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COUNTRY’S EXPORTS TO USA DROP BY E1.2 BILLION

20/09/2020 05:53:00 BY MFANUKHONA NKAMBULE

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mfanukhona@times.co.sz

MBABANE – The USA market, which was one of the country’s lucrative markets, has terribly nosedived to alarming proportions in the past five years.

Exports to the United States were valued at E1.3 billion in 2014 against E411 million that was recorded last year. This shows a sharp decline by E1.2 billion.

Due to the impact of COVID-19 and the country’s removal from trade benefits under AGOA, it could prove to be a mammoth task for the country to realise the gains achieved in 2014.

The trade balance hasn’t improved at all, with goods shipped to the United States from April 2020 to July 2020 not demonstrating any improvement in terms of the difference between the monetary value of the country’s exports and imports from USA.

Goods shipped to US over the past five months are valued at E11.2 million (US$700 000). However, US shipped goods valued at E83.2 million to Eswatini during the five-month period the country has been under COVID-19 siege.

The trade data has been sourced from the United States Census Bureau, the principal agency of the US Federal Statistical System responsible for producing data about American people and economy.

The Census Bureau is part of the US Department of Commerce and its director is appointed by the president of the United States.

From January to July 2020, the US has exported goods to Eswatini valued at US$10.2 million, the equivalent of E163.2 million against E33.6 million worth of goods sold to the American market.

This shows an unfavourable trade balance of E129 million. It effectively means the foreign exchange reserves have been greatly depleted during the period under review.

Apart from AGOA trade benefits, the USA and the Southern African Customs Union (SACU), which includes Eswatini, signed a Trade, Investment, and Development Cooperative Agreement (TIDCA) in 2008.

According to the Office of the US Trade Representative, the TIDCA establishes a forum for consultative discussions, cooperative work, and possible agreements on a wide range of trade issues, with a special focus on customs and trade facilitation, technical barriers to trade, sanitary and phytosanitary (SPS) measures, and trade and investment promotion.

Eswatini is also a member of the Common Market for Eastern and Southern Africa (COMESA)), which signed a Trade and Investment Framework Agreement (TIFA) with the USA in 2001.

The kingdom is currently USA’s 185th largest goods trading partner with E752 million (US$47 million) in total (two way) goods trade during 2018.

The US goods trade surplus with Eswatini was E320 million (US$20 million) in 2018. This is due to the fact that goods sold to the country by the US totalled E528 million against goods valued at E208 million shipped to America by Eswatini.

Eswatini imports the following goods from US –

l art and antiques;

l vehicles;

l machinery;

l organic chemicals;

l military equipment;

On the other hand, the country normally exports the following to the USA –

l tree nuts;

l prepared food;

l processed fruit;

l wine and beer;

l vegetable oils (ex. soybean);

l sugar;

l perfumery

l cosmetics;

Bheki Bhembe, the Principal Secretary in the Ministry of Economic Planning and Development, said the trade numbers between US and Eswatini told the country that it was a net importer of goods from America.

Bhembe mentioned that the country’s AGOA status would also weigh in on the kingdom’s trade position with the US. However, the principal secretary explained that the US/Eswatini trade position did not give the full story because most of the country’s exports were destined to SACU and European Union (EU) regions, which make up for the position with the United States.

Overall, he elucidated that the country imported more goods and services than it exported. Emmanuel Ndlangamandla, the Executive Director of the Coordinating Assembly of Non Governmental Organisations (CANGO), said the trade imbalance was unfavourable to Eswatini as it deprived it of foreign exchange gains that would have seen the country getting more dollars to improve the country. He said the availability of the market was insufficient if the manufacturing industry was small or lacking capacity to produce more for it (market).

improve

Ndlangamandla emphasised on the need for the country to improve its export base so that there was no trade deficit. The executive director mentioned that the country’s economic road map should be tailored to address such things.

He said the country’s trading system should ensure that production supplied the market satisfactorily.

According to the Post COVID-19 Economic Recovery Plan, government has resolved to boost production, with significant reduction in agricultural imports as the country is determined to produce more maize, avocados, citrus, baby vegetables, fish, poultry and red meat. It is mentioned in the recovery plan that agricultural exports will increase so that they would have positive effects on the Gross Domestic Product (GDP).

The recovery plan states that a total of 4 610 jobs will be created in the manufacturing industry.

It is also mentioned that the manufacturing investment will amount to E6.537 billion.

These manufacturing projects include the expansion of the sugar industry for value addition to produce various (sugar) products, and the manufacture of pharmaceuticals through the Royal Science and Technology Park (RSTP).

The projects will also include production of fridge components, and a Kellogg’s factory to manufacture noodles and other food products, leather factory for the manufacture of industrial protective clothing, the refurbishment of former Swazi Paper Mills for the manufacture of craft paper, cardboard, and other products.

enrichment

It is said that a Lubombo Industrial Park will be set up to manufacture soap, pharmaceutical, and assembly of cars as well as an ethanol enrichment plant.

It is worth noting that the manufacturing sector will benefit from the largest share of investments out of the Recovery Plan, so that the sector is well-positioned to drive the country’s growth as per the objectives of the Eswatini’s Strategic Road map 2019-2022.

A majority of these projects will take place in Matsapha – the industrial hub of Eswatini.

The manufacturing projects are in line with the NDP, which emphasises the development of a dynamic private sector that supports sustainable and inclusive growth.

Specifically, the manufacturing sector will contribute to the achievements of the four sectoral outcomes identified by the NDP, which are:

l enhanced export growth and product diversification;

l strengthen the business environment;

l increased employment;

l stimulating investment and fostering entrepreneurial activity.

One of the planned projects is already under construction, and that is the Kellogg’s Tolarum Eswatini (PTY) Ltd, which shall manufacture noodles.

It is anticipated that the project will contribute over E6 billion to the country’s Gross Domestic Product (GDP).

Government hopes this project alone will boost the economy in many ways. Particularly, it is thought that MSMEs will benefit, as they will be supplying the inputs needed for producing noodles such as flour.

To boost the economy and exports, government says Eswatini will be making the much needed investments for industrial innovation and improving local capacity to manufacture goods for export. At the same time, the manufacturing sector presents immense opportunities to absorb Eswatini’s youth, particularly those engaged in technical vocational education and training (TVET).

opportunity

“Moreover, this is a huge opportunity for skills development and skills transfer especially in high tech industries that will be manufacturing products,” according to the recovery plan.

The manufacturing sector projects will contribute to the achievement of SDGs, which allow the promotion of sustained, inclusive, and sustainable economic growth, full and productive employment, and decent work for all.

The target for the least developed countries like Eswatini for this goal is to achieve at least a seven per cent growth in per capita gross domestic product (GDP) per year.

However, according to the World Bank calculations, Eswatini requires a yearly minimum growth rate of 23 per cent in real per capita GDP to reduce poverty and inequality.

With an expansion of the manufacturing sector, Eswatini would be creating enumerable opportunities for both skilled and unskilled youth, including women, to close the inequality gap and further reduce poverty.