11 January 2013

Swaziland: Minister Wrong On Economic Recovery

analysis

The assertion by Swaziland's Minister of Finance Majozi Sithole that the kingdom's economy is no longer in crisis is wide of the mark.

Sithole is telling anyone willing to listen that Swaziland will have E12.2 billion (US$1.1 billion) to spend in the current financial year and therefore, 'I can safely say the economy is now under control. We have survived the worst economic challenges ever.'

He told the Times Sunday newspaper in Swaziland that the International Monetary Fund (IMF) has been 'shocked' by the kingdom's 'economic resurgence' having 'spelled doom for the country a long time ago'.

None of this is true. And it's not the first time Sithole and the Swazi Government, handpicked by King Mswati III, sub-Saharan Africa's last absolute monarch, have misled the Swazi people about the IMF.

The IMF has not said the financial crisis in Swaziland economy is over. In fact, it has said the exact opposite. In November 2012 it said that Swaziland's economy is in such a poor state there needs to be immediate cuts in public spending if the government is to meet its own budget forecasts. Next year even more cuts will be needed, the IMF said, because the Swazi Government has failed to make important changes to the economy that would increase revenue for the government and reduce unnecessary spending on 'investment projects that are not effective in fighting poverty'.

Sithole and Swaziland's Prime Minister Barnabas Dlamini have in the past deliberately lied about the IMF's support (or lack of it) for the government's financial management. In April 2011 Dlamini called a press conference to announce that the IMF would issue a 'letter of comfort' which meant it believed the government's economic-recovery plan was sound and the kingdom could be trusted with loans from international institutions such a s the World Bank and the African Development Bank.

No letter of comfort was forthcoming and eventually the IMF announced the Swazi Government was so far away from implementing a recovery plan it felt unable to continue offering support.

Nothing has changed with the Swaziland economy. The money Sithole speaks of is made up of E7.1bn receipts from the Southern Africa Customs Union (SACU) (up from E2.8bn last year), plus E4.8bn gathered from local taxes, and VAT receipts.

There is no expectation the same sum will be available from SACU next year and the locally-gathered taxes are a small percentage of the money the government needs to pay its bills.

The Swazi economy remains in dire straits; the government continues to have the highest public sector wage bill per capita in sub-Saharan Africa. It cannot fund health and social welfare projects, but continues to waste millions of emalangeni bankrolling King Mswati, his 13 wives and a Royal family so large, no one is sure how many members it has.

The king's vanity project, Sikhuphe international airport, remains uncompleted and unnecessary, but is still a black hole sucking in millions of US dollars a year.

While media in Swaziland have taken Sithole at his word, international media have been more sceptical. Business Report in South Africa said, economists questioned the basis of Sithole's 'boast' that Swaziland is experiencing an economic resurgence.

'Seven out of R12 of government revenue comes from SACU. Swaziland is tied with Somalia as having the worst performing economy in Africa and there is nothing on the horizon to improve the situation,' a Swazi investment counsellor told the newspaper.

The paper reported, 'He is among observers of the Swaziland economy who suspect that South Africa, having been slammed for supporting King Mswati's non-democratic government by offering the E2.4bn bailout loan [in 2011], is now providing "financial support of another kind" by agreeing to a near tripling of SACU payments to Swaziland this year.'

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