Will windfall help Swazi recovery?

Despite a R12.2 billion reprieve from a smothering three-year squeeze on the government of Swaziland’s financial well-being, the major question becomes: can the 1 million inhabitants of the tiny landlocked country sigh with relief?

Another moot point, in the wake of the windfall that eased the government’s fiscal crisis, concerns the danger of a country’s over reliance on one source of revenue over which it has limited or no control at all.

In 2011 Swaziland's King Mswati III approached President Jacob Zuma seeking financial support. But the R2.4bn loan comes with conditions that are disagreeable to Swaziland's government. Photo: Adrian de Kock. Credit: INLSA

The Swazi economy lacks diversity such that the country relies on the Southern African Customs Union (Sacu) for over 60 percent of its annual income.

Sacu drastically cut Swaziland’s allocation for 2010 and up to 2012, forcing the country to operate on half of what it usually needs annually. But this year and next financial year, Sacu receipts have reached R7.1bn. The rest, (close to R5bn) was raised internally, through improved revenue collection systems.

At the height of the cash flow crisis, in 2011, King Mswati III approached President Jacob Zuma seeking a lifeline of R2.4bn.

At the time, the Swazi government was forced to introduce tough economic cut backs and there were delays in paying civil servants and suppliers, sparking widespread protests.

Many companies, particularly small, medium and micro enterprises went under following the crisis. So desperate was the situation that the government owed local business entities and parastatals a staggering R1.6bn as of March last year.

Minister of Finance Majozi Sithole said the amounts had since been reduced to just more than half a billion rand. But this is still a huge amount when considering the size of the Swazi economy.

Before we can celebrate what some have coined ‘the Swazi success story of economic recovery’, we must understand that the slump was a government sector fiscal crisis. It is, therefore, wrong to assume that Swaziland is out of the doldrums because things on the ground remain very much the same.

Poverty levels remain high. More than 70 percent of the population survives on less than R7 a day. The official line is that unemployment is 28 percent, however, experts say it is much higher. Youth unemployment is more problematic and stands above 40 percent. The country’s health-care system is under heavy strain, largely due to HIV and Aids. Wealth distribution is skewed towards an elite 10 percent.

“We cannot expect that there would be immediate comfort for the general public, now that the government has access to over R12bn,” Swazi MP Nonhlanhla Dlamini said.

“After all, no one has said now that the state has recovered, the taxpayer should also get some relief. All the measures in place are permanent on the part of the taxpayer.”

She called on the government to consider easing the burden of tax on consumers and companies to allow people to have more disposable cash and businesses to have more resources to re-invest and expand, thus growing the economy.

The slump also emphasised the need for Swaziland to get its ducks in a row concerning its spending patterns. It is well and good to elevate health and education, but as independent economist Dumsani Sithole observes, it is more important for the country to shift its priorities towards areas that will improve the investment climate, create jobs and thus increase the tax revenue base.

“Currently, we are taxing the poor. Government must concentrate on the investment sectors of the economy over consumption,” Sithole said.

TradeMark SA says Swaziland’s public service wage bill, from a bloated civil service, currently exceeds 18 percent of gross domestic product, taking it to the highest level in sub-Saharan Africa. This is one of the reasons the country will have difficulty in turning its economic fortunes around.

An economist in the Ministry of Finance involved in the annual budgeting process who asked not to be named since public servants in Swaziland are restricted from addressing the media, admitted that the planning process was flawed.

“The process is not fully participatory to allow for the proper identification of priority areas. Budget allocations most times depend on who is the most aggressive, or vociferous head of department,” she said. For example, a former police chief who would intimidate the budget committee by saying if he was not given the amount he wanted the nation would have to contend with a sharp increase in crime.

Meanwhile, Sithole, the finance minister who is credited with setting up and boosting the Swaziland Revenue Authority’s (SRA) efficiency, agreed that the R12bn windfall did not mean that the challenges facing the country were over.

“We will continue with efforts to grow the economy, which unfortunately remains the lowest under Sacu. The introduction of the SRA has injected a fresh air of major efficiencies and best practice in revenue collection,” he said.

Sithole explained that the country could do without the R2.4bn loan from South Africa which, according to him, was intended to assist as a budget support. “It would be nice to receive it as assistance from our neighbours, but if there are complications to get it, it would not be a train smash. We can do without it,” he said.

Pro-democracy groups in Swaziland, Cosatu and other alliance partners in South Africa have put pressure on the South African government not to release the funds until Swaziland meets some stringent conditions to democratise and take steps to ensure the respect of universal human rights.

They want assurances that Swaziland will implement democratic reforms by, among other things, unbanning political parties that have been outlawed since 1973, release political prisoners and stop brutality to silence dissenting voices.

Mario Masuku, the president of Swaziland’s main underground political party, the People’s United Democratic Movement (Pudemo), said the government should not think the demands to usher in freedom for the people would be diminished by “the perceived lull in Swaziland’s cash flow problems”.

“This government is not answerable to the people and does not prioritise the needs of the people. Until and unless the government answers to the people, that money won’t help. It will be like throwing it into a bottomless pit. A hefty chunk will be allocated to the security forces where nobody can scrutinise it,” Masuku said.

However, Sithole said Swaziland did not have any political prisoners, adding that he was not aware of any brutality to silence dissenting voices.

“I am not aware of any stringent conditions to democratise and take steps to ensure the respect of universal human rights. At no stage was this ever put to the Swaziland government by the (South African) government,” Sithole said.