/ 17 March 2011

Swaziland seeks cash to plug deficit

Cash-strapped Swaziland is on course for an African Development Bank loan worth $145-million to help plug its widening budget deficit.

Cash-strapped Swaziland is on course for an African Development Bank (AfDB) loan worth $145-million (about R1-billion) which will be used to help plug its widening budget deficit despite ongoing concerns about the government’s financial priorities.

The money will only be allocated if certain International Monetary Fund (IMF) fiscal conditions are met, including a reduction in the public wage bill, currently among the highest in Sub-Saharan Africa and equivalent to 46% of total expenditure.

But the country’s controversial new airport — which last year cost R706-million and is this year budgeted to need R469-million — will not be affected, provoking anger among people in Swaziland who have labelled the project a white elephant before it has even been finished.

Reacting to news of the possible AfDB loan, Musa Hlophe, the coordinator of the Swaziland Coalition of Concerned Civic Organisations (SCCCO) said he was disappointed that Swaziland was simply being given money rather than specific anti-poverty or development programmes.

“This is outrageous and irresponsible,” the veteran pro-democracy campaigner said.

“What guarantees do we have that this money will not just be poured into vanity projects like the airport, or used to further internal repression?” he said.

Swaziland had gone cap in hand to the AfDB after an 40% drop in revenue transfers from the Southern Africa Customs Union (Sacu) — due to the global financial crisis — left a serious black hole in its finances.

An unbudgeted 4,5% wage increase granted to civil servants and politicians in April 2010, and a supplementary budget allocation of R350-million to finance overspends on the airport project have also added to the squeeze, the IMF noted in a report at the conclusion of a visit there last month.

‘Very difficult situation’
The central government deficit is expected to reach 13% of gross domestic product by April, reserves have fallen to R4,5-billion, and the country is fast running out of cash to pay public wages and run social support schemes for the 25% of its population which is HIV positive.

Speaking to the Mail and Guardian in Johannesburg, after a visit to Swaziland where he met the monarch of 25 years King Mswati III, AfDB President Donald Kaberuka said that the bank wanted to help Swaziland which was “facing a very difficult situation in terms of public finances”.

He stressed the money, which would be in the form of a loan and similar to a package recently extended to Botswana, would not come without conditions.

“Clearly before it is delivered, there are some things which have to be done,” Kaberuka explained, listing a need for the government to balance its revenue and expenditure, re-evaluate its high wage bill and re-asess its domestic borrowing strategy.

He praised the government’s decision to introduced value-added tax but he refused to comment on the Sikhuphe International Airport project which is expected to have run up a bill of close to $1-billion by the time it is finished.

“This is not something that has come to my attention,” Kaberuka said, adding: “I would not like to enter into the composition of their expenditures, these are privileged matters.”

He however went on to say that Swaziland’s overall capital expenditure was actually very small compared to other parts of the budget.

Tough choices
“My concern is the amount of money being spent on the recurrent budget, such as the wage bill, but I believe the capital expenditure in Swaziland is actually below what a country requires,” he said.

“Clearly in terms of capital expenditure they have to make tough choices for projects which have long-term viability. And they will have to make up their mind whether an airport is one of those. I will leave that for Swazis to decide and I trust them to make the right decision.”

He added that the bank had a responsibility to its shareholders to deliver results and only allocated funding where it felt it would be well spent.

The Swazi government was expected to announce details of its fiscal reform packages in the coming days, and it will then be up to the IMF to decide whether sufficient steps have been taken to address the high wage bill and fiscal imbalances.

If the IMF is satisfied, it will begin a staff monitored programme which will be backdated to January 1 this year and pave the way for the AfDB loan.

Then, if all the conditions of the SMP are met, the IMF at the end of the year may then consider entering into a formal funding arrangement with Swaziland.

Proposals by the IMF to slash 7 000 public jobs and cap salaries of parliamentarians and higher level civil servants have been met with fierce reaction in Swaziland.

On Friday thousands of union members were expected to stage a mass walk-out, following from last week’s three-day strike by nurses that closed several hospitals around the country.

Swaziland is Africa’s last-remaining absolute monarchy where political parties are banned and human rights activists are labelled terrorists.

There are concerns that industrial action will be seen as anti-government and there are fears of a heavy-handed police response which could lead to violence.

Meanwhile, a Facebook group calling itself the “The April 12 Uprising” is calling for mass action on that day, the anniversary of the 1973 decree which banned all political parties.

SA funding package
Energy, transport and entrepreneurship will be the focus of a $600-million AfDB funding package for South Africa over the next two years.

Kaberuka said a $400-million loan deal was currently being worked out with national power utility Eskom to fund wind, solar and coal energy projects and look at transmission and regional supply networks.

He said integration within the Southern African Development Community particularly in water and energy was the key to the future growth of the region and that South Africa was the logical platform for that given the size of its economy.

AfDB money will also be allocated to South Africa’s logistics utility Transnet, and Kaberuka said a new scheme to support entrepreneurship and the government’s job-creation agenda was currently being worked on by a bank team.

During his stay in South Africa Kaberuka met several government ministers to discuss G20 issues and the 17th Conference of Parties (Cop 17) of the United Nations Framework Convention on Climate Change (UNFCCC), being staged in Durban in November.

As well as South Africa and Swaziland, the bank president also visited Zimbabwe to re-open the AfDB office there and launch the Zimbabwe Multi-donor Trust Fund, which he said had an initial donor commitment of about $64-million.

Kaberuka urged the country’s government to stop sending mixed messages to potential investors.

“Zimbabwe is currently sending mixed and confusing signals to investors and I think it is important that these signals are made clearer to lead to greater business confidence,” he said.

“This is not just about foreign investment but about business overall. It is important they clarify what they want to do on indigenisation and their plans for the Zimbabwean dollar.”