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GLOOMY 2019 OUTLOOK

06/01/2019 01:08:00 BY SIFISO SIBANDZE

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sundayeditor@times.co.sz

MBABANE – As Eswatini has limped out of 2018 with expected growth below 2.0 per cent, attention is now on 2019, a year that will definitely be a rollercoaster for businesses and government.

With the already moribund economy, Prime Minister Ambrose Mandvulo Dlamini and his Cabinet will come under intense scrutiny to revitalise Eswatini’s economy, but that looks to be a mammoth task as most of the industries are faced with many challenges more so because their survival hinges on government liquidity.

And with wasteful government faced with challenges, some industries are yet to see the worse, something that will increase the prospects of job losses. That means it will be hard for government to make a dent on the unemployment rate, which is near 30 per cent. One of the sectors that will be hit hard this year include but not limited to construction, real estate, car dealerships, mining and quarrying, banking, professional services, wholesale and retail, forestry and tourism.

Construction

Construction is one of the sectors that will be greatly affected by the state of the economy. This will be made possible by the suspension of projects by the previous government. Currently, most companies are implementing on-going public projects and small private sector projects. The suspension of the projects will render construction companies jobless for the better part of the year.

Even those companies which are implementing on-going projects, the delayed payments from government will result in interruptions in some of the public sector projects and hence low implementation. According to the Central Bank of Eswatini Company Survey for 2018, some companies particularly those who mainly have public sector projects in their loan book reported cash flow challenges emanating from government’s fiscal position.

Car Dealerships

The wholesale and retail sector, mostly car dealerships will not be spared. One factor contributing to their poor performance is the rising motor vehicle prices and slow economic growth. Another challenge is that the construction sector is also struggling which consequently results in the construction companies slowing down to purchase vehicles for major construction projects.

The local dealerships are also negatively impacted by the stiff competition from same car dealerships based in South Africa, which reduces the local market share as customers have a preference to buy directly from South Africa. Moreover, competition continues to be stiff among local players in the sector, exacerbated by the Asian import (grey) cars as they come cheaper compared to the local car dealerships originating from South Africa. According to the Central Bank, the outlook remains uncertain as real disposable income is declining and sluggish economic performance is anticipated in the medium term.

Real Estate

This sector will also have a bumpy ride in 2019, especially those companies that invested in office parks like the Public Service Pension Fund (PSPF) and Eswatini National Provident Fund (ENPF). In 2017, there was mixed performance in the real estate sector, with some players recording positive growth while others recorded negative growth.

According to the Central Bank, the growth experienced was driven by an increase in rental property income, coupled with the successful implementation of township development projects as well as the institutional housing project.

On the other hand, the poor performance was influenced by the over-supply of rental office space which hampered rental prices and the loss of tenants that vacated the rental office space to occupy their own buildings. The performance of this sector is expected to decline in the medium term as more tenants (companies) continue to construct their own buildings, consequently decreasing the occupancy rate. Companies that have recently constructed their own offices include Eswatini Finance Development Corporation (FINCORP), Eswatini Revenue Authority (SRA) and the United Nations.

Professional Services

Due to the country’s failure to attract more foreign companies, the security subsector has been stagnant and no new clients have been acquired in 2018. According to the Central Bank, the sector is saturated and highly competitive while the size of the market is not growing, and as such each service provider makes an effort to provide good services to retain customers and lure customers from competitors.

The medium term is expected to be stable. In the auditing subsector performance was mixed in terms of revenue and profitability. Volumes have been stagnant over time and most customers are from the financial sector. Therefore, developments in the financial sector have an impact in the subsector.

Forestry

With the on-going challenges in the South African mining sector, this sector will be affected even in this year. According to the Central Bank, the industry recorded a weaker growth for 2017 mainly characterised by low demand from South Africa in light of the on-going challenges in the South African mining industry. Products affected by challenges in the South African economy include mining timber, saw logs and pulp.

Mining & Quarrying

Government unstable financial position is more likely to negatively impact this sector. So far, this sector is seeing some activity because of the continuation of public road construction projects such as Manzini-Mbadlane highway (Lot 1 and 2) and other smaller road works. A slowdown in the implementation of some road construction projects due to on-going fiscal challenges faced by government will continue affecting the performance of quarry production.

Prospects for growth in the mining and quarrying sector are uncertain, as this will depend on continued implementation of road construction projects such as the Manzini - Mbadlane Lot 2, Nhlangano - Sicunusa and commencement of Lukhula – Big Bend road projects.