KING’S SPEECH: THINGS WENT WRONG,LET’S FIX THEM THE HARD WAY

MBABANE - The more closely you read His Majesty King Mswati III’s Speech from the Throne regarding the economy, the more plausible it becomes that he admits the country is in big trouble.

And he wants government and every liSwati to contribute to its recovery. Suggesting he admits that the country is in an economic crisis, the speech is dominated by the usage of words and phrases which paint a bleak picture.
Some of the words and phrases used by the king to signify that he is cognisant of the country’s dire economic state  include, but not limited to: ‘we are faced with challenges’; ‘economic activity is weak’; ‘economic decline’; ‘dampened growth’; ‘faced with daunting fiscal and economic challenges’; ‘volatile SACU receipts’; ‘increased depletion of reserves’; ‘constrained economic growth’; ‘economic downturn’; ‘slight improvement’; ‘decreasing SACU revenue’; ‘domestic revenue would be insufficient’; ‘fail’; ‘we require stiff measures’; ‘we need hard decisions’;  ‘unconventional methods’; ‘we need to fight’; ‘punitive’; and ‘strain’.

Analysing the above stated phrases and words points to one thing – something went wrong and needs to be fixed as soon as possible. To show that the Head of State understands that the country’s economy is in the abyss, he mentioned the word ‘challenge(s)’ more than 10 times in his speech. More strikingly, he used ‘challenge’ or ‘challenges’ more than he used ‘opportunities’.

Domestic economic activity
The words ‘weak’, ‘declined’, and ‘dampened’ are contained in this paragraph: “Domestic economic activity remains weak and is estimated to have declined by 0.4 per cent in 2018, triggered by the current fiscal challenges and the frail external expectation which dampened growth for the country’s exports.

“The country’s economic growth in the medium term is expected to gradually pick-up, but remains below 2.0 per cent, driven by anticipated improvements in the agriculture and manufacturing sectors. Growth is forecasted at 1.8 per cent in 2019.”
Also notably featured in the King’s speech was that the Kingdom of Eswatini continued to face daunting fiscal and economic challenges.

He said government revenues and expenditures were continuously moving in opposite directions, driven by volatile receipts from the Southern African Customs Union (SACU) and ballooning government expenditure.
He also mentioned that the expansionary fiscal position had surpassed sustainable levels, resulting in the accumulation of arrears, increased depletion of reserves and constrained economic growth.
Even more striking is that the King is worried about the continued decline of the SACU revenue.

SACU slight improvement

He noted the slight improvement in SACU receipts by E500 million, but to show his grave concern, he said: “We need to find out what is the cause of this decline because it affects our national development plans. This calls for a proper analysis of the sharing of SACU receipts by member states.”
But he did not mention that the South African Government was also pushing for a bigger slice of the revenue generated by SACU.  Restructuring the revenue-sharing formula, which sees the lion’s share of revenue going to South Africa’s neighbours, could release badly needed funds to meet the country’s dire fiscal challenges.

In September last year, SA’s former Minister of Finance Nhlanhla Nene said he wanted Parliament’s support to push for a change in the revenue-sharing formula and to resist attempts to fundamentally restructure the tariff-setting mechanism.
The King made an observation that despite an expected increase in domestic revenue collections by Eswatini Revenue Authority in the financial year 2019/20, these will not be sufficient to offset the arrears accumulated over the years. “It will also fail to meet government’s domestic financing requirements for the fiscal year,” he said.

fully financed budget

In this regard, the King said it was imperative that government presented a fully financed budget to help contain the situation. He said the allocations should be informed by the funds that we have in the purse.
To see this happen, he said it would require very stiff measures and a concerted effort to curtail expenditure, whilst vigorously exploring avenues through which government revenue could be enhanced. In coming up with a fully-financed budget, hard decisions will have to be taken, sacrifices need to be made and unconventional methods of reducing expenditure need to be pursued, he said.

Again, what the king did not say was what stiff measures would be taken by government to curtail expenditure, and what were the avenues through which government revenue could be enhanced? 
Interestingly, our sister publication – Times of Swaziland, reported that the PM, Ambrose Mandvulo Dlamini-led government was considering the implementation of the Early Voluntary Enhanced Retirement Scheme (EVERS), which was abandoned in 2011. EVERS was considered after the International Monetary Fund (IMF) had recommended that government cut the number of civil servants by 7 000. By then, that was about 20 per cent of the total number of civil servants.
This was aimed at cutting the wage bill which currently stands at E8.8 million per month and is the second largest in Sub-Saharan Africa as a percentage of GDP.

introducing tax policies
In enhancing revenue, one of the solutions could be introducing new tax policies. The IMF said government should minimise the negative impact on growth by focusing on consumption, including VAT base, fuel levy, excises and property taxation,  and reducing tax incentives and exemptions (eg, under income taxes).

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