Big Interview with Marc Houareau, VCS Group Executive Chairman

Big Interview with Marc Houareau, VCS Group Executive Chairman

"Corruption continues to be an impediment to private sector growth"

- The first barrier facing investors is our banking sector

Victoria Computer Services (VCS) today operates 13 distinct companies in various business sectors. It started out 25 years ago as Seychelles' first information technology company. The man behind the tremendous growth of VCS is its founder and Group Executive Chairman, Marc Houareau. TODAY wanted to find out more about the man, his group and his philosophy. We take a look back at some of the milestones in the journey of this man with exceptional entrepreneurial ability and get a glimpse of the group's future. Mr Houareau also shares his uncompromising diagnosis of the ills of this country and what are the public policies that are required to allow the country to surge ahead.

by R. Meetarbhan

THE PERSON

You started as a computer specialist working in the US in the 1980’s. You are today one of the most influential business leaders of
Seychelles. What inspired your professional choices in life?

After completing my studies at the Seychelles College in the late 70’s, I left Seychelles to study Art in Durban, South Africa. This is where I met my American ex-wife and we married and moved to United States where I lived my boyhood dream of becoming a cowboy working on a ranch. I became a father at the young age of 18 and it became clear to me that I had to continue my education if I was to become successful in life and take care of my family. I then
worked briefly on oil rigs and seismograph and saved enough money to attend University where I enrolled for an Accounting degree. Shortly thereafter our class was taken to a computer lab and my eyes lit up when I saw those huge mainframe computers with blinking lights in action. I remember the professor telling us that
“those machines were the future of Accounting” and this prompted me to change my major to Data Processing as it was referred to
back then. After I received my first degree I joined the largest teaching hospital in South Dakota as a computer programmer and later moved to Kansas City to join a NASDAQ-traded firm that specialised in developing clinical and financial software for healthcare industry. As luck would have it, I was the Director of Development when our firm was acquired and all employees did quite well financially as we had stock options. Spending ten years in the USA influenced my life greatly and this is when I developed my
business acumen. Plus the exposure during the nascent years of the computer revolution was invaluable. In the end, my eventual career path was more destiny than a planned one and I just happened to be in the right place at the right time.

What would you like to be remembered for as a person?

A generous person who took great care of his loved ones, especially his family and employees. I would also like to be remembered as someone who mentored many people and taught them that doing something right the first time and aiming for perfection far outweigh the laissez-faire attitude usually associated with failure.

Is there something about your character that few people would not be aware of?

I am a great believer in God our Creator, but I have very little faith in religion. I am also a workaholic and somewhat of a night owl.

To what extent did your family background shape your career path?

My grandparents and parents were very hard workers who grew up in a very poor colonial Seychelles, mainly on Mahé and later on Fregate Island where we lived in a farming environment without modern conveniences such as electricity or running water. Everything we ate came from the land or the sea. Great work ethics, discipline, a passion for commitment and teamwork were all values engrained in us from a young age. Back then, there were very few career choices and in fact quite a few of our family members emigrated overseas for higher education or for a so-called better life. So I don’t think my family shaped my career path per se, but they certainly shaped my philosophy of life and concept of work. I
will never forget my Mom’s advice of “do something right or don’t do it at all”.

Do you feel you have realised all your dreams or do you intend to take up more challenges in the future?

I have certainly accomplished a lot in my life and I have no regrets
whatsoever. Indeed there are a few more challenges that I am willing to take on in the future as one cannot remain stagnant. My passion for technology is as strong as ever and I think in the near future we will see some amazing developments in the areas of renewable energy and healthcare and there will be more disruptive technologies that will improve our lives. In the short term, we need to focus our efforts on our fisheries and marine sectors as those can quickly become our country’s number one source of revenue if managed and developed responsibly. In fact I am disappointed that President Faure did not create a dedicated Ministry for this important sector.

What are the values you would like to transmit to your children?

I am blessed to have 4 sons, 1 daughter and 2 grandsons to whom I impart the same values that I was fortunate enough to receive from my own parents and grandparents; and those are honesty, integrity, humility and compassion. Work ethics is also important to me and one of my pet peeves is laziness.

THE PHILOSOPHY

What do you consider as the most significant financial and non-financial barriers facing private sector investors in Seychelles?

The first barrier is our banking sector. In order for companies to grow, it has to borrow at some stage of its development. Interest on loans in Europe, America and most Asian countries are below 4%, and yet in Seychelles, the banks have colluded to keep the interest as high as possible which has created barriers for many companies who wish to expand their businesses. How can we expect local businesses to compete with foreign ones when the latter borrows in Europe at 4% to start a business in Seychelles, whereas a local businessmen has to pay 12% or more to start a similar business? To rub salt into the wound, the collateral requirements and guarantees requested by local banks must be the highest and most stringent in the developed world. Thus, unless interest rates are reduced, there will be very little growth in Seychelles except for foreign investors who will have a huge advantage over our local counterparts.

The second barrier is our own Government and politicians in particular. Today, the cost of doing business in Seychelles is simply too high and this makes us uncompetitive globally let alone in our own region. Employment costs are high, capital goods are high, utility costs are exorbitant, land is atrociously priced, construction costs have gone through the roof, and business tax is the highest in the region at 30%. Add to that the lack of productivity, let alone a very small pool of workers, and it is a disaster in the making. In fact, I told Vice-President Meriton a few weeks ago that the biggest problem in Seychelles today was not drugs, but job creation. I believe we are going to see an unprecedented number of layoffs in the future if this situation prevails and the cost of doing business continues to rise.

Thirdly, we have not modernised our Employment laws and sadly the new Employment Bill 2016 which I have read recently shows how disconnected the Government is from understanding the role of the private sector, let alone the total lack of understanding on how businesses operate in this global marketplace.

For example, my company has paid a year-end bonus religiously for the past 25 years, but we have paid it based on the financial performance of the company as well as the performance of each
individual staff. Thus everyone gets a bonus but it is not equally shared. But one does not need a Mathematics degree to figure out
that the proposed 13th paycheck will increase a company’s payroll
expenses by 8.3% and that it is not related whatsoever to productivity as many politicians keep saying. One has to work extremely hard in this competitive environment in order to create, let alone sustain a profitable company, and whilst many companies such as ours compensate our workers generously, there is never a guarantee of profits at the end of each year. Sadly, the Government seriously believes that every company in Seychelles is minting money and making millions and this is simply not the case.

Let me quote what I stated in a
post on Social Media last week in
regards to the 13th month salary
being forced on the private sector:

“If this bill passes, both PL and LDS will be responsible for many jobs that will be lost in Seychelles. There is an air of entitlement in this country that needs to go away but it continues to linger because of politicians whose judgments are blinded by trying to win votes. Most do not understand how businesses operate, let alone the difficulties of doing business in Seychelles today. Competition is global today, and margins are being eroded year after year. Adding another unnecessary cost burden instead of addressing the minimum wage issue to alleviate poverty in the country is a huge mistake. This is not the way forward to ensure future employment and to grow our tax base. This political expediency bill will simply kill jobs in the country and wages will be frozen for many workers. Adding 8-plus percent to a company’s operating cost can only cause
prices to escalate as many will have to increase their prices in order to afford this new expense, and the customer/consumer will feel the pinch even more. Lest we forget, former President Rene also dropped a similar bombshell many years back with his five-year tenure compensation package which until today, remains a huge burden to most private companies in the country as it became an overnight, unplannned liability on their balance sheet. Now add the
highest business tax (30%) in the region, VAT, CSR, and other increasing operating costs, and it does not paint a rosy picture for private sector growth in the coming years. Meanwhile, the Government continues to expand and overspend, continues to compete with the private sector, and has doubled its budget in five years to the tune of SR 7.9 billion. And let us not forget our local and foreign debt of some SR 10 billion which seems to be forgotten by many in Government. But who knows, maybe just before the next election, our smart politicians will come back to the Assembly to propose a 14th month salary as by then, the voters would need a new incentive."

Throughout the last decades, Seychelles has been trying to move away from a centrally planned economy to a free market economy. Is the country moving in the right direction and at the right pace?

Absolutely not. We are moving too slow and the steps taken in the past decade can only be deemed as baby steps. Despite advice from the IMF, the Government continues to compete with the private sector in many sectors such as banking, importation, retail and even in printing and media to name a few. The Government also holds a monopoly on Utilities, Public Transport and the importation and resale of carburant. Therefore, it is either a lack of vision, or simply a lack of will to move from a socialist-styled centrally planned economy to a free market based economy. This Government continues to pay lip-service to Public-Private sector partnerships
and keeps singing the same old song: “The Private Sector is the
motor of the economy and the Government is the facilitator”. If only this was true! Sadly, the latest SR 7.9 billion rupee budget is the highest ever in our history and is double what it was a mere 5 years ago. It goes to show that the Government is not interested in down-sizing, but rather their intent is to continue spending frivolously while taxing the private sector to bankruptcy. Instead of working towards a major surplus each year to reduce our huge debt that aptly enough was created by the same Rene and Michel Governments who were
responsible for bankrupting our nation, we continue to tax and spend without a thought for the future of our country.

Government has pledged to reduce public debt below 50 percent of GDP by 2020. What can be done to achieve this target without affecting the quality of public services?

Well, it will be easy to achieve this target if we continue to increase
taxes, sadly at the detriment of the private sector. However, it would be much easier to realise such numbers and possibly even a lower percentage if Government was to downsize instead of expanding and making unnecessary political appointments, let alone creating
useless commissions that neither serve the public nor any real purpose. Having seen the latest budget numbers, one has to wonder what the real goal is as most Ministries and Departments have been allocated more money, and the forecast for 2018 is even higher. Any yet they speak of prosperity for the people while more citizens enter the poverty index. One wonders if this Government will ever put out an austerity budget that will redress our economy so that in a few years, we can afford to build our own infrastructure instead of running around the world with a begging bowl or selling our assets to supposed “friends of Seychelles”.

Incidentally, what are your views on government’s strategies for infrastructure development?

Probably one of my harshest criticism of this Government is its failure to plan ahead. When one visits countries such as United Arab Emirates, Singapore, Qatar and even Sri Lanka, one is amazed at the rate of development and how quickly such countries have erected infrastructure to benefit their people as well as to modernise their respective economies. In Seychelles, most of our infrastructure were built prior to Independence. Apart from a few architecturally flawed buildings, there has been very few capital projects worth mentioning, other than the dredging projects to create new islands. Furthermore, most of the new projects such as our National Assembly building and Judiciary complex have been built by the Chinese Government. Whilst we should not look a gift horse in the mouth, we also need to wake up at some point and start developing our own country with a sense of pride. Unfortunately, we simply cannot pay for our own infrastructure because the Government has bankrupted our nation through failed experiments, overspending and corruption. A simple example is the failure to plan for additional capacity for utilities (water, electricity and sewage), despite the increase in population and the construction of so many new hotels. A solution is to add a flat fee of say SR10 or SR25 rupees to each utility bill each month for a particular project. This will be seen by the entire working population as contributing towards that project, as long as the funds are really directed to that project and not siphoned into another black hole. What about burying our electrical cables instead of spending millions each year cutting down our beautiful trees and destroying our environment? How about building roads with proper drainage as well as proper ducting for electrical and telecommunication cables, water pipes etc..? Another example of failure and bad planning is the Providence Industrial Centre which is simply a disaster. The traffic issues with the outdated roundabout system that can easily be bypassed by building simple overpasses. We should by now have constructed new roads, for example from Bel Ombre to Port Launay, and also widen the existing roads.

In Victoria, we should have built a marina by now. Nearly 20 years ago, the Marine Charter Association tabled a plan for the Yacht Club Basin and even brought in an architect from Cape Town to develop the concept for the entire area. We even had planned a maritime museum on Hodoul Island, several restaurants and office blocks and even a business hotel opposite Unity House. This development would have brought some life to the dullest capital in the world (Victoria). But like everything else, politics got in the way and the project was never approved. Now we await to see the grand master plan drawn up by Abu Dhabi and I am sure the marina project will be reserved for some special group of investors and we will continue to sell off our land to foreigners instead of allowing Seychellois entrepreneurs the opportunity to develop their own country.

Another example is our airport. Why do we need a foreign company
to manage it for us? Why can’t we finance a new runway ourselves by issuing long-term bonds or through low-interest long-term loans from international banks or a friendly country? Why can’t we ask a friendly Government such as India or China to finance and even build a new hospital for us, and whereby all patients, exempting children and retirees, would pay a nominal fee of SR 50 every time they used the services. Yes, it might take us 25 or 30 years to pay back the loan, but at least we would know that we have a professional infrastructure that serves the public well and one that we can proudly say was paid with our own sweat. It is time to put the begging bowl aside and start working harder to develop our own country. We have not set any good examples for the next generation by begging for handouts when we can get off our behinds and go to work to achieve our goals. In fact, this has become a bad precedence as many of our citizens today have become just like the Government. Instead of going to work in the morning, they prefer to wait for a handout from Government who is more than happy to
oblige in order to secure that elusive vote.

What should be done in Seychelles to strengthen public governance?

Firstly, the bigger the Government, the more unmanageable it becomes and this is one of the primary reasons why there has been
so much corruption in the past decades. Secondly, it is only now that we are seeing the semblance of an independent Judiciary arm
of Government taking shape and I hope they succeed in weaning
themselves away from the Executive branch. Thirdly, the Attorney
General’s office has failed the people in that it has never prosecuted
anyone even when there was blatant theft and untold millions of dollars siphoned out of the country. Incidentally, I am encouraged that President Faure wants to make public the assets of high-ranking Government officials, rather than burying the same in the Central Bank vault as President Michel did. I was also quite happy last week when I read the message from the newly-appointed CEO of the Anti-Corruption Commission (Ms. Lucy Athanasius) to mark the International Anti-Corruption Day and I quote: “Corruption unabated provides the perfect gateway for financial resources needed for a country’s sustainable development to be siphoned off into private coffers at the expense of the social well-being of the people”. Well, this links directly to your previous question as to why our country has not seen any major infrastructure development in the past few decades other than those paid for by benevolent foreign governments or individuals.

Today, no one is ever jailed even when they have been caught with
their hands in the cookie jar. Thus when a worker sees his boss stealing, he does the same knowing full well that the worse that can happen to him is that he is sacked or moved to a different department, as long as he keeps his mouth shut. Thus, investigations of corruption must be taken seriously. The Auditor General’s report must also be taken to heart and any person or agency found guilty must be prosecuted.

Unfortunately, today we now have many government institutions and agencies who are supposedly guard dogs, but someone further up removed their teeth before putting them in those posts. Thus, willingly or not, they simply have no bite.

THE GROUP

You recently celebrated your company’s 25th anniversary and since it was founded, the VCS Group has considerably diversified its
business activities. Is this the result of a planned strategy or fortuitous events?

It is a bit of both. In fact, I returned to Seychelles due to a chance encounter with Mrs. Kathleen Mason while on holiday visiting my aging parents. We explored the idea of computerising her company
Mason’s Travel and I returned to the country with this project in hand. The rest as we say is history as we formed a company in 1991 and grew at an alarming rate due to the lack of computerisation in the country at that time. However, fortuity quickly turned to planned strategies as budgets and sales targets became
the norm and we also created partnerships with the likes of Microsoft, Compaq-HP, NCR and Xerox. About 15 years ago, due to declining margins and obviously more competition in the IT arena, we embarked on a serious diversification strategy and the result is that we are now operating in various sectors including IT, Tourism, Import &Distribution, Warehousing, Media, Automobile and others.

During the past 25 years your companies, like most others in the world, have had to face many financial crises. Which ones affected
you the most?

I think the rupee devaluation and the forex crises affected most companies quite seriously and had an overall adverse effect on business operation in Seychelles. And until today, we’ve had to put
up with high interest lending rates from commercial banks which have been detrimental to business growth in the country. Other factors include politics and victimisation against our group of
companies and sadly it is still happening today. In fact, I am seen as an “enemy of the state”, a term coined by ex-President René to label anyone who did not subscribe to his misguided socialist theories.

The VCS Group is made up of several individual companies which are autonomous. Do you envisage a consolidated approach in the future?

As much as we would like to operate all companies under one umbrella, it is not possible due to tax implications and also distributor agreements. For example, we cannot operate Honda and
BMW under one company as it violates the car manufacturers’ policies. Also, some of our companies are brands unto themselves, such as VCS, Printhouse or Switch. However, we have taken a consolidated approach in areas such as Marketing and Finance as
such group departments help to reduce overall operating costs. We also plan on preparing consolidated accounting reports in the future as this is important when presenting the group’s financials to banks and business partners.

The group has had a lot of successes but must also have met with some failures. Any line of business which has not been able to take off within VCS?

We were the first company to introduce IT training in Seychelles under our VCS Training Centre banner. We provided mainly professional Microsoft training courses and issued globally accepted
certificates. We were accredited by the Ministry of Education and was the only Prometric approved centre in Seychelles where anyone could come in and sit for exams. Sadly, the Seychelles Institute of Management (SIM) decided to also venture into this business and slashed training prices and even hired some of our staff. Eventually, we decided to close down this division.

Similarly, we were the first company to bring internet to Seychelles with two other shareholders, Space95 and MBM Limited, a Hunt Deltel subsidiary. The company ATLAS was doing quite well but
when we wanted to expand into Cable-TV and install a fibre-optic ring in Seychelles, we encountered resistance from certain departments of Government who obviously had ulterior motives. In the end, we had no choice but to sell out to Cable & Wireless and of course, we all know who received the Cable-TV license.

To me, those are not really failures but unfair competition from certain opportunistic individuals within Government. But I am not one to dwell on such matters except to say that corruption was rife
back then and continues to be an impediment to private sector growth.

Where do you see the group going in the next ten to 15 years?
We will continue to nurture our current companies and push for increased revenue as well as find new opportunities for growth in new and emerging sectors. At the same time, it is difficult for any entrepreneur to get excited or motivated at this juncture, given the
instability and uncertainly created by a “Tax and Spend” Government. They continue to move the goal posts and apart from progressive tax, high business tax, Value Added Tax (VAT), Corporate Social Responsibility(CSR) tax, licenses fees and now the 13th paycheck debacle which will add an 8.3% increase in operating cost to all private companies, very few people would want to start a company in Seychelles unless they are foreigners with millions to spare, or someone who will get red carpet treatment from our Government for one reason or another and enjoy tax concessions not available to us local businesses. Let us not forget the small pool of labour with a lack of both qualified professionals and unskilled workers, a Ministry of Employment which continues
to play politics with issuing Gainful Occupancy Permits (GOP), lack of finance or high interest rates, high utility and fuel costs, ridiculous
taxes on vehicles, pickups and trucks required for work, lack of land as most have been gifted to friends and party associates, and moreover, an irresponsible Government whose budget has doubled in 5 years and one that believes the Goose that lays the golden egg is the employee rather than the employer, then it makes it difficult to plan for the future let alone have the courage to expand. By nature
I am a very positive person but I have become somewhat disillusioned and cautious in the past five years as I see no end in sight to the mismanagement of our country let alone the rampant corruption that is definitely not a perception, except perhaps to the corrupt. So I strongly believe that the battle will continue between
the private sector and a Government who simply pays lip service to the concept of public-private partnerships.

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