/ 27 September 2011

Let them drink ouzo

You don’t need to follow the news too closely to know that failing a big bailout the Greek government will run out of money in a few weeks, perhaps as soon as the beginning of October. But did you know that the Swaziland government is already running out of money?

Greece is aiming for a €8-billion bailout from the troika, the International Monetary Fund, the European Central Bank and the eurozone’ s stability fund.

Swaziland has negotiated a R2.4-billion loan from South Africa, but to date no agreement has been signed, as Swaziland is yet to agree to the terms of the memorandum of understanding.

Swaziland schools were closed on the first day of term last week as teachers protested after the education budget was cut nearly in half, by R95-million.

“Much of the missing money was earmarked for school fees and supplies for orphans and other vulnerable children in a country where many children have lost parents to Aids,” the Associated Press reported.

Greece and Swaziland face funding crises. Both are unable to pay their bills because of poor management of public finances and a lack of economic efficiency, but there are notable differences too.

Greece’s government debt, at 155% of gross domestic product, is at unsustainable levels. In Swaziland’s case, the equivalent number is a humble 20%. Indebtedness is not Swaziland’s principal problem; it has a cash-flow crisis and has been unable to secure domestic or foreign funding to meet the shortfall.

Not that Swaziland wasn’t warned. About 60% of its revenue comes from its share of receipts from the Southern African Customs Union (Sacu), a customs-revenue sharing arrangement that is under discussion as it means billions in lost revenue to the South African treasury each year.

Recessionary conditions have led to a fall-off in Sacu revenue. Swaziland was warned more than a year ago that it would need to cut its cloth to fit leaner times.

It signed up to an International Monetary Fund (IMF) programme that recommended the salaries of public servants be cut by 5% while expenditure on health and education programmes should be protected. The public service, which, at 18% of gross domestic product, has the highest share of GDP in sub-Saharan Africa, was targeted.

Salary cuts
A R240-million cut was recommended by the IMF staff, in which, depending on their pay grades, public servants earning more than R150 000 a year would have cuts of between 4.5% and 10%, the higher earners paying the most. But the salary cuts have not been implemented.

A proposal to cut the salaries of politicians and ministers by 10% has been effected.

The IMF programme was intended as a precursor to Swaziland being able to access IMF funding, but it did not pass the qualification test.

King Mswati III has complained that Swaziland is unfairly treated, as Greece is able to tap IMF funds, while it is not.

But while Greece has, to date, not done enough to satisfy the troika that it should bail it out, it has implemented austerity measures, including cutting public service salaries by 15%. These workers no longer get 13th and 14th cheques. Swaziland has failed to deliver on austerity measures.

Greece is required to privatise state assets as part of a drive to improve efficiency. It has committed to privatisation, but has made little progress so far.

State ownership in Swaziland is more complicated. The state owns significant shares in leading companies, including Swazi Bank, Royal Swazi Insurance, Royal Swazi Sugar, Nedbank, MTN and Standard Bank.

There are indications that Swaziland is prepared to privatise the 100%-owned Swazi Bank and introduce a second GSM operator as a competitor to MTN, but there has been no progress on these moves to date.

Tibiyo Taka Ngwane
Outside of state ownership, Tibiyo Taka Ngwane, a trust that manages investments on behalf of Mswati, is also a significant player. By some accounts it owns one-third of privately held assets in the country. Tibiyo’s website says it is one of the main players in the Swazi economy.

Tibiyo’s financials showed assets of R1.3-billion when it last reported. Its holdings include stakes in Nedbank, the Swazi Spa (Sun International), Royal Swazi Sugar, the Bhunu Mall, Swaziland Development Corporation, Royal Villas, Tibiyo Properties and Illovo Sugar, according to the Times of Swaziland.

Tibiyo reported a profit of R150.2-million last year, according to the Swazi Observer, in which Tibiyo has a 100% stake. The trust has been criticised by the IMF because it does not pay tax. Tibiyo supporters say that while it does not pay tax, the underlying companies in which it invests do.

Mswati’s wealth is opaque, but he has featured on Forbes’s billionaire list, with a net worth of R770-million.

Swaziland has cut back on health and education expenditure, but news of tough times has apparently not reached its royalty, according to a recent report by journalist Nikiwe Bikitsha in the Mail & Guardian.

Bikitsha was a guest last month at a Swaziland hotel and a member of a group invited to a party by one of Mswati’s sons and other hangers-on.

“The princes sat around the table, ordered gallons of whisky, which they decanted into glass pitchers and gulped down like thirsty desert nomads.

“We were told we could order anything we wanted and drinks were on the princes. Really? One of the reasons Swaziland is in financial trouble is that state money has for years been spent on King Mswati, his wives and 25 children,” Bikitsha wrote.

“Watching the unseemly behaviour of these children as they ordered drink after drink left a bitter taste in the mouth. The princes were in their early 20s, but would routinely snap their fingers at their royal escorts and minders, who were much older than them, when they needed attention.

“During this drinking spree, one of our contingent made an imprudent remark, something to the effect of: ‘Now we know how our R2.4-billion is being spent.'”

Swaziland’s financial and political strain has sparked protest from pro-democracy movements.

On Monday Bloomberg reported that police fired tear gas to break up a protest by bus and taxi operators in the country’s commercial capital.

Mduduzi Gina, the secretary general of the Swaziland Federation of Trade Unions, said 1500 operators burned tyres to demand that the government reverse an increase in traffic fines. Thousands of commuters were left stranded, he said.

Transport operators and motorists have been targeted by traffic police in a bid to raise R3-million a quarter for the regime, the Congress of South African Trade Unions said in a statement.

Swaziland has to meet both political and financial conditions for South Africa to release the mooted R2.4-billion loan.

A statement by the national treasury in August said the loan was premised on four pillars, including that the Swazi government take confidence-boosting measures, implement the fiscal reforms required by the IMF, make use of capacity support provided by South Africa and co-operate in multilateral agreements.

The confidence-building measures require the establishment by the two governments of a joint commission to promote democracy, respect for human rights and the rule of law, as well as the establishment of credible and effective leadership

Even if Mswati is able to meet these conditions and get the loan, he faces longer-term challenges in that South Africa has tabled a draft proposal at Sacu that it ups its share of Sacu revenue by R12-billion a year. The three countries that would lose most from the new formula are Botswana, Namibia and Swaziland, said Roman Grynberg, writing in the M&G.