SACOS Privatisation

SACOS PRIVATISATION

How Mauritian investors brought zero money to the venture but got 15% of the company

Sacos Tower During his official visit to China, President Michel invited Chinese businessmen to come and invest in Seychelles. He made similar statement when he visited Mauritius on the occasion of its independence last year. In his own entourage, however, which in Beijing was quite substantial, Mr Michel never includes Seychellois businessmen. In fact he has shown what many consider open abhorrence of them by refusing to meet with the Seychelles Chamber of Commerce and Industry – the only organised representative body of private sector in Seychelles. Whenever he met with the private sector organisation’s elected representatives it was always at their insistence.

Mauritian businessmen have certainly taken Mr Michel to his word. The latest being the Swan Insurance Group. This is one of the oldest established insurance firm in

Mauritius

. Although the Group claims in its website that it was interested in doing business in the region, it does not appear that they have done much business anywhere else. In Seychelles it was an opportunity they could not miss.

Now it appears that in order to acquire 15% of the shares in SACL - the new entity taking over the assets (and some liabilities) of the defunct State Assurance Company of Seychelles (SACOS) - the Seychelles Pension Fund made a loan to SWAN Insurance of Rs. 5,000,000 with which to buy the shares. This revelation is bound to cause some controversy. Who else in the world was offered this sweetener. Many people in Seychelles would have liked to buy more shares if they had been offered a loan especially the employees of SACOS.

The sum is equivalent to one third of the declared gross profit of Swan Group for the year 2005. In its own published financial statement Swan considered its investment in Seychelles as “an investment opportunity - in partnership with the Seychelles Pension Fund. This investment is also viewed from the angle of a strategic partnership supplemented by a technical support which the Group will be providing to SACL.” In other words this arrangement smells more like you need me more than I need you.

The arrangement is the third controversial undertaking by the Board of the Pension Fund led by the Governor of the Central Bank, Francis Chang Leng. Under Chang Leng’s leadership, the Pension Scheme (before it became the Pension Fund) paid SR 57, 576,568 for a 97 year lease on part of the building called Caravelle House, a concern which is owned by the Mauritius Commercial Bank but built on reclaimed land leased to it by the Government for a period of 97 years.

In order for the “investment” to make sense for the Pension Fund, critics say, the leased portion of the building must generate rental income. In the balance sheet only SR 235,759 was attributable to rental income. In 97 years this would amount to only SR 23 million. Perhaps more will come in later years. At this time it is more likely to come from the Government as the major tenant, which is a kind of round about and more risky way for the pension Fund to invest in government debt. But the building cannot last 97 years.

The second controversial investment decision made by the Board of the Pension Fund under Chang Leng was the purchase of 3,314,606 shares in Seychelles Breweries from business associates of former Presidential Economic Advisor, Mukesh Valabhji, for the consideration of SR 59,662,908, slightly below the net asset value of the shares. The funds raised by the friends of Mukesh was used in turn to pay government in return for ownership of the Fisherman’s Cove, which had a 20 year lease contract with the Meridien hotel chain generating over US$ 60,000,000 .

It is not known exactly what technical assistance Swan is providing to SACL. Latest information coming from the SACOS tower is a programme of redundancies being prepared to take effect next year, after the budget speech, in order to make the company more competitive. SACOS Tower itself was acquired from Malaysian developers closely associated with Island Construction Company (an SPPF owned enterprise) for the then outrageous sum of SR 17,000 per square metre 5 years before, although all other owners subsequently paid between SR 5000 and SR 10,000 per square metre.

The revelation that the so-called “strategic investor” needed to be induced with a Seychelles rupee loan rather than them bringing hard currency – be it Mauritian rupees – is bound to be a major embarrassment to the government. This comes on top of the difficulty government had to get people to buy the shares when they were offered to the public, warranting numerous extension of the deadline. At this time no one knows how many shares are owned by the public at large and how many had to be taken up by the Pension Fund, which acted more as an under-writer for the share sale.