Swazi economy has been hit hard

SWAZILAND’S government budget unveiled by Finance Minister Martin Dlamini before parliament this week shows the country’s economy was hit hard by drought and a withdrawal of foreign direct investment.

A 24 percent decline in Swaziland’s allowance from the Southern African Custom’s Union (Sacu) has also stressed the economy.

To partly compensate for the loss in the country’s cut of Southern Africa’s shared customs receipts, tax authorities have been busy ensuring compliance from tax-dodging Swazis.

Revenues, grants

Even so, the treasury will struggle to meet the government’s 2017/18 budget of R21.8 billion, with revenues and grants projected to be only R16.9bn.

Figures quoted are in South African rand, to which the Swazi lilangeni is tied on a par.

“Sacu receipts for 2017/18 will increase to R7.1bn from R5.3bn received for the 2016/17 financial year, reflecting an increase of 36.8 percent,” Dlamini told MPs, signalling a slight ease in the government’s revenue concerns for the upcoming fiscal year.

However, this money is conditional to favourable customs revenues for the region this year.

The government’s deficit nearly tripled this past year from the year before, while gross domestic product growth (GDP) contracted by that same factor of three, from 1.9 percent in 2015 to 0.6 percent in 2016.

“The deficit for financial year 2016/17 is projected at 12.3 percent of GDP which is higher than the 4.8 percent deficit to GDP ratio for financial year 2015/16,” said Dlamini, who reported that the deficit grew from R2.5bn to R6.8bn.

This money is conditional to favourable customs revenues for the region this year

The International Monetary Fund has urged the government to trim its bloated public workforce whose remunerations are a significant burden to the treasury.

However, Dlamini blamed the deficit on a fall in Sacu receipts and losses incurred from drought. Export figures for 2016 are available only to June, but suggest exports were on target for duplicating their 2015 earnings of R22.1bn.

The government is setting aside R120 million for continuing emergency relief to drought victims. Last year’s historic drought devastated the crops of two-thirds of Swazis who practice subsistence farming.

Production fell from 81 000 tons in 2015 to 33 000 tons last year. Diminished harvests fuelled inflation in 2016 that reached 7.8 percent largely due to a steep rise in food prices.

In December 2016 food price inflation hit 19 percent.

The Central Bank of Swaziland’s prime lending rate increased to 10.8 percent in January 2017. Swaziland holds no attraction for international investors at the moment.

“Net foreign direct investment recorded a deficit of R387.7m during the six months ending June 2016, a complete shift from the surplus of R844.7m posted during 2015,” Dlamini said.

Welfare

Anticipating better harvests this year – 30 000 hectares have been planted and grain yield is projected at 120 000 tons – and an increased Sacu allowance, government will press forward with modest social welfare initiatives.

Elderly grants will rise from R240 to R400 monthly, and grants for the disabled are increasing from R80 to R180 a month. With 69 percent of Swazis now connected to the national electricity grid, Dlamini said new sources of energy were being pursued to lessen Swaziland’s reliance on imports from South Africa’s power supplier Eskom.

Swaziland has the world’s highest HIV prevalence rate, which is straining government health resources. Dlamini announced a 25 percent increase of Swazis who will receive anti-retroviral drugs, from 150 000 to 200 000 patients in 2016.