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BRIEFING ON SWAZILAND

Presentation to the Portfolio Committee22 June 2011

By Amb J MatjilaDirector-GeneralDEPARTMENT OF INTERNATIONAL RELATIONS& COOPERATION

OVERVIEW

INTRODUCTION POLITICAL SITUATION RECENT POLITICAL DEVELOPMENTS ECONOMIC SITUATION FISCAL ADJUSTMENT ROADMAP (FAR) RECENT DEVELOPMENTS ON FAR IMPLICATIONS OF THE SITUATION SA GOVERNMENT RESPONSE CONCLUSION AND PROGNOSIS

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Introduction Swaziland continues to face socio-economic political challenges. The year 2010 saw a somewhat compounded situation as the political

challenges were accompanied by some economic difficulties. The global economic downturn had a negative impact in the economies

of the SACU countries as evidenced by the reduced SACU revenues. As a result, Swaziland started to experience serious economic

problems. This situation has made the Swazi society restless. This has manifested

itself in the recent protests.

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POLITICAL SITUATION

The Swazi political problems can be traced to the 1973 decree which ban political parties in Swaziland and more recently, the 2006 Constitution which also bans political parties.

The continued banning of the political parties as well as the occasional arrests of opposition party and civil society leaders has led to an escalation of tensions in the country.

The opposition political formations are made up of the Peoples Democratic Movement (PUDEMO); the National Constitutional Assembly (NCA); the Ngwane National Libratory Congress (NNLC) and SIVE SIYANQOBA.

Chief among their demands is the call for the unbanning of political parties and the call for democracy.

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POLITICAL SITUATION Contd.

In response to the demands of the opposition parties, the Swazi authorities have over the years promulgated various security legislations including the Anti-Terrorism and Sedition legislations.

The Swazi political situation has also attracted international attention.

Pro democracy formations and labour unions organised mass protests on 18 March and 12 April 2011 – the so-called “12 April Uprising”

The Swazi authorities used the police and military to crush the protests thus rendering the protests ineffective.

The political situation remains volatile.

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RECENT POLITICAL DEVELOPMENTS

Pro democracy formations and labour unions organised mass protests on 18 March and 12 April 2011 – the so-called “12 April Uprising”

The Swazi authorities used the police and military to clampdown the protests thus rendering the protests ineffective.

The political situation remains calm but tense. Swaziland has also appeared for the ninth time before the ILO on

violation of Freedom of Association under Convention 87.

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ECONOMIC SITUATION

Apart from the fact that Swaziland’s currency is pegged to the South African Rand and thereby subsuming the country’s monetary policy to South Africa, Swaziland receives 85% of its imports from South Africa and sends almost 74% of its exports to South Africa.

Swaziland’s main export commodities include asbestos, coal, cotton, cut diamonds, minerals, paper and timber. The main import commodities include animals, automobiles, chemical products, energy and edible oils.

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ECONOMIC SITUATION cont

The economic crisis presents a serious and real challenge to the country’s stability as the country may be unable to continue to pay its public servants.

The 2008/9 global economic crisis has had severe impact on the country’s economy. This was followed by a dramatic reduction of the SACU Revenue allocations during the financial year 2010/2011.

For example, Swaziland received R1,9 billion revenue allocation in 2010/2011 compared to the R5,1 billion in 2009/2010.

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ECONOMIC SITUATION Contd

In response to this situation, Swaziland has since approached the International Monetary Fund (IMF) in order to obtain financial assistance.

The IMF has made a set of recommendations to the Swazi authorities.

Swaziland has subsequently developed an intervention strategy called Fiscal Adjustment Roadmap (FAR).

However, the Kingdom has only implemented few recommendations, such as intensive collection of tax and introducing VAT and fuel levy.

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FISCAL ADJUSTMENT ROADMAP(FAR)

In terms of the Fiscal Adjustment Roadmap, the following will have to be implemented:

Wage cuts for public servants, in gradual form; the largest cut from the top by 10%, less from middle income earners between 6% - 8% and none at all for bottom earners.

Improving the business environment thereby promoting economic diversification - this will have an effect in attracting foreign direct investment and, building good public –private partnerships;

The government was also advised to mobilize domestic borrowing through the Treasury and Government Stocks Act of 2010;

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FAR Contd

Issue E2 billion in long term government bonds; Increase the levy on fuel in line with South Africa, increase gambling

tax from 4.5% to 15%, with alcohol and tobacco tax to follow suit; Introduce value-added tax by 2011; Discontinue new government expenditure with the exception of

education and health; Implement a three-year comprehensive process that will see the

government freezing post and wage increments and auditing the roster of civil servants to eliminate ghost employees;

Sell telecommunication licenses in order to encourage competition among mobile telecommunications.

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FAR Contd

The implementation of the FAR is set to run for a period of four years under the supervision of the IMF staff monitored programme.

FAR is envisaged to address the fiscal challenges and reduce the fiscal deficit to less than 3% of GDP by 2014/15.

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FAR Contd

According to IMF, if Swaziland were to adopt these measures its economic situation would improve within six months after which the IMF, depending on the full implementation of the recommendations, would be ready to provide resources.

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RECENT DEVELOPMENTS ON FAR

Swaziland has a challenge in meeting the targets set by the IMF for implementing FAR.

As a result the IMF has given the Kingdom the ultimatum for end of June 2011.

Should the Kingdom fail to meet the deadline set by IMF, it could loose any chance of getting assistance from African Development Bank , World Bank and other donors.

Swaziland has requested financial assistance from South Africa. Talks on this are ongoing between the Political Principals from

departments of Finance of the two countries.

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IMPLICATIONS OF THE SITUATION

The implementation of FAR may have negative implications as it relates to proposed job cuts in the public service, thus could exacerbate the current over 40% unemployment rate in Swaziland with huge socio-economic ramifications.

South Africa could face increased flow of economic and illegal migrants which could have a negative impact on SA economy.

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SOUTH AFRICAN GOVERNMENT RESPONSE

The developments in Swaziland have generated international interests and attention with some calling on South Africa to actively try and address the political situation in that country.

South Africa is committed to good neighbourliness and non-interference in other countries’ domestic affairs.

However, noting the latest developments in Swaziland, the South African Government has urged all the relevant parties in the Kingdom to begin a political dialogue with a view to speedily and peacefully resolve all the challenges facing the country.

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SOUTH AFRICAN GOVERNMENT RESPONSE Contd

Swaziland has approached South Africa for any support in lieu of these challenges.

The South African Government would consider any request for support in the interest of peace and development in the region.

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CONCLUSION AND PROGNOSIS

POLITICAL The political parties are expected to continue calling for the

democratisation despite the response of the security forces. The declining economy will further strengthen their call for

boarder political reforms. Disgruntled USDF members will continue to resort to criminal

activities to augment their salaries and illegal immigrants will place a burden on local communities and resources in South Africa.

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CONCLUSION AND PROGNOSIS

ECONOMIC Given the current economic crisis, it is unlikely that the country

will recover unless there is sufficient funding from an external donor.

The government will also have to improve its governance and fiscal management system to eradicate corruption.

A strengthened foreign direct investment portfolio would also help to mitigate the financial crisis.

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THANK YOU

2020