When I first heard that I was going to be interning with SEYPEC, I was a bit skeptical due to my misunderstanding of the company. For example, I (stupidly) believed that SEYPEC was also involved with oil exploration (was actually PetroSeychelles which was merged with SEYPEC until 2013), as a student leaning towards business and humanities subjects I thought I was unqualified for the job. Thankfully, during my two weeks of internship with the company I have a better understanding of the business and my past misconceptions have disappeared, and I hope that this blog will help readers understand SEYPEC better.
- SEYPEC implements high prices on oil for higher profits
Let me explain their pricing process for their products like diesel and motor gasoline to the domestic market. When the product is received by SEYPEC, its price is in US dollars and then converted to Seychelles Rupees, which can push the price up depending on the exchange rate (this is why SEYPEC changes prices weekly to give the client the most honest price). The price is the average market price at the time (recorded by PLATTS) with cost, insurance and freight (CIF) added to it. SEYPEC then adds the 8.08 rupee tax required by the government (at the time of writing) and a 2.75 rupee for its profit margin. So, as you can see the profit margin is relatively small (about 16% of the total price for SEYPEC by October 2016 whilst tax was 48%).
- SEYPEC is government-owned thus benefits from subsidies
Yes it is a parastatal, but it does not benefit from subsidies. Rather SEYPEC subsidizes many companies as well as pay dividends to government, for example:
It does contribute about 10% to the national GDP so you could say it does earn a lot of money. However, its approximate net profit margin (2015) is 1.72%. Why such a low margin? Well…product costs and taxes make up 84% of the revenue, plus there are training costs (about R5.2million in 2015), loans (currently 87% of their tanker loans have been completed, they aim to increase that percentage next year), insurance costs (more than R20million), maintenance costs, salaries and subsidies; leaving a tiny percentage as profit.
Written by Anna Yang.