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DON’T REPEAT HISTORY

17/08/2018 03:49:00 By Martin Dlamini

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GOVERNMENT is broke? Well we’ve been here before back in 2008 to 2011 and we were lucky to be bailed out by a dramatic rise in Southern Africa Customs Union (SACU) receipts which contribute about 60 per cent to our national budget.

We do recall that before the financial crisis the country was sitting pretty with a fiscal surplus of 6.4 per cent of our Gross Domestic Product (GDP) in 2008/09. However, this turned into a deficit of 7.1 per cent of GDP in 2009/10 which nearly doubled in 2010/11 to about 13.8 per cent.
This time around, the SACU bail-out looks highly unlikely. Our big brother South Africa is on the verge of retrenching 30 000 civil servants as a cost cutting measure due to a sluggish economic growth. So what next for Eswatini?

Harping on the past may not be helpful to some, but experience remains the best teacher. In this instance it is absolutely necessary to revisit the strategies that were put on the table and what went wrong. We then need to pray that the incoming government will act decisively to avoid repeating the same mistakes.

The last thing we need is externally imposed reforms from the likes of the International Monetary Fund (IMF). The current fiscal challenges facing government causes us to take a look back at the Fiscal Adjustment Roadmap(FAR) born out of the Economic Recovery Strategy (ERS) which contained government’s declaration to implement decisive measures and reforms to deal with the challenges of the global financial crisis and to bring the fiscal position to sustainable levels.

Five action plans were laid out in the document that sought to achieve economic recovery for the country. Firstly, government promised to introduce fiscal reforms to broaden the tax base and tax collection while reducing the tax burden on the poor and impediment to economic activity.

We saw the birth of the Swaziland Revenue Authority (SRA) and the introduction of Value Added Tax (VAT), both of which helped improve efficiencies in tax collection and grow the government purse. However, there are no signs that the tax burden was reduced on the poor given consistent rise in service fees over the years.

Secondly, government promised to ‘Restructure, right-size, and improve the efficiency of the public expenditure and services’.
We all know what happened here. No restructuring with intent to right-size has ever taken place. In fact, the opposite is true. The civil service has grown, the number of parastatals has increased, hiring of recruits for the security forces has placed expenditure on the armed forces which is the second largest in the national budget. We’ve seen massive salary increments through the infamous ‘Dvuladvula’ salary award that saw politicians cash in an up to 32 per cent pay rise, much against advice to reduce the unsustainable wage bill.

On expenditure controls, the Auditor General’s report is damning in this regard and it would help our aspiring MPs to acquaint themselves with the reports of post 2008-2011 financial crisis that show how nothing has been learned since then.

Thirdly, FAR promised to ‘Improve governance so as to build investor confidence and allow for greater transparency and accountability.’

However, things only got worse. Investor confidence had been at a low ebb given our non-competiveness in terms of high electricity and communication costs, among others. It continued to wane after we lost our access to the African Growth and Opportunity Act (AGOA), a trade incentive that provides preferential trade access for Eswatini goods to the USA, resulting in thousands of textile workers losing their jobs. We have regained our status following amendments to our labour policies but the workers may take years to recover from this.

Fourth on the FAR list was to ‘Improve the export base and facilitate increased participation of the SME sector in the trade’
The country remains a large importer of good, especially consumables and our SME sector remains ill-equipped to compete on quality, standards and price on the international market. Failing to capitalise on our natural resources and mineral in the mining sector has also contributed to our current situation. A review of the mining policy has been very slow.

The fifth strategy was to attract Foreign Direct Investment (FDI) and provide support for the development and the involvement of domestic investors in the manufacturing and other businesses. The Swaziland Investment promotion Authority (SIPA) has failed to lure impactful investment resulting in our unemployment rate rising to 40 per cent. We’ve only managed to move one place up on the Ease of Doing Business rankings as we continue to roll out the red tape instead of the red carpet for investors.

What’s worse is that the country has allowed Asian businesses that does not qualify as FDI to flood the SME sector and increase outflow of capital. Evidently we had all the right strategies but adopted the wrong approach so it should not come as surprise that government finds itself back in a financial predicament. We can’t afford to make the same mistakes!