Tourism is at the helm of the economic development in Seychelles and plays an important role in the conservation of the natural heritage of the country. Hotels and tour operators channel their corporate social responsibility (CSR) taxes to the environmental organisations, providing them with essential funding. With this income, the NGOs can carry out marine and terrestrial conservation programmes, run educational campaigns, and engage the local community into beach cleanups and bird species censuses.
However, in response to the global COVID-19 pandemic, in March 2020, the Seychelles International Airport had closed its doors, putting a halt to the arrival of international travelers. With no guests, the hospitality sector has no income and limited means to finance the work of NGOs. Now, the environmental organisations are facing a tough challenge of finding new ways to finance the projects.
One of such sources can be the Seychelles’ Conservation and Climate Adaptation Trust (SeyCCAT) that manages the proceeds of the country’s debt-for-nature swap and the blue bond. The NGOs may apply for funding under one of SeyCCAT’s priorities and secure the foreseeable future of their projects. But SeyCCAT’s impact goes beyond the non-profit sector. The fund offers financing for small local businesses and individual entrepreneurs to enter the domestic market, develop new products, and build impactful businesses. These SMEs are the ultimate accelerators of the domestic economic development. Thus, SeyCCAT plays an important role in strengthening the private sector and helping the country build a sustainable blue economy.
But how do we make sure that SeyCCAT continues its work amidst the world-wide health crisis, collapse of the tourism industry, and the national economic shock?
Where is the money coming from?
SeyCCAT’s budget is formed from two main sources: Seychelles’ debt-for-nature swap and the sovereign blue bond. The Nature Conservancy (through Nature Vest) had mobilized an impact loan for the government of Seychelles. With this money, the government bought back US$ 21.6 million of the country’s debt from the external creditors. Then, a portion of the impact loan is not repaid back to The Nature Conservancy but is channeled to the Blue Grants Fund of SeyCCAT, a trust fund that finances marine conservation and climate adaptation projects. This approach called debt-for-nature swap means that the external debt of Seychelles is converted into a financing stream for conservation and climate adaptation work in the country.
Under the debt swap mechanism, marine and climate change projects receive US$ 200,000 from the Blue Grants Fund annually, ensuring their continuity and impact. For this money, SeyCCAT depends on the government repaying its debt. As for the blue bond, the second component of SeyCCAT’s budget, the government must honor its obligations to include US$500,000 in the national budget to subsequently transfer to SeyCCAT’s blue grants fund. Half a million dollars is a substantial amount of money for a small island country on a good day; but what about now, when Seychelles can no longer count on the income from tourism, the main source of the national revenue?
Something’s gotta give
2020 was supposed to be a super year for nature. The global community was anticipating the rollout of a new legally binding instrument for the conservation and sustainable management of marine biodiversity, new targets for protected areas under the Convention on Biological Diversity (CBD), and the revision of Nationally Determined before COP26. However, the attention of the policymakers worldwide had shifted to the force majeure of the COVID-19. With the unprecedented economic decline and a large part of the world’s population under a lockdown, marine conservation might be put on back burner of the national priorities. Even in the coming recovery phase, countries are likely to prioritise the sectors that create employment and generate revenue quickly and focusing on short-term exploitation.
The Government of Seychelles is no exception. With the economic pressures caused by the global pandemic and no income from tourism, the Government will be forced to make some difficult choices and set clear financing priorities. The policymakers might seek to renegotiate the national debts. The debt-for-nature swap, the base of SeyCCAT’s budget, might be one of them. But it shouldn’t.
Should we sacrifice innovative financing during the global pandemic?
There are several reasons why SeyCCAT should maintain the funding:
- SeyCCAT offers crucial alternative funding to the NGOs that otherwise depend on CSR taxes and tourism/hospitality donors to continue the enhancement of marine protection.
- SeyCCAT supports research and wider uptake of sustainable aquaculture, that can protect livelihoods and ensure food security.
- SeyCCAT can support entrepreneurs and small businesses that seek to diversify their businesses and enter the blue economy space. This includes supporting businesses with grants for product development, essential research, and business planning, including those willing to depart from a tourism-focused business model.
In addition, there are broader factors to consider:
- The Debt swap has favorable conditions: the debt was bought at a discount at 93.6 cents for a US$ and the repayment is at 3% over a 20-year period. A portion of the loan can also be repaid in the local currency. Thus, the government might prefer to renegotiate more demanding debts.
While the health crisis remains a priority, we should not lose sight of the recovery that will come after. We should do what we can now to ensure that we can bounce back quickly and build back better. Financing the recovery may loom on the minds policy-makers. Debt swaps may provide a new opportunity for countries to obtain debt-relief or even debt forgiveness while generating some income to put towards conservation and climate work. Such debt instruments can be tied to sustainability targets, helping countries to build back better.
During the global panedemic, countries must be strategic about distributing budgets and prioritising the programmes that have a direct impact on peoples’ livelihoods and the ones that support the sustainable development of the country. SeyCCAT’s next call for proposal will do that.