Vivid Economics - SeyCCAT€¦ · Web view2020/01/02 · Fishers currently receiving low incomes will avoid the even lower incomes and lower employment of the business as usual scenarios:

Fisheries recovery on the Mahé Plateau, Seychelles

Report prepared for The Prince of Wales's International Sustainability Unit and the Seychelles Fisheries Authority

Second draft reportSeptember 2015

2Fisheries recovery on the Mahé Plateau, Seychelles

Executive SummaryThe case for financing transition

This report analyses the benefits of the transition to a sustainable demersal fishery on the Mahé Plateau, in line with the government’s goal ‘promotion of sustainable and responsible fisheries development and optimisation of the benefits from this sector for present and future generations’. It was prepared in close cooperation with the Seychelles Fishery Authority.

The fisheryThe plateau is an area of around 41,000 km2 up to 50m deep, fished by 140 whalers and schooners and at least another 400 outboard vessels, as well as sport and recreational fishing boats. The more seaworthy vessels go to sea for up to a week at a time, carrying a crew of four or five, but the smaller ones are sometimes sailed single handed and make only day trips. They use hook and line and traps. The principal species landed are Bourgeois (Emperor red snapper), Job (Green jobfish), Maconde (Brownspotted grouper), Plat (Yellowspotted trevally) and Kapten (Blue-lined large eye bream). The Bourgeois contributes the greatest value to the catch. The total annual catch value is around 169 million (USD 12.5 million).

ManagementThe fishery is currently open access, restricted only in the sense that vessels must be registered in the Seychelles. Other than nationality, the other principal control is a prohibition on spear fishing. There are no controls over effort or catch.

The Seychelles is in the process of passing regulations to implement a new management plan. A number of management measures have been put into the plan to control the level of fishing mortality, such as limitation on the number of fish traps, minimum landed size and recreational bag limits for certain species. Further options are enabled, such as minimum size limits, gear restrictions, area closures and habitat restoration.

The 2015 management plan will not control mortality to the extent where stocks will start to rebuild. Instead, it may only slightly slow the rate of decline in stocks. Even so, the new management plan is useful because it puts in place many of the regulatory processes that would be needed to implement transition.

Biological statusKey evidence suggests that stocks are declining. The data for the numerous outboards and the few schooners show catch per unit effort, an indicator of biomass, declining significantly from 2005, the former by 27 per cent and the latter by 60 per cent, by 2014. Volatility in the data makes the change in status of the


fishery over time difficult to measure. It is not known what proportion of carrying capacity biomass is currently in the fishery, but it is certain that fishing pressure is causing the biomass to diminish.

Economic statusThe fishery is making a profit even without subsidies. For every SR100 of fish sold, around SR91 is spent catching the fish. Fishers receive subsidies of about a fifth of their revenue. The average revenue in 2013 was around SR 42/kg. Taking into account the unsubsidised costs of catching, which were SR 38/kg, the surplus of the demersal fishery was about SR 4/kg. This suggests that subsidies are not necessary for the average viability of current activities. Vessels made a profit on average even without subsidies. The subsidies cost the government around SR 35 million, USD 2.3 million, annually. Fish prices are set in international markets, and subsidies have not reduced the prices that Seychellois pay now. Although subsidies were introduced with the intention of making fish cheaper for Seychellois to buy, they have not achieved that outcome.

Business as usual prospectsWithout transition1, models indicate a continuing decline in biomass, a dramatic reduction in catch, and a steady decline in effort. A range of outcomes is possible. A central scenario is that biomass falls by around 40 per cent and the catch by around 60 per cent over a five year period. Fisher incomes would fall. The future of commercial fishing would be very uncertain.

A source of uncertainty is fish stock dynamics. For various reasons, there is a poor statistical fit of fishery data to standard models of fish biology, which means that the statistical estimates of biological parameters used to predict the future biomass are uncertain. This makes it hard to predict outcomes.

Prospects under transitionTransition offers much improved biological and economic prospects. In central scenarios for transition, biomass stabilises at a level between 2.5 and five times the biomass level of the business as usual central scenario. This greatly improves catch per unit effort, so fisher incomes are higher and effort is lower.

Under transition, economic consumption in Seychelles would rise. Although employment in catching will fall, employment in processing will rise, as a higher catch will require greater processing activity. In addition, the reduction in subsidy could stimulate employment and income levels elsewhere in the economy, as consumption expands.

The effect of transition on income in the Seychelles will be positive. Fishers currently receiving low incomes will avoid the even lower incomes and lower employment of the business as usual scenarios: wages might double from SR 62,000/yr to SR 141,566/yr, rather than falling by 100 per cent in business is usual. However, many fishers will have to find alternative employment, for which they may need training and help.

1 Transition is the process of establishing of a stock producing maximum sustainable or economic yield.


During the early years of transition, access rights, including tradeable quota or effort, can allow fishers to compensate each other for exit. Access rights can also perform a useful allocation function in the long run, when transition is complete.

Management of transitionOn the path to transition, the 2015 draft management plan is an important intermediate step to a full plan, but to achieve transition, the 2015 draft management plan must be extended in two or three ways:

– coordinated or integrated coverage of commercial, recreational and sport fishing;– full control over mortality; and– optional: control over total catching capacity

The costs of a full management plan2 are expected to total around SR 57.8 million (USD 4.2 million) over the first five years, or SR12 million (USD 0.9 million) a year. These costs relate to building the systems to implement the new controls, monitoring and enforcement, additional general operational costs and research costs. These individual elements have been costed by the SFA, without a full management plan as a reference, so the figures could go up once a detailed plan has been developed. Some of the costs of a full plan would already be funded under the current EU partnership agreement, if it continues in its current form after 2018.

For every Rupee spent on extending the draft management plan to a full plan, 17 Rupees of benefit are generated directly to the fishing sector. The incremental full management costs for the period 2015 – 2028 are around SR 18 million (USD 1.4 million). The value the plan adds is an estimated SR 305 million (USD 25 million), giving a benefit cost ratio of 17:1. If one were to count the benefits to the rest of the supply chain, the figure would be higher still.

FinanceThe transition of the fishery is a community investment. In the transition, enduring controls of the catch will be imposed, and fishing mortality reduced for a period while the biomass grows to a sustainable level, then fishing mortality governed to maintain a target biomass. The government will make an investment in the management of the fishery, fishers will make an investment in the stock, in some arrangements by buying access rights from their peers, or otherwise by continuing to operate on reduced incomes for a period, and the people of Seychelles will make an investment by forgoing some of their consumption of fish, substituting it for other sources of protein, until the biomass has grown.

By using finance, the government can maximise the benefit of transition for the Seychelles economy. Finance increases economic resources available to the economy, smoothing consumption.

The Seychelles Government is considering a capital raising transaction that would fund the costs of plan implementation. To raise the required capital, it is proposed that the Seychelles Government issue a sovereign bond with proceeds used to fund the Mahé Plateau management plan. It would follow the Green Bond model that has been used by governments, development banks and corporations to fund projects with environmental and climate benefits.

2 Full management plan drops some elements from the draft plan and introduces additional controls to effectively control mortality


RecommendationsBy taking six actions over the next 18 months, the government will be on track to achieve its objectives. The first four are policy actions:

– adopt and implement the draft management plan in 2015;– develop options by November 2015 then adopt in 2016, after Presidential elections, a plan to phase

out subsidies;– develop by November 2015, then adopt in 2016, after Presidential elections, a plan to introduce

effective mortality and capacity controls, and develop implementation plans through 2017, implementing the controls fully from 2017 or at latest 2018;

– assess in 2015 the scope for introducing access rights, including tradeable quota and tradeable effort rights, and implement it before fishers leave the sector from 2017.

The last two are management actions:– review the fishery biology and publish a reference table, and alongside this, develop and publish a

base set of business as usual and control scenarios;– publish annual fisheries accounts.


AcknowledgementsThe authors at Vivid Economics gratefully acknowledge the assistance of many people in the production of this report. In particular, the following gave considerably of their time and expertise:

– Jude Bijoux, Fisheries scientist, Seychelles Fishing Authority;– Karine Rassool, Fisheries economist, Seychelles Fishing Authority;– Larry Band, finance expert, New York;– Lucy Holmes, International Sustainability Unit, Prince of Wales’ Charitable Foundation;– Nico Gutierrez, fisheries biologist.

We are also grateful to the advice and support to make from the following, which were essential to the success of the project:

– Alan Mason, Mason’s Travel, Seychelles Hospitality and Tourism Association;– Amit Wasserberg Silhouette Cruises, Seychelles Hospitality and Tourism Association;– Angele Lebon, Financial Controller, Seychelles Fishing Authority;– David Bentley, Managing Director, Sea Harvest;– Didier Dogley, Minister of Environment, Energy and Climate Change;– Grant Heyer, Secretary, Seychelles Sports Fishing Club;– Jan Robinson, Fisheries scientist, James Cook University, Victoria, Seychelles;– Jean-Paul Adam, Minister of Finance, Trade and the Blue Economy;– Juliette Lucas, Consultant for Data Management and Statistics, Seychelles Fishing Authority;– Justin Mundy, International Sustainability Unit, Prince of Wales’ Charitable Foundation;– Kate Carolus, Executive Director, Seychelles Hospitality and Tourism Association;– Keith Andre, Chairperson, Fishermen and Boat Owners Association (FBOA), Victoria;– Klaas de Vos, International Sustainability Unit, Prince of Wales’ Charitable Foundation;– Lindsay Skoll, British High Commissioner to Seychelles;– Matthew Harper, British High Commission, Seychelles;– Michel Marguerite, Fisheries economist, Seychelles Fishing Authority;– Philippe Michaud, Chairman of Seychelles Fishing Authority and Special Advisor for the Blue

Economy;– Rod Thorrington of JOUEL, Seychelles Hospitality and Tourism Association;– Roy Clarisse, Deputy Chief Executive Officer, Seychelles Fishing Authority;– Vincent Lucas, Acting Chief Executive Officer, Seychelles Fishing Authority;– Wallace Cosgrow, Minister of Fisheries and Agriculture.– Lindsay Skoll, British High Commissioner to Seychelles at the time of the study.

Finally, the warm hospitality of the SFA staff was extremely welcome.


An appropriate citation for this report is:

Vivid Economics, Fisheries recovery on the Mahé Plateau, Seychelles, report prepared for International

Sustainability Unit and Seychelles Fisheries Authority, July 2015


Contents

1 Introduction..........................................................................................112 Background..........................................................................................133 Current status of the fishery...............................................................174 Transition planning.............................................................................225 Costs of transition................................................................................356 Finance..................................................................................................427 Conclusions...........................................................................................448 Recommendations................................................................................46

Appendix 1: Estimation of biological parameters.................................................50

Appendix 2: Fishing costs.....................................................................................54

Appendix 3: Projections........................................................................................57


List of tables

Table 1. Five species account for approximately 35 per cent of revenue.........19

Table 2. The fishery account shows a profit in 2013........................................20

Table 3. Estimated subsidy costs of SR 35 million/year...................................21

Table 4. Initial and final values of biomass, catch and effort in the BAU

stabilization and reform scenario........................................................25

Table 5. Key effects on employment, profitability, wages and vessel owner

income.................................................................................................29

Table 6. Potential evolution of controls............................................................31

Table 7. Potential evolution of controls............................................................32

Table 8. Estimated management costs..............................................................35

Table 9. Implementation costs...........................................................................36

Table 10. Monitoring and enforcement costs......................................................37

Table 11. Operational costs.................................................................................38

Table 12. Research costs.....................................................................................39

Table 13. A full management plan offers excellent investment returns..............40

Table 14. Data management................................................................................48

Table 15. Data management................................................................................49

Table 16. Variable costs constitute 70–75 per cent of total cost.........................55

Table 17. Average costs per trip (without subsidies)..........................................56

List of figures

Figure 1. Vessel Monitoring System activity map for 2009-2014 for speed less

than 0.1 knots......................................................................................14

Figure 2. Catch per unit effort has fallen between 2005 and 2014 for schooners

and outboards but whaler productivity has remained static but volatile

.............................................................................................................18

Figure 3. Whaler costs with (left) and without (right) subsidies........................20


Figure 4. Possible outcome under draft plan, business as usual.........................22

Figure 5. If effort stays at 2013 levels, biomass declines rapidly.......................23

Figure 6. Enhanced opportunity from full mortality control..............................24

Figure 7. The projection of biomass under a range of biological parameter

values and four management scenarios...............................................26

Figure 8. The projection of catch under a range of biological parameter values

and four management scenarios..........................................................27

Figure 9. Transition from red to green management, the headline controls.......33

Figure 10. Illustration of timing of transition.......................................................34

Figure 11. Heat map of sensitivity analyses of rate of return to management costs

and levy rates.......................................................................................40

Figure 12. Scope of draft and full management plans..........................................47

Figure 13. Yearly catch level and abundance for Red Snappers in the Seychelles

.............................................................................................................51

Figure 14. K and α estimates for different value of r; along with MSY and

stabilising catches in 2014...................................................................52

Figure 15. Whaler costs with (left) and without (right) subsidies........................54

Figure 16. Schooner costs with (left) and without (right) subsidies.....................54

Figure 17. Outboard costs with (left) and without (right) subsidies.....................55

Figure 18. If effort stays at 2013 levels, biomass declines rapidly.......................57

Figure 19. Projected outcome under 30 per cent (shallow) cut in effort from 2018

.............................................................................................................58

Figure 20. Projected outcome under a 50 per cent (deep) cut in effort from 2018

.............................................................................................................59


1 IntroductionObjectives, purpose and structure of the report

1.1 Objectives

This report supports the enhancement of fisheries management in the Seychelles and its financing. The objective of the work was to work closely with the Seychelles Fishery Authority to analyse the economic, social and environmental benefits of the transition to a more sustainable demersal fishery on the Mahé Plateau and to articulate a financial strategy for its implementation and long-term sustainability. The work takes into account the existing fisheries and spatial management plans and draws on local knowledge, expertise and thinking. It recognises the government’s Blue Economy strategy and the role of fisheries generally within the Republic.

1.2 Background to commissioning of the study

The Prince of Wales's' International Sustainability Unit (ISU) aims to foster a global transition to sustainable fisheries, with a focus on financing. In recent years, the ISU has engaged stakeholders on the opportunity for the transition and last year, in an effort to codify and share knowledge, the Environmental Defense Fund and the ISU drafted a report on investment in fisheries recovery. They made the case for a transition to sustainable fisheries, stating that the return on investment has the potential to reach or exceed market benchmark levels, outlining the steps necessary to create investable propositions, and describing the types of capital that can be deployed to minimise risk and maximise return.

The Mahé Plateau may be used as a demonstration. The ISU seeks to catalyse the development of this work through the creation of a pipeline of bankable projects that are able to demonstrate a return on investment. It has identified a group of countries, the Small Island Developing States, which are vulnerable to climate change and dependent on oceans for economic activity. Fisheries are a core part of these countries’ economies and securing them for future generations must be a priority.

1.3 Approach

The support of SFA and Ministry of Finance staff has been vital for the success of the project. Vivid Economics has worked closely with both and the quantitative work presented in this report is almost entirely derived from data held by the SFA.

The work builds on the existing fisheries management plan and policy ambitions. In reviewing existing plans, this report identified options for improving the current plans, and these emerged as recommendations for immediate and medium term steps to make the plans more effective in delivering the government’s objectives.


The work practically applies the ISU’s and Vivid Economics’ 2014 transition finance work. The same team and modelling tools have been employed.

1.4 Deliverables

The specific deliverables contained in this report are:– results from building and running a bio-economic model of the Mahé demersal fishery;– estimates of expenditure for fisheries transition;– the current status of the fishery, business as usual and transition scenarios;– estimate the return on investment under the full management plan;– sensitivity analysis of returns to management costs.

In pursuing this agenda, the work either fully or partially answers the following questions:– what is the state of the fishery?– will the draft management plan deliver a sustainable, productive fishery?– what are the benefits of transition to a sustainable fishery?– what is the impact of reducing subsidies?– how can data collection be improved?

1.5 Structure of the report

The report is structured as follows:Section 2 explains the context of the fishery;Section 3 presents the current status of the fishery;Section 4 describes transition planning and outcomes;Section 5 assesses costs and returns on investment;Section 6 states the role of finance;Section 7 offers conclusions;Section 8 lists recommendations.

There are four appendices which contain more detailed information, focusing on data and model results.


2 Background

2.1 Fishing in the Republic of Seychelles

The Republic of Seychelles relies heavily on its blue economy, especially for tourism and fishing. It is a small island developing state with limited land resources.3 Fishing alone accounts for around 8 per cent of GDP and around one sixth of employment and is the country’s largest foreign exchange earning sector. Fish is a staple source of food in the Seychelles where per capita consumption of fish protein is among the highest in the world at 48 per cent of animal protein consumed (FAO, 2011).

The near-shore fisheries, harvested by semi-industrial and artisanal fleets, are vitally important contributors, although they are on a small scale compared with the industrial tuna fishery. The demersal fisheries remain productive but, due to increasing fishing pressure, are experiencing flat to declining catch levels, general environmental degradation and low value addition. As a result, jobs and livelihoods are at risk and seafood is becoming less accessible to many Seychellois.

Most of the fish protein that is consumed locally comes from the small-scale artisanal fisheries operating over the Mahé Plateau. Fish are woven into the fabric of the Seychelles. The fisheries sector has an unrivalled role in food supply for the nation and plays an important part in the promotion of the government’s integrated economy concept, where fisheries supports other sectors of the economy such as manufacturing and tourism. The Plateau bounds an area of about 41,000 km2, of which the greatest part lies at depth of between 50 – 65 metres. Industrial fishing is prohibited, but about 140 whalers and schooners and at least another 400 outboard vessels operate here, as well as sport/recreational fishing boats. The demersal fisheries exploit a high diversity of species and habitats, using hook and line or traps, with recent analysis of fishing effort using vessel monitoring system (VMS) data showing that most of the Plateau area is fished.

3 The text in this section draws upon material prepared by the SFA.


Figure 1. Vessel Monitoring System activity map for 2009-2014 for speed less than 0.1 knots

Note: The polygon highlighted in yellow in the first diagram above is the plateau

Source: SFA


The small inshore vessels, known as outboards, use a mixture of hook and line and traps and a crew of one or two. The whalers, which are undecked, use handlines, and the schooners, which are full decked with a cabin, use lines. The latter carry around 3,000 hooks per boat The schooners are typically manned by crews of four or five, sometimes more, and make trips of around six days duration. The whalers carry crews typically of three or four and make trips of two days duration. The average catch per trip for outboards, schooners and whalers between 2009 and 2013 was around 100 kg, 920 kg and 400 kg respectively. The principal species landed are Bourgeois (Emperor red snapper), Job (Green jobfish), Maconde (Brownspotted grouper), Plat (Yellowspotted trevally) and Kapten (Blue-lined large eye bream). The secondary species are Vara (Two-spot red snapper), Balo (Bludger), Laskar (Yellowtail emperor) and Bordmar (Humphead snapper).

2.2 Fishing policy and management

The long-term policy of the Government of Seychelles for the fishing industry has been the ‘promotion of sustainable & responsible fisheries development & optimisation of the benefits from this sector for present and future generations’. Over the years, emphasis has been placed on generating the maximum amount of employment from the sector with a firm commitment to maintaining or enhancing the livelihood of fishermen and those involved in supporting activities. The government, upholding its responsibility as a facilitator to encourage investment in the fisheries sector, put in place certain fiscal and monetary measures. In 2008, these were incorporated as one package within the Fisheries and Agricultural Incentives Act (AFIA - Appendix A). However, certain aspects of the AFIA – such as General Sales Tax, social security contributions and foreign exchange retention – became irrelevant, so the Act was repealed in 2015. Despite this, the sector continues to benefit from concessions, particularly tax exemptions and ice subsidies.

The Seychelles is in the process of passing regulations to implement a new management plan. As a result of concern for the long term sustainability of the demersal fishery, the SFA initiated work to prepare a demersal fishery management plan in 2014. The overarching goal of the management plan is to develop ‘a sustainable fishery that delivers the best possible ecological, economic and social benefits for the Seychelles through effective, transparent and participatory management’. This plan was prepared through a consultative process and will be implemented under a fishery co-management framework involving the participation of stakeholders. A number of management measures have been put into the plan to control the level of fishing mortality, such as limitation on the number of fish traps, minimum landed size and recreational bag limits for certain key species. Further options available are minimum size limits, gear restrictions, area closures and habitat restoration. Though these measures may help to reduce fishing mortality, it is believed they will not be to the extent where stocks will start to rebuild. Instead, they may only slightly slow the rate of decline in stocks.

There has been growing controversy over the provision of concessions to the fisheries sector, particularly the tax rebates on fuel. The increasing interest of investors and the addition of new vessels to the artisanal fleet have intensified the debate. The government budget for fuel duty refunds to boat owners has increased steadily from SR 19.6 million in 2010 to SR 23.5 million in 2014.


2.3 The potential role for finance in transition

Finance can allow fishery transition to pay for itself, rather than having to use tax revenue from other parts of the economy, temporarily reducing consumption in other parts of the economy, in order to pay for the fishery investment. In a fishery transition, costs are incurred at the start of the transition and benefits accrue later. Finance can be used to smooth the cash impacts of the transition so that the profile of costs better matches the profile of benefits accruing from the transition.

Finance can cover the costs of setting up and running the regulatory controls necessary to allow fish stocks to build. It takes resources to buy and run the equipment and to staff the processes necessary to implement effective control of fishing mortality. This includes the recording of activities and catch of fishing vessels, policing compliance and conducting the research that supports efficient management. It may also be needed to ease the costs of redeploying labour and assets from the fishing sector to other parts of the economy when fishing effort and capacity is reduced.

To support the initiative of raising finance, this work analyses the economic, social and environmental benefits of the transition. In due course, seeking further assurance of the positive environmental attributes of the management plan, the Seychelles government may engage with internationally recognized environmental NGOs and certification bodies. Their role could range from validating the management plan to engaging in the on-going governance of fishery management. For example, the government might choose to implement a certified Fisheries Improvement Plan.


3 Current status of the fishery3.1 Management

The fishery is currently open access, restricted only in the sense that vessels must be registered in the Seychelles. Other than nationality, the other principal control is a prohibition on spear fishing and there appears to be quite good compliance with this rule. There are no controls over effort or catch.

The fishery is managed by the Seychelles Fisheries Authority (SFA), which is the management authority established in 1984 and comprising around 130 staff. It exercises management control over both the demersal fishery on the plateau and the pelagic fishery in the deep ocean. The catch value from the latter is around 20 times the size of the catch value from the demersal fishery. The SFA has a small executive team and it is governed by a Board of Directors, which directs the SFA, appointed for three years by the President of the Seychelles and comprising a number of non-executive members. The SFA is accountable to the Ministry of Fisheries and Agriculture, which has its own, small fisheries team.

Over the last 12 months the SFA has developed a draft management plan which begins to lay the foundations for fishery transition. After extensive consultation, the draft management plan is currently proceeding through various stages of approval, with the intention of implementation from early 2016. Further details can be found in Section 4.2.1.

3.2 Biological status

The status of the biomass and its dynamics are the foundations upon which management control decisions will be made in the future. Quantification of the fishery’s biological status is necessary to inform decisions on:

– speed of action;– depth of intervention; and– future potential.

Key evidence suggests that stocks are declining. Catch per unit effort is a key statistic. If the gear in use, fish finding techniques and target species remain constant, and the species does not aggregate in shoals, then changes in catch per unit effort can be attributed linearly to changes in biomass. The data on catch per unit effort for whalers are quite volatile, and appear to be showing an improving trend since 2007, though still below the peak recorded in 2002, but the data for other vessels contradict this. The data for the numerous outboards and the very few schooners show less volatility and a more robust trend, both peaking in 2005 and declining significantly, the former by 27 per cent and the latter by 60 per cent, by 2014. Although analysis of the data by inspection is not wholly conclusive, it weakly supports a hypothesis that catch per unit effort was increasing to 2005 and has subsequently been in steady decline. There is some anecdotal evidence that in the early 2000s Sri Lankan fishermen, operating in Seychelles water, introduced new and improved techniques to local fishermen, which may have caused catch per unit effort to increase. It is thought that these new


techniques were widely adopted within around five years and may partly explain improving CPUE in the first five years of the chart. If this is the case, it may be that the stock was not increasing in the early 2000s, but was being fished close to maximum sustainable yield, but there is an alternative explanation that the stock did increase over this period. The catch of red snapper at that time was around 380 tpa.

Figure 2. Catch per unit effort has fallen between 2005 and 2014 for schooners and outboards but whaler productivity has remained static but volatile

- 60%

- 8%

- 27%

Whaler

2000 – 2005 CPUE increased

Source: Data from SFA

To draw a firmer conclusion, other sources of evidence must be consulted. Gutierrez, (2015) finds that CPUE for the main species in the Seychelles has shown a period of stability from 1990 to 1998, increasing afterwards and peaking around 2000-2002 and finally decreasing towards recent years.

3.3 Economic and social status

The fishery is making a profit of about SR 4/kg. The fishery operates with a net margin of around 9 per cent. This is similar to the net margin for the European Union fishing fleet of about 7 per cent, another fleet which has over-capacity and many depleted stocks (European Commission Joint Research Centre, 2014). In other words, for every SR100 of fish sold, around SR91 is spent catching the fish. The fishery receives subsidies worth a fifth of its revenue which push up the net margin to 16 per cent. Its present value


contribution to the economy under business as usual constant effort (not stabilisation) over the next generation, 25 years, 2015 to 2040, would be negative, that is, minus SR 425 million.

Bourgeois (red snapper) is the most valuable species, accounting for an estimated 21 per cent of revenue. In 2013, 348 tonnes of Bourgeois were landed. This was very close to the 354 tonnes of Job landed that year, but the price of Bourgeois, being nearly two and a half times that of Job, means that it contributed SR 35 million of revenue against Job’s SR 14 million. Together, these two species account for a third of catch revenue, see Table 1. Total catch revenue is estimated at around SR169 million, USD 12.5 million .

Table 1. Five species account for approximately 35 per cent of revenue

Species modelledLanding price

(Grade A) (SR/kg)Catch (tonnes) Revenue (SR)

Proportion of value of all demersal

landings

Bourgeois 100 348 34,756,287 21%

Maconde 75 37 2,778,028 2%

Job 40 354 14,176,338 8%

Kapten 40 39 1,546,416 1%

Karang Plat 25 223 5,576,667 3%

Total revenue of modelled species 58,833,735 35%

Source: Catch data from SFA, 2013; Price data from Oceana

The vessels in the fishery on average made a profit in 2013. Considering the figures on a per kilogramme basis, the average revenue in 2013 was around 42 SR/kg. Vessels’ operating costs were around 19 SR/kg, so they made an operating profit (gross margin) of around 23 SR/kg. Taking into account their fixed costs of 19 SR/kg, they were left with a final profit after total costs (net margin) of 4 SR/kg or 9 per cent. This means that the surplus generated by the demersal fishery was about 4 SR/kg, see Table 2. Their costs were reduced by subsidies which amounted to about 8 SR/kg.


Table 2. The fishery account shows a profit in 2013

Variable Unit, SR/kg

Revenue 42

Costs without subsidies

Operating costs of catching 19

Fixed costs of catching 19

Total cost of catching 38

Gross operating margin without subsidies 23

Net margin after fixed costs 4

Subsidies 8

Note: The change is net margin without subsidies is not the same as the cost of subsidies since the crew share falls as the

variable cost increases due to subsidy removal

Source: Vivid Economics calculations

Around half of the true cost of fishing is fuel and ice, see Figure 3, but because of subsidies, these variable costs are lower. They make up 34 per cent of vessel costs in the fishery today. This enables vessels to continue fishing when they otherwise might not. If the subsidies were suddenly removed, vessels would make fewer trips and some would exit the sector. The price of fish might rise as the catch falls.

Figure 3. Whaler costs with (left) and without (right) subsidies

Source: Vivid Economics calculations based on SFA data


3.4 Subsidies assessment

3.4.1 DescriptionThe demersal fishery is heavily subsidised. The subsidies reduce the annual costs of fishing by more than SR 35 million, USD 2.3 million, which is more than one fifth of the revenue from fishing, of around SR 169 million. This is a drain on Seychelles economy of the same value, SR 35 million. Around eighty five per cent of the subsidy, SR 29.7 million, is in the form of exemptions from fuel duty. The next largest subsidy is for ice, around SR 4 million; in contrast sales tax exemptions are insignificant. In addition to these, there are a number of other subsidies around income tax exemption and concessional loans, which this work has not documented.

Table 3. Estimated subsidy costs of SR 35 million/year

Subsidy Amount (SR/yr) Share

Fuel duty exemption 29.7 85%

Ice concessionary price 3.8 11%

Gear VAT exemption 0.9 2%

Vessel tax exemption 0.5 1%

Loans, income tax exemption not available -

Total 34.8 100%

Source: Vivid Economics based on SFA data

The subsidies are ineffective at protecting consumers and they are costly. Although they were introduced with the intention of making fish cheaper for Seychellois to buy, they have not achieved that outcome because they have subsidised production not consumption. Fish prices in the Seychelles respond to market conditions. Local demand competes with demand from international buyers in Europe, Asia and the Middle East. The markets in those places have prices set locally, and once the cost of air freight is deducted, there is sufficient willingness to pay by international buyers to command a share of the local Seychelles production. This connects the prices of fish in the Seychelles to prices in international markets. The subsidies have no impact on this dynamic whatsoever.

The subsidies have increased margins in fishing, encouraging owners to add new vessels to the fleet and discouraging exit. The fleet size has increased as a result, increasing pressure on stocks, depressing utilisation, and through both mechanisms, destroying productivity. As a consequence, fisher incomes may be lower today than they would have been if subsidies had not been introduced.


4 Transition planningFull control over mortality is needed

4.1 Scenarios for recovery

4.1.1 BiologicalIf the policy is left as it is today, the models indicate a continuing decline in biomass, a dramatic reduction in catch, and a steady decline in effort. If effort falls, it might stabilise at around 30 per cent below current levels (see Figure 4). The number of vessels might fall by a larger amount given their current low utilisation. In this policy scenario, biomass falls by around 40 per cent, and the catch by around 60 per cent. This change could take place over five years or it might take longer, one cannot be sure how long it would take.

Figure 4. Possible outcome under draft plan, business as usual

Key assumption:

effort follows the historical decline rate of 6 per cent per annum till 2018 and then stabilizes at the 2018 level

-30%

-60%

-40%

Note: The model assumes the carrying capacity (K) estimates to be twice those estimated by Nico Gutierrez in his 2014 study.

Biomass in 2013 is 25 per cent of K for all species except Plat, for which it is 100 per cent of K.

Source: Vivid Economics

Figure 5 shows a scenario in which the effort stays constant at the 2013 levels, as a result of which the biomass declines rapidly to a level which is less than half the level shown in the previous figure. As a


consequence the catch is around half the final level in the previous catch. With the same level of effort but half the catch, either subsidies would have to be tripled to maintain fisher and vessel owner incomes, or those incomes would halve.

Figure 5. If effort stays at 2013 levels, biomass declines rapidly

Key assumption:

effort stays constant at the current level

-63%

-61%




One source of uncertainty in these business as usual scenarios is fish stock dynamics. The fish stock dynamics determine how quickly the stock stabilises, the final level of biomass and the ratio of catch to biomass and hence the catch per unit effort, a key driver of profitability for vessel owners and of income for fishers. The fish stock dynamics are uncertain because the stock’s behaviour cannot be measured directly, it is estimated from catch, effort and scientific survey data. In the Mahé Plateau, the catch and effort records are imperfect, they are not accompanied by a detailed narrative explaining their patterns, and there may have been structural changes in the data such as changes in technique that have not been identified. These reasons are probably the cause of the poor statistical fit they have to standard models of fish biology, which means that the statistical estimates of biological parameters obtained from these models are uncertain.

Another source of uncertainty is the future level of effort. The amount of effort is a function of fisher decisions, the subsidy level and management controls. At the present time there is no management control of effort and effort is subsidised. In the first scenario, effort declines at around 6 per cent per year to 2020, in line with recent trends. In the second scenario the effort level stays constant. The higher level of effort in the second example leads to much lower levels of catch and biomass.


The purpose of fishery transition is to reform control the fishery in an optimal manner. This is done by reducing the catch or effort, or both, and a better outcome is obtained. The transition can be modelled. In the scenario shown below, biomass stabilises at a higher level, consistent with maximum sustainable or economic yield, around 2.5 times the biomass level of the business as usual scenarios, see Figure 6. Effort still falls to a level below the current level because the current level of effort is unsustainable. The catch per unit effort is greatly improved by the higher biomass and the catch per vessel is higher. This means that although the catch is higher than in either of the business as usual scenarios, and fisher incomes will be higher too, the effort needed to obtain that catch is in fact lower than in either of the BAU scenarios.

Figure 6. Enhanced opportunity from full mortality control




The key numbers in these charts are laid out in Table 4.


Table 4. Initial and final values of biomass, catch and effort in the BAU stabilization and reform scenario

Variable Units BAU stabilization Transition(reducing effort by 30 per cent)

2013 2040 2013 2040

Biomass kg 1,913,000 1,250,180 1,913,000 2,276,000

Effort days 22,000 15,200 22,000 11,3005

Catch kg 1,000,000 401,000 1,000,739 618,000




Figure 7 and Figure 8 are heat maps showing sensitivity analysis of the combined biomass and catch estimates to biological parameter values. The colours range from orange, where biomass and catch are equal to or greater than the combined MSY levels to blue, where biomass and catch are approaching zero. For each heat map, results are grouped into two business as usual scenarios and two reform scenarios. Under BAU – constant effort, catches are maintained at their current level until the biomass is exhausted. Under BAU – stabilization, effort is reduced just enough to stabilize the biomass. The shallow cut is 30 per cent from 2018 levels and the deep cut is 50 per cent. Within each scenario, results are provided for twenty seven combinations of parameter values of carrying capacity (K) intrinsic growth rate (r) and the ratio of current biomass level to carrying capacity (alpha), encompassing their plausible ranges.


Figure 7. The projection of biomass under a range of biological parameter values and four management scenarios

Note: Alpha is B2013 /K. Blue is very low level of biomass. Orange is MSY biomass. The colour coding has been chosen to be visible to

people with colour blindness.



Figure 8. The projection of catch under a range of biological parameter values and four management scenarios

Note: Alpha is B2013 /K. Blue is very low level of catch. Orange is MSY catch. The colour coding has been chosen to be visible to

people with colour blindness.


4.1.2 Socio-economicThe transition illustration above in Section 4.1.1 shows clearly the tension between employment and productivity. Fisheries transition can deliver good biological and economic outcomes, with a productive biomass and higher catch, with higher incomes and no subsidies. It is better for the remaining fishers and better for the economy, but it needs relatively low levels of employment.

It is far from clear whether the net effect of transition on total employment in the Seychelles is positive or negative. Although employment in catching will fall, it is likely that employment in processing will rise, as a higher catch will require greater processing capacity. There will be a small increase in employment in fisheries management. It is also likely that the reduction in subsidy will stimulate employment elsewhere in the economy, as consumption in other parts of the economy expands through a mixture of government spending increases or a reduction in taxation.

It is clear that the net effect of transition on income in the Seychelles will be positive. Not only will incomes in fish catching increase substantially but so will incomes in fish processing and in the wider economy, through indirect effects in the supply chain, and through induced effects from the reduction in government spending.

Without reform (BAU), the fishery continues to make losses. The fishery has a negative present value (without subsidies) of around SR 400 million or USD 31 million. If subsidies were withdrawn, it is likely


that there would be a substantial exit of vessels and effort would decline rapidly. If subsidies are maintained, then there would be no exit and the fishers will continue to exploit the stock to lower levels; the fleet would remain large and under-utilised and continue to be an expensive drain on the state’s resources.

During the early years of transition, access rights such as individual tradeable quota or effort rights, can allow fishers to compensate each other for exit. There needs to be a response through a reduction in fishers and vessels, but all fishers know that if they wait, others might exit the sector instead, allowing themselves to continue. These situations lead to excessive reductions in individual incomes until some are forced to leave. There is a way to achieve compensation of vessel owners in a fair manner and that is to vest access rights in the current generation of fishers. The fishers can sell their rights when they exit, thus receiving some compensation from the fishers who remain in the sector. These access rights can continue to perform a useful allocation function in the long run, when transition is complete.

Transition produces much improved key economic indicators. Variable cost per kg landed might fall from about SR 19/kg to around SR 16/kg, with average costs fall from SR 38/kg to SR 31/kg. In contrast, costs increase under business as usual. After transition, wages might double from SR 62,023/yr to SR 125,993/yr, rather than falling by 100 per cent in business as usual.


Table 5. Key effects on employment, profitability, wages and vessel owner income

Performance indicator 2015 (SR) 2040 (SR)Change 2015 to

2040Comment

With subsidies

Revenue/kg BAU 42 28 -32%

Decreases because the share of bourgeois decreases over time

Revenue/kg reform 42 48 +15%

Increases because the share of bourgeois increases over time

Variable cost/kg BAU 11 62 +485%

Increases since CPUE in the BAU scenario falls over time

Variable cost/kg reform 11 9 -15%

Falls since CPUE in the reform scenario increases over time

Average cost/kg BAU 35 54 +53%


Average cost/kg reform 35 29 -19%


Wages (stable BAU) 85,160 0 -100%

Falls since total revenues fall over time and total variable costs fall less

Wages (reform) 85,160 171,524 +101%

Increases since total variable costs fall more than fall in revenue over time

Vessel owner income (per vessel) BAU 66,555 (95,574) -244%

Vessel owner absorbs the reduced profitability of the vessel

Vessel owner income (per vessel) reform 66,555 187,146 +196%

Vessel owner income increases as the CPUE increases

Without subsidies

Variable cost/kg BAU 19 111 +485%


Variable cost/kg reform 19 16 -15%



Performance indicator 2015 (SR) 2040 (SR)Change 2015 to

2040Comment

Average cost/kg BAU 38 71 +86%


Average cost/kg reform 38 31 -18%

Decreases since CPUE in the reform scenario increases over time

Wages (stable BAU) 62,023 0 -100%

Falls since total revenues fall over time and total variable costs fall less

Wages (reform) 62,023 125,993 +103%

Increases since total variable costs fall more than fall in revenue over time

Vessel owner income (per vessel) BAU 36,473 (160,752) -541%

Vessel owner absorbs the reduced profitability of the vessel

Vessel owner income (per vessel) reform 36,473 121,968 +251%

Vessel owner income increases as the CPUE increases

Note: All figures are in 2015 SR. Vessel owner income is the annual income for an average vessel. It is the income after

accounting for all costs, including management costs and crew share. The reason why average cost does not increase

by the full value of the subsidy is because the crew share falls as variable cost increases. Wages become negative in the

BAU scenario indicating that the fishery has collapsed.


4.2 Management plans

4.2.1 DraftThe draft management plan proposed in 2015 substantially extends control over the fishery, as shown in Table 6. It introduces standard elements of minimum landing sizes and regular plan reviews. It begins to address catch and effort limits through the introduction of maximum numbers of traps per vessel and bag limits for recreational fishers. The authors of the draft plan have started to put in place better registration of activities, but they opted for partial effort based controls rather than more complete effort or catch controls. The plan will be ineffective in delivering transition without complementary controls over the number of vessels and controls over the catch itself or total effort or both.


Table 6. Potential evolution of controls

Type Instrument CurrentDraft plan

(2015)

General Code of conduct

Minimum landing size

Regular plan review

Gear Restricted gear types

Effort Capped number of traps per vessel

Number of demersal fish carried by long liners

Capped aggregate capacity of licensed vessels

Catch Bag limits

Access rights

Discard ban


4.2.2 FullOn the path to transition, the 2015 draft management plan is an important intermediate step to a full plan. A full plan could drop some elements from the draft plan and introduce others, as shown in Table 7, if it takes the direction of catch controls, or it might keep and extend the draft controls if it chooses an effort-based approach instead. One of the next steps to be taken is to debate the merits of effort- and catch-based controls and to identify what packages of instruments would give full control over mortality.


Table 7. Potential evolution of controls

Type Instrument CurrentDraft plan

(2015)

Full catch control plan

(2017)

Full effort control

plan (2017)

General Code of conduct

Minimum landing size

Regular plan review

Gear Restricted gear types

Effort Capped number of traps per vessel

Number of demersal fish carried by long liners

Capped aggregate capacity of licensed vessels

Capped effort rights

Catch Bag limits

Access rights

Discard ban

Note: The full plan’s minimum landing size has been marked with a cross because in this illustration there is a discard ban, so

undersize fish would have to be landed.


These sets of issues can be reduced to the following extensions to the 2015 draft management plan, summarised in Figure 9:

– coordinated or integrated coverage of commercial, recreational and sport fishing;– full control over mortality; and– optional: control over total catching capacity.


Figure 9. Transition from red to green management, the headline controls

Some gear

control

S&R catch

per trip

Whole fleet

catch, discard,capacity

Current Draft 2015 plan ‘Full plan’

Note: S&R denotes inclusion of sports and recreational fishing within management control


The activities required can be grouped under three headings: monitoring and enforcement, management and finance. Monitoring and enforcement addresses detection and penalties, while management covers the scientific and economic data, analytic tools and fishery controls. Finally, finance picks up the fiscal aspects (subsidies, compensation, levies and other revenue instruments), debt management, asset purchase and investment appraisal, audit, governance and reporting. Of these, the elements which belong in the management plan are the enforcement, penalties and fishery controls, and the fiscal elements. Those that belong in the SFA’s strategy and business plan are data acquisition and management, analytic tools, investment appraisal, audit, governance and reporting.

4.3 Timing of management reform

A further simplification is to divide the transition into phases. There are six phases:– I – Planning: the design, enactment and funding of the full management plan;– II – Implementation Part I: the execution of the draft management plan, investing in processes and

introducing licensing, bag limits and some other controls;– III – Implementation Part II: the execution of the full management plan;– IV – Stock rebuilding: a period of reduced fishing mortality to recover the biomass to its maximum

economic or sustainable yield level, accompanied by monitoring, enforcement and reporting of progress;

– V – Steady state with finance repayment: a period post recovery when any finance for the recovery is repaid, see discussion in Section 6.2;

– VI – Final steady state: a period after financial exit in which the economic surplus generated by the fishery can be divided between the State and the fishers.

The duration of the timing depends on political decisions which have yet to be made, the biological performance of the fishery, which is uncertain, and market conditions which determine the price of fish and the cost of catching and hence the surpluses available. The timing of phases I, II and III depends on political preferences and the practical question of delivery capacity within the SFA and government. The


duration of the rebuilding phase is determined by the biology of the fishery and political preferences over the depth of catch reductions. The duration of V, finance repayment, is determined by political considerations over the level of revenue recovery, economic conditions relating to the margin from fishing, and biological conditions relating to the yield produced by the fishery. All of these are currently uncertain, but the main stock recovery timing is explored through sensitivity analysis in Figure 7 and Figure 8.

Figure 10. Illustration of timing of transition

Planning

I II III IV

Implementpart 1

Implementpart 2

InvestmentLicensingBag limits

InvestmentQuotaDiscard ban

Revenue collectionFinance repayment

Stock rebuilding

MEY Steady state

MonitoringEnforcementReporting

V

1 1 1 5 5

MEY Steady state

Returns to SEY government

VI

2015 2016 2017 2018 2023 2028

Note: the duration of phases IV and V are uncertain and dependent on policy choices, management effectiveness and the

performance of the fishery biology



5 Costs of transition5.1.1 Management costsThe estimated costs of a full management plan are expected to total around SR 58 million (USD 4.2 million) over the first five years, or SR 12 million (USD 0.9 million) a year. The costs in the second five years will be lower, at around SR 8.9 million (USD 0.7 million) a year, because most of the costs in the first five years are set-up costs, see Table 8. Most of the first five year costs, SR 20.9 million (USD 1.5 million), relate to building the systems to implement the new controls. Also in the first five years, there are additional monitoring and enforcement costs, SR 4.9 million (USD 0.4 million); additional general operational costs of SR 12.6 million (USD 0.9 million) and research costs of around SR 19.4 million (USD 1.4million).

Table 8. Estimated management costs

Measure First 5 years (SR million), cumulative

First five years (USD million),

cumulative

Percentage covered by the EU budget*

Annual costs thereafter

(SR million/yr)

Implementation costs 20.9 1.5 31% 0.3

Operational costs 12.6 0.9 0% 3.1

Monitoring and enforcement costs 4.9 0.4 85% 0.7

Research costs 19.4 1.4 100% 4.7

Total 57.8 4.2 51% 8.9

Note: *if EU partnership continues in its current form


Some of the costs of a full plan would already be funded under the current EU partnership agreement, if it continues in its current form after 2018. This reduces the amount to be funded over the first five years to SR 28 million (USD 2.1 million). There is a caveat. Although the individual elements have been costed by the SFA, they have been estimated without a full management plan as a reference, so the figures could change once the full management plan has been developed. It would be prudent to assume that the costs of a full management plan will be higher.

Table 9 to Table 12 list the detailed management costs.


Table 9. Implementation costs

MeasureFirst 5 years (SR),

cumulativeFirst five years (USD),

cumulative

Annual costs thereafter

(SR/yr)

Set-up costs

Development of plans and strategies for addressing IUU fishing 5,670 419

Workshops 18,245 1,348

Purchase equipment 320,000 23,651

Compliance database 53,584 3,960

VMS installation costs (not including equipment cost) 159,191 11,766

Development and implementation of the demersal fisheries management planSFA co-financing of SIH (Systeme Informatique Halieutique project) Data processing software development, staff training, equipment purchase

672,612 49,713

Socio-economic and bio-economic consultancy services 336,306 24,856

Implementation of the demersal fisheries management plan 840,765 62,141

Other

VMS Accessories and Tools 1,136,306 83,984 200,000

Themis hardware & software upgrade 2,017,836 149,138 112,102

Additional equipment 1,109,810 82,026

Surveillance equipment 81,355 6,013 3,753

Coastal patrol boat (Equipment) 677,138 50,047 9,757

Portable VMS transceivers on board small scale fishing vessels (projections for next 5 years)

Purchase of equipment for small boats 3,124,615 230,940

Replacement of damaged VMS 3,198,223 236,380

VMS on new boats coming into the fishery 3,981,852 294,298

VMS on boats already in fishery with no VMS (100 in total) 3,185,481 235,438

Total 20,918,989 1,546,119 192,279



Table 10. Monitoring and enforcement costs


cumulativeFirst five years

(USD), cumulativeAnnual costs thereafter

(SR/yr)

Coastal patrol running costs 2,321,142 171,555 174,063

Boat repairs and maintenance 2,522,295 186,422 504,459

Maintenance cost of VMS Equipment 67,261 4,971 16,815

Total 1,785,494 323,359 655,169



Table 11. Operational costs


cumulativeFirst five years (USD),

cumulativeAnnual costs thereafter

(SR/yr)

Operational costs - Mahé

Total annual operational cost: day patrols (80 days of ‘day patrol/yr)

746,452 55,170 297,880

Total annual operational cost: night patrols (25 nights of ‘night patrol/yr)

356,072 26,317 142,094

Patrol vessels: annual maintenance 154,545 11,422 61,673

Offshore / Outer Mahé Plateau - on water surveillance 1,132,753 83,722 452,038

Operational costs - land-based surveillance (based on 50 days per year on Mahe)

217,908 16,106 86,959

Operational costs - Praslin

Operational costs - on water surveillance 1,477,798 109,224 589,732

Operational costs - land-based surveillance 462,181 34,160 184,439

Other

System to link all databases together 1,180,800 87,273 78,805

Establishment of mortality controls 473,550 35,000 150,333

Stakeholder engagement and roll-out and training for fishermen

1,217,700 90,000 360,800

Education and awareness campaign 1,000,000 73,910 250,000

International accreditation/certification costs

Full assessment costs 2,016,000 149,002

Ongoing certification costs 504,000 37,251 56,000

Costs for pre-assessment 420,000 31,042

Fisheries improvement programme 1,260,000 93,126 420,000

Total 12,619,760 932,724 3,130,754

Note: The operational costs only start from 2017, the cumulative costs start from 2015, that is why the average in the first 5

years is lower than annual costs thereafter



Table 12. Research costs


cumulativeFirst five years,

cumulative (USD)Annual costs thereafter

(SR/yr)Catch-at-age determination: otolith collection and processing 2,231,868 164,957 550,103

Statistical and programming services (software) 714,198 52,786 176,033

Stock assessment consultancy services: development of operating models

1,785,494 131,966 440,082

Stock assessment consultancy services: update and peer-review

2,231,868 164,957 550,103

Growth parameter and age/length key estimation 892,747 65,983 220,041

Stock spatial structure research: genetics 892,747 65,983 220,041

Demersal fisheries independent survey 2,321,142 171,555 572,107

Reproductive biology: spawning aggregation and nursery area research

1,785,494 131,966 440,082

Catchability: selectivity and efficiency research 892,747 65,983 220,041

Fish ecological research 1,785,494 131,966 440,082

Fish habitat research: benthic and oceanographic 1,339,121 98,974 330,062

Lab consumables 892,747 65,983 220,041

Scientific equipment 892,747 65,983 220,041

Lobster independent survey 714,198 52,786 176,033

Total 19,372,612 1,431,826 4,774,891


5.2 Value of implementing full management

For every Rupee spent on extending the draft management plan to a full plan, 17 Rupees of benefit are generated directly to the fishing sector. One can compare the total management costs with the benefits of transition. For example, one can take the incremental management costs over the period 2015 – 2024, estimated at around SR 18 million (USD 1.4 million), and compare them with the additional value added in the fishery through improved management, an estimated SR 340 million (USD 25 million). That is a benefit cost ratio of 17:1. If one were to count the benefits to the rest of the supply chain, the figure would be much higher. It may seem incredible that the benefit cost ratio is so high, but there are three reasons why it is. First, the draft management plan puts most of the processes in place that are needed for a full plan, so while the draft plan costs around SR 82 million to implement (USD 6 million), it only costs an additional SR 18 million (USD 1.4 million) for the full plan. Second, the draft plan does not change the outcome for the


fishery. It produces plenty of process outputs, but does not change the biomass trajectory or future harvests, so it generates no value. It has a benefit cost ratio of approximately zero. All the value creation is concentrated in the move from the draft to the full plan. Third, this calculation only considers management costs. Costs to fishers from reduced income while the stock recovers have been omitted. The internal rate of return (IRR) for the project is sensitive to the management costs and levy rate. For a combination of medium costs and 25 per cent levy rate on vessel owner’s revenue, it is 11 per cent (see Figure 11).

Table 13. A full management plan offers excellent investment returns

Metric Draft 2015 plan Full plan

Incremental cash investment ~82 million 18 million

Project incremental NPV (2015-2040) zero 305 million

Benefit cost ratio ~0 : 1 17 : 1

Note: costs and returns assessed over the period 2015 to 2040


Figure 11. Heat map of sensitivity analyses of rate of return to management costs and levy rates

Note: Management costs are on the horizontal axis (high medium, low); levy rates are on the vertical axis. High costs are 20

percent higher than the medium or current scenario and low costs are 20 per cent lower. IRR is based on total

investment numbers of the full plan.



6 Finance6.1 Need

The transition is a true community investment. In the transition, the government will make an investment in the management of the fishery, fishers will make an investment in the stock (by buying access rights from their peers and by continuing to operate on reduced incomes for a period in exchange for holding access rights of appreciating value or through other commitments of rationed access devised by the government), and the people of Seychelles will make an investment by forgoing some of their consumption of fish, substituting it for other sources of protein, until the biomass has grown.

The government should use finance in order to maximise the benefit of transition for the Seychelles economy. The expenditure involved in this case is not so large that the government could only proceed using finance. Even if the management costs turn out to be higher than estimated, the government would still have the means to finance it from its current account if it wished. However, judicious use of finance on productive investments is a means of achieving higher growth in an economy. That means borrowing to invest and not investing more than is affordable. Finance increases economic resources available so long as it is invested in a valuable asset. In this case, the government is right to make use of finance.

6.2 Structure

Finance may be available in the form of Blue Bonds. The Government of Seychelles has been working with the International Sustainability Unit (ISU) of The Prince of Wales’ Charitable Foundation on identifying mechanisms to finance the transition of the demersal fishery to biological and economic sustainability. One of the possible financing mechanisms for the implementation of transition in the demersal fisheries in Seychelles is the issuance of a Government Blue Bond to ‘impact’ investors or other investors.

The Seychelles Government is considering a capital raising transaction that would fund the costs of plan implementation. At this time, the government has not decided whether to proceed, nor whether to coordinate this transaction with other fund-raising efforts. It is expected that successful implementation of the plan will result in a more economically valuable fishery, a healthier fleet and supply chain, better and more secure jobs, and a healthier environment. In its recovered, more productive state, it would be able to meet the costs of management.

To raise the required capital, it is proposed that the Seychelles Government issue a sovereign bond with proceeds used to fund the Mahé Plateau management plan. Bond proceeds would go to the Seychelles Fishery Authority as the implementing agency for the management plan. Repayment of the bond would be a general obligation of the Seychelles Government that may or may not be supported by specific revenues derived from the Mahé fishery.

The proposed bond offering would generally follow the Green Bond model that has been used by governments, development banks and corporations to fund projects with positive environmental and


climate benefits. Since the Seychelles bond would fund an ocean-based project and virtually all Green Bonds have funded terrestrial projects, this offering could be differentiated as a Blue Bond. The term Blue Bond has generally been used to refer to transactions that would support a sustainable marine economy.

Over the last five years, the Green Bond market has provided over $50 billion in debt funding to issuers with environment enhancing projects. This market has been driven by a growing investor base with a specific mandate to invest in sound investment propositions that also create clear social and environmental benefits. Issuance in this market is guided by the Green Bond Principles, among others, which are voluntary guidelines which highlight the importance of reporting on the use of proceeds.

There are various ways in which the finance could be structured. It is not within the scope of this work to present the financing options nor their relative merits. However, any finance raised under the moniker of a Green or Blue Bond would have use of proceeds restrictions within it. The funds might be provided by a single investor or a consortium acting on equal terms (parri passu contracts) or having an alternative distribution of and interest payments between them, but given the small scale of the bond, a single investor seems more likely. It might be issued in local currency or in a hard currency such as USD, and the Seychelles government may have a preference between the two depending on its existing foreign exchange risk exposure.

t seems likely that any bond would have to be guaranteed by the Republic of Seychelles government, for the reason that investors would struggle to assess the risk associated with fiscal revenues (royalties, levies or taxes) from the fishery itself. Hence, although the fishery might contribute wholly or partly to the servicing and repayment of the finance, the counterparty to the transaction would have to be the State. Meanwhile, the State could still choose to recover some or all of its expenditure by raising fiscal revenue the fishery, or could go further and recover a surplus from the fishery. A range of fiscal instruments would be available, including royalties and taxes, and it could use these together with charges and levies to fund both the repayment of debt and the ongoing provision of management services. While royalties and taxes might be designed to capture a portion of the rent (economic surplus) generated by the fishery once it is in a healthy state, the charges and levies might be used to cover the costs of services such as registration, inspection, stock assessment. monitoring and enforcement, quays and market facilities, ice and gear storage facilities. Based on the projections shown in Appendix 3, it may be 7 to 10 years before the fishery has sufficient economic surplus to contribute substantial receipts through these mechanisms and from that point onwards it could take a number of years for the fishery to pay in receipts an equivalent sum to the amount that the government had borrowed.


7 ConclusionsA strong case for taking action and a role for finance

7.1 The case for action

Failure to act now to reduce fishing pressure on the Mahé Plateau is likely to be a source of regret later. Without effective control of mortality, the demersal Plateau is likely to experience continuing declines in productivity. It will be visible first as reduced catches and falling utilisation of vessels, then later as demand for greater subsidy followed by exit. Fishing incomes will remain lower and might fall further while the price of fish available in the Seychelles would rise and export revenues would fall. Processors reliant on exports might be forced to close. In the worst case, stocks would collapse completely, irreversibly affecting the ecosystem and removing this natural asset for ever.

The benefit of action is around SR 305 million as a sum over the next 25 years. For every Rupee the government spends on improving the management controls over and above the draft management plan, to secure effective control over mortality in the fishery, more than 17 Rupees will be returned to the Seychelles economy. Fishers will benefit, with wages per fisher rising potentially by up to 128 per cent on current levels, avoiding a 100 per cent fall if no action is taken. There will be a substantial increase in processing activity.

The sector is currently making a profit of SR 15 million a year, a margin of 9%. However, if effort levels are maintained, the stock level will decline. The present value of the sector if effort levels are maintained is minus SR 400 million over the next 25 years. For every kilogramme of demersal fish landed, the Seychelles economy receives a surplus of SR 4.

There is likely to be a cost for each year the government delays effective action. For every year that the Seychelles waits before acting, there will be a cost because the stock will decline and fisher incomes will deteriorate. This will continue until effective action is taken.

The government currently spends SR 35 million (USD 2.3 million) a year on subsidies in a sector which generates SR 169 million (USD 12.5 million) in revenue. This sector is very heavily subsidised. The subsidy is a cause of low productivity in the fleet. It is an expense for the government and reduces the welfare of Seychellois.

7.2 The role of finance

Financing offers two potential benefits: first, an immediate expansion of the Seychelles economy, rather than a contraction followed by an expansion; second, a commitment to see through the reforms and to establish the principal of revenue sharing, which increases the likelihood of achieving long term sustainable outcomes for the fishery. The case for spreading the costs through financing is strong, but the case in favour of finance is not cash flow reasons on the government’s current account. It makes economic


sense, so long as the cost of finance is low, to use finance to deliver transition, so that the government’s resources are free to be invested elsewhere.


8 Recommendations8.1 Take six actions

By taking six actions over the next 18 months, the government will be on track to achieve its objectives. The first four are policy actions:

– 1: adopt and implement the draft management plan in 2015;– 2: develop options by November 2015 then adopt in 2016, after Presidential elections, a plan to

phase out subsidies;– 3: develop by November 2015, then adopt in 2016, after Presidential elections, a plan to introduce

effective mortality and capacity controls, and develop implementation plans through 2017, implementing the controls fully from 2017 or at latest 2018;

– 4: assess in 2015 the scope for introducing access rights, including individual tradeable quota and effort rights, and implement it before fishers leave the sector from 2017.

The last two are management actions:– 5: review the fishery biology and publish a reference table, and alongside this, develop and publish a

base set of business as usual and control scenarios;– 6: publish annual fisheries accounts.

8.2 Details of immediate steps which can be taken

8.2.1 Appraise management options for full mortality controlThe appraisal will set out management options which could build on or replace part of the Draft Fishery Management Plan to effectively control mortality and allow recovery of the demersal fish stock on the Mahé Plateau to BMEY or BMSY.

It will include a literature review of management control measures that are currently being implemented in various parts of the world to reduce fishing mortality. Each management control measure will be ranked based on criteria to be developed, around its demonstrated effectiveness, ease of implementation in the demersal fishery operating over the Mahé Plateau and likelihood of success. The measures to be examined include forms of input and output controls such as fishing effort, fleet capacity and tradable quotas, operating singly or in combination. Prior to assessing each control measure, a short description of each measure will be prepared. The assessment will elicit the measure’s expected biological impact on the stock and socio-economic impact on the fisher. The final report will be presented to Ministers and will include recommendations for them to consider. It will also be published.

8.2.2 Develop a full planIn order to be comprehensive, the plan should cover management controls, monitoring and enforcement and financing as shown in Figure 12. The SFA will need to develop a clear vision of the regulatory instruments which will be in management plan and the investment and operational measures which will be needed to implement it.


Figure 12. Scope of draft and full management plans

Monitoring and enforcement

Capacity

Management

24/7 working

Support

Autonomy

Strategy

Data

Financing

Transparency

Consultation

Process

Subsidies

Controls

Control path

Revenue

Science

Draft plan

Full plan


8.2.3 Appraise options to reduce or remove subsidiesIf the subsidies are phased out, it would releasing substantial savings to the government, some or all of which could be used for compensation and retraining, other public expenditure or to lower taxation or to reduce public debt.

The SFA has agreed to undertake an appraisal of subsidy removal. The appraisal will assess the total amount of subsidies allocated to the fisheries sector for the most recent financial year for all material subsidies. For a subset of larger subsidies, it will work out the impacts on typical vessels of the three main types, based on changes in variable and average costs. This work will allow the government to develop a plan to remove the subsidies and to decide whether or not to implement the plan.

8.2.4 Conduct a crew surveyThe SFA might choose to collect statistics on crew nationality, previous education and training and preferences on alternative employment. It could use this information to develop a plan for crew retraining, to mitigate the initial employment effects of transition, when catching effort is reduced.

8.2.5 Revamp fisheries data collectionThe SFA should review the scope of its data collection to see whether improvements can be made and where the costs can be justified, as shown in Table 14. One area is to extend catch and effort data to sport and recreational fishing. Another is to establish the CLARISSA survey of vessel economics on an annual basis and to structure part of it as a longitudinal survey tracking individual vessels. The vessel register could be drawn up to include vessel age and insured value. It should establish a monthly bulletin of prices and include


this in its annual statistical review. The annual review should also report subsidy costs. It could also usefully develop activity-based management accounts for its own expenditure.

Table 14. Data management

Area Current Future

Catch Catch database Review data collection and quality

Effort Record of days at sea Cross-check with VMS data

Subsidies - Publish annual statement within fishery accounts

Catching cost CLARISSA Survey Repeat survey annually. Establish longitudinal study

Prices Recent figures only Establish monthly survey and annual publication

Export ? Record destination, value, quantity, species, level of processing

Management cost Annual report for EU funded expenditure

Activity based annual report for all management expenditure

Vessels Register Record vessel age and insurance value

Fisher income CLARISSA Survey Repeat survey annually


8.2.6 Develop and publish annual national fisheries accountsFisheries accounts provide an accessible and insightful framework for tracking management and fleet performance. They can be applied to both the demersal and pelagic fisheries and would make a valuable part of the governance arrangements under a full management plan. They might also create a substantial return in the next round of negotiations for the EU Partnership Agreement and will contribute greatly to the understanding of value created by the fishery transition policy, making it easier to justify the tough controls of a full management plan.

The profit and loss account must be accompanied by a balance sheet. The fishery is a natural asset and changes in its value can be recorded in a balance sheet, enabling growth in the stock to be valued and depletions to be highlighted, making it much easier to maintain a sustainable fishery policy in the future. The accounts will also be helpful in determining the timing of switching between phases in the management plan and will reveal the impact of subsidies, making it easier to defend their removal. It is recommended that the SFA produces national fisheries accounts for the demersal fishery on behalf of the Ministry of Finance. These accounts can be extended to the pelagic fishery once the demersal accounts have been established.


Table 15. Data management

Profit and loss account Balance sheet

Revenue Opening stock (kg)

Costs Harvest

Fishing costs Recruitment

Subsidies Closing stock (kg)

Infrastructure expenditure Opening value of stock (residual value approach, constant harvest)

Government expenditure on services Change in stock

EU expenditure on services Change in fish price

Wages and crew share Change in fisher cost of catching

EBITDA Change in subsidies/taxes

Interest payments Closing value of stock

Depreciation and amortisation Manmade assets

Profit (loss) Vessel and gear assets

Management assets

Infrastructure assets

Private and public loans



Appendix 1: Estimation of biological parametersStock assessment model for Bourgeois

There is a great deal of uncertainty in the parameter estimates of the bio-economic models used to assess the current level of the biomass, predict MSY and project future paths of the biomass under various management regimes. In the Gordon-Schaefer model the biomass changes according to the following dynamic equation:

Bt=r Bt (1− Bt

K )−Ct+1 …( A 1)

where Bt +1 is the change in biomass, Bt is the level of the biomass at the start of the period and C t+1 is the catch level. r and K are model parameters which need estimating using data on catches and abundance levels. r is the intrinsic growth rate and K , the carrying capacity. To make inference about the parameters of model a relationship between the unobserved biomass Bt and an index of abundance I t is formulated as:

Bt=I t

q…( A 2)

where q is a catchability parameter. The model is estimated using maximum likelihood using a data sample on caches and abundance index; {C t , It }, t=1,2, …, T . Using equation (A1), and starting from the initial biomass B0, the level of biomass for the entire period is predicted. The likelihood is defined with respect to the log deviation between simulated biomass and the biomass implied by the abundance index:

de v t=ln ( Bt )−ln ( Bt )where Bt is the level of biomass predicted by equation (A1) and Bt is the level of biomass implied by the abundance index. Maximising the likelihood function is equivalent to minimising the sum of square deviations

SS=∑i=1

T

de v t2

the objective function is minimised with respect to the model parameters, r , K , q and in the absence of information on the actual stock level at any given point in time, the initial level of the biomass B0 is also estimated as an additional model parameter. Equivalently the ratio of the initial stock level to the carrying

capacity, α=B0

K is estimated.

For successful estimation of all model parameters the data needs to have enough information (contrast in the data) to identify the model parameters, particularly the carrying capacity. There is a second problem with the current specification, in the context of the Seychellois Red Snapper, in that there is an apparent break in the data around the period 2003 to 2004. Figure A1 shows a substantial jump in catches in 2003 and 2004, similarly, the estimated abundance index also jumps up around the same period. The abundance index in essentially based on Catch Per Unit Effort CPUE, which is a ratio of catch over standardised effort. If there is increasing targeting of a particular species by fishers, or if better catching techniques are being used, failure to control for such factors will result in an underestimation of effort attributed to the fishing of the particular species and will cause the abundance index to jump up, without there being more fish.


The apparent break in the catch level can succinctly be captured in the model by allowing the value of catchability parameter to switch in the period 2003 to 2004. This extra flexibility enables the model to have a better fit.

Bt={ I t

q1, t=1992 ,… ,2003

I t

q2, t=2004 , …, 2013

The problem relating to lack of contrast in the data is managed by fixing a value for the intrinsic growth rate r and estimating the remaining parameters, K , α , q1and q2. r takes value in the set {0.03, 0.05, 0.1, 0.15, 0.2, 0.25, 0.3, 0.35, 0.4, 0.45, 0.5}.

Figure 13. Yearly catch level and abundance for Red Snappers in the Seychelles

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

0

200

400

600

800

1,000

1,200

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Abun

danc

e in

dex

Cat

ch le

vel (

'000

Kg)

Catchs Abundance index

Note: Abundance index was estimated based of CPUE, using multiple regression to account for fleet, gear and other

important factors.


Figure (A2) shows the resulting estimates of K , α and the implied MSY and stabilising catch in 2014.4 It is evident that low values for the intrinsic growth rate produce implausible estimates of the carrying capacity and by extension a very low value for α , albeit, these low values of r are likelihood maximising. Given that this fishery was artisanal before 1990’s, α is likely to be on the high end. This is the case if an intrinsic growth rate values above 10 per cent is used. If further, this rate is assumed to be between 10 per cent and 25 per cent, the MSY is estimated in the range 290 tonne to 440 tonne and the stabilising yield in the range 270 tonnes to 440 tonnes.

4 Stabilising catch is the level of catch that needs to be maintained starting in 2014, for the level of the biomass to stabilise.


Figure 14. K and α estimates for different value of r; along with MSY and stabilising catches in 2014

0.000.100.200.300.400.500.600.700.800.901.00

0.03 0.05 0.1 0.15 0.2 0.25 0.3 0.35 0.4 0.45 0.5Initi

al b

iom

ass

over

car

ryin

g ca

paci

ty (

per c

ent)

Intrinsic growth rate (per cent)

0

500

1,000

1,500

2,000

2,500

3,000

3,500

0.03 0.05 0.1 0.15 0.2 0.25 0.3 0.35 0.4 0.45 0.5

MSY

('00

0 K

g)


0

100

200

300

400

500

600

0.03 0.05 0.1 0.15 0.2 0.25 0.3 0.35 0.4 0.45 0.5

Stab

elis

ing

yiel

d in

201

4 ('0

00 K

g)


050,000

100,000150,000200,000250,000300,000350,000400,000450,000500,000

0.03 0.05 0.1 0.15 0.2 0.25 0.3 0.35 0.4 0.45 0.5Car

ryin

g ca

paci

ty ('

000

Kg)



There is scant information on an appropriate intrinsic growth rate, the literature on stock assessment of variants of the Emperor Red Snapper from Australia, Venezuela and Seychelles report wide ranging estimates of r . Gutierrez (2015) uses the production surplus model to assess artisanal fishery In Praslin, using a Bayesian estimation technique he reports a high posterior mean of 50 per cent. This estimate is large and suffers from a non-informative likelihood function, since the simulated posterior distribution is flat and attaches almost equally high density mass for all admissible values of r .5 Also, using such a high intrinsic growth is consistent with a low carrying capacity and may i) overestimate the time to recovery and ii) underestimate the MSY. Grandcourt, Hecht, Booth and Robinson (2008) report a contrasting picture with a growth rate of 14 per cent. They report a profile for the Red Snapper fish characterised by a long lifespan, slow growth rate, low natural mortality and late age at sexual maturity. This is more in line with the preferred range found in our estimates. A further analysis corroborating the hypothesis of a low intrinsic rate was carried out by Mendoza and Larez (2004). They use an indirect procedure to evaluate the intrinsic growth rate, using auxiliary data, for the Southern Red Snapper in the south-eastern Caribbean. They report a rate of 24 per cent, while a similar exercise produces a rate of 18 per cent for Yellow Edge Grouper. Finally, Leigh, Williams, Begg, Gribble and Whybird (2006) estimate a surplus production model to assess the biomass of the Australian Red Throat Emperor and find a very low intrinsic rate at 12 per cent. They also suggest that this estimate is too low to be realistic. They subsequently supplement their analysis by fixing the growth rate at 30 per cent which corresponds to the upper bound of the 95 confidence interval of their central estimate.

5 The posterior distribution of r is uniform.


In view of the evidence above, a fool proof estimate of the intrinsic growth rate and by extension the consistent set of estimates for all the model parameters is not currently possible, due to data quality. However, there is enough information to produce an acceptable range of estimates, for which a regret table of alternative management regimes can be produced.


Appendix 2: Fishing costsCurrent vessel cost breakdown (with and without subsidies)

Figure 15. Whaler costs with (left) and without (right) subsidies


Figure 16. Schooner costs with (left) and without (right) subsidies



Figure 17. Outboard costs with (left) and without (right) subsidies


Subsidies reduce total vessel costs by 55 to 63 per cent

Table 16. Variable costs constitute 70–75 per cent of total cost

Cost Whaler (SR) Schooner (SR) Outboard (SR)

Fixed costs per year 78,504(25%)

114,418(30%)

22,090(30%)

Variable cost per year 232,620(75%)

273,321(70%)

51,717(70%)

Total cost per vessel 311,124 387,739 73,808

Total cost per kg 14 20 14

Number of vessels 96 20 287

Total cost per year after subsidy removal 483,579 630,984 120,402

Percentage increase in total cost after subsidy removal 55% 63% 63%

Source: Vivid Economics calculations based on data from SFA

Cost per trip


Table 17. Average costs per trip (without subsidies)

Variable Whaler (SR) Schooner (SR) Outboard (SR)

Fuel 5,950 15,000 1,617

Food 1,500 2,233 119

Bait 1,643 2,333 400

Ice 1,896 2,545 89

Gear 647 2,549 218

Total 11,636 24,661 2,443

Source: Vivid Economics calculations based on data from SFA


Appendix 3: ProjectionsCatch projectionsConstant effort drives stocks down to very low levels where they may completely collapse. Constant effort such as this would be highly unprofitable and impossible to sustain: vessels would voluntarily exit.

Figure 18. If effort stays at 2013 levels, biomass declines rapidly

-

5,000

10,000

15,000

20,000

25,000

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

2015 2020 2025 2030 2035 2040

Effo

rt (f

ishi

ng d

ays)

Cat

ch a

nd b

iom

ass

(kg)

Biomass

Effort

Catch





Figure 19. Projected outcome under 30 per cent (shallow) cut in effort from 2018

-

5,000

10,000

15,000

20,000

25,000

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

2015 2020 2025 2030 2035 2040

Effo

rt (f

ishi

ng d

ays)

Cat

ch a

nd b

iom

ass

(kg)

Biomass

Effort

Catch



Figure 20. Projected outcome under a 50 per cent (deep) cut in effort from 2018


Contact us:Vivid Economics Limited T: +44 (0)844 8000 254The Media Village E: [email protected] Great Titchfield StreetLondon W1W 5BBUnited Kingdom

Company ProfileVivid Economics is a leading strategic economics consultancy with global reach. We strive to create lasting value for our clients, both in government and the private sector, and for society at large.

We are a premier consultant in the policy-commerce interface and resource- and environment-intensive sectors, where we advise on the most critical and complex policy and commercial questions facing clients around the world. The success we bring to our clients reflects a strong partnership culture, solid foundation of skills and analytical assets, and close cooperation with a large network of contacts across key organisations.

Documents

Vivid Economics - SeyCCAT€¦ · Web view2020/01/02 · Fishers currently receiving low incomes will avoid the even lower incomes and lower employment of the business as usual scenarios: