HOW SPPF GOVERNMENT GRABS 75% OF THE WEALTH

Seychelles Breweries Ltd is one of the largest business concerns in Seychelles. As its name would suggest it makes beers. But it also makes soft drinks or sodas as the Americans would say. 

Established since 1972, SEYBREW, as it is colloquially known, has become an institution. Its shares are sought after but none is available for sale.

Every year, when the company holds its annual general meeting, the event is synonymous with a beer festival. Over one hundred people attend the annual general meeting representing just about 5% of the total shareholding. The drinks and lavished food on offer after the meeting are invariably worth more than value of shares of the most of the members present but certainly worth a lot more than the dividend. The original meeting of the company when it was launched some 35 years ago was held at the Salle d’Oeuvre.  This year the occasion was celebrated at the Mahe Beach Hotel, the last major function before the hotel shuts down for renovation.

In the last financial year the brewery increased its total sales by SR 22 million to SR 322 million. Despite that, its trading profit – or Total Wealth Created as its financial statement puts, dropped by SR 17 million or 7 %. The drop in profit was no doubt due mostly to an increase in the cost of raw materials and services, itself due to the depreciation of the rupee.

Nevertheless, SR 223 million of profit is, by any standard of businesses in Seychelles, a substantial sum.  Of this amount, however, the State takes 75% or SR 168 million in the form of various taxes. The tax on the net profit of the company, however, amounted to just SR 18 million or 11% of the total taxes the company paid during the financial year. The rest of the taxes the company pays, some SR 150 million are taxes which it collects on behalf of the government on its products as and when they bill customers. In effect the company is a cost free tax collector for the government.

As the name would suggest, one would think that the breweries main product would be beer. In fact beer accounts for only 32% of production. While soft drinks account for most of the rest (54%) of the company’s production, coca-cola alone accounts for 35%.

Interestingly enough, since we are in a socialist paradise, wages and salaries account for merely 8% of the net profits while dividends, or return to shareholders (the capitalists) account for 12%. At least 5 members of staff have been with the company since it was launched 35 years ago.

Like all foreign own companies, except the commercial banks, Seychelles Breweries has been unable to repatriate dividends or royalties overseas due to the foreign exchange crisis that has lasted well over ten years now. As a result the company has accumulated cash in the banks in local currency to the tune of SR 300 million. The company keeps going because its major shareholder, the multinational drinks giant DIAGEO is prepared to extend timeless credit.

It is not clear if the company is permitted to receive foreign currencies in return for its products sold to 5 star hotels that have been given concessions to keep between 75 and 100% of their foreign currency earnings. Only the government can permit one to receive foreign currencies in return for goods or services supplied.

November 23, 2007
Copyright 2007: Seychelles Weekly, Victoria, Mahe, Seychelles