan90%ofthetotaloperatingcostfortheelectricitydivisionofthePUC.Overthelastfiveyears,fuelcostperunitelectricityproduced has increased from SR 1.45/ kWh in 2008 toSR 2.86/ kWh in 2012. In order to reduce Seychelles’dependenceonimportedfuel,Seychellesisthusexploringoptionstoproduceenergyfromrenewablesources.Thereissignificantpotentialforenergygenerationthroughsolarandwindsources.The indicativeunitcostestimates (asper the PUC) for solar energy and wind energy are SR2.82/kWh and SR 4.91/ kWh respectively. Even thoughwind cost is currently on the high side, the generationcost through solar technology is 11% lower than thecurrent generation cost through fuel-based generatorsets. The recently enacted EnergyAct 2012 is a step intherightdirectiontopromoterenewableenergysourcesinSeychelles.ThePUCshouldfurtherexploreoptionstogenerateenergythroughrenewablesourcesandachievethe target of 15% of electricity generation throughrenewablesourcesby2030.80

qThe power station at Praslin is located close to aresidential area. Since this is an old station and noiselevelsneartheplantwerenotamajorissuewhenitwasconstructed, there is considerable noise pollution fornearbyresidentialcommunitiesfromthispowerstation.ThePUCisplanningtoconstructanewpowerstationatPraslinatamoreisolatedlocation.ThisnewpowerstationwouldalsoaddressthecapacitydeficitatPraslinandLaDigue. Therefore, it is recommended that the PUC topursuethisproject,toaddressboththepowerdeficitandnoisepollutionissues.

4.3 Action Plan for the Transport Sector

4.3.1 Overall Requirements for the Transport Sector

The analysis in the previous section identified the needandjustificationforinterventionsinthetransportsectorwithspecific gaps identified within the respective subsectors ofaviation,marine,roadsandpublictransport.

Bothmarineandaviationsubsectorsarestrategicgatewaystotheislandandplaypivotalrolesinsupportingfisheriesandtourism, the two pillars of the economy. They also supportregional and international trade. Between 2009 and 2013,tourismgrewby46%withacorrespondingincreaseinaircraftmovementsandpassengerarrivals,whichgrewbybetween10%and27%duringthatperiod.

80 AsproposedintheSeychellesEnergyPolicyfor2010-2030

Theroadsandpublic transitact synergistically todispersepersons and the goods on the islands and thereby supportthe overall economic activities. Tourists and goods arrivingthrough the two gateways are dispersed throughout theisland primarily through the roadway system. However theroads are edging towards capacity and it is estimated thatdemands could reach existing screen capacities within thenext 5 to 10 years.Moreover, because of themountainousterrainonMahé,andtheright-of-wayconstraintsinVictoria,constructionofadditionalroadwaystoexpandcapacitywillbelimitedandtransitisexpectedtotakethebulkofthefuturegrowthintraveldemands.

Public transportationwill thusneed toplay amuchmoreprominentroleinthefuturesincethetransportationdemandincreasesfasterthanroadcapacity.Transitridershiphasbeenincreasing steadily at 4% annually but targeted projects arerequired to supportor accelerate that growthby increasingboththesystemcapacityand itsmodalshareto increaseoracceleratethatgrowthgiventhat transit isexpectedtotakethebulkofthefuturegrowthintraveldemands

Owing to the importance of the transport sector inthe economy, investments in the sector need to focus onsustainable projects and those that can spur growth anddevelopment in the other sectors which are (or will be)importantforthecountry.

4.3.2 Potential Transport ProjectsThe DoT and its constituent authorities and bodies are

planning a number of very large projects that will requirefunding for implementation. Those projects need to beevaluated and in consideration of competing needs, bothwithinthesectorandfromothersectors.

The DoT does not have a Transportation Master Plan or indeed any strategic planning tool for infrastructuredevelopment, to assist in planning investments in thetransportsectorinanoverarchingmanner.Suchaplanwouldguide transport in the various sub-sectors and ensure theentire department is moving toward a consistent target orgoal. Lack of both IT capacity and lack of professional staffremains a problem to the department andhas hindered itsabilitytoundertakethenecessarydatacollectionforplanningpurposes. An asset management program is essential, toallowlong-termplanningandprogrammingofmaintenance,rehabilitationandreplacementof thecurrentassets. Theserequirements could be addressed through a TechnicalAssistance Programme with capacity building components,involvingtrainingstafflocallyorabroad.Moreover,aspartofthese programs, staffwould be involved in the preparationof the Transportation Master Plan and other requirementsstudies, aswell as the setting up of the assetmanagementprogram.Thepotentialprojectsandprogramsinthetransportsectorthathavebeenidentifiedbasedontheissuesabove,orproposedbytheDoT,aresummarizedtogetherinTable4-8.Itshouldbenotedthatanumberoftheprojectslistedbelowareincludedhereforcompleteness,butarenotprioritizedinthefollowingchapter.TheTransportMasterPlanproposedisnot

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an infrastructure investment,andtheprojects likely toarisefromitcannotatthisstageberegardedassufficientlyclearlydefinedtobeprioritized.

While some of these projects were submitted by thevarious departmental agencies, a number were identifiedby the project team following meetings and discussionswiththoseagencies.Theproject list isnotyetexhaustive; itis anticipated that additional projectswill be identified andrecommendedaspartoftheproposedTransportationMasterPlan (TMP) development. In particular, it is anticipated thatprojectsrelatedtoroadwayimprovements,publictransitandTransportation Demand Management (TDM) initiatives willbe identified and recommended for implementation in theshort-,medium-orlong-termhorizons.SomeoftheprojectslistedinFigure4-8couldhavehigherprioritiesthanothers.

Abriefdescriptionofeachoftheprojectstobeprioritizedfollows:81

1. New Asphalt Plant in Mahé: A new asphalt plant isrequired to replace theone inMahéwhich isnowover

81 AdescriptionofthecomponentsoftheproposedTransportMasterPlanisprovidedinSection5below

20yearsold.TheoneonPraslin isevenolder. It shouldbe complemented with a laboratory for quality controlpurposes. The asphalt plants require regular majormaintenanceworktokeepthemoperationalbecauseoftheirages.

2. Non-Motorized Traffic Planning and Implementation of a Skeletal Network (10-20 km): Thiswill include theplanning,designand constructionofNMT facilities thatcould include bicycle facilities and pedestrianwalkwaysinVictoriaaspartofa targetedTransportationDemandManagementprogram.NMTfacilitiesareassociatedwithsustainabilityandwellness/healthbenefits. Itwasnotedthatapartfromsidewalks,suchfacilitiesarenotavailableonMahé.

3. Traffic Management Improvements within Victoria, including: Signalization (Traffic Lights), Extending Bus Lay-Byes, New Roundabout at Airport and Francis Rachel St –new partial lane.ThesearecurrentinitiativesoftheDoTand the SLTAandareaimedaddressing congestionthatisincreasinginVictoriaintheshortterm.Thesearemostlyoperationalbutalsoincludesomeexpansionthatwouldcontinuetoprovideserviceinthemedium-tolong-termperiods.

Figure 4.9: Potential Transport Sector ProjectsAgency Item/Project Indicative Cost

DoT (Generally) Technical Assistance (TA) in Traffic and Highway Engineering includingpreparationofTransportationMasterPlanwithIntegratedTransitStudyandsettingupAssetManagementProgram

$6.35Million

Land Transport (SLTA) NewAsphaltPlantinMahé $300,000

Land Transport (SLTA) Non-Motorized Traffic Planning and Implementation of a Skeletal Network(10-20km)

$10.0Million

Land Transport (SLTA) • CapitalandTrafficManagementImprovementswithinVictoria,:• Signalization(TrafficLights)• ExtendingBusLay-Byes• NewRoundaboutatAirport• FrancisRachelSt–newpartiallane• 5thJuneAveNewlane

$2.15Million

Land Transport (SLTA) WaterfrontBypass-AtGradeandoverpassLeChantierRoundabout:ThisisaGoS-fundedinitiativewiththeobjectiveofaddressingtrafficvolumeconcernsaroundVictoriaespeciallyduringthepeakperiods

$10.0Million

Land Transport (SLTA) RoadLinkBetweenMtFleuriRdandBoisdeRose $1.5Million

Land Transport (SLTA) RoadLinkStevensonDelhommeandBelAir $1.0Million

Public Transit (SPTC) BusReplacementProgram $7.7Million

Public Transit (SPTC) BusEquipmentReplacement&Upgrade $1.6Million

Public Transit (SPTC) DepotImprovements–Barbarons/IleduPort $1.7Million

Public Transit (SPTC) NewBusDepotatPraslin $750,000

Aviation – Short Term SeychellesInternationalAirportTerminalRehabilitationandRefurbishment $15Million

Aviation – Long Term BuildingSecondrunwayonreclaimedland $150-200Million

Aviation – General Security Improvements: Surveillance, screening and monitoring to ensuresafetyandcompliancewithICAOstandardsandpractices.

$3Million

Marine Transport (Ports) VictoriaPortExpansionincludingQuayextensionanddredging $90Million(70MillionEuros)

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4. Victoria Waterfront Bypass - At Grade and overpass Le Chantier Roundabout: This is a GoS-funded initiativewiththeobjectiveofaddressingtrafficvolumeconcernsaround Victoria, especially during the peak periods. Itwouldinvolveadualcarriageway(fourlanes)connectingBoisdeRoseAvenue,runningparallelto5thJuneAvenue,pasttheAmusementCentreBuildingandstraighttowardsIle Du Port and beyond (Perseverance / Anse Etoile). ItwouldalsoextendatleasttoIleDuPortasafirstphase

5. Road Link Between Mt Fleuri Rd and Bois de Rose: This project would support the Victoria Waterfront Bypass,with theaimofproviding abypass route to reduce thetown centre traffic volumes. It would involve wideningBois de Rose Avenue up to Roche Caiman/Eden IslandRoundabouttoadual(4lanes)carriageway.AroundaboutisalsoplannednexttoGeantCasinoBuildingandaroadlinkfromForetNoireJunctionatMontFleuri toBoisdeRoseRoundabout.

6. Road Link Stevenson Delhomme and Bel Air: This is another project that would support the VictoriaWaterfront Bypass in reducing the town centre trafficvolumes.ItproposesaroadconnectionbetweenSt.Louisand Bel Air through the existing Stevenson DelhommeRoadandtherebyfacilitatingsouthboundtrafficfromSt.LouistotheAirportforexampletobypassVictoria.

7. Bus Replacement Program: This aims at maintaining areliablebusfleetby removingolderbuses fromfleet inorder tomaintain the average fleet age below 8 years,withtheaimofreducingannualmaintenancecosts.

8. Bus Equipment Replacement & Upgrade: Thisincludesabraketesterforbuses,amoderndynamometerfortestingaggregatesonbusesandanewticketingsystem.

9. Depot Improvement Works: Expansion to reducecongestion around and within the depot, includingparkingandthebuscirculationarea.

10. New Bus Depot at Praslin: Construction of a new busdepotinordertoimproveservicesonPraslin.

11. Seychelles International Airport Terminal Rehabilitation and Refurbishment: This includes improvements to thepassenger terminal, expansion of the immigration andcustomareasaswellasparkingforaircraftandvehicles.Therearealsoplansforfurtherextensionoftheterminalsand parking facilities, an expanded cargo area toaccommodatetheforecastedfutureloadsandacquisitionofadditionalequipment.

12. Building a Second Runway Through Land Reclamation: Construction of a second runway at the SeychellesInternational airport including constructionofa3,000mrunway on reclaimed land, 210m east of the existingone (which will be used as a taxi way or for domesticoperations).ThiswouldbeundertakeninparttobringtheairportuptotheCode4Airportcategorythatcanservetheultra-largeaircraftandprovideflexibility,includingthepossibilityofsimultaneousoperationsonbothrunways.

13. Airport Surveillance, Screening and Monitoring to Ensure Safety and Compliance with ICAO Standards and Recommended Practices.Componentsincludeprovisionof full security contingent, transport, equipment andammunition, surveillance video cameras around the

airport and infrared intrusion detection systems alongthe sea side of the runway. Additionally, this wouldinclude access control system for airport entry permitsandsecuritycontrol,X-raymachines,aswellasa smartfence system along the perimeter to enhance security.It also includes preparation of the Airport Manual andestablishmentofSafetyManagementSystems.

14. Victoria Port Expansion Including Quay Extension and Dredging: Includes extension of quay length to 200m,dredgingtoincreasethequaydepthfrom9.5to11mandconstructionofanewtouristpassengerfacility

4.3.4 Prioritization of Transportation ProjectsTherankingoutcomeresultingfromthecriteriaproposedin

Section4.1isprovidedinFigure4-10:

Figure 4.10: Ranking of Transport Sector Projects – Development Criteria

Based on this assessment of the transport sector, thehighest-priority investments are port expansion, bus fleetreplacement, implementation of a non-motorized network,busdepot improvement,andairport terminal rehabilitation.Twoof theserelatetothe internationalgateways,while thebalancearedesignedtoreducetherecenthighrateofgrowthofvehicletrafficonMahé, in an environment where vehicle traffic is fast approaching road capacity, particularly around Victoria.

4.3.5 Screening Based on Financial Performance

The projects that could be considered as investmentswith potential for revenue generation, and hence qualifyfor financial analysis based on internal rate of return (IRR)procedures,include:

qBusReplacementProgram(SPTC)qSeychelles International Airport Terminal Rehabilitation

andRefurbishmentqVictoria Port Expansion including quay extension and

dredging

Most of the other projects have not been formulated bytheir proponents as investment undertakings. Detailed dataon costs and potential revenues that are essential to suchanalysis were therefore not available. In addition, some oftheprojects,particularlythebuildingofasecondrunway,arerequiredprimarily for strategic reasonsandnot for capacityreasons.Assuchtheyareunlikelytobeviablefromafinancialviewpoint,butmaybenecessarytoensurethatthecountryremainsaccessibleinemergencysituations.Forthosereasons,financialanalysiswasundertakenforonlythreeprojects.Theranking of the projects based on the combined scores fordevelopment criteria and project FIRR is provided in Figure4-11.82Thischangesthescoresslightly,buthasnoimpactontherelativerankingofthefivehighest-priorityprojects.

82 FinancialevaluationissummarizedinAnnexesB,C,andDtothisReport.

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4.3.6 Potential Project PhasingThepotentialphasingoftheidentifiedtransportprojectsis

showninFigure4-12andFigure4-13.Thetechnicalassistanceand the construction of a new asphalt plant in Mahé arealsoexpectedtobe implemented intheshortterm,buttheexpansionof theVictoria Port and thebuildingof a secondrunwayareexpectedtobecompletedinthemediumandlongtermsrespectively.

4.4 Combined Ranking of Utilities and Transport Sector Projects

Thefinalstepcombinesthe37projectsconsideredacrossthetwosectors,basedonthenumericalscoringinFigures4-7through4-11.ItshouldbekeptinmindthatexceptforFIRR,

scoringissubjective,sominordifferencesinoverallscorearenotcritical.Allprojectswiththesamescorecanberegardedasbeingofequalpriority.83

TheprojectrankingswithandwithoutFIRRarepresentedinthenexttwotables.

TherankingoftheprojectsbasedonthecombinedscoresfordevelopmentcriteriaandprojectFIRRisprovidedinFigure4-15. Under this scoringmethodology, theprojectwhich is

83 TheTablehasbeencreatedbasedonthearbitraryconventionthatpowerprojectsarerankedaheadoftransportprojectswiththesamescore.Asnotedinthetext,projectswiththesamescorecanberegardedasbeingidenticalintermsofdevelopmentimpact.

Figure 4.11: Ranking of Transport Sector Projects: Development Criteria + Project FIRR

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VictoriaPortExpansionincludingQuayextensionanddredging

3 2 3 1 3 1 1 3 1 18 1

BusReplacementProgram 1 2 0 2 2 2 2 0 2 13 2

Non--MotorizedTrafficPlanningandImplementationofaSkeletalNetwork

0 2 0 1 2 3 1 0 x 9 3

DepotImprovements 1 2 0 1 2 1 0 1 x 8 4

NewAsphaltPlantinMahé 2 2 0 1 1 1 1 0 x 8 4

SeychellesInternationalAirportTerminalRehabilitationandRefurbishment

1 3 0 1 0 0 0 3 0 8 4

BusEquipmentUpgrade 1 2 0 1 1 1 1 0 x 7 6

VariousCapitalImp--Congestion 1 2 0 1 1 1 0 0 x 6 8

VictoriaBusTerminalImprovements 1 2 0 1 1 1 0 0 x 6 8

BuildingSecondrunwayinvolvinglandreclamation 1 2 0 0 0 0 0 3 x 6 8

MtFleuriRoadLink 1 2 0 1 1 0 0 0 x 5 10

StevensonBelAirRdLink 1 2 0 1 1 0 0 0 x 5 10

VictoriaBypassProject 1 2 0 1 1 0 0 0 x 5 10

NewBusDepotatPraslin 1 2 0 0 0 1 0 0 x 4 13

SecurityImprovementsProjects 1 3 0 0 0 0 0 0 x 4 13

Figure 4.12: Phasing of Top Ranked ProjectsProject Potential Phasing

Short Term (0-5 years)

Medium Term (5-10 years)

Long Term (10+ years)

Bus Replacement Program ü

Victoria Port Expansion including quay extension and dredging ü ü

Non-Motorized Traffic Planning and Implementation of a Skeletal Network (10-20 km)

ü

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Figure 4.14: Cross-sectorial Ranking of Projects – Development Criteria

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Victoria Port Expansion including Quay extensionanddredging

90.0 3 2 3 1 3 1 1 3 x 17 1

Subtotal 90.0

NewPowerStation,Praslin 32.6 1 2 0 1 3 2 2 0 x 11 1

Subtotal 32.6

BusReplacementProgram 7.7 1 2 0 2 2 2 2 0 x 11 3

Subtotal 7.7


10.0 0 2 0 1 2 3 1 0 x 9 4

Subtotal 10.0

DepotImprovements 1.7 1 2 0 1 2 1 0 1 x 8 5


15.0 1 3 0 1 0 0 0 3 x 8 5

NewAsphaltPlantinMahé 0.3 2 2 0 1 1 1 1 0 x 8 5

Subtotal 17.0

EfficiencyImprovementofall3PowerStations 5.4 1 1 0 1 1 2 1 0 x 7 8

SubmarineCableNetworkinLaDigue 4.5 2 1 0 1 2 0 1 0 x 7 8

MahéDistributionNetwork 11.2 2 2 0 1 1 0 1 0 x 7 8

BusEquipmentUpgrade 1.6 1 2 0 1 1 1 1 0 x 7 8

Subtotal 22.7

Figure 4.13: Phasing of Remaining ProjectsProject Potential Phasing

Short Term(0-5 years)

Medium Term(5-10 years)

Long Term(10+ years)

New Asphalt Plant in Mahé ü

Bus Equipment Upgrades ü

Depot Improvements ü

Victoria Bus Terminal Improvements ü

New Bus Depot at Praslin ü

New Asphalt Plant in Mahé ü

Various Capital Imp* ü

Victoria Bypass Project* ü

Mt Fleuri Road Link* ü

Stevenson Bel Air Rd Link* ü

Airport Security Improvements Projects ü

Seychelles International Airport Terminal Rehabilitation and Refurbishment

ü

Building second runway involving reclaimed land ü

*The TMP recommended projects could include some of these projects

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expected to have the greatest impact is the Victoria Portexpansion at a capital cost of $90 million, followed by thePraslinPowerStationfor$33millionandthebusreplacementprogramataround$8million.Theadditionalpowercapacityat Praslin will have an impact on the quality of life andtourismaswellasapositiveFIRR.Theportexpansionandbusreplacementprojectsinthetransportsectorareexpectedtoresult fromaTransportMasterPlan,which isasyetentirelyundefined. The port upgrading could have a major impact

throughoutmanysectorsoftheeconomy.84Thehighpriorityof the port expansion is based on the SPA’s projection thattrafficwillcontinuetogrowfasterthanthepopulationorGDPand outstrip the existing container handling capacity at theportintheveryimmediatefuture.The$90millionestimatedcostofthissingleportprojectwouldrequiretheallocationofalmosttheentireannualcapitalbudgetallocationoftheGoS.

84 Forprojectsnotyetdefined,wherearangeofpossiblecosthasbeenprovidedabove,thistableusesthemid-pointofthatrange.

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AdditionalGenerationCapacity,RocheCaiman 30.1 1 1 0 1 1 1 1 0 x 6 12

NorthMahéSystemReinforcement 0.4 1 2 0 1 1 0 1 0 x 6 12

PraslinDistributionNetwork 4.1 1 1 0 1 2 0 1 0 x 6 12

LaDigueDistributionNetwork 2.1 1 1 0 1 2 0 1 0 x 6 12

IleAuroreNetworkDevelopment 2.7 1 2 0 1 1 0 1 0 x 6 12

IleDuPortNetworkDevelopment 0.9 3 0 0 1 1 0 1 0 x 6 12

IleSoleilNetworkDevelopment 2.2 1 1 0 1 1 1 1 0 x 6 12

VariousCapitalImp--Congestion 2.2 1 2 0 1 1 1 0 0 x 6 12

BuildingSecondrunwayinvolvinglandreclamation 175.0 1 2 0 0 0 0 0 3 x 6 12

VictoriaBusTerminalImprovements 0.5 1 2 0 1 1 1 0 0 x 6 12

Subtotal 220.2

NewPowerStation,Mahé(40MW) 73.3 1 1 0 1 1 0 1 0 x 5 22

TransmissionNetwork(AiporttoAnseBoileau) 9.1 1 1 0 1 1 0 1 0 x 5 22

TransmissionNetwork(AnseBoileautoBaieLazare) 6.4 1 1 0 1 1 0 1 0 x 5 22

TransmissionNetwork(TurtleBaytoAnseRoyale) 3.1 1 1 0 1 1 0 1 0 x 5 22

TransmissionNetwork(AnseRoyaletoTakamaka) 5.8 1 1 0 1 1 0 1 0 x 5 22

TransmissionNetwork(TakamakatoBaieLazare) 1.3 1 1 0 1 1 0 1 0 x 5 22

TransmissionNetwork(HuteauLanetoBeauVallon) 10.7 1 1 0 1 1 0 1 0 x 5 22

SystemImprovementtoincreasetransfercapacity 3.1 1 1 0 1 1 0 1 0 x 5 22

UnderseaCabletoLongIsland&OtherInnerIslands 0.7 1 1 0 0 1 0 2 0 x 5 22

VictoriaBypassProject 10.0 1 2 0 1 1 0 0 0 x 5 22

MtFleuriRoadLink 1.5 1 2 0 1 1 0 0 0 x 5 22

StevensonBelAirRdLink 1.0 1 2 0 1 1 0 0 0 x 5 22

Subtotal 126.0

NewBusDepotatPraslin 0.8 1 2 0 0 0 1 0 0 x 4 34

SecurityImprovementsProjects 3.0 1 3 0 0 0 0 0 0 x 4 34

ProvidenceNetworkDevelopment 0.8 0 1 0 1 1 0 1 0 x 4 34

PrivateDevelopmentsonPraslin&LaDigue 1.0 0 1 0 1 1 0 1 0 x 4 34

Subtotal 5.6

Grand total 531.8

Figure 4.14: Cross-sectorial Ranking of Projects – Development Criteria (continued)

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Figure 4.15: Cross-sectorial Ranking of Projects – Development Criteria + Project FIRR

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Victoria Port Expansion including Quay extensionanddredging

90.0 3 2 3 1 3 1 1 3 1 18 1

Subtotal 90.0

NewPowerStation,Praslin 32.6 1 2 0 1 3 2 2 0 3 14 1

Subtotal 32.6

BusReplacementProgram 7.7 1 2 0 2 2 2 2 0 2 13 3

Subtotal 7.7

AdditionalGenerationCapacity,RocheCaiman 30.1 1 1 0 1 1 1 1 0 3 9 4


10.0 0 2 0 1 2 3 1 0 x 9 4

Subtotal 40.1

NewPowerStation,Mahé(40MW) 73.3 1 1 0 1 1 0 1 0 3 8 6

DepotImprovements 1.7 1 2 0 1 2 1 0 1 x 8 6


15.0 1 3 0 1 0 0 0 3 0 8 6

NewAsphaltPlantinMahé 0.3 2 2 0 1 1 1 1 0 x 8 6

Subtotal 90.3

EfficiencyImprovementofall3PowerStations 5.4 1 1 0 1 1 2 1 0 x 7 10

SubmarineCableNetworkinLaDigue 4.5 2 1 0 1 2 0 1 0 x 7 10

MahéDistributionNetwork 11.2 2 2 0 1 1 0 1 0 x 7 10

BusEquipmentUpgrade 1.6 1 2 0 1 1 1 1 0 x 7 10

Subtotal 22.7

NorthMahéSystemReinforcement 0.4 1 2 0 1 1 0 1 0 x 6 14

PraslinDistributionNetwork 4.1 1 1 0 1 2 0 1 0 x 6 14

LaDigueDistributionNetwork 2.1 1 1 0 1 2 0 1 0 x 6 14

IleAuroreNetworkDevelopment 2.7 1 2 0 1 1 0 1 0 x 6 14

IleDuPortNetworkDevelopment 0.9 3 0 0 1 1 0 1 0 x 6 14

IleSoleilNetworkDevelopment 2.2 1 1 0 1 1 1 1 0 x 6 14

VariousCapitalImp--Congestion 2.2 1 2 0 1 1 1 0 0 x 6 14

BuildingSecondrunwayinvolvinglandreclamation 175.0 1 2 0 0 0 0 0 3 x 6 14

VictoriaBusTerminalImprovements 0.5 1 2 0 1 1 1 0 0 x 6 14

Subtotal 190.1

TransmissionNetwork(AiporttoAnseBoileau) 9.1 1 1 0 1 1 0 1 0 x 5 23

TransmissionNetwork(AnseBoileautoBaieLazare) 6.4 1 1 0 1 1 0 1 0 x 5 23

TransmissionNetwork(TurtleBaytoAnseRoyale) 3.1 1 1 0 1 1 0 1 0 x 5 23

TransmissionNetwork(AnseRoyaletoTakamaka) 5.8 1 1 0 1 1 0 1 0 x 5 23

TransmissionNetwork(TakamakatoBaieLazare) 1.3 1 1 0 1 1 0 1 0 x 5 23

TransmissionNetwork(HuteauLanetoBeauVallon) 10.7 1 1 0 1 1 0 1 0 x 5 23

SystemImprovementtoincreasetransfercapacity 3.1 1 1 0 1 1 0 1 0 x 5 23

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AnnexFprovidesalistofdatadeficiencies, indicatingthatneither the constraints limiting port capacity to 25,000 TEUper year, nor the rationale for projecting the port traffic togrowsignificantlyfasterthantheeconomy,havebeenclearlyidentified.However,itisnotuncommontoexpectporttrafficto grow at a rate exceeding the economic growth rate of acountry.

The capital cost of the first eight projects alone is $160million-$260 million, depending on whether or not FIRR isincluded,andwillalmostcertainlyexceedtheexpectedtotalcapital budget allocated by the MoF for these sectors forthe next four years. 85 Until the automatic tariff adjustmentmechanismproposedfortheelectricitysectorisfullyinplace,it will be difficult to obtain long-term commercial financingfor the PUC generating capacity expansion and networkstabilization, so the sectorwill remain dependent on eitherdirectfinancingbytheGovernmentorongrantfinancing.

4.4.1 New and High-Growth Potential Projects Not Identified:

Asmentionedearlier in this report, thedraftMTNDSandother strategic plans may not have considered smaller,but higher growth potential projects that will diversify theSeychelles economy and reduce the risks from the nexteconomicdownturn.ItissuggestedthatSeychellesmayuse,inadditiontothecriteriausedinthischaptertoprioritizeknownprojects, the following additional criteria for finding andselectingnew,smallerhigh-growthbusinessesforinvestment:

85 Currentannualcapitalallocationisintherangeof$100million.Provisionofwaterandsewageservices,alsodevelopedandmanagedbythePUCbutnotconsideredinthisreport,ispresentlynotcost-recoveringandislikelytorequiremajorcapitalinvestmentoverthenextfewyears.

qAddressesagapinpotentialqEnableseconomicdiversityqEngagestheprivatesectorqAchievesgainsreasonablyquickly

Identifying new and high-growth potential businessopportunities will require significant additional ‘blue sky’brainstorming by policymakers, will present additional risksanddemandsonlimitedfinancialandinstitutionalresources,andwillrequirestakeholderapprovalandpoliticalconsensustoapprovethesecriteriaandidentifynewprojects.

4.5 Financing the Infrastructure Action Plan

4.5.1 Funding Gap and Financing OptionsThedraftMTNDSidentifiesports,roadsandenergyasthe

three infrastructure sectors that have funding gaps andwillrequire external financing, as shown in the following table.Thestrategy report suggests that theairport, ICTandwatersectorswillbeinternallyfunded.

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UnderseaCabletoLongIsland&OtherInnerIslands 0.7 1 1 0 0 1 0 2 0 x 5 23

VictoriaBypassProject 10.0 1 2 0 1 1 0 0 0 x 5 23

MtFleuriRoadLink 1.5 1 2 0 1 1 0 0 0 x 5 23

StevensonBelAirRdLink 1.0 1 2 0 1 1 0 0 0 x 5 23

Subtotal 52.7

NewBusDepotatPraslin 0.8 1 2 0 0 0 1 0 0 x 4 34

SecurityImprovementsProjects 3.0 1 3 0 0 0 0 0 0 x 4 34

ProvidenceNetworkDevelopment 0.8 0 1 0 1 1 0 1 0 x 4 34

PrivateDevelopmentsonPraslin&LaDigue 1.0 0 1 0 1 1 0 1 0 x 4 34

Subtotal 5.6

Grand total 531.8

Figure 4.15: Cross-sectorial Ranking of Projects – Development Criteria + Project FIRR (continued)

Figure 4.16: Seychelles Infrastructure Funding GapSector Requiring External Funding Total Cost Funding Gap % Gap

Roads 882 535 61%Ports 1,230 1,230 100%Energy 1,022 919 90%

Total (SR Million) 3,134 2,684 86%

Total ($ Million) $251 $215

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Thetableshowsthat86%ofthetotalinvestmentsplannedfortheroads,portsandenergysectors,or$215million,willhavetocomefromexternalsources.Sincetheglobalfinancialcrisis and formulation of Basel III,86 conventional sources ofexternal financing for promoters of infrastructure projectshave shrunk, and Seychelleswill have to look at innovative approachesforfinancingitsinfrastructureprojects.

Whilethedetailedfinancingoptionsforeachproject(debt/equityratio,percentageandsourceofgrantfunds,loans,gapfinancing,fundingmixi.e.Government-DevelopmentPartnerco-financing;PPP,etc.)willneedtobestructuredonacase-by-casebasisonthemeritsofeachproject,thissectionexploresthefinancingmodalitiesavailabletoSeychelles,andpresentsguidelinesforselectingtheappropriatefinancingstructureforeachproject.

The following diagram presents the options availablefor financing infrastructure projects, which may include acombinationofthreeormoresourcesoffinancingasfollows:

qEquityfinancingby theproject sponsor throughvariousequityinstruments

qDebtfinancingthroughcommercialbanksqGrants, loans and risk guarantees from Multilateral

FinancialInstitutions(MFI)qCreditguaranteesthroughExportCreditAgencies.qSubsidies, grants and subsidized loans from the

government.

86 BaselIII(ThirdBaselAccord)isaglobal,voluntaryregulatorystandardonbankcapitaladequacy,stresstestingandmarketliquidityrisk.Itcanreduceaccesstocapital.

87 FCCBForeignCurrencyConvertibleBonds;CCDCompulsoryConvertibleDebentures;ADR/GDRAmerican/GlobalDepositaryReceipt;RTLTermLoan;ECBEuropeanCentralBank

Traditionally, commercial bank financing supplementedbygovernment support in the formofviabilitygap funding,soft loans, revenue shortfall loans and funding fromMFI’s,export credit institutions and country infrastructure financefundshaveprovided theappropriate liquidity to theprojectfinancingmarket.Sincetheglobalfinancialcrisis,themarketforprojectfinancinghasbecomemuchmoreconservativeandless liquid, and institutional investors are likely tobeanewsourceoffunding.

qThe past practice where governments supported andfinanced infrastructure projects with cash, grants andguarantees is unsustainable due to significant budgetdeficitsandcountrydebt

qThe bank debt market liquidity is decreasing, andthe market is risk averse for project financing. Thelarge commercial banks that used to lend money forinfrastructure projects are reducing their exposure asBaselIIIcapitalrulesmakelendingmuchlessattractive

qTheAfDB,exportcreditagenciesandothermultilaterals,alongwithstate-ownedinfrastructurebanks,willcontinueto play an important role in financing infrastructureprojects

qPrivate investment will also continue to grow inimportance. The large amount of capital managedby pension funds, sovereign wealth funds, insurancecompaniesandotherinstitutionalinvestorscanbetappedfor infrastructure bonds. Structured correctly, this is anideal match between long-term lenders and long-termborrowersforinfrastructureprojects



financing; PPP, etc.) will need to be structured on a case-by-case basis on the merits of each project, this section explores the financing modalities available to Seychelles, and presents guidelines for selecting the appropriate financing structure for each project.

The following diagram presents the options available for financing infrastructure projects, which may include a combination of three or more sources of financing as follows:

1. Equity financing by the project sponsor through various equity instruments 2. Debt financing through commercial banks 3. Grants, loans and risk guarantees from Multilateral Financial Institutions (MFI) 4. Credit guarantees through Export Credit Agencies. 5. Subsidies, grants and subsidized loans from the government.

Figure 4-17: Infrastructure Project Finance Options88

Source: Mint and HSA.

88FCCB Foreign Currency Convertible Bonds; CCD Compulsory Convertible Debentures; ADR/GDR American

/Global Depositary Receipt; RTL Term Loan; ECB European Central Bank

Figure 4.17: Infrastructure Project Finance OptionsSource: Mint and HSA.

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4.5.2 Guidelines for Selecting the Appropriate Project Financing Structure

ItisclearthatSeychelleswillhavetofinancethegapprojectsthough some form of partnership with the private sector.“Public-PrivatePartnerships(PPPs)haveemergedoverthelastdecadeasoneofthebestwaystofosterdevelopment,fuelledbyinsufficientinvestment,growingpressuresongovernmentbudgets and a general concern about service provisionby state enterprises and agencies. PPPs have taken placemainly in economic (physical) infrastructure such as power,transport, telecommunications and water and sanitation,inorder tobenefit fromgreaterefficiencyandperformanceof infrastructure services and by accessing a larger pool offinancialandtechnicalresources.

PPP projects are generally financed using project financearrangements, where the project financing ensures thatfinancial and other risks are well-managed within andbetweentheprojectcompanyshareholders,sponsorsanditsfinanciers.Inawell-structuredprojectfinancetransaction,allparties(sponsor,governmentandlenders)needtheprojecttosucceedinordertomeettheirobjectives.

4.5.3 Type of Infrastructure AssetsSeychellesinfrastructureprojectscanbeclassifiedintotwo

categories:

qGreenfieldAssets:• New projects designed, built, financed and operated

byamajorityprivately-ownedSPV• Lenders finance construction and operations risks,

and are repaid over 15-25 years after the project isoperational

• Risks are mitigated by guarantees from operator,fixedrepaymentprofile,andinvestmentandfinancialcovenantsincludingdebtcoverageratiosetc.

• Debt is structured so that lenders are repaid underveryconservativeand/oradversesituations,buthavelimited recourse to shareholdersof SPV. Theprimarysourceofrepaymentisfromtheprojectcashflows

qBrownfieldAssets:• Currentlyoperatingprojects• Safe assets with steady revenue and assumed lower

risks,duetopreviousperformance• Lenderscanproviderefinancingofexistingdebtorcan

providelendingforexpansionofproject(i.e.financingan additional turbine to increase the capacity of anexistingpowerplant)

4.5.4 Type of PPP FrameworkSeychelles needs to understand and apply the two

principaltypesofPPPoracombinationofboth,basedonthecharacteristicsoftheprojects,andthesearepresentedbelow:

qVolume and Revenue Based Projects (e.g. revenuegenerating-tollroadconcessions):

• SPV designs, builds, finances and maintainsinfrastructure

• SPV takes all the volume risks on the infrastructure,paymentofoperatingexpenses,fundingmaintenanceand renewal. Repayments of debt and dividendpaymentsaredependentuponrevenuegeneratedbyprivateoperator

• SPV revenues are generated by users of theinfrastructure

qAvailabilityBasedProjects (e.g. service fora fee - socialbuildings):

• SPV designs, builds, finances and maintainsinfrastructure

• SPVreceivesavailabilityrentfromgrantingauthoritytocoverfinancing,maintenanceandotherscostsinvolved

• Payment can vary depending upon agreed-uponperformancecriteriainthecontract

qCombination of fee paid by public authoritywith somerevenue risk, where fee will vary depending uponperformance of the project (e.g. power generationprojects,IPPs)

4.5.5 Sources of FinancingInadditiontoequityfinancingbythepromoter,thesponsor

willneedtoaccessvarioussourcesoffinancingforitsprojects,including debt finance; local and international sovereignbonds;corporatebankloans;grants;domesticrevenuesandfunds from development financial institutions. It is helpfulheretoreviewtheprojectfinancingexperienceintheregion.

The Infrastructure Consortium for Africa (ICA) tracks andpromotesdonorandprivatesectorfinancingofinfrastructureprojectsandprogrammesinAfrica. ICAmembersincludetheG8countries,theWorldBankGroup,theAfricanDevelopmentBank Group, the European Commission, the EuropeanInvestment Bank and the Development Bank of SouthernAfrica.The2012annualreportof ICAshowsregional trendsonwhoisfinancinginfrastructureprojectsandhow,andwillprovide somedirection for Seychellesonhow tofinance itsinfrastructureprojects.

q$39billionwasinvestedinAfrica’sinfrastructurein2012qNon-ICAmemberChinaremainsthebiggestinstitutional

financierofAfrica’sinfrastructureqHigh-growth countries such as Brazil, India and South

Korea as well as the Arab countries are also becomingsignificantplayersininfrastructuregrowth

qAfrican national governments are investing more ininfrastructure–withregionaldevelopmentbanksplayinganincreasinglyimportantrole

In an ICA survey of private sector infrastructure investorsinAfrica,partnerriskappearedtobethemainconsiderationtaken into account when deciding whether to invest,followed closely by concerns about the legal, regulatoryand political environment. It was seen that InternationalFinancial Institutions (IFIs) were the principal guarantors ofrisk,confirmingthatMFIswillcontinuetoplayanimportantroleinfinancingSeychellesinfrastructureprojects.ThereforeitisexpectedthatIFIssuchastheAfDBandtheWorldBank

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willcontinuetobeamajorsourceofdonorfundingandmostimportantly,toinsuretheprojectagainstpoliticalandbusinessrisks.

ThereareanumberofAfricanand regional infrastructurefundsthatSeychellesmaywishtoexploreforprojectfinancing:

qTheAfDB’sAfricaClimateChangeFund(ACCF),whichisabilateralthematictrustfundtosupportAfricancountriesin their transition to climate-resilient and low-carbondevelopment.TheAfDBwillhostandmanagetheACCF,whichwascreatedwitha4.725millioneurocontributionfromGermanyforaninitialthree-yearperiod.

qTheAfDBistheimplementingagencyofthe$7.6billionClimateInvestmentFunds(CIF)andisexpectedtochannel$1 billion—more than a third of all CIF investment inAfrica — to 17 African nations, with the AfDB Energy,

Environment and Climate Change Department (ONEC)leadingtheinstitutionalcharge.

qAdministered by the African Development Bank, theSustainableEnergyFundforAfrica(SEFA)isamulti-donortrustfund–anchoredinacommitmentof$60millionbythegovernmentsofDenmarkandtheUnitedStates–tosupportsmall-andmedium-scaleRenewableEnergy(RE)andEnergyEfficiency(EE)projectsinAfrica.

qTheAfricaGrowingTogetherFund (AGTF) isa$2billionfund co-financedby theAfDB and thePeople’s BankofChina over 10 years, to support “sovereign and non-sovereign guaranteed development projects” totaling$200m(£119m)annually.

qNEPADInfrastructureProjectPreparationFacility.Fundingupto$10million.

qEU-AfricaInfrastructureTrustFund.Fundingupto$40.5million.

Figure 4.18: Who Is Financing Africa’s InfrastructureSource: ICA

Figure 4.19: Challenges for Africa Infrastructure InvestmentSource: ICA

http://www.afdb.org/en/topics-and-sectors/initiatives-partnerships/africa-climate-change-fund/

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qTheAfrica50InfrastructureFundrecentlylaunchedbytheAfDBwillfocusonbankable,growthsupportingregionalconnectivity mega-projects, including priority projectsunder the Program for Infrastructure Development inAfrica(PIDA).

qTheWorldBankGrouphasanewstrategy thataims tousefinancialinnovationandpartnershipswiththeprivatesectortofundselectedsectors,includinginfrastructure.

qChinahasrecentlypledged$3billionforjointinvestmentswith the IFC to support private sector development inemerging markets, including in African infrastructure.TheChina-AfricaDevelopmentFundhasalreadyfinancedprojectsinmorethan30Africacountries.

The development of domestic government bondmarketsand access to international bond markets are fundamentaltobridgingthefinancinggapfor infrastructureprojects,andAfrican sovereign bonds have been attracting high levels ofinternational interest for investors seeking new and highersourcesofyields.However,thesizeofSeychellesmarketandeconomymostlikelyprecludesthissourceoffinancing.

Finally,projectbondsandnon-bank lendingcouldprovideaflowofsuitablehighly-ratedassetsdirectly to institutionalinvestorssuchassovereignwealthfunds,pensionplansandlife insurance companies.However, thefiduciary constraintson these funds of investing only in “investment grade”financialinstrumentsmayexcludeSeychellesfromthissourceoffinancing,asnewprojectsinSeychellesareunlikelytogetaratingofinvestmentgrade.Toreducetheriskoflessdesirableratings,investorsmayrequirebonding/lettersofcredit,state-provided credit enhancements, commercial de-risking ofprojectsandadditionalriskcapitalfromeitherprivatesourcesor (increasingly) multilateral initiatives such as the MIGAand the European Investment Bank’s Project Bond CreditEnhancement(PBCE)mechanism.

The financial products offered by AfDB are discussed indetailnext.

4.5.5 Financial Products Offered by African Development Bank

“As a multilateral development finance institution, theAfrican Development Bank (AfDB) Group seeks to furtherthe social and economic well-being of its regional membercountries. To attain this objective, the Bank uses theleverageaffordedbyitsAAAratingtoon-lendtoitsborrowercountries,atfavorableterms,resourcesraisedininternationalcapitalmarkets.”88

Tomake the lendingenvironmentmore responsive to theborrower countries’ varied and evolving needs, the Bankcreated a number of financial products including singlecurrency loans, where borrowers were given the option tochoosefromanumberofcurrenciesreadilyavailabletotheBank, and the flexibility to customize their debt repaymentprofile with access to annuities, step-up or step-downamortizationofprincipal,orbulletrepayment.88 http://www.afdb.org/en/projects-and-operations/financial-products/

Inaddition,theBankprovidesarangeofRiskManagementProducts including interest rate and currency swaps, caps,collars, commodity hedges and indexed loans enablingborrowerstomanagerisksoccurringduringthelifeofagivenloan.Withthe introductionofguarantees in2004,theBankopenedupanewwindowofopportunityforborrowerswhowant toaccess resources fromthird-party lenders, includingcapitalmarkets.

OnDecember9,2009, theBoardofDirectorsof theBankapproved several amendments to the menu of the Bank’sfinancialproducts.TheseamendmentsincludethewithdrawaloftheVariableRateLoan(VLR)productforallborrowers,themaintenanceofthetemporarysuspensionoftheFixedSpreadLoan (FSL) product and the introduction of the EnhancedVariableSpreadLoan(EVSL)productforsovereignguaranteedborrowers.

CurrentlytheBankoffersthefollowingfinancialproductstoitsborrowercountries:

qStandard Loan Products• Sovereign Guaranteed Loans (SGL) are made to a

regional member country (RMC) or a public sectorenterprisefromanRMCsupportedbythefullfaithandcreditof theRMC inwhose territory theborrower isdomiciled.

• Non‐Sovereign Guaranteed Loans (NSGL) are madeeither to public sector enterprises, without therequirement of a sovereign guarantee, or to privatesector enterprises. Syndication of Non‐SovereignGuaranteed Loan is typically a large loan in which agroup of financial institutions (the syndicate) worktogethertoprovidefundsforaborrower.Oneformofthisloanisshownbelow.

qSynthetic Local Currency Loans (SLCL) aredenominatedinoneoftheBank’slendingcurrencies,currentlyUSD,EUR,JPYandZAR;andanyothercurrencyifthereissufficientdemandandiftheBankcanfullyhedgethecurrencyandinterestrateriskwithatleastonemarketcounterparty.

qGuarantees. The Bank offers Guarantees to fulfilthe obligations of a borrower to a lender under anagreement, in the eventof non-performanceor defaultbytheborrowerofitsobligations.Thesecangenerallybeclassified into two categories: Partial Credit Guarantees(PCGs)andPartialRiskGuarantees(PRGs).

MTN Partial Credit Guarantee for Project Finance

ThisguaranteecoversuptoEuro13millionequivalentofprincipalpaymentsona localcurrency (CFA)syndicatedloan raised by MTN Cameroon for a Euro 209 millionmobile telephone development project. This was aprojectfinancingforthepurchaseofequipmentandtheprovisionofrelatedworkingcapital.TheAfDBguaranteeissharedparri-passubyFMO,whichissuedaguaranteeof a similar amount to the company. The guarantee issecuredbytheprojectscomprehensivesecuritypackage.

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• PCGs cover a portion of scheduled repayments ofprivate loansorbondsagainst all risks, and couldbeutilized to support mobilization of private funds forproject finance, financial intermediation and policybasedfinance.Anexampleisshownbelow.

• PRGs cover private lenders against the risk of thegovernment,oragovernment-ownedagency,failingtoperformitsobligationsvis‐à-visaprivateproject.PRGscan attract commercial financing in project financetransactions,particularlyinpublicsectorutilitiessuchaspower,water,oilandgas,andmining,whereprojectsuccessdependsasmuchongovernmentundertakingsas on private commercial acumen. In public‐privatepartnerships (PPPs), PRGs can give assurance tothe private partners that government will meet itsobligationstowardthepartnership.

qEquity Investment.TheBankundertakesEquity&Quasi-Equity investment in financially viable private sectorcompanies(bothstart-upsandestablishedentities)inanysector, public sector companies in the process of beingprivatized (so long as government provides assurancesabout the timeframe in which private shareholderswill gain majority control), and regional/sub-regionalinstitutions.

qRisk Management Products.TheBankoffersRMPstoitsclientsinordertoenablethemtohedgetheirexposuretomarketrisksincludinginterestrate,currencyexchangeandcommoditypricerisks.RMPswillbeavailabletoclientsatthetimeofloansignatureoratanytimeduringthelifeoftheloan.AndmayincludeoneoracombinationofthefollowingRMP’s:

a) Interestrateswaps;b) Currencyswaps;c) Commodity/indexswaps;d) Interestratecapsandcollars.

IllustrationsofRMPsandafeestructureareshownbelow:



to the Bank, and the flexibility to customize their debt repayment profile with access to annuities, step-up or step-down amortization of principal, or bullet repayment.

In addition, the Bank provides a range of Risk Management Products including interest rate and currency swaps, caps, collars, commodity hedges and indexed loans enabling borrowers to manage risks occurring during the life of a given loan. With the introduction of guarantees in 2004, the Bank opened up a new window of opportunity for borrowers who want to access resources from third-party lenders, including capital markets.

On December 9, 2009, the Board of Directors of the Bank approved several amendments to the menu of the Bank’s financial products. These amendments include the withdrawal of the Variable Rate Loan (VLR) product for all borrowers, the maintenance of the temporary suspension of the Fixed Spread Loan (FSL) product and the introduction of the Enhanced Variable Spread Loan (EVSL) product for sovereign guaranteed borrowers.

Currently the Bank offers the following financial products to its borrower countries:

1. Standard Loan Products • Sovereign Guaranteed Loans (SGL) are made to a regional member country (RMC)

or a public sector enterprise from an RMC supported by the full faith and credit of the RMC in whose territory the borrower is domiciled.

• Non-‐Sovereign Guaranteed Loans (NSGL) are made either to public sector enterprises, without the requirement of a sovereign guarantee, or to private sector enterprises. Syndication of Non-‐Sovereign Guaranteed Loan is typically a large loan in which a group of financial institutions (the syndicate) work together to provide funds for a borrower. One form of this loan is shown below.

Source: AfDB

Source: AfDB



5. Risk Management Products. The Bank offers RMPs to its clients in order to enable them to hedge their exposure to market risks including interest rate, currency exchange and commodity price risks. RMPs will be available to clients at the time of loan signature or at any time during the life of the loan. And may include one or a combination of the following RMP’s:

a. Interest rate swaps;

b. Currency swaps;

c. Commodity/index swaps;

d. Interest rate caps and collars.

Illustrations of RMPs and a fee structure are shown below:

Interest Rate Swap

Cross Currency Swap

Commodity Index Swap

Interest Rate Swap





b. Currency swaps;




Interest Rate Swap

Cross Currency Swap


Cross Currency Swap

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qTrade Finance Initiative. Responding to the impact ofthefinancial crisis, theBankestablishedaUSD1billionTradeFinanceInitiative(TFI)on4March2009.TheTFIisintendedtoenabletheBanktodeliverintheshort-term,arapidresponsetothesuddenshortfall infinancingfortrade.

qTechnical Assistance. TheBankprovidesgrants to fundtechnicalassistancetotheborrowers.Themostimportantareasoftechnicalassistancerequiringgrantsincludethetrainingofcentralandregional/localgovernmentofficialsin project design, preparation and analysis. In addition,the technicalassistanceaims to fosterand sustainRMCefforts in creating an enabling business environmentto promote private sector investment and growth. TheBank’smainsourcesoffundsfortechnicalassistanceareitsTechnicalAssistanceFundforMiddleIncomeCountries(MIC Fund) and the Fund for African Private SectorAssistance(FAPA).Priorityisgiventoproject/programmepreparation,intensificationofEconomicandSectorWork(ESW) andother country analyticalwork, private sectorpromotionandcapacitybuilding.

4.5.6 Timing and Sequencing of ProjectsSomeinformationontheamountandtimingofinvestments

intheenergyandtransportationsectorsisprovidedinChapter4. Aswith structuring the project finance, this needs to bedeterminedonacase-by-casebasis inconsultationwith thekeystakeholdersinGoS.





b. Currency swaps;




Interest Rate Swap

Cross Currency Swap





Use of Interest Rate Caps and Collars

Summary of RMP Fees

6. Trade Finance Initiative. Responding to the impact of the financial crisis, the Bank established a USD 1 billion Trade Finance Initiative (TFI) on 4 March 2009. The TFI is intended to enable the Bank to deliver in the short-‐term, a rapid response to the sudden shortfall in financing for trade.

7. Technical Assistance. The Bank provides grants to fund technical assistance to the borrowers. The most important areas of technical assistance requiring grants include the training of central and regional/local government officials in project design, preparation and analysis. In addition, the technical assistance aims to foster and sustain RMC efforts in creating an enabling business environment to promote private sector investment and growth. The Bank’s main sources of funds for technical assistance are its Technical Assistance Fund for Middle Income Countries (MIC Fund) and the Fund for African Private Sector Assistance (FAPA). Priority is given to project/programme preparation, intensification of Economic and Sector Work (ESW) and other country analytical work, private sector promotion and capacity building.

Use of Interest Rate Caps and Collars

RMP Transaction Transaction Fee

Interest rate swaps 1/8%

Currency swaps 1/4%

Commodity/Index Swaps 3/8%

Cap & Collar 1/8%Summary of RMP Fees

Currencies USD, EUR, JPY and ZAR

Pricing Interestrate+margin

Final Maturity Upto3.5years

Grace Period Upto1year

Front End fee Up-frontfeesupto1%

Disbursement Multipledrawdown

Repayment Amortizing repaymentor singleinstalmentatfinalmaturity

Prepayment Prepaymentpenaltycharged

Summary Terms of TF LOC

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Chapter

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Facilitating Implementation of a Systematic Infrastructure Action Plan

A number of areas within the Seychelles will requirestrengthening to ensure the successful phasedimplementation of the infrastructure action plan.

Thesecanbeconsideredunderfourbroadgroupingsintermsofcontent,andclassified in termsofactions tobe takenbythe Government of Seychelles on its own and those thatare likely to require financial and technical assistance fromdevelopmentpartners.

qPolicyandRegulatoryEnvironment• Supporttoongoingreforms• Enablingenvironmentforprivatesectorparticipation

qInstitutionalCapacityBuildingandSkillsDevelopment• Strengtheningofkeyinstitutionstoaccompanyreform

efforts• Skillstraininginspecificareassuchasmanagementof

PPPframeworks,etc.qDevelopmentPlanningandManagement

• MasterplanstudiesqRegionalIntegrationandCompetitiveness

• Harnessingbenefitsfromregionalintegration• Enhancingtradeinservices

5.1 Actions by The Government of SeychellesTheGoShasestablishedahigh-level committee (PS level)

to oversee the implementation of all large-scale projects;regardlessofhowtheyarefinanced(day-to-daymanagementof these projectswill restwith a ProjectManagement Unit(PMU) under theMinistry of Land Use and Housing). Theroleof thehigh-level committee (perhaps supportedby thetechnical resources of the PMU) should be expanded toinclude the screening/prioritization/selection of projects,whethertheyaretobefinanceddirectlybytheGoSordirectlybyentitiessuchastheSPTCorthePUC.TheMoFisactivelyparticipating in this process in order to manage debt load,includingexplicitorimplicitguaranteesbytheGoS.Giventhepresentshortageoftechnicalresourcesforprojectevaluation,this activity may initially require technical support fromdevelopmentpartners,complementedbythetrainingofkeystaffinprojectevaluationmethods.

It is vitally important that the regulations to enforce thenewEnergyAct2012,andenable3rdpartyparticipationinthesector(currentlyindraft)beputintoforceassoonaspossible,sothatallpotentialIPPofferscanbeevaluatedwithinaframework that prescribes a common and transparent process.Sinceopportunitieshavealreadybeenidentifiedbyanumberofpotentialbidders,thiswork-in-progressshouldhavemuchhigherprioritythancreationofaPPPunit.Infact,itwouldbebeneficialtohavesuchexperiencemonitoredandevaluatedbeforeaPPPunitwithabroadermandateiscreated.

Itwillalsobeimportantforthegovernmenttoevaluatethepastperformanceandexpectationsofportoperations.Some

stakeholdershavesuggestedthatacompetitiveenvironmentatquaysidewouldencouragegreaterefficiency,althoughitisnot clear that the scaleof activityatPortofVictoriaor thelayout of the port would facilitate multiple cargo handlingentities.

5.1.1 Immediate ActionsThis report places high priority on development of a

TransportMasterPlanforMahéandPraslin(includingthelinksbetweenthethreemainislands).WhilethisMasterPlanwillincludebaselinetrafficsurveys,itwouldbedesirabletobegintosetupacontinuoustrafficcountingprogramimmediately,tocollect informationontrafficpatternsandtheirevolutionovertime.Anappropriateagency,probablytheSLTA,shouldimmediately acquire traffic counters and begin collectingdata systematically, particularly onmajor routes in and outofVictoria.Thiswouldincludenotonlytrafficcounts,butanindication of the importance of heavy/overweight vehicles.Whilethefieldworkcouldmostlybeundertakenbylocalstaff,withoutanyspecializedtraffictraining,itwouldbedesirabletohaveshort-termassistancetocoordinatetheplanningandimplementation of this critical undertaking. An action planshouldbeprepared to guide theprocess, to identify surveytypesandlocations,andtoidentifythebasicequipmentthatwould be necessary for the exercise. An outline Terms ofReferenceisprovidedinAnnexE.

Owingtothefuturesignificanceofpublictransportationinthecountry,theSPTCshouldembarkonasimilarregularsurveyofbusoperationsandpatronstoestablishvitalcharacteristicsincludingbusreliability,accessibility,comfortandtravelspeedsaswelltypicalprofilesandoriginanddestinationsoftheriderstosupportserviceenhancementsandimprovements.Whilethe SPTC keeps detailed information on passenger revenue(boarding) by route and by stop, this does not provide theorigin-destinationinformationthatwouldbeneededforrouteplanning.89

5.1.2 Technical Assistance and StudiesTechnical Assistance (TA) in Traffic and Highway

Engineering will be required prior to final prioritization ofdevelopments in the land transport sub-sector. This shouldinclude arrangements whereby various experts in planning,engineering,andprojectvaluationdisciplinesworkalongsideGoS staff for periods of 2-3 years to assist in setting upsystems,settingupanAssetManagementProgram,capacitybuilding, andpreparing a TransportationMaster Plan (TMP)with an integrated transit study. An Asset ManagementProgramisrequiredtofacilitatemorecost-effectiveplanning,

89 Forexample,theSPTCisconsideringaproposaltoterminatesomeroutesatterminalsoutsideofVictoria,toreducecongestionattheVictoriaterminal.HoweverthisconsiderationisnotinformedbyknowledgeofhowmanypassengersontheserouteshaveafinaldestinationwithinVictoria,andifso,whethertheywouldcontinuetousethebusiftransferatanintermediateterminalwasrequired.

5. Facilitating Implementation of a Systematic Infrastructure Action Plan

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budgeting and implementation of repairs, rehabilitationand replacement of the current fixed assets related to landtransport(roadways,bridgesandculverts).ATMPisrequiredtodefinethepatternoftransportationdevelopmentandtheinvestmentsneeded,onboththesupplyanddemandsides,inanoverarchingmanner.TheTMPwouldspelloutasetofcoherentpoliciesand initiativesthatconsidersallmodes,soas toplaya supportive role topublic transit. An integratedtransportation study focusing on Public Transit should gohand-in-handwiththeTMPStudy.

While further consultation with the GoS is required todetermine an accurate estimate, an initial and preliminarybudgetof$6.65millionisestimatedfortheTransportSectorTAefforts,includingthefollowingcomponents:

qTechnicalAssistance,involvingexpertprofessionalsworkalongsideGoSstafffor2-3yearperiods($5million)

qTransportMasterPlan($750,000)qTransitStudy($500,000)qEstablishinganAssetManagementProgram($400,000)

The government will need to decide on priorities andevaluateoptionsfor increasingly involvingtheprivatesectorinthesupplyofgoodsandservicesrelatedtotransportthatin Seychelles traditionally havebeenprovidedby thepublicsector.OnespecificoptiontoexploreimmediatelywouldbetheprovisionofasphaltforSLTApavingoperationsthroughaPPParrangement,priortotheSLTAcommittingcapitalfundsto replacement of the existing over-age plants, which arereported to be subject to frequent breakdown despite highannual maintenance expenditure. Another option, beingactivelyexplored,wouldbetoconcessionatleastpartofthemanagementandoperationoftheinternationalairport,asisincreasinglytheglobalnorm.

Thereportalsogiveshighprioritytocarryingoutadetailedandcomprehensiveresourceassessmentstudy,toexamineindetailthepotentialandfeasibilityofgeneratingcost-effectiveenergyfromrenewablesources.Whileacomprehensivereportwas prepared for wind energy, as part of the developmentof the wind turbines financed by the Abu Dhabi Fund forDevelopment, there has not been any detailed examinationconducted on the potential for other renewable sources ofenergy.ThereportalsoemphasizesthatwhiletheSeychellesEnergyPolicy2010-2030and theEnergyAct2012are stepsin the right direction, a detailed implementation plan andstrategyhas tobedefinedand implemented toachieve thedesiredobjectives.Aspartoftheplan,theimmediateprioritywouldbetodeveloprulesandguidelinesforparticipationofIndependentPowerProducers(IPPs)forelectricitygeneration,with emphasis on renewable sources. This would helpSeychellesreduceitsheavydependenceonimportedfuelforgenerationandassistwithcreationofastablemacroeconomicenvironmentinthecountry.

Discussionswith the EU relating to financing of aMasterPlan for the electricity sector should be finalized. It will beimportant to ensure that the individual components of the

proposed overall upgrading of generation and distributionproceedsinasequencethatwillensuretechnicalviabilityofthesystemduringtheinterimperiod.

On a more general level, while operating entities collectand report basic cost and revenue information, collectionand analysis of such information has been oriented towardstatutory reporting requirements rather than assisting withidentificationofproblemareasandthenprioritizingsolutionsagainst broader national goals. For potential energy andtransport infrastructure projects, theGoS needs to conducteconomic demand projections to determine timing of thecapacityshortfall,andtechnicalfeasibilitystudiestodeterminetheconditionoftheexistingfacilitiesandcapital investmentrequirementsintheeventtheeconomicprojectionsindicatean imminent need for new infrastructure over the next 10-yearperiod.

Finally,theprivatesectorinSeychellesneedsstrengthening,asdiscussed in Section2.4. While Seychelles scoreswell interms of both the ‘Ease of Doing Business’ and the ‘GlobalCompetitiveness’ relative to regional neighbours, but scoresremain low relative to those middle-income countries withwhich the Seychelles is competing for investment funds.Concertedeffortsneedtobemadeto improvethebusinessenvironmentand investmentclimate.Theweakareas intheDBIneedtobeaddressedand investmentclimate improvedbyensuringriskfactorsaremitigated.

5.2 Actions by Development PartnersAnumberofdevelopmentpartnersandbilateralagencies,

including:AfDB,EU,AFD(France),BADEA,andAbuDhabiareprovidingongoingtechnicalandfinancialassistanceinthetwosectors.Howevertominimizetheadhocanduncoordinatednature of support, it is important that the Government ofSeychellesannouncesclearprioritiesintermsofbothsectorsandprojects.Itisthusessentialtomovequicklyonestablishingongoing screening mechanisms such as those proposed inSection4ofthisreport,applyingthosemechanismstoeachprojectproposed,andannouncingtheresults.

The current Public Sector Investment Programme (PISP)showsaprojectbudgetforthepublicenterprisesofmorethan$440millionbetween2013and2017.Ofthis,nearlySR700million($62million) isallocatedtoPhase1oftheextensionofMahéquayin2016and2017,noneofwhich is identifiedasbeingfinancedfromforeignloans.CurrentimplementationprioritiesofthePUC,forexampleappeartobebasedprimarilyon financing availability; that is, high-priority projects tendto be those for which financing has been obtained. Thisapproachdoesnotensureappropriatebundlingorpackagingofcomplementaryprojects.

Inrecognitionofthefactthatinfrastructureisoneofthemostcritical constraints to Africa’s sustainable development, theAfricanHeadsofStateandGovernmentwithintheframeworkof the New Partnership for Africa’s Development (NEPAD),approved the Program for Infrastructure Development inAfrica(PIDA)attheirsummitheldinAddisAbaba,Ethiopia,in

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January2012asameanstotransformAfricathroughmoderninfrastructure and to make Africa competitive internallyand in the global economy. PIDA, to be realized by 2020,has 51 priority regional infrastructure projects in energy,transport,ICTandwaterataninvestmentcostof$68billion.To realizePIDAwill require scalingup resourcemobilizationby African governments themselves, enhancing public-privatepartnerships(PPPs)andadoptinginnovativefinancingsolutions. However, thePIDA frameworkdoesnotexplicitlytakeintoconsiderationthespecialsituationanduniqueneedsof island nations. Thus, although Seychelles is presently amember of both COMESA and SADC, the country has onlylimiteddirectinterestandinvolvementinthecurrentregionalinitiativesoftheseorganizations,mostlyaimedatfacilitatingthe movement of goods and people across land borders.Greater integration of island nations into the appropriateregionalandsub-regionalgroupingswithincontinentalAfricawillrequireadditionalinitiativesfromdevelopmentpartners.

5.3 Technical Support/Consulting Services Required

Requiredtechnicalsupportcanonlybeidentifiedfollowingagreementonaprioritylistofprojects.Howeverweanticipatethat thepriority listwill includeaTransportMasterPlan forthetwomainislands,aresourceassessmentstudytodefineoptionsforrenewableenergy,andamasterplanforupgrading/expanding theelectricitygenerationanddistributionsystemofthemainislands.HoweveritisclearfrombothfieldworkinApril2013andtheresultsoftheMDGanalysisundertakenby the government that there are general shortcomingsthroughoutthepublicsector,relatingbothtodatacollectionand to the engineering and financial analysis required forevaluationandprioritizationofprojects.90

ConclusionThisreportprovidesSeychelles’policyanddecision-makers,

aswellasdevelopmentpartners,withasoundstrategicandanalytical basis to make informed decisions for long-terminfrastructure investments, to support Seychelles overallsocio-economicdevelopment.

Toprepare itself tobecompetitive in theglobaleconomyofthefuture,insulateitselfagainstfuturecrisis’andmaintainand grow its current economic and social well-being andsize,Seychellesmustdiversifyandinvestinitsinfrastructure,capacitybuildingandenhanceitsbrandingasan“easyplacetodobusiness.”Engagingtheprivatesectorandprivatecapital,willbeacriticalintheseareas.

AnassessmentoftheessentialcriteriacriticalforsuccessinPublicPrivatePartnershipsshowsthatonallcriteriaexcepttheproposed investments in physical infrastructure, Seychellesis not yet entirely ready to effectively implement PPPs, andmuchneedstobedone,asshownbelow.

qThe government’s policy framework, while outlined

90 ThisconcerndoesnotapplytotheworkoftheNationalBureauofStatistics,whichprovidesabroadrangeofgeneralindicatorsonatimelybasis,inmostcasesonline.

in draft MTNDS and other documents, has conflictingstatements about encouraging PPPs and maintaining“strategic” controlover theprivatebusiness sectormaysendthewrongsignalsandcreateconcernsintheprivatesector.

qThe government does not yet have the necessaryinstitutional capacity, and has acknowledged that foralmostsectors,ithas“limitedinstitutionalcapacity.

qThe government has not announced any significantinvestment in PPP projects, and neither has anyimplementationplanbeenconfirmed.

qThelegalandregulatoryframeworkisbeingdraftedandawaitinglegislativeapproval.Thegovernmentismovingtowards developing the regulatory framework for PPPsandenhancingtheinstitutionalcapacity.

qInvestmentinpublicinfrastructurehasbeenannounced,butisawaitingfunding.

Additionally, Seychelles’ infrastructure investment plancurrently facesa fundinggapof$215million,allof it in theports, roads and energy sectors, and ideally, this should befinancedwhenfeasiblebytheprivatesector.Additionalequity,debtandgapfinancingwithgrantsmaypotentiallybesoughtfromMFI,commercialandsovereignfundlenders.

qThe AfDB, World Bank Group, and other MFIs willcontinuetobeamajorsourceofdonorfundingandmostimportantly,willacttoinsuretheprojectagainstpoliticalandbusinessrisks.

qNEPADInfrastructureProjectPreparationFacilityprovidesfundingupto$10million

qEU-Africa InfrastructureTrustFund,canprovide fundingupto$40.5million.

qChina,SouthKorea,IndiaandtheArabcountryinstitutionalandsovereignfundsareincreasinglybecomingimportantsourcesofprojectfinancingintheregion.

qProjectbondsandnon-banklendingcouldprovideaflowof suitable highly-rated assets directly to institutionalinvestorssuchassovereignwealth funds,pensionplansandlifeinsurancecompanies.

qCommercial bank lending is still available, but withreduced liquidity, as themarket has becomemore risk-averse toprojectfinancing.The largecommercialbanksthat used to lendmoney for infrastructure projects arereducing their exposure as Basel III capital rules makelendingmuchlessattractive.

Toassist thegovernment inachieving increasedeconomicgrowth through private sector participation, this report,in addition to prioritizing and sequencing infrastructureinvestments,proposes the followingPriorityActionsneededfromthegovernmentanditdevelopmentpartners:

qTheGovernmentofSeychellesneedsto(a) providetheSECwithregulationsinafinalformthat

willdefinea transparentprocess forevaluating IPPproposals;and

(b) expandthemandatetothecommitteetaskedwithoverseeing large projects first by evaluating each

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new projectwithin a standard framework, such astheonedeveloped inthisreport, thenbyupdatingtheframeworkovertimeasappropriate.

qSeychelles’DevelopmentPartnersmayassistbyproviding(a) technicalassistanceindevelopingaTransportMaster

Plan with integrated public transit plan (TMP/IPT);and

(b) technicalassistanceinevaluatingtheappropriatenessofdevelopmentofalternativesourcesofenergy inthe unique physical and economic environment oftheSeychelles,toreducegrowthinpetroleum-basedtraditionalpowergeneration.

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Annex

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1. Financial Model: Additional Generation Capacity at Roche Caiman

Model Objective:The financial model is prepared in order to evaluate the

variousquantitativeaspectsoftheproject.

Model Structure:Thefinancialmodelisstructuredinto3differentsheets:

qAssumptions: This sheet contains all the assumptionsbeingusedinthemodel

qCalculations:Thissheetcontainsthecalculationsforthemodelworkings

qOutput:Thissheetcontainstheoutputfrommodel

Model Assumptions:The assumptions used in the model are based on the

detailedPUC91financialplan(“20130419-PUCfinancialModel.xlsx”).ThisPUCfinancialplanprovidesforecastsfrom2013to2035.Thekeyassumptionsusedinthemodelarementionedbelow:

91 ThePublicUtilitiesCorporation,Seychelles

Calculations:qThefinancialmodel ispreparedwithannualperiodicity;

thefirstyearofthemodelisbasedontheyearinwhichtheprojectconstructionstarts.

qThe revenues arederivedbasedon electricity sales perannummultipliedbyunitelectricityprice.

qThemajorcostisthefuelcostwhichisbasedonelectricityproductionmultipliedbyunitfuelcost.

qMaterialandequipmentchargesarebasedonpercentageofrevenues.

qO&M 92 costsarefixed innatureand there isanannualescalationeachyear.

Output:Theoutputfromthemodelisstructuredintothreesections:

qMargins:Thissectionprovidesthegrossmargins,EBITDAmarginsandnetprofitmarginsfortheproject.

qLeverage Ratios: This section provides the debt equityratio,interestcoverageratioandDSCR93fortheproject.

qReturns:ThissectionprovidestheprojectIRR94andequityIRRontheproject.ProjectIRRistheoverallrateofreturnforallstakeholdersintheproject,includingequityholdersanddebtholders.EquityIRRistherateofreturnachievedbytheequityholders(shareholders)intheproject.

Results:ProjectIRR=28.4%;EquityIRR=39.4%

Pleasenotethattheelectricitypriceescalationisassumedtobe5%perannumwhilefuelcostescalationis3%perannum.Thisleadstoanincreaseingrossmarginsfrom34.7%in2016to54.5%in2034.Ifweescalatebothelectricitypricesandfuelcostsby3%,theequityIRRdeclinesfrom39.4%to23.8%.

Pleasenotethatthemodelstructureremainsthesamefor

92 OperationsandMaintenance93 DebtServiceCoverageRatio94 InternalRateofReturn

ANNEX A: Financial Analysis for Power Projects

Item Unit Amount Comments

Investment Amount mnSR 336.0

Investmenttobeundertakenin2014and2015.EquivalentUSDAmount=$30.0mn

Plant Capacity MW 24.0

Safe Capacity MW 17.3

Plant Utilization % 30.0%

Increasingto75.0%by2025(LowerinitialutilizationassumedasthereseemsinsufficientdemandinMahétocoverthenewcapacityaddition)

Fuel Cost SR/kWh 2.65 3.0%annualescalationinfuelcost

Material and Equipment Charges

%ofrevenues 2.1%

O&M Cost per annum mnSR 29.6

5.0%annualescalationinO&Mcost


Electricity Price – Base Year

SR/kWh 4.205.0%annualescalationinelectricityprice

Debt as % of total capital

% 70.0%

Interest Rate on Debt

% 8.0%

Debt Repayment Period

Years 15.0

76


all the financial models mentioned in Annexes. Therefore,theseaspectsarenotcoveredforotherfinancialmodels.

2. Financial Model: New Power Station, Praslin

Model Assumptions:Theassumptionsusedinthemodelarebasedonthedetailed

PUCfinancialplan(“20130419-PUCfinancialModel.xlsx”).






qO&M costs are fixed in nature and there is an annualescalationeachyear.



3. Financial Model: New Power Station, Mahé

Model Assumptions:The assumptions used in the model are based on the

detailedPUCfinancialplan(“20130419-PUCfinancialModel.xlsx”).



Investmenttobeundertakenin2014and2015.EquivalentUSDAmount=$32.5mn


Safe Generation Capacity

MW 5.4


Average Fuel Cost SR/kWh 2.65 3.0%annual

escalationinfuelcost


%ofrevenues 2.1%






% 70.0%


% 8.0%


Years 15.0



Investmenttobeundertakenin2018to2020.EquivalentUSDAmount=USD73.3mn


Safe Generation Capacity

MW 28.8


Increasingto70.0%by2029(LowerinitialutilizationassumedasthereseemsinsufficientdemandinMahétocoverthenewcapacityaddition)

Average Fuel Cost SR/kWh 2.65 3.0%annual

escalationinfuelcost


%ofrevenues 2.1%






% 70.0%


% 8.0%


Years 15.0

77










78



financialaspectsoftheproject.

Model Structure:The financial model is structured into 3 different sheets,

similartothoseusedforthepowersectoranalysisinAnnexA:

Assumptions:Variousassumptionsofweremadebasedonthefinancial

andoperationalinformationprovidedbySPTC.Theinformationprovidedshows that97new (45Tata,52Yutong)buseswillbeacquired from2014 to2018.Thebuseswereassumed tobeoperationalfor12years,upto2024.Thekeyassumptionsusedinthemodelarementionedbelow:



qThe revenues are derived based total bus ridership perannummultipliedbybasefarewhichisalsoassumedtoincreaseeveryyear


qThe major cost is operation as and maintenance costsincludingfuel,personnelandoverheadcosts.


Results:ProjectIRR=6%;EquityIRR=2%.ProjectandequityIRRare

bothpositive.

ANNEX B: Financial Analysis for Bus Replacement Project – SPTC


Investment Amount MillionSR 76.6

InformationprovidedbySPTC,spreadfrom2014to2018

Number of Buses 97 Acquiredoverthe

sameperiod

Daily Capacity of Buses

Passengers/Day 19,500

Basedon2012ridershiplevels

Average fare per ride

SR 55.0%annualescalationbusfare


%ofrevenues 4.7%

O&M Cost per annum MillionSR 22.8

Estimatedinconsiderationofexistingexpendituresfor250busesnotingthatnewbuseswillhavelowerO&Mcosts.5.0%annualescalationinO&Mcost


% 75.0%


% 8.0%


Years 10.0

79




Model Structure:Thefinancialmodelisstructuredinto3differentsheets.

Assumptions:Assumptionswerebasedontheincomestatementprovided

by SCAA. For the year 2012, a total of SR 266Million wasrealizedasaeronauticalrevenue.Atthesametime,thetotaloperating expense was SR 149Million excluding bad debtsanddepreciation.Theprojectisexpectedtobeimplementedbetween2016and2020withbenefitsaccruing for20yearsuntil 2040. The key assumptions used in the model arementionedbelow:

Calculations:qOtherproceduresasforpreviousannexesqTherevenueswereestimatedassumingthattheproject

willgenerateupto25%of theaeronautical revenuefor

the2012shownintheauditedaccounts.Therevenueisassumedtoincreaseeveryyear


qThe O&M costs were estimated based on the sameauditedstatementsandareassumedtohaveanannual5%escalationeachyear.

Results:ProjectIRR=NA%;EquityIRR=NA%

Based on the financial projections, the project does notappeartobefeasible.Theprojectandequityreturnscannotbe calculated as the project has negative free cash flowsthroughout.

ANNEX C: Financial Analysis for Airport Terminal Rehabilitation Project – SCAA


Investment Amount MillionSR 160

InformationprovidedSCAA,spreadfrom2016to2020

Annual Income on Completion

41.5

Assumesa15%increaseintheaeronauticalincomerelatedtolandingandpassengerfees.2.0%annualescalationinrevenue


%ofrevenues 4.7%

O&M Cost per annum 22.3

Estimatedas25%existingoperatingexpenses5.0%annualescalationinO&Mcost


% 75.0%


% 8.0%


Years 15.0

80




Model Structure:Thefinancialmodelisstructuredinto3differentsheets.

Assumptions:Assumptions were based on the preliminary economic

analysis provided by the SPA. Revenue generated by theproject is expected to increase from 11.7 to 40.3 Millionfrom2018 to2023.Over the sametime, theexpenditure is

expectedtoremainconstantatSR22.9Million.EscalationinbothrevenueandO&Mcostshavebeenassumedthereafter.The project is expected to be implemented by 2017, withbenefitsaccruingfor20yearsuntil2037.Thekeyassumptionsusedinthemodelarementionedbelow:

Calculations:qOtherproceduresasforpreviousannexes

Results:ProjectIRR=2.2%;EquityIRR=-2.0%

ANNEX D: Financial Analysis for Expansion of the Victoria Port Project – SPA


Investment Amount 1,170

InformationprovidedSPA($90Million)

Annual Income on Completion

41.5

InformationprovidedbySPAfor2018to2023(SR11.7to40.3Million).Thereafter2.0%escalationinincomeassumed

Project period Years 20


%ofrevenues 4.7%

O&M Cost per annum 22.3

ConstantatSR22.3Millionupto2023,thereafter5.0%incostsescalationassumed


% 75.0%


% 8.0%


Years 15.0

81


BackgroundTheRepublicofSeychellesisasmall,undiversified,service-

based, isolatedmiddle income island-state economywith agrossdomesticproduct(GDPincurrentprices)percapitaof$12,783 (2012) 95 andanestimatedpopulationof88,303 96 (2010).ItsGDPpercapitaisamongthehighestoftheMiddleIncomeCountries(MICs).

Astraveldemandincreaseswithpopulationandeconomicgrowth,coherentpoliciesarenecessarytocontrolthedemandaswellasguidethesupplysidethatwillincludeinvestmentsin transportation systems involving both roads and publictransport. Demand management schemes should also beincludedandconsiderationgiventothepossibilityoftransit-supportiveTravelDemandManagement initiatives, includingpark-and-rideplansattheperipheriesofVictoria,thecapitalcitylocatedonMahéisland.

There is broad agreement on the need to provide morepublictransporttodiscouragegreaterownershipandusageofprivatecarsinrecognitionofthefuturechallengesinprovidingadditionalroadwaycapacity.Itisrecognizedthatmanyofthekey existing roads cannot be widened due to right-of-wayconstraints.

In consideration of the above, a Transportation MasterPlan(TMP)isrequired,tosupportandguidethesupplyanddemandfortransportationdevelopmentsandinvestmentsinanintegratedmanner.

ObjectivesTheprimarygoaloftheconsultancyistodevelopaTransport

Master Plan with Integrated Public Transit Plan (TMP/IPT)for Seychelles thatwill guide land transport operations andmanagement, and the effectiveness and efficiency of thepublictransportwithinandbetweentheislandsofMahéandPraslin.

Themainobjectivesoftheserviceswillbeto:

qDevelopacomprehensive,multi-modalTransportMasterPlan and Integrated Public Transit Plan for the year2040, and identify short- and medium-range interimrequirements(for2020,2030and2040).

qIdentify relevant transportation linkages to the rest ofthecountry,recognizingtherolesofmarineandaviationtransportbetweentheislands

qDevelop Transportation Demand Management (TDM)Strategiesincludingforparking,carpooling,parkandrideandtransittocontroltheuseofpersonalvehicles,therebyhelpingtoreduceoveralldemandsintheisland.

qDevelop transportationmodels to be used for demandforecastingandotheranalyticalpurposes.Itisanticipated

95 Yearend2012.SeeNBS,StatisticalBulletin,National Accounts Estimates 2004-2012,October2013

96 Asofmid-year2012.SeeNBSwebsite:Vitalstatistics-Population-Update2012

that the task will include the development, calibration,testing and supply of a state-of-the-art, multi-modalnetworkforecastingmodeltobeused inevaluatingandcomparingthefullrangeofalternativenetworkandpolicyoptions.Trainingofstaffintheusageofthemodelisalsoanticipated.

Study TasksTheTMP/IPTstudywillbecompletedwithin12monthsand

willbecarriedoutoverthreemainphases:

qPhase1:AssessmentqPhase2:EvaluationqPhase3:ImplementationPlan

Phase 1: Assessment. This will involve a comprehensive review of existing

conditions, policies andplans to identify the key issues andoptions to be addressed and the additional informationrequiredtoevaluatefuturepolicy/planningscenarios.

Assessmentwillbeundertakenthroughthefollowingmajortaskgroups:

qReviewofexistingconditions,policiesandplansincludingdemographic information, infrastructure characteristicsandtrafficandtransportdemands

qIdentificationofkeyissuesandoptionsincludingproblemsareas,bottlenecksormissinglinks

qAssessment/confirmation of the level of modellingrequiredandselectionofasuitabledemandforecastingmodel(TRANSCADorEMME)

Phase 2: Evaluation. Thiswillprovideacomprehensiveanalysisofall the likely

impacts of alternative scenarios for the management anddevelopment of the transport system and public transport,TDM and Non-Motorized Traffic (NMT) systems. The taskswill includesurveystoassemblethedatarequiredtoensurereliableforecastsandpredictionsofimpacts,theformulationofalternativescenarioscharacterizedbydifferentapproachesto meeting suitable benchmarks, and the development,validation and application of planning tools or model(s) toassessthefullrangeoftheseimpacts.

Asetofevaluationcriteriashallbeformulatedandisexpectedto include technical performance factors, environmentalconsiderations, financial implications, and alignment toGoSgoalsandpriorities.

Evaluationwillbeundertakenthroughthefollowingmajortaskgroups:

ANNEX E: Terms of Reference for Transportation Master Plan

82


qSurveysincludingtrafficcounts,householdsurveys,publictransportsurveys,statedpreferencesurveys

qFormulation of alternative road networks, transitnetwork/systems,andpolicyplanningscenarios

qModel development including calibrationand validationandsensitivitytesting.InadditionamoredetailedanalysisoftheMahénetworkshouldbeundertakenusingmicro-simulationmodeling

qEvaluation of alternative networks/systems and policy/planning scenarios based on the formulated evaluationcriteria

qPhasingofPreferredScenariosfortheinterimshortandmediumtermsaswellas theultimatehorizonyear (i.e.2020,2030and2040)

qRefinement and Finalization of TMP/IPT componentsincludingsupportiveTDMmeasures

Phase 3: Implementation Plan. This final stage will result in implementation schedules

and action plans for recommended networks, systems, andmeasures.Theimplementationwillidentifytherequirementsfor the various five-year interim periods. Potential fundingsourceswillalsobeexamined.ThatwillincludepotentialforPublicPrivatePartnerships (PPPs).WherePPP initiativesareproposed, the recommendations will include appropriatelegal and institutional structures to ensure efficiency andcost-effectiveness while ensuring that the Government ofSeychellesprioritiesandMDGsaremet.

Aperformancemonitoringsystemwillbedevelopedbothasameansofmonitoringandevaluation.

Project DeliverablesThe project deliverables consist of working papers at the

successfulcompletionofthevariousPhases.SuitablereportswillalsobepreparedandwillincludeInceptionReport,DraftFinalReportandtheFinalStudyReport.

The Draft Final Report and the Final Study Report shallincludethefollowingcomponents:

qSeychelles Transportation Master Plan. – Policies andnetwork plans as well an implementation schedule forrecommendednetworksandactions

qIntegrated Public Transport Plan –Apublic transitplanidentifyingrequiredsystemsandnetworks

qSkeletal NMT Plan (Bicycle with Pedestrian Linkages) andotherTDMMeasurestosupporttheTMP/IPTPlan

qPotentialAreasforPPPinvolvementinthesector

Public and Stakeholder ConsultationPublic and stakeholder consultation shall forman integral

part of the study process and shall include workshops,seminars, open houses and presentations as appropriate.Stakeholders will include relevant government agencies,environmentalgroups,etc.Membersofthepublicwillalsobeinvolved in theconsultationsprocess. Inputs frommembersofthepublicandstakeholdersshallbeintegratedintheTMP/IPTdevelopment.

Level of Effort and BudgetToundertaketheTMPstudyitisestimatedthat500to750

man dayswill be required. Assuming an average compositedailyrateof$1,000perman-dayforsalariesandexpenses,thetotalbudgetwouldbeintherangeof$600,000to$750,000.Thestudyshouldbecompletedwithin12to18months.

83


Infrastructure Items in the 2015 BudgetThegovernmentwillcontinueto invest inmaintenanceof

existingand,developmentof,newinfrastructure.However,topreserveoursustainabilityobjectiveswewilldosowithinourannualdebtceiling.

Wewillcontinuetoensurethatourhealth,educationalandhousingsectorsreceiveadequatebudgetsto implementoursocial programs while further improving our infrastructure,notably our transportation networks, utilities, and socialinfrastructure.

Thegovernment issteppingup itseffortsto improveroadinfrastructure.Ourtransportationsystemwillbenefitfromanincreasedallocationin2015,withatotalofSR68millioninthePSIPandSR22millionintherecurrentbudget,whichincludesthefollowingprojects:

qConstructionofnewroadsSR27.3millioninvariousdistrictsqRoadmaintenanceandpurchaseofbitumenSR11.3millionqAcquisitionofmachineryandequipmentSR8.6millionqVictoriaTrafficManagementSR8.0millionqRoadupgrading(feederroad,roadwidening)SR7.8millionqOther Infrastructures like crash barriers, bus shelters

SR3.6million

AnextraSR20millionwillbespentoninfrastructureworkslikemajorstormwateroutlets, riverchannel,de-silting,anddrainageworks,includinginPointeLarueandonLaDigue.

PortsMr. Speaker, the démarche toward modernization of

our port infrastructure is gaining momentum. Earlier thisyear,we saw the opening of a new 120-metre fishing quayfundedbytheEuropeanUnionwhichcostUS3.7million,andcommencement of works on a new $18million, 425-metrefishing quay, which is a public-private partnership betweengovernment andprivate investors.Wehavemadeadvancestowardmobilizing funding for the Victoria commercial portextension and rehabilitation project. The feasibility study isexpected to start shortly and should be completed by end-2015, following which potential investors will be invited toparticipateinfunding.

RoadsGovernmentistosustainthehigherlevelofinvestmenton

roadinfrastructuresmorerevenuesneedtoberaisedandin2015, Government will increase the rates of several items.First, the levy on privately registered motor vehicles willincreaseby50percent.Thiswillmeanincreasesasfollows:

qMotorCycles:FromSR5,000toSR7,500;qVehiclescarrying>10peopleFromSR5,000toSR7,500qVehicles for Transporting of Goods From SR10,000 to

SR15,000qVehiclesof800-1600ccFromSR30,000toSR45,000

qVehiclesof1600-2000ccFromSR50,000toSR75,000qVehicles Greater than 2000cc From SR100,000 to

SR150,000

To ensure the effective administration, all motor vehiclelevies will, as of January 2015, be made at the SLA afterregistration of vehicles. Second, road tax will increase in2015;bySR1.0percctoSR2.50perccforprivately-registeredvehiclesand trucksabove5 tons;andby50centspercc toSR2.0perccforallothervehicles.

Third, vehicle testing fees will double. These fees havenot been increased at all since the new station becameoperational.In2015,theywillincreaseasfollows:

qMotorbikes:fromSR75toSR150acrossSeychelles;qCarHire:fromSR100toSR200onMahéandfromSR75to

SR150onPraslinandLaDigue;qLightVehicles: fromSR150toSR300onMahéand from

SR75toSR150toSR150toSR400onPraslinandLaDigue;qMediumVehicles:fromSR200toSR400acrossSeychelles;

andqHeavyVehicles:fromSR350toSR700acrossSeychelles

Mr. Speaker, Government also recognizes that the publicwants to see tangible results of their contributions such asmoreroadimprovementsandamoreefficienttransportationnetwork.In2015,spendingonroadinfrastructureandotherrelatedcapitalworkswillincreasetoSR115million.

Energy and Utilities:Moreover, in partnership with Government and the

UNDP,DBS has so far this year funded 23 projects for overSR900,000 under the newly launched Photovoltaic Systems(PV)RebateScheme.Thisschemeaimsatpromotingtheuseof renewable energy through PV for both the householdsand business sectors. Government contributed SR3 milliontoward this scheme in 2014 and a further SR3 million isprovided for in 2015. This has complemented the financialsupportprovidedthroughtheSEEREPschemewhichaimsatproviding subsidized lending through commercial banks andtheSeychellesCreditUniontohouseholdsforreplacementofenergysavingappliancesandenergy-friendlyequipment.

Intheutilitysector,Governmentwillsigntwonewloansin2015.Thefirstisa$21millionloanfortheraisingofLaGoguedam and improvement to the north Mahé potable watersystem, and the second a $35 million loan to finance the33kvlineforSouthMahé.Alsoin2015,PUCwillbenefitfromfurther7millioneuros from theEuropean InvestmentBankand the Agence Française deDéveloppement for thewaterandsanitationproject.

ANNEX F: Infrastructure and Utilities in the 2015 Budget

84


Seychelles Port Authority qThe government, through Ministry of Finance, has

approached the IFC to be advisors for the portdevelopmentproject,with a view to adviseon thePPPstructurethatcouldbeusedtofinancetheport

qThefeasibilitystudyprepared7yearsagoandreviewedin2012isbeingusedasthebasisforthefurtheranalysis.IFCpreparedaninitialdeskanalysisinAugust2014(receivedand shared earlier) and will now prepare a feasibilitystudyexpectedtobecompleted inearly2015.TheGoSintentistosharewithprivatesector,withfinancingbeingfinalizedin2016

qDue to the large costs, itwill bemost practical to fundit in phases (see initial cost study for the phases) withnew quay development being the first phase. (RepairsofexistingportEuro100m,newquayatEuro200-320m,dredgingEuro50m,ConstructionservicesEuro20m)

qAnewcargohandlingbusinessmodelwillbereviewedaspartofthenewfeasibilitystudy. Thenewmodelmightalsoincludeatransshipmentelement

Public Utilities CompanyqThe feasibility study for the 33KVAwas completed. The

projectwillbefinancedbytheSaudiandKuwaitFundsfor$20million

qDue to the poor condition of the Praslin plant (oldgenerators causing some environmental concerns giventhe location), twonewgeneratorswereordered for theold Praslin plant at a cost of 14.4m euro. This wouldprovidesomeneededtimebeforeanewplantwasbuiltonanewsite.ThereforethenewpowerstationatPraslinhasbeenovertakeninimportancebythenewgenerationneeds.

qThere has been no action on the North Mahé projectand$1millionisstillrequiredforthePraslindistributionnetwork

qWithregardtonewIPPs,therehadbeennonewadditions.HoweveranewgridcodewasdevelopedwithassistancefromWorld Bank feed in tariff model to underpin thepowerpurchaseagreements.Assoonascomplementaryregulations are in place IPPs will be able to enter themarket

qThere has been some interest in developing projects inother formsofenergy,e.g.PVC,Thermalandalsousingdifferentenginemodels

qThere isalsokeen interest inexploringLNGpotential.Astudyreviewingthesecurityofsupplyandpricestabilityover15yearswasundertaken-thepricingneedstobere-examined

qThe PUCwould like to recruit an expert to look at theevolutionofdemandofLNGinSeychelles,andislookingfor$200,000torecruitsuchanexpertforsixmonths

Seychelles Energy Commission qMain work this year has been reviewing legislation to

ensure they are in linewith and canmeet demands ofIPPs.Aconsumerrightsandobligationsbillwasgazettedin April 2014. Other regulations under review are theRegulations for Licenses- under the Seychelles EnergyAct (2012), Electricity Safety regulations are also beingamended

qThenewgridcodedevelopedwiththehelpofWorldBankneedstobevalidated.

qThebiggestchallengefacingSECisthelimitedcapacityinthisnewfieldofregulation.TheagencyrecommendsthattrainingandcapacitybuildingwillbeessentialtoenabletheSECmeet itsrole.Giventhe limitednumberofstaff(theSECisnotfullystaffed);shorttrainingprogramsandpracticalvisitstootherregulatorswouldbemostuseful

Seychelles Public Transport CorporationqNew fleet replacement plan will be implemented from

2015-17.Resourcesforadditional107buses(65in2015,22in2016and23in2017)hadbeensecuredandwouldbebudgetedintheFY2015GoSbudget.ThecostwouldbeSR111,650millionasaloanfromIndia

qMain depot improvements almost completed but someresourceswereneededforminorimprovements$0.7m

qVictoriaandPraslinstationsstillunfundedqBusupgradeequipmentforticketing,schedulingstillnot

funded.$0.2millionwouldberequired

Seychelles Airport Authority qPlanningfortherehabilitationoftheinternationalterminal

(toincreasebaggagehandlingandholdingcapacity)wascompleted, funding was sourced internally $2 million.Tendering would be finalized by end 2014.Work wouldcommenceinJanuary2015andbecompletedbyQ12016.Thefundingdoesnotincludethecostofequipment.

qTherehabilitationofthedomesticterminalwasdeferredto2015.Estimatedcostofthisis$6.2million(constructionofnewfacilities,relocationofcommercialareas,etc.)

qThesecondrunwayasdescribedindocumentshouldbecallednewrunway.Theaimistofundthisbasedontrafficgrowth and forecasts (however the security elementshouldnotbeunderplayed).Anewterminalbuildingwithequipmentwouldcost$200million

qEstimated statistics for 2014 (International arrivals-529,115;Domestic-157,187;Total686,302).

qFootnote80,shouldreadplanfor2014-16

Department of Transport qThe Mont Fleuri Road link (#32) and Victoria by pass

project(#31),andStevenson-BelAir#33,wereexpectedtobefinancedinthe2015Governmentbudget.FortheVictoria bypass project, the Departmentwas already in

ANNEX G: Current Initiatives Underway as of December 2014

85

Executive Summary

finalstageofdesigningtheproposedroute.WhilefortheStevenson-Belairroad,thefeasibilitystudyanddetaileddesignsarealreadyunderway

qNew Asphalt plant+ million machine (Mahé) wassubmitted for FY 2015budget.AnewAsphalt planwaspurchasedforPraslininFebruary2014

qAnewSeychellesStrategicPlan(2015-2040) forGreaterVictoriawasbeingpreparedbyAbuDhabi.Thedocumentwould be reviewed in 2015 and would influence newurbandevelopmentinitiativesinthemediumterm

qThedepartmenthas receiveda grant fromSouthKoreato undertake an urban transportation study and a roadconditionssurvey

ThedepartmentisworkingwiththeMinistryofLandUseandHousingtolookattheallocationofland,vis-a-visdevelopmentneeds e.g. road links, new commercial developments, redevelopmentofland(e.g.newfinancialdistrictatEnglishriverwithundergroundparking).Landuse,parkingandpossibilitiesformore non-motorized transport being explored; howevermorestakeholdersneedtoworktogether.

EP#15-2242

African Development Bank GroupImmeuble du Centre de commerce

International d’Abidjan CCIAAvenue Jean-Paul II

BP 1387 01Abidjan 01, Côte d’Ivoire

Phone (Standard): +225 20 26 10 20

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