The first budget from the Swaziland / eSwatini
Minister of Finance Neal Rijkenberg has been largely welcomed in the media in
the kingdom. But memories are short. Commentators have failed to notice the
similarities between the 2019 budget plan and the Fiscal
Adjustment Roadmap of 2010 (FAR 2010) that failed to save the Swazi
economy.
FAR 2010 was a blueprint for getting the Swazi economy
out of what was then described as the worst economic crisis in its history. It
was intended to be implemented between 2010 and 2015.
The similarities between FAR 2010 and Budget 2019 are
many. They include reforms on tax and increasing the efficiency of tax
collection, increasing the so-called Sin taxes (tobacco and alcohol), improving
the efficiency of public services, decreasing the public service wage bill, selling
government assets, building investor confidence, attracting both private
investment and foreign direct investment.
Key to FAR 2010 was the reform of public services,
privatising government assets and ensuring ‘that the wage bill remains under
control’. FAR 2010 proposed cutting 7,000 public service jobs.
FAR 2010 failed. As an indicator of this in 2010 total
external debt was about 13.4 percent of Swaziland’s gross domestic product (GDP).
In 2018, Swaziland’s external debt was 23.3 percent of GDP. GDP is the total
value of goods produced and services provided in a country during one year.
In his budget speech delivered on Wednesday (27 February 2019) Finance Minister Rijkenberg said Swaziland, ‘is facing an unprecedented economic crisis’. He added the economic outlook remained ‘subdued’.
In his budget speech delivered on Wednesday (27 February 2019) Finance Minister Rijkenberg said Swaziland, ‘is facing an unprecedented economic crisis’. He added the economic outlook remained ‘subdued’.
He said, ‘Foreign Direct Investment has been on average
negative for a number of years. Arrears have accumulated and we continue to
draw down on our reserves. The economy has stagnated and we are failing to
attract investment as the gap between the rich and poor continues to grow.’
He said the government wage bill was ‘a key component
of our crisis’, stating in the past ten years the wage bill had grown by 125
percent. Decreasing the public sector wage bill had been a key objective of the
FAR 2010.
He said the Swaziland economy was in trouble, ‘because
our private sector is too small and its growth is too slow. We are in trouble
because we have not been balancing our books.’
Then he announced a range of polices very close to
those of FAR 2010 that failed.
There is no reason to be optimistic about Swaziland’s
economic future if the past few years are a guide. FAR 2010 was never likely to
succeed and Budget 2019 faces the same fate.
A key reason for failure is the nature of the
political system in Swaziland. The kingdom is ruled by King Mswati III as an absolute
monarch. Political parties are banned and the King chooses a significant number
of the House of Assembly and Senate. He also chooses the Prime Minister and
Cabinet ministers.
The King chooses people who will do his will. They owe
their positions to him, not to the people who elected them. Put simply, he does
not want people in power who will change the economic structure of Swaziland.
The King holds all profits from Tibiyo Taka Ngwane, which is an investment fund
with extensive shares in a number of businesses, industries, property
developments and tourism facilities in Swaziland.
He also takes 25 percent of all mining royalties in
Swaziland. Neither Tibiyo nor the King pay tax. The monies are reportedly held
by the King ‘in trust for the Swazi nation’ but it is no secret that he uses
this money to finance his own lavish lifestyle. He has two private jets, 13
palaces and diamonds and gold. Meanwhile, nearly seven in ten of the 1.3
million population live in abject poverty on incomes less than the equivalent
of US$3 per day.
The first thing an independent Finance Minister should
do is to take Tibiyo and mining profits away from the King and use them to
boost the economy.
A second reason for failure is that the people the
King chooses for high office tend not have the experience nor the abilities to
deliver complicated policies. After the last election in September 2019 King
Mswati appointed
Ambrose Dlamini as Prime Minister and Neal Rijkenberg as Finance
Minister. Neither men have any experience in politics. They do not know how to successfully
draft the necessary legislation to enact Budget 2019 (Rijkenberg has reportedly tabled eight new bills
around the Budget 2019) and they do not know how to deliver on policies.
Again, Rijkenberg said that in the coming year
government needed to sell off assets to raise E400 million but he also said he
did not know what was to be sold. ‘An exercise’ was underway at the Ministry of
Finance to identify these, he said.
Both FAR 2010 and Budget 2019 were imposed on the
people. There was no meaningful discussion with the private sector, foreign
investors or public service unions. FAR 2010 fell almost at the first hurdle
when the government tried to implement public service wage reductions and job
cuts. Even members of parliament would not take pay cuts.
A report
on Swaziland from the World Bank published in August 2018 said, ‘The
business environment remains unconducive to private sector development due to
perceived weak transparency in regulatory systems and lack of clarity on
government policies and implementation.’
It added, ‘stronger commitment and leadership is
required’ to implement government policies.
The commitment and leadership is unlikely to be
forthcoming.
Richard
Rooney
See also
Swaziland
Finance Minister threatens public sector job cuts if workers don’t back his
budget
Gap
between rich and poor in Swaziland continues to grow, Finance Minister reports
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