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OPPORTUNITY IN MIDDLE OF CRISES

09/06/2023 07:20:00 Editor

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ESWATINI must be proactive to succeed amid South Africa’s (SA) challenges if she is to avert sinking with the Titanic. The political and economic challenges facing our largest trading partner may look grim, but they present a possible 1980s scenario where the apartheid era boosted our economic gains.

In its recent report on SA, the International Monetary Fund (IMF) describes business and consumer confidence and sentiment in the SA economy as ‘weak’. It says our neighbours are facing mounting economic and social challenges and projects real GDP growth of 0.1 per cent in 2023, reflecting a significant increase in the intensity of power outages, weaker commodity prices and the external environment.

Eswatini may be heavily attached to the SA economy and very prone to catching the cold of its sneeze, but such proximity can also be advantageous to investors keen on continuing to use the region as their business hub. This opportunity needs a proactive strategy, which one hopes the business sector is already exploring before SA gets its act together. We can’t afford to repeat the mistakes of the past.

In an excerpt from a private sector diagnostic of Eswatini, published in September 2022, the International Finance Corporation (IFC), a member of the World Bank and the largest global development institution focused on the private sector in emerging markets, recalled how Eswatini experienced strong investment-led growth during apartheid SA due to foreign direct investment (FDI) inflows from companies that sought to avoid the sanctions against South Africa, while keeping access to its market. The report notes how Eswatini lost its comparative advantage as an investment destination after SA’s democratic transition in 1994, as the latter became the region’s preferred destination for investment and skilled labour.

“Eswatini shifted from a private investment-led higher-growth model to a government spending-led lower-growth model after the end of apartheid in SA. The growth outcomes of the two models have been starkly different: Real gross domestic product (GDP) growth averaged 6.7 per cent between 1980 and 2000 and three per cent between 2000 and 2019,” reads the report.

Repeat

So how do we avoid a repeat of this scenario? This time we need to ensure any investor settling here is there for the long haul, no matter how and when SA stabilises politically and economically. Let’s take cues from countries such as Namibia, which is luring investors their way by offering Namibian residency by investment visa, which allows global investors to obtain a renewable work permit and Namibian residency in exchange for a minimum investment of about E5 million (US$265 000). The initiative also offers permanent residence permits to international investors if they purchase at least 10 per cent of the shares of a new or existing Namibian company.

How far are we from offering a similar incentive? I do recall His Majesty tasking Commerce, Trade and Industry Minister Manqoba Khumalo to engage with his counterpart at the Home Affairs Ministry to work on this inducement. The King’s call was made during an Eswatini Business Forum hosted in New York in collaboration with the United Nations Development Programme (UNDP).

It came about after UNDP Regional Director for Africa Ahuuna Eziakonwa received a text from a successful business friend she had just informed of the existing investment opportunities in Eswatini. The acquaintance had asked her to inquire from His Majesty if permanent residency for investment was a possibility. “I have just been instructed by His Majesty to take this matter up with my colleague at Home Affairs to work on making this a possibility for those who make investments at a reasonable threshold,” was a response of Minister Khumalo at the event. This came shortly after the King had assured the forum of Eswatini’s commitment to offering various incentives that would make their investments worth their decision.

Prospects

The IMF recently gave Eswatini a more positive review of its growth prospects when compared to the report it gave SA recently. The IMF projects our GDP growth at 3.2 per cent, while that of SA has been placed at 0.1 per cent in 2023. The organisation noted the risks to Eswatini imposed by the weaker growth of SA and the new shocks to food, fuel and fertilizer.

The IMF has recommended the implementation of macro-structural and governance reforms to support private sector-led inclusive growth and reduce poverty and inequality. The IMF directors agreed that ‘continued efforts to improve the business climate, diversify the economy and close gender gaps are key’. What this all boils down to is how quick we can act on getting our house in order to see the opportunities that lie in the cloud of uncertainty facing SA and the world at large as the Russia-Ukraine war continues to divide global superpowers.

Let us market ourselves as an ideal alternative investment site and implement incentives to ensure that people who do move here do not wish to leave for a long time. Every crisis, as the saying goes, contains an opportunity. Those who made a fortune during the COVID-19 outbreak may testify to this more clearly.