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LOCAL BUSINESSES SET TO LOSE E4.2BN

05/12/2020 23:56:00 BY MFANUKHONA NKAMBULE

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BY MFANUKHONA NKAMBULE

mfanukhona@times.co.sz

MBABANE – Businesses and services in Eswatini stand to lose E4.2 billion this year because of COVID-19 lockdowns and supply chain disruptions.

Presenting the country’s Mid-Year Budget Review Report for the financial year 2020/2021, Neal Rijkenberg, the Minister of Finance, said the Gross Domestic Product (GDP) for 2020 was projected to contract by 5.6 per cent.

What does that mean? The GDP, the total value of goods and services produced in a country, for Eswatini was worth E76.3 billion, the equivalent of US$4.8 billion at the current exchange rate, in 2019. This was according to official data from the World Bank.

In the event the GPD contracts by 5.6 per cent as projected by Rijkenberg, it effectively means that businesses and services will collectively make E71.74 billion, which is a decrease from the E76.3 billion. Rijkenberg mentioned that government had projected a 2.2 per cent GDP increase, meaning that there was a probability that the GDP increased by E1.67 billion if lockdowns did not disrupt businesses and services. That would have increased the GDP for 2020 to E77.67 billion if COVID-19 had no effects on local economy. “Mr. Speaker, the Gross Domestic Product (GDP) for 2020 is projected to contract by 5.6 per cent from a 2.2 per cent growth estimated in 2019,” Rijkenberg told Parliament.

disruptions

He said the growth was hindered by weakened demand in major advanced economies due to lockdowns and supply chain disruptions. Additionally, the minister of Finance pointed out that lockdown measures enforced in the domestic economy disrupted production in non-essential industries, imposed travel restrictions, lockdown and other containment measures.

As a result, he said most export industries and travel related sectors were hit hard, with the manufacturing (beverages), construction, wholesale and retail, transport and leisure sectors being the major contributors to the anticipated contraction. A government economist speaking on condition of anonymity said there was a strong need to enhance investor confidence through enactment of laws that respect human rights and protect investors. He said there was a need to improve on economic activity, creating more local and foreign companies, and further export more and import less. He urged government to cut personal costs and improve on FDI (Foreign Direct Investment). Generally, economists say economic growth is measured by an increase in gross domestic product, which is defined as the combined value of all goods and services produced within a country in a year.

Despite the unfavourable environment, the Finance minister said mid-year target collection was achieved by Southern African Customs Union (SACU).

increase

Eswatini received E4.174 billion at half year 2020/21 as compared to E3.16 billion in 2019/2020. This reflected a 32 per cent increase in SACU receipts expected this year when compared to last year.

“This source of revenue continues to prove volatile and there is little control to manage it,” said the minister.

“However, to achieve higher growth rates in this revenue source, some short term measures were recommended, which include reducing the age restriction of second-hand motor vehicles imported from outside SACU and minimising as far as possible the importation of petroleum products from outside of SACU,” he added.

With successful implementation of some revenue enhancing measures and strict adherence to the budget, Rijkenberg said it was expected that government would reduce the fiscal deficit to 4.5 per cent of GDP and halt the accumulation of arrears.

The Times of Eswatini quoted the minister to have said that revenue and grants in 2020/21 fiscal year were budgeted at E21.2 billion, but had been subject to a downward revision. He said the revenue and grants are now expected to reach E18.5 billion, implying a shortfall of E2.7 billion. Out of that, he said core tax items like individual income tax (PAYE) and company tax have been revised downwards by E1.4 billion. This was due to supply chain disruptions and weaker global and local demand leading to temporarily closing of businesses and retrenchment of workers, according to the minister. Taxes on goods and services will fall by E1.2 billion, mainly caused by an underperformance in the major tax items VAT and fuel tax, the minister of finance projected in his report. “The substantial revisions of revenue collection and reallocation between different expenditure items resulted in the drafting of a revised budget for 2020/21,” he said. mic activity.