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Swazi minister expects growth to speed up as rand peg helps reduce import costs

Published Sep 15, 2004

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Johannesburg - A strong currency had hit exports in Swaziland but business had benefited from cost cuts in imported capital goods, and economic growth looked set to accelerate, Swazi finance minister Majozi Sithole said yesterday.

Sithole said Swazi economic growth for 2004 remained on track to come in at between 2 percent and 3 percent, in line with his earlier forecasts, and he saw it accelerating to between 4 percent and 5 percent next year.

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The emalangeni currency is pegged one to one to the rand, underscoring Swaziland's economic relationship to South Africa.

"The exporters have felt the pinch on that front ," Sithole said on the sidelines of the African Investment Forum conference in Johannesburg.

Swaziland's key export is sugar. But Sithole said imports on capital goods such as machinery, its main import, were much cheaper and some businesses had taken advantage of the situation.

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He also said that imports from South Africa, where the bulk of the country's imports come from, were not affected by rand fluctuations because of the peg.

The rand is only about 2.5 percent firmer in the calendar year to date against the dollar after surging 40 percent in 2002 and 28 percent last year.

This has affected South Africa's neighbours Swaziland, Namibia and Lesotho, the currencies of which are all directly pegged to the rand.

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Sithole said Swaziland had no intention of undoing the peg to the rand, which is a commodity currency anchored in minerals such as gold and platinum. Swaziland does not have these metals in significant quantities.

Swaziland is also heavily dependent on aid from donors, which have raised their eyebrows at the lavish lifestyle of the country's ruler, King Mswati III.

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