- Government planning initial sale of $10 million this year
- Securities modeled on green bonds, target impact investors
Seychelles, an Indian Ocean archipelago off the East African coast, plans to offer so-called blue bonds, which fund the development of sustainable fisheries, to investors later this year.
The country’s Treasury is in talks with multilateral agencies including the African Development Bank and the World Bank to facilitate the sale of $10 million of the government-backed debt, Finance Minister Jean-Paul Adam said in a phone interview Jan. 22 from the capital, Victoria. The securities are modeled on green bonds, which channel their proceeds to projects that save energy, curb pollution and recycle resources.
“If you’re going to finance a fishing business it will be generally seen as a risky business and will be costed accordingly,” Adam said. “We hope to absorb this risk. And the involvement of the multilateral agencies will help reduce the cost so we get an affordable interest rate.”
Seychelles is considering the debt as its $169 million of bonds due January 2026 outperform other sub-Saharan African nations, returning 2.6 percent this year compared with an average loss of 2.9 percent among 17 countries on the continent tracked by Bloomberg. The commercial fishing industry in Seychelles, which has Africa’s biggest tuna-canning factory, is dominated by companies including Thai Union Group Pcl, Thailand’s largest seafood exporter. Fisheries account for about 1 percent of the country’s $1.4 billion economy, according to World Bank and African Development Bank data.
The government is developing sustainable ways of expanding Seychelles’ fishing industry as part of an initiative to deal with the impact of climate change. Sea levels have risen 19 centimeters (7.5 inches) since the end of the 19th century, including about 5 centimeters in the past 15 years, as global temperatures have increased by an average of 0.8 degrees Celsius.
“The innovation in this bond is that you get a very secure facility which will also have a good impact,” Adam said. “We’re going to be targeting impact investors who want to show that it’s possible and that their investment is making a difference.”
Seychelles defaulted on about $311 million of debt in 2008 and was forced to seek help from the International Monetary Fund after higher oil prices and a drop in tourism earnings curbed government revenue. The country’s economy is forecast to grow more than 3 percent this year, compared with more than 4 percent last year, helped by lower oil prices that are expected to boost the number of visitors to the country as the cost of travel declines, Adam said.
Yields on the country’s debt securities rose 2 basis points to 8.88 percent at 4:01 p.m. in Victoria on Monday and compared with 8.97 percent at the start of January. That compares with average emerging-market yields that have climbed 13 basis points to 5.35 percent this year, according to the Bloomberg USD Emerging Market Composite Bond Index, which tracks more than 60 countries. Fitch Ratings assesses the country’s debt BB-, three steps below investment grade and on a par with countries including Nigeria and Vietnam.
The sale of the blue bonds will be linked to a fisheries-management plan to develop the country’s semi-industrial and artisanal fishing sectors, Adam said.
“If we look at the existing trend in that sector, it’s a very strong growth sector for us,” he said. “The fisheries-management plan will encourage fishermen to look at the entire value chain -- from catching, to how the fish are stored on vessels, to how it’s processed and how it’s exported.”
Seychelles plans to tap the market further and expand the project to incorporate other Indian Ocean island nations such as Comoros, Madagascar and Mauritius, if the bond is successful, Adam said.