S AFRICA DENIES LOAN - UPDATE

Reuters

The Reuters news agency has updated its report from earlier today (28 June 2011) that denied the South African government had granted a R1.2 billion loan to Swaziland.

28 June 2011

SOURCE

S.Africa denies Swaziland bailout reports

* Pretoria denies granting aid to Swaziland

* Pressure mounting on Africa's last absolute monarch

JOHANNESBURG, June 28 (Reuters) - South Africa denied reports on today it had approved a $1.2 billion bailout loan for neighbouring Swaziland, which is Africa's last absolute monarchy and mired in an acute cash flow crisis.

"While the South African government is in receipt of a loan request from Swaziland, as confirmed last week, no loan has been agreed to or granted to Swaziland," the Treasury said in a statement.

The Swaziland Communist Party (SCP), an underground movement based mostly in South Africa, said this week it had received "credible reports" Pretoria had thrown a lifeline to King Mswati III, who is ploughing through central bank reserves to keep his unelected government afloat.

The SCP declined to say how it had obtained the information.

Mswati, who has at least a dozen wives and an estimated fortune of $200 million, turned to Pretoria after the International Monetary Fund (IMF) said he must do more to slim down Africa's most bloated bureaucracy if he wanted any aid.

A collapsing Swaziland -- a landlocked nation of 1.4 million people -- is not in the interests of South Africa, the continent's largest economy, but helping Mswati is politically very sensitive for the ruling African National Congress.

It is inconceivable that the ANC, a self-proclaimed champion of democracy in the region, would write a blank cheque to a country that has served as a long-running diplomatic and political headache right on its doorstep.

South Africa's powerful COSATU union federation, which loathes Mswati, and opposition parties have made clear any assistance should only be granted in the interests of regime change and restoring democracy.

Swaziland's chronic fiscal crisis -- the IMF puts its budget deficit at 14.3 percent of GDP, similar to Greece -- stems from a sharp decline in receipts from a regional customs union that has normally provided it with two-thirds of its revenue.

The budget crunch and prospect of a civil service overhaul has sparked rare protests against Mswati, whose security forces have responded with water cannon, rubber bullets and the arrest of prominent students and activists.

So far, the government has kept its head above water by eating into central bank reserves and running up at least $180 million in unpaid bills, although there are doubts about its ability to pay public sector salaries in the next few weeks.