Press Release - Performance Audit report

Assessing the effectiveness of revenue collection by the Seychelles Ports Authority

The 7th performance audit report of Office of the Auditor General was tabled in the National Assembly on 23rd May 2017. The report assesses whether the Seychelles Ports Authority has been collecting revenue in an efficient and effective manner for the period January 2013 to December 2016.

The Seychelles Ports Authority (SPA), previously known as the Port and Marine Services Division (PMSD), was set up in 2004 and is regulated by the Seychelles Ports Authority Act, 2004, and the Harbour Act (Cap 90). The Authority falls under the portfolio of the Minister for Tourism, Aviation, Port and Marine and it is headed by Chief Executive Officer (CEO). The SPA’s vision is to continuously transform and sustain Port Victoria as a viable Maritime Hub, and their mission is to safeguard the maritime gateway to the Seychelles socio-economy by providing adequate and reliable port infrastructure and efficient services.  

The SPA is self-funded and a profitable Authority, generating revenue through a number of port-related services. Our audit focused on the highest revenue streams of the SPA. Audit observed the following shortcomings in the revenue collection process.


Cargo handling fees collected are not being cross-checked by the SPA
The SPA has collected an amount of R141.7 million from cargo handling fees from the year 2013 to 2016. Revenue generated from cargo handling makes up the highest proportion of the SPA’s total annual revenue. The Land Marine Ltd. (LML), a private company, has exclusive rights to undertake stevedoring/ shore handling activities at the Commercial Port which includes the loading and unloading of a ship’s cargo. All applicable fees in respect of containers and break-bulk cargoes are billed and collected on the SPA’s behalf by the LML. In turn, the LML communicates the monthly collections to the SPA for monthly invoicing of such amounts. Audit observed that the SPA was not cross-checking the monthly collections communicated from the LML to ensure the accuracy and completeness before proceeding with the monthly invoicing.

Non-collection of annual fee payable by hire craft and pleasure vessel operators
An annual fee should be paid by all hire crafts and private pleasure vessels plying the Seychelles’ coastal waters as stipulated under Schedule 2 of the Harbour (Port and Harbour Dues) Regulations 2013. However, as at December 2015, the SPA was not collecting annual fees from both hire craft and private pleasure vessel operators. Audit obtained details of licenses issued in respect of hire crafts from the Seychelles Licensing Authority (SLA) and computed the minimum, maximum and average revenue forgone by the SPA over the years from non-collection of annual fees from hire craft operators. The average revenue not collected by the SPA over the three year period was over R1 million. The SPA pointed out that it is not mandated to manage hire crafts and pleasure vessels and it depends on information input from another Government Agency for the processing of invoices and collection of annual fees. The SPA took the initiative to start collecting annual fees from hire crafts towards the end of 2015, and as at 31st December 2016, had collected R 326,638.


The SPA lacked the likely benefits of the Value Chain Analysis
Audit also noted that the SPA is lacking the likely benefits of the Value Chain Analysis. The value chain analysis is in line with the COMESA regional integration agenda, and approval was granted in August 2013 for the sum of R1.5 million under the COMESA Fund to assist the value chain analysis consultation study in respect of port-related activities in Port Victoria. The aim of the study was to assess whether the Government is collecting sufficient revenues from the port sector, with special focus on the SPA’s operational efficiency, the Port Victoria’s competitiveness in relation to other ports in the region, assessing the legal framework relating to the Port’s revenue generating activities, worker productivity amongst other issues. Audit noted that it took almost three years for the study to be conducted, administered by the Department of Transport, after approval of funds had been granted.

Delay in revamping of the Commercial Port
The Commercial Port was constructed in 1972 and officially opened in 1975. It has been in use for almost 45 years without any major rehabilitation and extension work of the Port being carried out. Based on interviews conducted with the SPA Management and documents reviewed, we have found that plans to improve the Commercial Port were identified back in 2004 when the ports division became an Authority, and proposals were made in 2006 as per the Seychelles Ports Development Master Plan. However, it is only in 2016 that   a feasibility study was initiated.

No policy regarding lease and property rental
It was also observed that the SPA does not have a rental policy that outlines the terms for leasing and rental of properties. As such, the basis as to how the rates are deduced could not be ascertained by Audit. We observed certain inconsistencies in the charging of rental in two warehouses of the same size and situated in the same premises. They were being charged significantly different monthly rental fees of R14,000 and R5,000 each.  The SPA pointed out that the differing rates relate to concessions given to cargo/schooner/landing craft operators as they are expected to pass on the benefit to other Praslin and La Digue residents as opposed to purely commercial entities that do not benefit from such concessions. However, this is not yet formally documented.

Management of Debtors
The SPA has a Debt Management Policy and Debt Management Procedures detailing the various steps that the SPA has to take when its clients default on payments. This policy states that invoices raised in respect of port dues, and for other services other than port dues, should be settled within 60 days from the last day of the month in which the invoice was raised, and 30 days from the invoice date respectively. As at 31st December 2016, the total debtors’ balance as per the SPA aged debtors summary stood at R53.1 million of which 91 per cent related to the year 2016 and includes both port dues and non-port dues related debtors.

The port dues related debtors amounted to R47.8 million and non-port related debtors amounted to R5.3 million. Audit performed analysis of the SPA debtors’ summary and observed that the total debtors falling within the SPA’s credit limits i.e. 60 and 30 days was valued at R34.3 million whilst debtors exceeding the credit limits amounted to R18.8 million as at 31st December 2016.

 

Auditor General said:
“The Seychelles Ports Authority, generates revenue through the provision of a number of port-related services. Given that Seychelles relies heavily on imports, an efficient, effective and regionally competitive Port is critically imperative for the country’s economic growth and development. This report assesses the effectiveness of revenue collection by the SPA and the weaknesses identified should be duly addressed by the SPA with a view to maximise the revenue collection”.

Notes to the Editor:

1.    Press notices and reports are available from the date of publication on the Auditor General’s website www.oag.sc

2.    The Auditor General, Mr. Gamini Herath, heads the Office of the Auditor General employing some 40 staff. The Office performs the external audit function of public funds on behalf of the National Assembly. The Constitution and the Audit Act provide a broad framework for the role and responsibilities of the Auditor General. The Office is independent of the executive arm of the government. The independence of the Auditor General entrenched in the Constitution is a vital factor in the value and credibility that the public can place on the Office’s work.


3.    Furthermore, the OAG is a member of the International Organisation of Supreme Audit Institutions (INTOSAI) which sets operational standards as well as Code of Ethics for the conduct of all those who work for, or on behalf of, a Supreme Audit Institution (SAI). The OAG’s ethical behaviour based on a set of values and principles inspires confidence and credibility in the works it carries out and earns the much needed trust of its stakeholders.

4.    The purpose of the OAG is not just to identify and report upon shortcomings but also to assist and advise managers throughout Seychelles public sector administration on how to improve good governance, transparency and accountability in the management of public resources. The OAG’s value addition comes from the results of audit of financial statements, compliance regime and the value for money aspects of operational performance of public bodies.

 

Press Notice: 01/2017

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Email Address: auditgen@oag.s