Reignited Swazi bailout raises hackles
It looks as though South Africa will finally lend cash-strapped Swaziland R2.4-billion, although the details, terms and conditions of the loan remain unclear. It has raised concern among pro-democracy activists who have always questioned the wisdom of the loan.
Treasury spokesperson Jabulani Sikhakhane confirmed to the Mail & Guardian that a memorandum of understanding had been signed by the countries’ foreign ministers, but said “discussions between the financial authorities are still ongoing”.
Department of international relations and co-operation spokesperson Clayson Monyela directed all inquiries to the treasury, whereas Percy Simelane, spokesperson for Swaziland’s government, could not confirm any details.
“We have elected to play our cards from the chest [sic] on the loan in question and a few other issues of national interest until they have been completed or finalised,” he said by SMS, adding to the level of secrecy with which the loan deal has been cloaked from the start.
The bailout package was first announced in August last year after King Mswati III paid a personal visit to his close friend President Jacob Zuma, to ask for help to support Swaziland’s failing economy.
Hard hit by a 60% drop in regional customs revenue because of the global financial crisis, Swaziland is struggling to run basic services, provide life-saving drugs for the 25% of its population living with HIV and pay wages and social grants.
Swaziland pro-democracy activists, supported by South African organisations such as trade federation Cosatu, urged Pretoria not to give Mswati’s regime, which they describe as autocratic, any money without imposing terms for dialogue and governance reform.
They said they feared the money would be squandered on more royal vanity projects such as the new $1-billion Sikhuphe International Airport, which is not ready for use after nearly a decade of construction, rather than being channelled into programmes to help the two-thirds of the population who live in poverty.
A statement issued in August last year by the South African treasury said conditions for the release of the money — which would be paid out in three instalments and guaranteed by the Southern African Customs Union — included broadened dialogue “to determine appropriate reforms” in a “conducive environment that is open and enjoys legitimacy among the people of Swaziland and the region”.
There was also a requirement for wide-ranging fiscal and technical reform pinned to Swaziland’s adherence to its fiscal adjustment road map and continued collaboration with the International Monetary Fund (IMF).
In the months following the loan announcement, it was widely reported that traditionalists in Swaziland’s government — controlled directly by Mswati and heavily influenced by traditional chiefs and elders — were not keen on the “dialogue conditions” South Africa had demanded.
One Mswati loyalist and adviser, Prince Mahlaba, wrote in a local newspaper that Swaziland’s governance system, known as Tinkhundla, was “not for sale for R2.4-billion”.
The resistance from Swaziland appeared to put the bailout deal on ice and sources in the South African government confirmed the talks had “more or less ground to a halt”.
Despite a windfall payment from the customs union worth R7-billion for this year, Swaziland’s economy has continued to struggle because of the high level of debt it incurred during 2011. In May, the Central Bank of Swaziland acknowledged that reserves had slumped to R3.7-billion by the end of March, a 6.7% drop on February to just 1.9 months of import cover. It has put at risk the pegging of its currency, the lilangeni, to the rand, but economists say the lilangeni is already overvalued by more than 30%.
The failure to stick to its IMF programme, which included slashing 7000 public service jobs, excluded Swaziland from international donor funding and in December 2011 the government was forced to borrow privately, using state assets as collateral, to pay public servants’ salaries.
This week the Swazi finance ministry, which earlier this year forecast a budget surplus, admitted that it was running a deficit and the money from the customs union had not filled the gaps as hoped.
Acting principal secretary Sizakele Dlamini said: “The government is still faced with the challenge of clearing arrears that were accumulated over the past two financial years. Ministries and departments are faced with an even tighter budget, because they are expected to deliver public services with fewer resources since they must prioritise the payment of arrears within the same budget allocation.”
The Swaziland Coalition of Concerned Civil Organisations acknowledged the need for a cash injection, but repeated its earlier calls for the cash to be spent wisely.
“It must not be used to prop up the current foolish spending patterns,” a spokesperson said. “South Africa must stick to the original conditions of credible economic and democratic reforms in Swaziland. Without these necessary reforms, the South African government is wasting its time and its taxpayers’ money.”
Lucky Lukhele from the Swaziland Solidarity Network, a Johannesburg-based lobby group run from the offices of the South African Communist Party, said: “We would rather this loan went to a democratic country than to a prop up a dictator. And we want to know the exact terms and conditions, such as when this promised political dialogue will begin and when we will see the end of the criminalisation of political activity in Swaziland and the release of political prisoners.”
Melissa Arjoonan, a Southern African analyst at Rand Merchant Bank, said there were question marks about whether South Africa could really afford the loan, given the “uncertain global economy as well as weaker growth prospects domestically”. She said strong conditions had to be attached.
“Going forward, there needs to be structural changes in Swaziland’s economy to create sustainable growth. It is crucial that the loan is used to develop key sectors of the economy and improve productivity, which would assist Swaziland in gaining a competitive advantage, attracting foreign direct investment and generating much-needed additional revenue.”
Speaking in August last year, Finance Minister Pravin Gordhan said it was in South Africa’s interest to ensure that Swaziland’s economy did not collapse.
The news that the loan deal might be back on track comes as thousands of Swaziland’s teachers enter into a second week of strike action that has resulted in clashes with police, who used tear gas and rubber bullets, injuring pupils and sparking several arrests. The teacher unions want a 4.5% wage increase, but the government has said that it does not have the money.
Simelane compared their request to looking for snow in a desert.
In an editorial on Wednesday, the Times of Swaziland warned: “The continuing deadlock between the government and teachers poses the threat of deteriorating into widespread unrest.”