Fi­nan­cial sec­tor in­vestors have ap­proached gov­ern­ment with the idea to turn the coun­try into a SubSa­ha­ran Africa fi­nan­cial hub

Observer on Saturday - - Front Page - By ec s aba Edito

With gov­ern­ment strug­gling to im­prove its rev­enue base and al­ready hav­ing ex­pe­ri­enced two sharp de­clines in the South­ern African Cus­toms Union (SACU) re­ceipts within a space of five years and the re­ces­sion be­ing ex­pe­ri­enced by ma­jor eco­nomic part­ners, fi­nan­cial ex­perts have ap­proached the min­istry of fi­nance and the Cen­tral Bank of Swazi­land with a pro­posal to turn the coun­try into a in­ter­na­tional off­shore fi­nan­cial cen­tre.

In fact, the then min­is­ter of fi­nance and now Gover­nor of the Cen­tral Bank, Ma­jozi Sit­hole is un­der­stood to have com­mis­sioned fi­nan­cial ex­perts be­tween the year 2000 and 2001 to de­velop an in­te­grated cus­tom-made leg­is­la­tion that would have seen the coun­try be­com­ing a global fi­nan­cial cen­tre.

It is said that our fail­ure to make our de­ci­sion on the mat­ter re­sulted in the idea be­ing taken to Mau­ri­tius and has boosted its econ­omy and is one of the rea­sons that make it one of the lead­ing tourism hubs on the con­ti­nent.

The idea was again pur­sued in 2011, this time around with a Bill be­ing drafted in Fe­bru­ary 2011, which was to be known as an Act to reg­u­late In­ter­na­tional Busi­ness Ac­tiv­i­ties car­ried on within the King­dom of Swazi­land.

It was en­vis­aged that the draft Act to reg­u­late In­ter­na­tional Busi­ness Ac­tiv­i­ties car­ried on within the King­dom of Swazi­land will func­tion as the main Act, rarely re­quir­ing amend­ments or up­dates.

It fur­ther posits the leg­is­la­tion which will form the ba­sis of the Fi­nan­cial Cen­tre sys­tem will take the form of reg­u­la­tions, rather than laws, and will be able to be amended and up­dated as and when nec­es­sary.

The idea for the Bill was to make Swazi­land the in­ter­na­tional off­shore head­quar­ters Hub for SubSa­ha­ran Africa.

The ex­perts noted that at the time there was no other valid hub op­er­at­ing in Africa since Mau­ri­tius was strongly dis­ap­proved of by se­ri­ous gov­ern­ments.

It fur­ther stated that Botswana and Namibia have not got off the ground. It pre­dicted that an In­ter­na­tional Off­shore Fi­nan­cial Cen­tre will en­hance fi­nan­cial strength and sta­tus of Swazi­land.

It was said that the new leg­isla­tive, reg­u­la­tory and ad­min­is­tra­tive frame­work would give the coun­try a global face as an in­ter­na­tional fi­nan­cial hub.

In light of un­cer­tain­ties within the re­gion, in par­tic­u­lar the devel­op­ments in the Repub­lic of South Africa and other South­ern African coun­tries, it was be­com­ing ur­gent to pro­ceed with this ini­tia­tive by the coun­try’s lead­ers to cre­ate Sub-Sa­ha­ran Africa’s first true IOFC and to gen­er­ate eco­nomic growth, so­cial up-lift­ment and sus­tain­able em­ploy­ment.

“In or­der to make Swazi­land a de­sir­able in­ter­na­tional in­vest­ment des­ti­na­tion and to achieve per­ma­nent so­cial, eco­nomic and in­dus­trial em­pow­er­ment for all in­come groups, it is es­sen­tial to of­fer to a very dis­cern­ing sec­tor of the world’s in­vest­ment com­mu­nity, all the best fea­tures to be found in any other ju­ris­dic­tion, sub­ject to the over­rid­ing re­quire­ment of full re­spect for the new in­ter­na­tional norms of fi­nan­cial and le­gal com­pli­ance,” the re­port stated. In the above re­spect they were talk­ing to strength­en­ing of an­ti­money laun­der­ing laws and fi­nanc­ing of ter­ror­ism laws, things which the coun­try has con­tin­ued to im­prove. It fur­ther noted that Swazi­land’s state-of-the art leg­isla­tive and reg­u­la­tory struc­ture will achieve the fol­low­ing; Full re­spect for all in­ter­na­tional stan­dards Con­comi­tant ben­e­fits for Swazi­land, South Africa and the Sub-Sa­ha­ran re­gion. “It is for the first time any­where in the world that a new IOFC has de­signed its leg­is­la­tion with a full aware­ness of, and re­spect for, the in­ter­na­tional norms re­lat­ing to non-abuse of the tax sys­tems of other coun­tries and the fi­nan­cial and le­gal stan­dards set by the United Na­tions and the OECD. “In light of the in­evitable con­cern and sen­si­tiv­i­ties that the gov­ern­ments of South Africa and other re­gional high tax coun­tries would have in re­la­tion to a new in­ter­na­tional fi­nan­cial cen­tre on their door step, great care has been taken to pre­vent po­ten­tial abuse,” the doc­u­ment stated.

It stated that the Act pro­vides for spe­cific mea­sures for the preven­tion of abuse by in­di­vid­ual tax­pay­ers of the ben­e­fits af­forded un­der the Dou­ble Tax­a­tion Agree­ments con­cluded by Swazi­land and its treaty part­ners.

Three suc­cess pack­age el­e­ments for the IOFC were stated as; 1. A ded­i­cated Au­thor­ity 2. Preven­tion of abuse of Dou­ble Tax­a­tion Agree­ments; and

3. The right kind of in­ter­na­tional busi­ness struc­tures

The func­tions of SIFAC

The doc­u­ment stated that the func­tion of the Swazi­land In­ter­na­tional Fi­nan­cial Cen­tre (SIFAC) are:

(a) To reg­u­late in­ter­na­tional busi­ness ac­tiv­i­ties within Swazi­land; and

(b) To cer­tifi­cate the right to con­duct such in­ter­na­tional busi­ness ac­tiv­i­ties within Swazi­land

It is said that suc­cess­ful ex­am­ples of a ded­i­cated au­thor­ity con­trol­ling off­shore ac­tiv­i­ties are to be found in Malaysia, Malta and Mau­ri­tius.

The main Act will es­tab­lish SIFAC as the au­thor­ity.

Role of SIFAC

SIFAC cre­ates the reg­u­la­tory and ad­min­is­tra­tive frame­work to make the in­ter­na­tional fi­nan­cial hub work ef­fi­ciently and prof­itably.

To this ef­fect, SIFAC is granted those pow­ers nec­es­sary to set up and run an IOFC in Swazi­land, in­clud­ing the pow­ers to charge the fees re­quired to run the cen­tre and to grant li­cences and cer­tifi­cates which en­ables SIFAC to con­trol the op­er­a­tions and trans­ac­tions car­ried on within the frame­work of the cen­tre.

Ad­min­is­tra­tion and Reg­u­la­tion of SIFAC

Ad­min­is­tra­tion of SIFAC is by the board of Gov­er­nors, con­sist­ing of a chair­man, a vice-chair­man and three other per­sons with wide busi­ness ex­pe­ri­ence.

The board’s prin­ci­pal func­tions are as fol­lows:

De­ter­mine poli­cies and pro­ce­dures;

Process ap­pli­ca­tions for li­cences or cer­ti­fi­ca­tion;

Is­sue li­cences and cer­tifi­cates;

Pre­scribe and reg­u­late the pay­ment of fees for li­cences and cer­tifi­cates;

De­ter­mine the va­lid­ity and du­ra­tion of li­cences and cer­tifi­cates; and

Ad­min­is­ter the cen­tre The board will process the li­cens­ing and cer­ti­fi­ca­tion of in­ter­na­tional trusts, in­ter­na­tional busi­ness com­pa­nies, in­ter­na­tional co­or­di­na­tion cen­tres, in­ter­na­tional in­for­ma­tion tech­nol­ogy cen­tres, in­ter­na­tional cap­tive in­sur­ance com­pa­nies, in­ter­na­tional li­a­bil­ity com­pa­nies, rep­re­sen­ta­tive of­fices of for­eign banks and mu­tual funds.

SIFAC de­ter­mines its own in­ter­nal reg­u­la­tion and may del­e­gate pow­ers.


All re­lated doc­u­ments and other in­for­ma­tion are con­fi­den­tial in­so­far as this not over­ride cer­tain other leg­isla­tive pro­vi­sions, in par­tic­u­lar re­lat­ing to anti-money laun­der­ing. Mak­ing the fi­nan­cial cen­tre work All of the fol­low­ing el­e­ments will have to be brought into op­er­a­tion, with the nec­es­sary co­op­er­a­tion be­tween SIFAC and the Gov­ern­ment of the King­dom of Swazi­land: Ad­min­is­tra­tion of the fi­nan­cial cen­tre Mar­ket­ing of the King­dom as a fi­nan­cial cen­tre

As­sist­ing in the con­clu­sion and func­tion­ing of dou­ble tax­a­tion agree­ments

Cre­ation of the right kind of in­ter­na­tional busi­ness struc­tures

Train­ing and ed­u­ca­tion of Swazi­land na­tion­als in the op­er­a­tion of the Fi­nan­cial Cen­tre Im­por­tance of reg­u­lat­ing the is­sue Swazi­land has main­tained the tra­di­tional tax sys­tem whereby tax­pay­ers are taxed on their do­mes­tic source in­come. In 2011 South Africa changed its tax sys­tem in favour of a res­i­dency based sys­tem un­der which South African res­i­dents are taxed

INIATOR: Gover­nor of the Cen­tral Bank, Ma­jozi Sit­hole.

AWARE: Min­istry of Fi­nance Prin­ci­pal Sec­re­tary Bheki Bhembe.

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