Swaziland: Lifeline loan delayed

The economy is crumbling and the desperately poor suffering.

This article will appear in the Africa Research Bulletin: Economic, Financial and Technical Series, Vol 48 No 10 p. p.19302 . Subscribe here.

Donor-dependent Swaziland has been plunged into a financial crisis since receipts from the Southern Africa Customs Union (SACU) dried up. Finance Minister Majozi Sithole has also recently conceded that government corruption cost the country nearly twice the annual amount budgeted for social services.

The Swazi economic crisis is getting more desperate as the South African loan lies in limbo, Business Report said.  Business is one of the most affected sectors as the government fails to pay suppliers who are already in arrears with financial institutions.

South Africa approved a R2.4bn conditional loan to its cash-strapped neighbour back in August (Economic Series Volume 48 No. 7: Controversial Loan) and it was due to be released in three tranches from the SA Reserve Bank to the Central Bank of Swaziland (CBS). CBS governor Martin Dlamini said the banks were waiting for the two governments to sign the memorandum of understanding (MOU), which was “a political issue.”

The loan conditions were that Swaziland undertook confidence-building measures, guided by the Joint Bilateral Commissions for Co-operation agreement, which promotes democracy and the respect of universal human rights. While the government has not come out to clarify the delay surrounding the loan, a senior royal family member and adviser to King Mswati III said the country could not be sold for a paltry R2.4bn.

Prince Mahlaba criticised South Africa’s conditions, arguing that they would allow for political parties, which do not freely operate in the kingdom.  Swaziland also failed to meet the International Monetary Fund’s (IMF) conditions, particularly the cutting of public servants’ salaries to reduce the wage bill (Vol. 48 No. 1 p. 18987 IMF View, Vol. 48 No. 8 p. 19236 IMF Mission). Since then the loan issue between the two governments has been deadlocked, and the Swazi economy continues to crumble.

President of the Federation of Swaziland Employers and Chamber of Commerce Tineyi Mawocha said the judicial crisis was not helping the situation. Courts are grounded after a private lawyers’ boycott following a fallout with Chief Justice Michael Ramodibedi, whom they accused of mismanaging the judiciary. “Business is reeling under pressure,” said Mawocha, who is also the managing director of Standard Bank Swaziland. “People are struggling to service their loans.”

Mawocha said that while banks were doing their best to help government suppliers, who are defaulting because of the fiscal crisis, there was a limit to the grace period. “But with the ongoing judicial crisis where courts are grounded we can’t even repossess because we need the strength of a court order to be able to do so,” Mawocha said.

Business is not the only sector feeling the pinch – schools have not opened on time owing to government’s failure to pay for Free Primary Education and orphans and vulnerable children. The opening of the University of Swaziland was also delayed because the government did not have enough money for scholarships.

The government has also announced that there is no money to pay the quarterly elderly grant of R600 to over 40 000 beneficiaries. The construction of the multi-million Sikhuphe International Airport remains grounded because there is no money to pay suppliers and contractors.

The effect of the suspension of grants to the elderly is catastrophic, the UN humanitarian news agency, IRIN, reported.  In a country with the highest HIV rate in the world many of the elderly are carers for their orphaned grandchildren. Amos Zwane, president of the Swaziland Old Age Society, told IRIN:  “No pensioner has received any money from government in three months. We go to the collection points, but there is nothing. There is no explanation.”

King Mswati III continues to dodge the budgetary and political reforms that South Africa has set as conditions for a bailout loan to prevent his country’s financial collapse, said Southern African Report.

The government has all but run out of options for accessing the cash to keep itself afloat, and is relying on borrowing from the central bank and cutting spending on vulnerable sectors, such as health, education, food security and agriculture, which is having a catastrophic impact on the population, already carrying the world’s highest HIV and TB rates.

The Times of Swaziland, the country’s only independent newspaper, pessimistically noted that the South African loan was “as good as dead”.

Find out more with the following back issues of the Africa Research Bulletin

IMF view (Vol. 48 No 1)

Economic Crisis (Vol. 48 No 2)

Drastic Action (Vol. 48 No 3)

 Budget 2011-12 (Vol. 48 No 3)

Labour Federation (Vol. 48 No. 4)

Silver Jubilee Postponed (Vol. 48 No 5)

Insolvency Looms (Vol. 48 No. 6)

South African Loan (Vol. 48 No 7)

IMF Mission (Vol. 48 No. 8)

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