Transcript POLITICAL SITUATION Contd.

BRIEFING ON SWAZILAND
Presentation to the Portfolio Committee
22 June 2011
By Amb J Matjila
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Director-General
DEPARTMENT OF INTERNATIONAL RELATIONS
& COOPERATION
OVERVIEW
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INTRODUCTION
POLITICAL SITUATION
RECENT POLITICAL DEVELOPMENTS
ECONOMIC SITUATION
FISCAL ADJUSTMENT ROADMAP (FAR)
RECENT DEVELOPMENTS ON FAR
IMPLICATIONS OF THE SITUATION
SA GOVERNMENT RESPONSE
CONCLUSION AND PROGNOSIS
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Introduction
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Swaziland continues to face socio-economic political challenges.
The year 2010 saw a somewhat compounded situation as the political
challenges were accompanied by some economic difficulties.
The global economic downturn had a negative impact in the economies
of the SACU countries as evidenced by the reduced SACU revenues.
As a result, Swaziland started to experience serious economic problems.
This situation has made the Swazi society restless. This has manifested
itself in the recent protests.
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POLITICAL SITUATION
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The Swazi political problems can be traced to the 1973 decree
which ban political parties in Swaziland and more recently, the 2006
Constitution which also bans political parties.
The continued banning of the political parties as well as the
occasional arrests of opposition party and civil society leaders has
led to an escalation of tensions in the country.
The opposition political formations are made up of the Peoples
Democratic Movement (PUDEMO); the National Constitutional
Assembly (NCA); the Ngwane National Libratory Congress (NNLC)
and SIVE SIYANQOBA.
Chief among their demands is the call for the unbanning of political
parties and the call for democracy.
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POLITICAL SITUATION Contd.
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In response to the demands of the opposition parties, the Swazi
authorities have over the years promulgated various security
legislations including the Anti-Terrorism and Sedition legislations.
The Swazi political situation has also attracted international
attention.
Pro democracy formations and labour unions organised mass
protests on 18 March and 12 April 2011 – the so-called “12 April
Uprising”
The Swazi authorities used the police and military to crush the
protests thus rendering the protests ineffective.
The political situation remains volatile.
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RECENT POLITICAL DEVELOPMENTS
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Pro democracy formations and labour unions organised mass
protests on 18 March and 12 April 2011 – the so-called “12 April
Uprising”
The Swazi authorities used the police and military to clampdown the
protests thus rendering the protests ineffective.
The political situation remains calm but tense.
Swaziland has also appeared for the ninth time before the ILO on
violation of Freedom of Association under Convention 87.
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ECONOMIC SITUATION
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Apart from the fact that Swaziland’s currency is pegged to the South
African Rand and thereby subsuming the country’s monetary policy
to South Africa, Swaziland receives 85% of its imports from South
Africa and sends almost 74% of its exports to South Africa.
Swaziland’s main export commodities include asbestos, coal, cotton,
cut diamonds, minerals, paper and timber. The main import
commodities include animals, automobiles, chemical products,
energy and edible oils.
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ECONOMIC SITUATION cont
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The economic crisis presents a serious and real
challenge to the country’s stability as the country may be
unable to continue to pay its public servants.
The 2008/9 global economic crisis has had severe
impact on the country’s economy. This was followed by a
dramatic reduction of the SACU Revenue allocations
during the financial year 2010/2011.
For example, Swaziland received R1,9 billion revenue
allocation in 2010/2011 compared to the R5,1 billion in
2009/2010.
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ECONOMIC SITUATION Contd
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In response to this situation, Swaziland has since approached the
International Monetary Fund (IMF) in order to obtain financial
assistance.
The IMF has made a set of recommendations to the Swazi
authorities.
Swaziland has subsequently developed an intervention strategy
called Fiscal Adjustment Roadmap (FAR).
However,
the
Kingdom
has
only
implemented
few
recommendations, such as intensive collection of tax and
introducing VAT and fuel levy.
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FISCAL ADJUSTMENT ROADMAP(FAR)
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In terms of the Fiscal Adjustment Roadmap, the following
will have to be implemented:
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Wage cuts for public servants, in gradual form; the largest cut
from the top by 10%, less from middle income earners between
6% - 8% and none at all for bottom earners.
Improving the business environment thereby promoting
economic diversification - this will have an effect in attracting
foreign direct investment and, building good public –private
partnerships;
The government was also advised to mobilize domestic
borrowing through the Treasury and Government Stocks Act of
2010;
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FAR Contd
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Issue E2 billion in long term government bonds;
Increase the levy on fuel in line with South Africa, increase gambling
tax from 4.5% to 15%, with alcohol and tobacco tax to follow suit;
Introduce value-added tax by 2011;
Discontinue new government expenditure with the exception of
education and health;
Implement a three-year comprehensive process that will see the
government freezing post and wage increments and auditing the
roster of civil servants to eliminate ghost employees;
Sell telecommunication licenses in order to encourage competition
among mobile telecommunications.
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FAR Contd
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The implementation of the FAR is set to run for a period
of four years under the supervision of the IMF staff
monitored programme.
FAR is envisaged to address the fiscal challenges and
reduce the fiscal deficit to less than 3% of GDP by
2014/15.
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FAR Contd
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According to IMF, if Swaziland were to adopt these
measures its economic situation would improve within
six months after which the IMF, depending on the full
implementation of the recommendations, would be ready
to provide resources.
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RECENT DEVELOPMENTS ON FAR
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Swaziland has a challenge in meeting the targets set by the IMF for
implementing FAR.
As a result the IMF has given the Kingdom the ultimatum for end of
June 2011.
Should the Kingdom fail to meet the deadline set by IMF, it could
loose any chance of getting assistance from African Development
Bank , World Bank and other donors.
Swaziland has requested financial assistance from South Africa.
Talks on this are ongoing between the Political Principals from
departments of Finance of the two countries.
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IMPLICATIONS OF THE SITUATION
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The implementation of FAR may have negative implications as it
relates to proposed job cuts in the public service, thus could
exacerbate the current over 40% unemployment rate in Swaziland
with huge socio-economic ramifications.
South Africa could face increased flow of economic and illegal
migrants which could have a negative impact on SA economy.
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SOUTH AFRICAN GOVERNMENT
RESPONSE
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The developments in Swaziland have generated international
interests and attention with some calling on South Africa to actively
try and address the political situation in that country.
South Africa is committed to good neighbourliness and noninterference in other countries’ domestic affairs.
However, noting the latest developments in Swaziland, the South
African Government has urged all the relevant parties in the
Kingdom to begin a political dialogue with a view to speedily and
peacefully resolve all the challenges facing the country.
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SOUTH AFRICAN GOVERNMENT
RESPONSE Contd
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Swaziland has approached South Africa for any support in lieu of
these challenges.
The South African Government would consider any request for
support in the interest of peace and development in the region.
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CONCLUSION AND PROGNOSIS
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POLITICAL
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The political parties are expected to continue calling for the
democratisation despite the response of the security forces.
The declining economy will further strengthen their call for
boarder political reforms.
Disgruntled USDF members will continue to resort to criminal
activities to augment their salaries and illegal immigrants will
place a burden on local communities and resources in South
Africa.
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CONCLUSION AND PROGNOSIS
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ECONOMIC
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Given the current economic crisis, it is unlikely that the country
will recover unless there is sufficient funding from an external
donor.
The government will also have to improve its governance and
fiscal management system to eradicate corruption.
A strengthened foreign direct investment portfolio would also
help to mitigate the financial crisis.
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THANK YOU
2020