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Kingdom under seige: there has been plenty of trouble in the tiny kingdom of Swaziland as the citizens demonstrate against a serious loss of income and a crippling power shortage. Tom Nevin assesses the situation.

The tiny kingdom of Swaziland (population 1.3m) is being buffeted by a succession of storms--some close at hand and others the echoes of political upheaval on the other side of the continent. At home, Africa's last remaining absolute monarch is feeling the tightening of the social vice as his subjects loudly tell him they've had enough and that it's time for democracy.

Regionally Swaziland's fiscus was dealt a body blow when its major source of income, its share of the customs revenue from the Southern African Customs Union (SACU), was summarily cut by South Africa by more than two thirds; and government offices faced days of darkness as the state electricity company pulled the plug unless it is paid the R13.5111 ($1.9m) it is owed by several ministries.

Abroad, Swaziland's King Mswati II is feeling the heat of international diplomatic disapproval at his anachronistic rule, and it quite clearly showed in the seating arrangements for visiting heads of state at the April wedding of Prince William and Kate Middleton. He was ushered into Westminster Abbey privately through a side entrance and was seated with guests from various 'rogue' states, including the Zimbabwean ambassador in London.

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At home, the Swazi nation is feeling the full blow of the fiscal crisis as its cash-strapped government fails to pay the bills. Some government offices are in darkness because of the SZL60m ($8.6m) debt with the Swazi Electricity Company (SEC), leaving many public servants idle. Vincent Dlamini, secretary-general of the National Public Service and Allied Workers Union (Napsawu), reports that people in affected areas cannot access passport and other civic offices in some areas where the SEC has switched off power.

The Swazi Observer newspaper says both big and SME companies are "sitting with huge bills unpaid by the government and are suffocating under the pressure". The government suspended buying goods and using services in November last year, putting suppliers, mainly SMEs, out of business.

Swaziland's Prime Minister, Barnabas Sibusiso Dlamini, lays the blame for the crisis at the door of corruption, a 60% reduction in SACU receipts and a huge civil service wage bill. Lamented Mbabane businessman Johannes Manikela: "Government is not buying even toilet paper and cleaning material."

Letter of comfort

The government found some relief in the International Monetary Fund's issue to Swaziland of a $i45m letter of comfort that enabled the country to borrow funds from international institutions, although the president of the Federation of the Swazi Business Community, Henry du Pont, warns it could presage more trouble, "With the lack of accountability that we're seeing, the letter of comfort could mean a step forward and five steps backwards," he says.

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The IMF has imposed some unpalatable conditions for its help. These included pay cuts of 10% for ministers and a 5% cut for all state employees, a three-year pay freeze and a wide range of other cuts in government spending. Swaziland will also resume privatisation, and intends starting with Swazi Bank, and the issuance of a new cellphone licence.

The proposed reforms are also qualifiers for financial assistance from the African Development Bank and possible World Bank assistance.

While the Swazi cabinet voted to comply with the IMF's requirements, unions and activists have come out in opposition to it and have promised further demonstrations. They say they are in favour of the 10% cut for politicians but roundly condemn salary reductions for civil servants.

"We can't afford to have our salaries cut so we can finance a silver jubilee," says Napsawu's Dlamini.

Another big source of civic contention is the government's plan to spend E5m ($770,000) to celebrate the silver jubilee of King Mswati's rule later this year. Workers' organisations are up in arms at what they call "a blatant waste of money we need for more important things".

In the health sector, nurses were told by their unions to "down syringes" and the nation was advised to take sick relatives to government hospitals and clinics "at its own risk in view of the nurses' total shutdown strike". Hospitals ran out of medication and old-age grants went unpaid as the cash crisis worsened.

While assistance came from the IMF, it also brought labour trouble by insisting on state spending cuts, particularly of the inflated civil service wage bill. Steps to improve revenue collection were welcomed. The kingdom is targeting a budget deficit of 7.5% of GDP in the new fiscal year, against a deficit of 13% last year.

Liquidity crunch

The government's liquidity crunch was worsened by a sharp drop in transfers from the revenue pool of (SACU), which traditionally funds about 60% of its budget and in 2008, accounted for about 25% of GDP.

The overhaul sees South Africa keeping a far bigger slice of pooled customs receipts, with the lesser partners having to make do with smaller slices; Swaziland is the hardest hit with a 60% loss in revenue.

Tralac, southern Africa's Trade Law Centre, believes the tiny monarchy could be driven into bankruptcy without substantial help.

The revenue-sharing review, the first major overhaul in the century-old organisation, initially recommended an eight-year adjustment period for the new formula, starting in 2012, to minimise the shock to already vulnerable economies.

The IMF calculates that SACU revenues account for nearly two thirds of official receipts in Swaziland and Lesotho, just over a third in Namibia, and 25% in Botswana. South Africa, reportedly "tired of being the region's ATM", wanted its share of pooled customs receipts to rise to 72% in 2019 from 50% in 2012. In the revised formula Swazi-land's share falls to 3% by 2019 from 9% in 2012.

If Swaziland is to survive the cut in its revenue share, its sluggish economic recovery after the recent downturn and the trickle of investment, it will need a major overhaul of both its governance, development and social structures.

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Swaziland is southern Africa's second-smallest economy after Lesotho, and its economic challenges are legion.

The combination of low investment, slashed customs receipts, the end of EU preferential treatment for its main sugar and textile exports, low productivity, deteriorating trade receipts, low domestic resource mobilisation and the ongoing effects of the global economic crisis mean that meaningful, sustained growth will remain elusive.

Years of persistently sluggish growth have resulted in an expansion of poverty and unemployment. The alarming 32.4% prevalence rate of HIV/ Aids will continue to drain government resources and has restricted population growth to about 0.4% a year since 1997. Swaziland is a member of the Common Monetary Area (CMA) and its currency, the lilangeni (SZL) is fixed at parity with the greatly overvalued South African rand. This also impedes its imports and discourages investment.
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Comment:Kingdom under seige: there has been plenty of trouble in the tiny kingdom of Swaziland as the citizens demonstrate against a serious loss of income and a crippling power shortage.
Author:Nevin, Tom
Publication:African Business
Geographic Code:6SWAZ
Date:Jun 1, 2011
Words:1128
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