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Swaziland faces another year of declining growth

How is a small country to compete in a global marketplace where size is rewarded? Case in point is the tiny Southern African country of Swaziland, nestled between geographic giants South Africa and Mozambique. Its neighbouring countries also have booming economies, while Swaziland is mired in its 10th year of declining economic growth.

New thinking must come into play if the little kingdom is to survive as a viable state.

“Economically, 2005 was defined as either disappointing or downright disastrous, depending on who is speaking. No one had a positive appraisal. We learned it can no longer be business as usual, because there is no such thing as business as usual in a changing world,” said Richard Dube, a public-transport company owner.

The two pillars that sustained the country’s economy, textiles in the industrial sector and sugar in the agricultural sector, suffered enormous losses in 2005, resulting in massive layoffs that reversed the employment gains of the past five years.

But even “recession proof” businesses like Dube’s bus company took a hit when fares rose — in response to large petroleum price hikes — and cut into passenger numbers.

Also, with nearly half of garment-manufacturing companies closed since 2004 and thousands of workers laid off in the sugar belt, fewer employees mean fewer riders.

“The trickle-down effect of major problems in the economy’s leading sectors, impacting smaller businesses like goods suppliers and services, is spreading the misery. A new set of priorities to refocus the economy is required,” said an economist with the Central Bank of Swaziland.

The bank reported: “Official estimates put real GDP growth at 2,1%. Given the estimated population growth rate of 2,9%, the unimpressive economic growth implies a deterioration of the standard of living as measured by per capita income.”

The downward trend in economic performance — last year’s GDP growth was 2,9% — was attributed to a low growth rate in foreign direct investment, weaker performance of the manufacturing sector and low agricultural productivity.

In a country where the livelihoods of 70% of Swazis are tied to agriculture, the industry’s contribution to the national economy fell to 8,6% from 8,7% last year. Mining, manufacturing and construction also contributed slightly less to GDP.

Swazi exports were less attractive globally, particularly garments produced by Asian-owned clothing factories that began operations in the late 1990s to take advantage of Swaziland’s favourable trade treaties with the United States and Europe. The robust South African rand, to which the Swazi currency, the lilangeni, is linked, made Swazi exports less of the bargains they once were. The introduction of cheaper Chinese-made garments prompted the closure of some major clothing factories.

The strong rand also made Swazi sugar less competitive, at a time when the European Union said it would pay 36% less for sugar it is obliged to purchase from Swaziland through a treaty intended to boost the small nation’s economy.

Agriculture’s poor performance, the Central Bank of Swaziland reported, “exacerbated the already severe problem of high unemployment, income inequality and poverty”.

The government had hoped that the textile companies would lead the way to a new era of job creation. But the bank found a reversal in the employment situation that saw tens of thousands of Swazis finding jobs in garment factories as recently as 2002.

“Accounting for the decline in job opportunities was the loss of competitiveness of Swazi products in world markets, which resulted in the closure of a number of textile companies. Employment opportunities were further undermined by limited investment in other labour-intensive industries. In addition, existing companies continued to shed some workers and to outsource non-core activities,” the bank reported.

So, economists and government planners are asking at year’s end: What is to be done?

One initiative that generated optimism this year was a “job summit” called by King Mswati in July. To brainstorm new ideas, hundreds of representatives from the nation’s largest companies gathered at the International Trade Fair in Manzini, the commercial hub of Swaziland, located 35km east of Mbabane.

What resulted was a consensus that small and medium enterprises should be “empowered” through access to capital. In the theory that if successful, these small Swazi businessmen and women will evolve into titans of industry, various companies pledged financial assistance.

Only after the rosy hue of good feeling that pervaded the conference had dimmed did the reality set in that financial institutions were extending credit only to qualified applicants, as they had always done, and no new pool of funding was available.

For years, the government had sought to wean small landholder farmers away from strictly subsistence farming to cultivating cash crops to sell at profit through export. Until the downturn of sugar’s fortunes, peasant farmers were encouraged to form cooperatives to grow sugar cane.

“We learned that over-reliance on a single crop can be disastrous. We told farmers not to grow just one crop — maize, which is Swazis’ staple food — only to have them rely on another crop, sugar. Now we are encouraging flexibility, and more sensitivity to market demands. 2006 will see more fruits and vegetables grown, and cotton in drought-prone areas,” said Sandile Kunene, an agriculture field officer in the southern Shiselweni region.

The same need for diversification now guides industrial growth, while retaining foreign direct investment already in the country.

“We need to attract new businesses, while keeping those already here,” said Bhekie Dlamini, CEO of the Swaziland Investment Promotion Authority.

Better road infrastructure, a more reliable power supply and coming to grips with Aids, which is devastating the workforce, are cited as necessities to lure investors.

“It’s a highly competitive world, and the dilemma for all small nations is to carve a niche for themselves, create a uniqueness, because they don’t have size and lots of resources in their favour,” said the Central Bank of Swaziland economist.

For Swaziland, that means capitalising on its own unique identity as a traditional African kingdom: from tourism (oversees visitors are being lured by a marketing campaign drawing them to “the royal experience”) to finding new uses for indigenous products — a line of cosmetics launched by the queen mother and to be sold internationally are made from the local marula fruit. — IPS

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James Hall
Guest Author

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