The Seychelles Column - By Christopher Gill

“The 2010- 4 Joker Budget” a la Danny Faure 

Minister Danny Faure, Seychelles Minister of Finance, mustered all his courage that he learned to face the worse of times from his Cuba political science courses and swallowed some communist pride, and faced the National Assembly and the SBC to deliver the Budget Speech of his career and the Budget Speech of Parti Le Pep’s (P.P.) history.

In total the Budget Speech in front of me represents 52 pages, and the entire budget with the figures itself is nearly 150 pages. The strategy in that, is to wear down the Opposition, bore them to death, leave them in the clouds… “Cloud Nine (9)” if possible.

When the Opposition has made it to Cloud Nine (9), Faure will them hit them unassumingly with fake projections, that will instil confidence in the minds of the lay person. This will then, convert to continued support by the P.P. (aka Poor People).

Unfortunately, for Faure and P.P., in the next elections, people will vote with their empty stomachs, after Faure’s Budget speech delivers nothing on the table, and does not replace the worn out shoes for all those that are a little lucky now.

Like A Tall Hollow Tree Stands

While Faure’s voice bellowed out confidence, behind the numbers, behind the strategy, behind the acting that communists are famous for, there was nothing but hot air and internal rot, rivalling a budgetary joke of a Budget when faced with the dire straits Seychelles sees herself in today.

People of Seychelles, SNP, NDP, and in particular, the SPPF families looking for a clear path forward, and all independent Seychellois as myself, this budget speech solidifies our suffering in brass and bronze. Mr. Faure as he has every year, will have you believe that it is a strong budget.  It is not, as it has been every year. It is another nail in our economic coffin under P.P.. It is another Budget Speech of economic failures, because the economic fundamentals have been ignored.

1. More Promises of Success By Failures

As usual, it is a political budget that is meant to numb us into submission as a people and keep us on our knees as individuals. As Mr. Faure promises us a brighter future for our children, he neglects to tell us that it is our children and grandchildren who will inherit the debts created by his party, the same party that has nurtured him from cradles of infancy to Cuban education to office of Minister of Finance.

But then, correct me if I am wrong Minister Faure.

As you promise us a new, modern economy, you neglect to be candid with us to inform us, as we walk this new path of modernity, that we will carry the burdens of the One Party State debts and other debts created by your Government for roads that are full of potholes, of houses that are deteriorating, generators that do not work, and for failed, collapsed projects and ventures, for the next 25 years at least. Mr. Afif your good friend spins a positive note to the debts and says 18 years.

If so, I urge you to correct me if I am wrong Minister.

It is a budget that is intended to have us think that we should be grateful to be on our knees today; it is a budget that will ask us to be thankful for less, and be happy with less, but be happy at the same time, with SPPF, now P.P. failure. It is a Budget Speech that asks us to be grateful and pay homage to the missing US$ 2.4 Billion from our banking system as we undergo great suffering. Mr. Faure, by neglecting to address this issue, is asking us to forget about this missing money. Kiss it goodbye.

People of Seychelles, as you kiss this money goodbye as Mr. Faure would like us to do to please his master, remember, this is OUR money. It is one key of two keys, to our future.

The second key is debt forgiveness, which Mr. Faure does not talk about. He speaks instead, about Debt restructuring, which will prolong the pain for us and our children. Mr. Faure does not speak about debt forgiveness because it will mean removing Mr. Faure and P.P. from Government to make it a reality. A sad state of affairs, but true.

2. Budget Performance

According to Mr. Faure, we have a Budget surplus of 5% in terms of projected performance. The highlight has been support and grants. This means: donations to keep us going. Mr. Faure strategy in 2009 has been to pull out the begging bowl and make the rounds for collections. Hardly an economic or budgetary strategy that you can rely on these days to foster real GDP improvements.

The begging bowl is not a pillar of the economy. How does it fit into GDP?

To his credit, the Revenue Authority has improved tax collections by 20%. But that does not mean there has been more money in the economy. It means they have been inefficient in collecting taxes in the past and that has resulted in hundreds of millions in loss revenue to the People of Seychelles which could have been used for roads, houses, hospitals, education. And even money to build our National Assembly and Judiciary buildings instead of relying on Chinese donations!

Most of this 20% surplus is from taxing income on rental homes and on interest. Houses have traditionally been a wealth savings for Seychellois. To now tax this base, unreasonably, P.P. Government is taxing our savings. Consequently, the housing inventory will be curtailed over the medium term as people are discouraged from building. The effect will be devastating on the construction industry, which is shrinking as we speak.

P.P. does not focus revenue collection where it should.

Example, the P.P. Government has been baby sitting Eden Island Development for years now.  That is, on the revenue it receives, transactions on the houses the owners rent out as unlicensed holiday villas, the cars that are rented black market, and the boats that are chartered in the area.  Most of the money is banked in some other area or other country.

Eden Island has gone into competition with existing licensed hotels, and some houses have even penetrated the local market rental schemes, competing with existing markets instead of creating new markets. Where is the revenue collected from that Mr. Faure? Nothing to declare!

Mr. Faure says SIBA and Nouvobanq returns have been high. Of course, they are higher than last year.  It is in the “why” that Mr. Faure hides the reality. The reason “why” SIBA and Nouvobanq have higher Seychelles Rupee revenue is because of devaluation or floating of the Seychelles Rupee. No magic trick there.

Profits are high but money looks more like monopoly money in real terms than it did last year. First class Minister of Finance joke!  Again, correct me if I am wrong Minister Faure.

3. Monetary and Financial Sector Developments in 2009

Mr. Faure says the primary objective of the monetary policy of P.P. is “price stability”. This is a fundamental objective of failure.

It is the Achilles heel of the failure of the P.P. monetary policy today. Again, they put the right shoe on the left foot, and put the left foot in their pockets and hop around on one foot without a shoe. A joke indeed, but our reality in any case. We must face it and take it down!

What Mr. Faure is saying is that P.P. through Pierre Laporte at the Central Bank, wants to use the powers of the Central Bank to curb inflation, keep it low, and make shopping in Seychelles predictable. Basically, a box of UHT milk will always cost us between Scr 18.00 – 19.00 Rupees. It is a dream that only a communist could think of.

We do not live in a bubble of paradise. We are subjected to many external factors that affect the cost of goods hence inflation. Our governmental finances and misuse of funds and non-payment of debt will trigger inflation as well. Sooner or later, it will be back after the hocos-pocus of Pierre Laporte. Why? Because it never really left us, Pierre Laporte just hid it through buying up hard currency from the markets to keep us from discovering it. He cannot do that all the time.

Pierre Laporte’s job is regulating fiscal monetary policy in relation to supply and demand. Curbing inflation by using Central Bank monetary tools is like an old man using red Viagra pills to reclaim his youth prowess. When the pill wears off, the results could be cardiac arrest. The pill is wearing off now. Beware.

The better and most sound effort P.P. or any government could do in terms of “monetary policy” is not to ensure “price stability”, but rather, to ensure that we have “more money” (this means create growth conditions to increase GDP), to buy what we need and spend as we chose. This will create more economic activity, more money circulating which will reach everyone equally according to their sweat, ideas, sacrifice, ability to survive this catastrophic downturn we are entering, only now.

This is the better understanding of the Free Market P.P., not the garbage you are dishing out to us that is planted in ideas of greater failure than what we witnessed in the last days of One Party State.

What you are doing with our finances today, is a little like putting Rene in a white safari suit, and calling him a great success, because he is the only one who dares wear such a silly looking, outdated dictatorial suit.

The Cost of P.P. Perverted Financial Policy

“Price stability” theory has a cost. The cost is an artificial Seychelles Rupee value that will not be acceptable by investors. As the value of the Seychelles Rupee falters to achieve legitimacy, there will be less hard currency in circulation, and the demand for that will increase.

Black Is Back

If Pierre Laporte is sleeping on the job, the Black Market will be back, as it is now, but it will become more prolific as it was two years ago. As that happens, Government, banks, business, will lose access to hard currency availability, Mr. Faure. You will be back to square one.

Enter Deflation Into P.P. Dreams

The additional cost of your “ Price Stability “ theory is DEFLATION to our detriment as a nation.

Mr. Faure may ask, what is DEFLATION? It is in simple terms: the reducing of size, in real terms of your economy. This means less money circulates, less activity, less growth, results in severe increases in unemployment, and if your labour force is not trained, or flexible, it results in the labour force becoming unemployable in the medium term.

Deflation has symptoms such as high profits when you devalue currency, or low inflation when no one buys anything, and no FDI when your one stop business centre is open, but the World Bank suggest that it better be a window instead of a door.

No Productive Capacity To Increase GDP- Face it!

Why will our labour force become unemployable, Mr. Faure will ask. Because if left unemployed for a prolonged period of time, they will lose their skills. Example, a carpenter is only as good as his last job. If he drinks for 3 years before his next job, he will not be as good as his last job.

Additionally, we have a severe problem with drug addicts that P.P. does not recognize and the budget treats the problem like it is a common cold. According to CARE, which I do work with as an anti-drug NGO, we have between 9,800-18,000 drug addicts in Seychelles. The high figure, represents 32% of our population.  And the majority are young people, the supposedly future workforce of the nation.

When these should be patients come for a job interview, we see the red eyes, we see the needle tracks on their arms and legs, we smell the drugs on them, we smell the alcohol. So they are not hired. These patients need to be treated before they can contribute to society Mr. Faure. To include them as part of Seychelles productive capacity is a falsehood that will destroy business and hopes for recovery economically.

This is why we have almost 10,000 workers on GOP and will continue to require them and more, unless we want to hand Seychelles over to Pirate Hassan for a holiday destination for hard working pirates, and lure them away from Kenya as their prime investment centre for ransoms collected from the world. Perhaps you will advocate the selling of some passports to Somalia pirates.

As Mr. Faure seeks price stability, we undergo Deflation syndrome. Hence, our economy will shrink. We will have less and less money in circulation, goods can come down in price for a short time, but

Seychellois will not have money to buy them. Stores will be full, and warehouses stocked for a short time, then the goods will expire, rot, and merchants will raise the price of the next consignment to pay for the loss on the last consignment. The wheel of failure will turn, and it will spin for Mr. Faure into a state of hopelessness.

Correct me if I am Wrong Minister Faure.

4. Outlook for 2010

In this section of the Budget Speech, Mr. Faure takes his shoes, and throws them away, not having a grip on the outside world realities. Literally, the Minister of Finance has no clue what kind of deep economic recession the world is in 2009, 2010, 2011 and beyond. Without having a solid grip on what is happening in the outside world, little Seychelles, will not be able to set in place a successful economic –financial recovery package.

Mr. Faure fails before he even gets off from the starting line, because he does not know what race he is running. He shows up to a 15 kilometer race with a spoon and unboiled egg in hand.

Mr. Faure makes a reckless intellectual presumption that the global recovery is under way and results will translate into increase Tourism numbers in 2010 and increased FDI into Seychelles a micro emerging market.

If Europe’s productive capacity is -15.75% this year, how will it recover in 2010? If the European banks are faltering under bad debts going unpaid, today in December 2009, how will it improve its situation in 2010 next month? Faure of course, in traditional communist style and fashion, puts the cart before the cow. You can forget about a horse with these guys.

It would all be funny if it was not our lives they are playing with. But they are playing with our lives and it is not funny for a moment.

The global recovery is at the beginning stages of recovery. The western countries, which we depend on for trade and tourism have lost enough money down the drains over night to bring their economies of 2008 back to YEAR 2000 in terms of the amount of money available in the markets.

That is 8 years Mr. Faure, not 8 days. USA alone Mr. Faure, has $840 Billion missing from circulation in it’s economy alone. The stock markets in Europe will not move upwards, if Wall Street does not. With -10.75 % unemployment in USA, Wall Street will not move upwards. Why? Because in America, it is the workers that are the main investors in stocks, not the royal family as in Seychelles.

Yes Mr. Faure, in America, it is the workers that are the main capitalists. Wow! Can you believe that?

In Cuba Raul owns most of the hotels and rent-a-cars with his ailing brother. Sound familiar?

Dreaming of Low Interest Rates

Wishfully, Mr. Faure asserts that bank interest rates will continue to drop. This is an “Alice in Wonderland” assertion. Banks have taken in savings deposits at 10-12% and placed the deposits in Treasury Bills when they were 32%,21% 18% and made a killing, without having to risk lending out money, which is their business. As Mr. Faure gave his Budget Speech, Treasury Bills had dropped to 1%, leaving banks with no option but to lend at 13%,14% 15% or more, or not at all.

Without banks stimulating the economy through reasonable loan fees and in fact making money available to local business, there will be no investment in Seychelles in the medium term. FDI under a bankrupt government is wishful thinking. The only bank that can lend at a loss to government will be Nouvobanq, since government owns most of it anyways. But that has a short time line as well. Eventually, Nouvobanq would go bankrupt as well if it implemented such a foolish policy.

If banks cannot drop rates, and find that they are in a Pierre Laporte fish trap, then they are stuck.

If banks are stuck, then business is stuck.

If business is stuck, then the employed are stuck.

If the employed are stuck, it means the unemployed are out of luck under P.P..

This is the reality Mr. Faure does not address in his budget.  

Our Reality Beyond Faure’s Fancy Words

Contrary to Mr. Faure’s assertion, in 2010, Seychelles will continue to undergo a downward contraction of the size of her economy. This contraction will result in increased unemployment, further cancellation of projects as seen in 2009, and many businesses outside of the essential commodities supply chain, will continue to face great hardship, manufacturing and farm productions will suffer a heightened downturn. The construction industry will slump further as contracts are cancelled or not implemented. Block manufacturing will continue to witness slump in production as demand slumps. IT industries will remain a dream as the government over taxes the phone companies and does not reinvest that money in larger bandwidth which could catapult Seychelles into the 21^st century in the shortest time. Hence the best use of any spare cash surplus at this time. Alternatively, any surplus should have been used to pay down debts to re-establish our credit worthiness.

Instead of increasing salaries by an insulting 4%, salaries of fat cats called constitutional appointments should have been cut by 38% since they have all collectively taken the money and simultaneously failed Seychelles in her hour of need and need of their individual but collective sacrifice.

The question is not how much growth in 2010, but rather, how much less will the economy contract: -8%,-10%,-6%,-5%.  This is not success or SIKSE as P.P. call it. It is FAILURE! Get use to the word.

Already in 2008 it was -4% and 2009 -8% according to IMF. Mr. Faure’s track record in running our national budget does not look good. He is getting worse every year. Based on the last 2 years performance, in 2010 he will bring Seychelles to -16%, as he doubles the downturn in GDP every year. Sad but very true.

Correct me if I am wrong Mr. Faure.

The mess the Central Bank made with the Treasury Bills has resulted in a greater loss of confidence in the Seychelles economy. Now in future, who will buy Treasury Bills? Parastatals like the Pension Scheme I suppose because it is not their money after all!

While the Seychelles Rupee is in theory convertible, we have less money in circulation to use. Hence the real reason why banks had hard currency for a short period.  A person who earned Rupee when it was 5.0 -1.0, could not afford to covert it at 10.0 – 1.0 or 13.0 -1.0 . It is a net loss. Hence the hard currency stayed with the banks, unless their was an emergency need for hard currency.

The commercial banks had so much hard currency, that it threatened the viability of the Seychelles economy. Hence, why Mr. Laporte intervened into the system and bought the hard currency to shore up reserves which were already below the red line. This was done, not because we were doing so well, we all know we were not, it was done because we were doing so bad, we can all feel that of course.

It is a little like an ICU patient.

You look at him and see him breathing.

You say, ah, looks like he is doing well.

No. He is not.

It is the machine forcing air to his lungs, and blood bottled connected to his veins keeping the flow.

This intervention keeps the patient alive.

Pull the machine, you kill the patient. The machine and blood bottle is a combination of IMF, World Bank, ADB, Central Bank tools, however badly they are used.

This is Seychelles economy today with Mr. Faure at the Head of Finance, President Michel as Minister of Foreign Affairs travelling the world with no care in the world with his large entourage toting platinum credit cards and hard currency in the briefcases, Pierre Laporte as Governor of Central Bank, using screw drivers and pianos to figure out our economy.

Mr. Faure can act like a success in front of the camera, but we who are on the ground, live, breathe, the failures of SPPF and today, P.P..

They are the same people less the 15% voters who dumped umbrellas in the bins around the country this year. Those that tossed the umbrellas know the impact of P.P. failed policies and attempt to stage act themselves out of economic malaise.

The rest of the budget is sectoral reviews of different departments and programs.

I leave that to the Public to rip apart as there are a lot of dreams and a lot of square pegs being put into round holes everywhere.

The end result will be a little like putting water in your fuel tank when your car runs on only unleaded fuel.

You can expect Mr. Faure to place a bold sign on your car that reads “HYDROGEN-DREAM CAR”.

Unfortunately, if your plan to make money is not thought out well, then your plan to spend it which can be as detailed as the amount of stars in the sky, will not work out well either, and will not be worth talking much about.

Dream on communist brothers, dream on.........

May God Bless All Freedom Loving Seychellois and Our Beloved Seychelles