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Swaziland Focuses on Private Sector for Economic Growth

June 7, 2011

  • Swaziland has experienced weak economic growth and is launching a recovery strategy.
  • Encouraging trade and investment friendly reforms that make the most of the country’s comparative advantages can offset weak growth.
  • A seminar hosted by the Government and the World Bank focused on boosting private sector growth, attracting investment and linking with neighboring countries.

MBABANE, June 7, 2011 – After years of weak economic growth, Swaziland is launching an economic recovery strategy aimed at easing its fiscal crisis. The country’s leaders are looking to the private sector as an engine for growth.

As Swaziland begins to map a strategy for regaining lost ground, it is essential that policy levers be matched by a comprehensive set of actions,” said John Panzer, World Bank Sector Manager for Poverty Reduction and Economic Management, Africa Region. “Assessing market opportunities, tapping into its comparative advantages, analyzing – and removing – hindrances to foreign investment are all proven methods for facilitating private sector-led growth.”

From 2003 to 2011, Swaziland’s real GDP grew at just over 2.5 percent from 2003 to 2010, compared with 3.7 percent from 1990 to 1999. To overcome this weak growth and the disadvantage of having a small domestic market, Swaziland can accelerate structural and institutional reforms that draw on its comparative advantages. The country benefits from a geographically strategic location near South Africa, the continent’s largest economy, and favorable market access to regional blocs such as the Southern African Development Community (SADC) and Southern African Customs Union (SACU).

To help boost private sector growth, the Government of Swaziland and World Bank jointly hosted a seminar, “Swaziland’s Prospects for Private Sector-Led Growth” on May 23, 2011 in Mbabane.

The solutions for our country’s economic challenges have to be found by Swazis only, with guidance and support of our international and regional partners,” said HRH Prince Hlangusemphi, Minister of Economic Planning and Development of Swaziland.

At the seminar, over 100 participants called for a stronger reform push to boost trade and attract foreign direct investment, both of which are necessary to offset the effects of the global slowdown and lay the foundations for sustainable growth and recovery.

This is a time of crisis and it is easy to lose sight of the many opportunities that are within the reach of Swaziland,” said Ruth Kagia, World Bank Country Director for Swaziland. “The discussions at today’s seminar are timely and provide a meaningful set of policy options to boost trade, attract investment, and secure growth-enhancing linkages with neighboring countries.”

Some key findings discussed at the seminar include:

  • Swaziland’s real Gross Domestic Product (GDP) grew at just over 2.5 percent during 2003 to 2010, compared with 3.7 percent during 1990 to 1999. Economic growth in 2010 was 2.0 percent and is projected to be negative in 2011 as the recovery in global demand for agricultural and manufactured goods is offset by the need to restrain public expenditures;
  • Swaziland received US$67 million in foreign direct investment during 1990 - 2000, dropping to just US$7.4 million over 2003 to 2008. Recent flows remain modest, and are consistent with maintaining or replacing existing production capacity rather than undertaking completely new investments.
  • Swaziland’s export growth has been modest. During 2003 to 2008, its annual average growth in exports of goods and services was just 5.7 percent. Consequently, the trade balance has moved into deficit as import growth, which is driven by high government expenditures on construction projects, rising oil prices and manufacturing inputs, has outpaced exports.
  • Swaziland’s ranking in the Doing Business Indicators are generally lower than in other SACU countries.

At the seminar, the discussion centered on the opportunities that exist for Swaziland to build on its latent sources of comparative advantage, making it attractive as a investment destination of choice. These include:

  • Education: Swaziland’s labor force is English-speaking, well-educated with a literacy rate of 82 percent. Seven percent of its workers have average education levels of more than 12 years of schooling, compared to 5 percent in Mauritius and Namibia.
  • Labor costs: Swazi wages are lower than those in South Africa, and close to other middle-income countries in the neighborhood.
  • Labor relations: Despite an uptick in strikes, labor relations are stable and better compared to neighboring South Africa.
  • Sound infrastructure: Above average infrastructure, and well-developed road links with South Africa, easy access to the Durban port are all major plus points favoring Swaziland.
  • Supportive business environment: Access to finance in Swaziland is on par with South Africa and other backbone business services are generally of a high standard.
  • Swaziland is part of a rich market in SACU
  • Swaziland has a degree of economic sophistication and diversification that can connect to the South African economy.

According to Jean Van Houtte and Callista Chen of the World Bank who played an instrumental role in organizing the seminar, the primary purpose of the meeting was to present, share and discuss early results of the latest analytical work conducted by the World Bank with a view to informing policy-making. A policy note covering the main topics of the seminar is being finalized based on the inputs received and will then be presented to Government of Swaziland.