Swazi no longer need SA bailout
Business / 08 Jan '13, 3:20pm
Swaziland, one of Africa’s most impoverished countries, no longer requires a so-called bailout loan from South Africa, thanks to a massive increase in revenue coming from the Southern Africa Customs Union (Sacu).
“I can safely say the economy is now under control. We have survived the worst economic challenges ever,” Swaziland Finance Minister Majozi Sithole boasted at the weekend.
Swazi Finance Minister Majozi Sithole says his country's economy is under control, following a boost in receipts from Sacu. Credit: inlsa
In 2011 King Mswati III broke protocol and reportedly irritated South Africa’s foreign ministry when he returned to Swaziland from a trip to South Africa and announced that he had succeeded in securing a R2.4 billion loan. He did not mention any of the conditions attached to the loan, including mild language urging his government to accommodate democratic reform.
However, when these codicils came to light the royal family was vocal in its opposition.
In South Africa, President Jacob Zuma’s administration was criticised for pandering to the king instead of allocating the money to fixing domestic challenges like unemployment.
King Mswati’s older brother, Prince Mahlaba Dlamini, a senior royal counsellor, attacked the loan as “selling your wife for R100”.
Meanwhile, human rights groups and organisations seeking a democratic state in Swaziland poured pressure on South Africa’s government to use the loan as a means to pressure King Mswati to commit to political reform.
Sithole also told the media in Swaziland that the government would no longer seek a R100 million loan from the African Development Bank. The bank requires a letter of endorsement from the International Monetary Fund (IMF) as proof that the government is economically responsible and will not squander the money.
When the government failed to obtain the letter, King Mswati and government officials began to criticise the IMF.
“By achieving the Sacu windfall Mswati has freed himself of pressure for political reform for some time to come, and he has obtained a substantial amount of money for free; there is no loan interest to be paid,” political consultant Thomas Gule said.
Sithole said Sacu receipts of R7.1bn, up from R2.8bn last year, would combine with R4.8bn gathered from local taxes, including the introduction of VAT last year, for a total of R12.2bn revenue this year. This will suffice to allow the government to settle some of its debts and continue paying civil servants.
Swaziland, with a population of just a little more than a million people, has the largest percentage of civil servants per capita in Africa.
The government has no plans to cut back on public workers. With the economy moribund and the private sector shedding jobs, Prime Minister Sibusiso Dlamini said cutting government jobs would lead to political unrest.
By recommending a trimming of the civil service and other measures considered unpalatable to the ruling royal family, the IMF has incurred the wrath of government officials, particularly Sithole, who are appointed by King Mswati.
Sithole ratcheted up his criticism of the IMF at the weekend when he said the fund would be unhappy that Swaziland was not yet insolvent.
“Our survival and economic resurgence has shocked the IMF, which spelled doom for the country a long time ago,” Sithole told the Swazi media.
However, economists are questioning 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,” said a Swazi investment counsellor in Mpumalanga, from where he monitors Swaziland’s economic fundamentals.
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 R2.4bn bailout loan, is now providing “financial support of another kind” by agreeing to a near tripling of Sacu payments to Swaziland this year.
The National Treasury’s chief director of communications, Jabulani Sikhakhane, said yesterday that the department would not comment much on the issue of the loan. He said there had been ongoing conversations between the two countries but nothing concrete had come of it.
“There have been no new developments,” he said.