Swaziland is a landlocked, open economy in Southern Africa. It has a population of 1.2 million. With a gross domestic product (GDP) per capita of about $3,500, Swaziland is classified as a lower middle income country.
Swaziland is very closely linked to South Africa, which accounts for about 85% of imports and about 60% of exports. The European Union (EU) is the second largest export market for Swaziland. While the country was able to use trade effectively to generate growth in the past, exports performance has weakened in recent years. Looking ahead, Swaziland faces considerable vulnerabilities in its existing export base. A significant portion of current exports is dependent on trade preferences, including sugar (under the EU Sugar Regime) and apparel (under AGOA). The former is scheduled to expire in the near term.
For the latter, Swaziland did not meet the conditions for the extension of African Growth and Opportunity Act (AGOA) set for May 15, 2014, and as a result preferences are set to expire by January 2015. This is expected to have a negative impact on exports and jobs, given that about one third of total apparel exports are destined to the US market. On the labor market, the adverse impact will be felt particularly negatively among women. Uncertainty originating from AGOA may lead to a significant contraction in the sector. However, the overall impact on growth and employment is likely to be dampened by a reallocation of production towards regional markets.
The primary development challenge for the Kingdom of Swaziland is to address the high rate of poverty and inequality in the country. An estimated 63% of the population lives below the poverty line, and about 29% lives below the extreme poverty line. Inequality is very high with a Gini coefficient of 49.5. Between 2001/02 and 2009/10 consumption of the bottom 40% of the population grew very slowly. Poverty is strongly correlated with unemployment which is about 28.5% overall and 52.4% among the youth. Poverty is also associated with the high burden of communicable diseases. The HIV/AIDS prevalence of 31% of the population is the highest in the world and life expectancy has fallen to approximately 49 years. While the country has made significant progress towards achieving the Millennium Development Goals (MDGs), it is unlikely to reach the health related MDGs due to the high disease burden.
To address poverty, the country has to overcome its low growth trap. During the 1980s, Swaziland grew at a rapid pace that exceeded the growth rate of other Southern African Development Company (SADC) member states. Growth slowed down in the 1990s, but remained positive at an average rate of around 3.7%, and dropped further to an average rate of around 2.3% in the 2000s. Stimulating growth requires a multipronged effort aimed at addressing the HIV/AIDS and TB co-epidemic, managing external and domestic shocks better, promoting good governance and fiscal management, and strengthening the domestic investment climate in a way that will make Swaziland a destination of choice for investors.
Growth will need to be supported by investments in human capital and an inclusive social safety net system to address the poverty challenge. The country faces a unique opportunity to capitalize on the demographic transition; improvements in containing the health epidemic can propel more young people into the labor force. For the country to utilize this growth potential, adequate investments have to be made in education and skills development. This would also require adequately supporting the poor and the vulnerable, in a manner consistent with fiscal affordability. To seize these opportunities, consistent implementation of existing policies and a transformative development program is required in order to put Swaziland on a high growth and development trajectory.
Swaziland has shown some improvements in both the Global Competitiveness Report and the Doing Business Indicators, but continues to be ranked lower than what its level of economic development would suggest. The country is ranked 124th out of 148 countries in the global competitiveness index of 2013-14. Inefficient government bureaucracy, perceptions of corruption and access to financing were often cited among the top five most problematic factors for doing business in the country. The Doing Business Report (2014) ranks Swaziland 123rd out of 189 countries in the overall ease of doing business. The country shows a subpar performance relative to its ranking in several areas, particularly in enforcing contracts (176th), starting a business (172nd), and getting electricity (163rd). A comparison across several of the Doing Business indicators between 2006 and 2014 also suggests that the country has made some (absolute) improvements in several indicators over time. However, the overall pace of progress has been slower than in Sub-Saharan Africa and other countries in general, resulting in a stagnation in Swaziland’s relative ranking vis-à-vis the rest of the world.
Government published its Programme of Action (2013-2018), which aims to fast track progress towards Vision 2022. As a monitoring tool, the Swaziland Development Index (SDI) has been defined with eight focus areas; economic prosperity, agriculture & environmental sustainability, education, health, government service delivery, infrastructure, governance, and corruption. The index will be used to assess the country’s overall status, but also to set performance targets and action plans for ministries and agencies up to 2022.
Last Updated: Oct 07, 2014