SWAZILAND ‘FAILED STATE’ FEARS

More bad news on the economy: Swaziland could become a ‘failed state’ if a proposal to reform the Southern African Customs Union (SACU) goes ahead.

The proposal is to cut the amount of money Swaziland gets each year from SACU still further. This year Swaziland’s income from SACU was down from E6 billion (about $US875 million) in 2009 to E1.9 billion in 2010.

According to the Reuters news agency, which published a leaked report on the matter, if the new proposal goes ahead Swaziland’s slice of the SACU receipts will fall from 9 percent in 2012 to 3 percent by 2019.

The Swazi News, an independent newspaper in Swaziland, reported this means the kingdom would lose E580 million per year (2 percent of the kingdom’s gross domestic product).

Swaziland is at present reeling under the effects of SACU cuts and years of bad economic management by a succession of governments handpicked by King Mswati III, sub-Saharan Africa’s last absolute monarch.

The kingdom is effectively broke already and cannot pay its bills. Only last week the Central Bank of Swaziland could sell only one-fifth of the E750 million (US$106 million) bonds it needed to so the government could pay its short term expenses, including public sector wages.

In a speech at the opening of the Swazi Parliament on Friday (4 February 2011), the King was unable to come up with any plan for economic recovery. The best he could tell his subjects was to ‘work harder’. The previous week, he told his subjects they should ‘pray’ to save Swaziland from the economic mess.

Professor Roman Grynberg, a senior research fellow at the Botswana Institute of Development Policy Analysis, has a clearer idea of what is going on than King Mswati. Grynberg wrote, ‘Swaziland, which gets more than 60 percent of its revenue from SACU transfers, would suffer without these funds.’

He said the loss of revenue ‘may well turn Swaziland, the most vulnerable of all SACU members, into a failed state’.

Reuters reported, ‘A drop in funds could mean bankruptcy for Swaziland.’

The proposal put forward by Australian consultants, the Centre for International Economics, has still to be discussed by SACU.

SWAZILAND ECONOMY ‘CATASTROPHE’

Just how bad is the state of Swaziland’s economy?

It’s a ‘catastrophe’ if you believe Roman Grynberg, senior research fellow at the non-governmental Botswana Institute for Development Policy Analysis, who said this week that changes made in the past to the way Southern Africa Customs Union (SACU) revenues were distributed, added to further changes being discussed for the future, would have ‘absolutely catastrophic’ consequences for countries such as Swaziland and would be ‘serious for political stability in the whole Southern African region’.

Grynberg was predicting the future, but the present is pretty grim as well.

There are rumours flying around Swaziland at present that the government of King Mswati III, sub-Saharan Africa’s last absolute monarch, is overspending by E30 million a month (4.2 million US dollars) and is using its foreign currency reserves to pay bills.

Finance Minister Majozi Sithole has already said that government revenues are so low that ‘non-SACU’ revenues are not enough to pay the government wage bill. There are well-founded fears that the government will not be able to pay civil service salaries from next month (October 2010).

The government needs income and it needs it quickly. It is trying all the usual tricks of economists to stay afloat, such as seeking loans, selling assets, issuing bonds.

So far they have little success. In August 2010 the World Bank and the International Monetary Fund refused to support Swaziland in its effort to secure a 500 million US dollar loan from the African Development Bank on the grounds that the government had consistently ignored warnings that its wages and salaries bill was too high for a kingdom of its size.

There is little interest in buying bonds in Swaziland (countries all over the world, most with much more stable economies than Swaziland, are selling bonds), which leaves the sale of assets as the last resort. But, Swaziland has few state -held assets, but what it does have is an unknown amount of wealth ‘held in trust’ for the Swazi people by King Mswati, but there is little likelihood that he will give up his control of this money to help out.

All that is realistically left for Swaziland is aid from the international community to ensure that people don’t starve and that the health and education services in the kingdom don’t grind to a halt.

But the Swazi regime didn’t help its cause earlier this month when police and security forces harassed and intimidated foreign nationals during the Global Week of Action before throwing them out of the kingdom.

This action will not make people in developed countries feel well disposed to Swaziland.

There is also suspicion that ‘development aid’ destined for Swaziland doesn’t go where it is needed, but instead is siphoned off by King Mswati to pay for his palaces, Mercedes cars and his general lavish lifestyle.

So to sum up: there is overspending by E30 million a month, little chance of selling bonds or assets or securing loans, and a potentially unsympathetic international community.

Sounds to me like Grynberg’s ‘catastrophe’ has already struck.

CLARIFICATION. The amount of the loan sought at the ADB is 75 million US dollars - about E500 million.