When it made its loan announcement on 3 August 2011, the South African Treasury said was a ‘conditional guarantee’ only.
Among the conditions were that Swaziland meets the technical and fiscal reforms required by the International Monetary Fund (IMF).
But, as we all know, Swaziland has failed to meet the IMF requirements. Simply put, the IMF wants to see an increase in government revenue (through taxes, mainly) and a decrease in public spending (by reducing the salary bill for public service workers).
The Swazi Government, handpicked by King Mswati, sub-Saharan Africa’s last absolute monarch, failed to make much headway in either of these. Public sector workers, most notably the teachers, have had a series of work stoppages against the proposed measures and are threatening all-out protests if their salaries are cut, or if teachers are retrenched.
It was because of the government’s failure to control income and expenditure that the IMF did not issue its so-called ‘letter of comfort’ that would have supported Swaziland’s bid to get a loan from the African Development Bank (AfDB).
And because it was unable to secure the AfDB loan, the Swazi Government went begging to South Africa.
Now, the South African Treasury has stated it will grant a R2.4 billion loan in three stages, starting this month (August 2011) once ‘the negotiations with the relevant parties have been finalised’.
That surely means, once South Africa is satisfied that Swaziland has got control of its finances. But, as things stand, with no agreement on salary cuts, that control is not there.
So what happens next? If, as seems likely, the Swazi Government fails to get an immediate agreement on cuts, it will not have met a major requirement for the loan. South Africa will then have to decide whether to grant the loan anyway. There are growing fears in South Africa that unless something is done about Swaziland without delay it will become an economic basket case like Zimbabwe and will be a massive drain on the whole Southern Africa region.
Because of that the loan may be given even without the cuts. But it will only delay by a few months the meltdown of the Swazi economy. The loan of R2.4 billion is roughly the equivalent of five months government spending in Swaziland. Chicken feed.
Here is the list of fiscal measures the South African Government wants to see Swaziland make. Decide for yourself whether you think King Mswati’s boys will be able to deliver.
Table in parliament the Public Finance Management Bill by October 2011;
Implement the Fiscal Adjustments Roadmap [the plan Swaziland gave to the IMF to save the economy] by February 2012;
Protect the peg between the lilangeni and rand;
Agree on priority spending programmes as contained in the Staff Monitored Programme that was agreed between the Government of the Kingdom of Swaziland and the International Monitory Fund; and
Implement acceptable financial reporting and finalise and implement an auditing bill.
S AFRICA SETS OUT LOAN CONDITIONS