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Saturday, 27 July 2013

ECONOMY HIT BY POLITICAL INSTABILITY

Claims by King Mswati III and his government that the economic crisis in his kingdom is largely due to world economic conditions have been undermined by two new reports.

One shows  Swaziland has again underperformed compared to other countries in the region.

And, a separate report says that political instability in Swaziland, where King Mswati rules as sub-Saharan Africa’s last absolute monarch, stops firms investing in his kingdom.

African Economic Outlook reported there falls in production in agriculture, mining, manufacturing over the past year.

The report stated, ‘[M]anufacturing contracted by 0.6 percent, making it the only sector that has contracted for four consecutive years, with a cumulative decline of almost 8 percent. 

‘The services sector, which had grown by more than 5 percent in 2009 and 2010, has experienced a significant slowdown in economic activity. In 2012, the services sector recorded a mere 0.4 percent growth.’

African Economic Outlook said the freezing of public sector salaries for the past two years, ‘has limited the purchasing power of about 10 percent of the labour force and further reduced consumer confidence and domestic demand’.

It said the slow implementation of the government’s ‘Economic Recovery Strategy’ has ‘prolonged the negative impacts of the fiscal crisis’. 

It went on, ‘Subsequently, public and private investments have remained low, even by regional standards. Therefore addressing the structural weaknesses characterising Swaziland’s slow growth remains critical – the business environment and management of public resources need to be improved to build confidence in the economy and encourage private investment. Further actions are also required to address skills shortages.’

A separate report by consultancy DNA Economics in Pretoria, found that fewer than 10 percent of 400 firms questioned in South Africa would consider investing in Swaziland, but more said they would consider trading with the kingdom.

The survey also interviewed 25 Swazi firms, which agreed that the country’s political situation was detrimental to the stable foundations desired by foreign investors, particularly when investors could do business in economically robust Mozambique or other regional economies, all of which are faring better than Swaziland. 

‘Swaziland has fallen behind in sub-Saharan Africa in terms of growth. The global crisis has affected every country but why is it that others have managed to do better? This could be attributed to domestic issues,’ Matthew Stern of DNA Economics told Business Report newspaper in South Africa. 

One banker told the newspaper, ‘We can’t openly discuss what is keeping Swaziland down, because it is governance. People are terrified to talk for fear of being labelled traitors and terrorists, which is what this government does with its critics, no matter how well meaning.’

He added that until it could be open to honest discussion, the root problems hindering its economy would fester. 

‘Swaziland is different from other sub-Saharan African countries, and until that changes investors will remain nervous about coming here. In fact, they’ve stopped.’

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