ANOTHER BLOW TO GOVERNMENT PLAN

The Swaziland Government has received another blow to its economic recovery plan, with a claim from a top business leader that its tax policy will force businesses to close.

The government needs cash to pay public servants’ salaries and also to demonstrate to the International Monetary Fund (IMF) and the global financial institutions that it is able to run an economy.

As the Swazi economy approaches critical meltdown, the government put forward its ‘Fiscal Adjustment Roadmap (FAR),’ aimed at putting the economy on an even keel.

A major part of the FAR is collecting extra taxes from business.

But a Swazi business leader said there will be immediate closures of companies if tax rises go ahead.

Reuters news agency reports Hezekiel Mabuza, deputy president of the Federation of the Swaziland Business Community, saying the government has introduced new taxes which have worsened the plight of businesses already hit by the withdrawal of state contracts that had sustained them.

‘Some of these businesses that had contracts with the government ... have got no other markets that can sustain their businesses. So definitely they have to close down,’ Mabuza said.

‘Added to that, the new taxes have a negative impact on businesses that exist because their revenue is already down due to the economic crisis,’ he added.

About 40 businesses, or 10 percent of his organisation's membership, had indicated they would go under, Mabuza said, adding the tally could be higher.

The property sector was among the hardest hit as companies discontinued rentals of business premises.

Unemployment in Swaziland is about 40 percent, and 70 percent of the population of about 1 million live in abject poverty.

This blow to the Swazi Government’s hopes of convincing the likes of the African Development Bank and the World Bank it is capable of running an economy and therefore should be granted loans in the region of US$125 million-plus, follows news that some politicians and all civil servants are refusing to take10 percent pay cuts that are also part of the FAR.

Time is running out for the government as it is expected it will not be able to pay civil service salaries in June unless it gets an increase in tax revenue.

See also

SWAZI ECONOMY PLAN ‘IN TATTERS’

http://swazimedia.blogspot.com/2011/05/swazi-economy-plan-in-tatters.html

SWAZILAND: DEATH BY 1,000 CUTS

Swaziland is dying and it’s a death by a thousand cuts.

Last week, the International Monetary Fund (IMF) reported that the Swaziland Government was unable to meet its bills and the only thing it could still pay was the wages of public servants. The Government whistled in the dark and said it would get some cash by selling bonds on the financial markets.

It tried, but the Central Bank of Swaziland only sold one-fifth of the bonds it needed to. This means that there must be serious doubts that the government can meet it wages bill for much longer.

That is a catastrophe, but for many people it is a crisis that they don’t really understand (and don’t expect the Swazi media to explain it to them).

But the ordinary people in the kingdom, ruled by King Mswati III, sub-Saharan Africa’s last absolute monarch, are suffering the effects of the cuts as one-by-one they hit their ordinary lives.

Even before the latest catastrophe on the money markets, some government ministries were forced to slash their budgets for 2011/2012 by at least 24 percent. Tourism and Environmental Affairs, is reported to have cut its budget by at least E14 million (about US$2 million) from E78 million in the previous financial year.

The economic meltdown has meant that government departments have had to add an extra 10 percent to the cuts demanded in 2010. But, not all ministries are hit; Health and Education are considered essential and the intention is not to cut their budgets.

There is a growing list of consequences of the cuts that are now hitting the poorest in the land, where seven in ten of King Mswati’s one million subjects earn less than one US dollar a day.

News about the cuts is being made public one drip at a time. Here is a ‘round-up’ of those that I know of (so far).

Even though the Swazi Government pledged not to make cuts in the education and health services in the kingdom, cuts to other government services, such as maintenance to roads and vehicles, is impacting on people’s lives. Many sick people cannot make it to hospital for treatment because there is no longer transport available.

Swazi companies have had to retrench workers because the government can no longer afford to buy goods and services. Some will probably have to close down altogether. Johannes Manikela, Federation of the Swaziland Business Community (FSBC) Mbabane branch Chairman, said there were no salaries to pay their employees. ‘Since October last year [2010], the companies have not been receiving anything in terms of cash because government, whom we do business with, stopped tenders. While government is in a move to retrench her staff, the situation has automatically retrenched our staff,’ he said.

The government has no money to buy blades for graders, which may result in some damaged roads not being attended to for quite some time. Ntuthuko Dlamini, Minister of Public Works and Transport, said because of the financial crisis the ministry could not buy the parts.

The Swaziland Electricity Company (SEC) has halted all rural electrification projects, until the Ministry of Tinkhundla Administration and Development pays its outstanding bill of about E30 million. It is also reported that the Ministry of Tinkhundla Administration and Development owes a total of E59 million for its use of electricity. Prince Gcokoma, the Minister, confirmed this to the Weekend Observer.The bill covers the use of electricity over the whole of Swaziland.

The Central Transport Administration (the government’s central garage) owes E79 million to suppliers. The government also owes E40 million to companies that hire it cars and other vehicles. All contracts have now been cancelled.

The Swaziland Government website was closed down because it hadn’t paid a bill of E100,000. The site is up again, but it is not clear if the bill has been paid.

The Ministry of Public Service couldn’t pay the rent for flats it has to house civil servants.

Government fuel depots ran dry because of unpaid bills and subsistence farmers are unable to plough because they rely on government tractors which are now standing idle for ploughing.

Swaziland’s Tourism Authority is to scale down its activities because of the current economic crisis, Eric Maseko, its Chief Executive Officer said.