E23BN ‘DIRTY’ MONEY IN ESWATINI

mfanukhona@times.co.sz

MBABANE – It’s unbelievable, but it may be true.  Minister of Finance Neal Rijkenberg told the nation on February 27, 2019, that Eswatini’s shadow economy accounted to 37.4 per cent of the Gross Domestic Product (GDP).
Notably, many people might have not subjected the minister’s declaration to scrutiny to measure its seriousness. The country’s GDP stands at E61 billion (when using Friday’s exchange rate of E14/US$). GDP means the total value of goods produced and services provided in a country during a year.

On the other hand, the Market Business News (MBN) refers to shadow economy as all work activity and business transactions that occur below the radar – economic activity that is undeclared and for which taxes that should be paid are not.
It is illicit economic activity (such as black market transactions and undeclared work) existing alongside the country’s official economy.

Therefore, Rijkenberg had to lay the issue bare when he presented his budget to the House of Assembly two weeks ago.
The minister disclosed that 37.4 per cent of the GDP was money circulating outside the tax net.
It must be said that 37.4 per cent of E61 million, the country’s current GDP, translates to a whopping E22.8 billion.

LARGE SHADOW ECONOMY

In his own words, Rijkenberg said: “Eswatini has a large shadow economy, as per a paper published by ESEPARC’s in 2016. Eswatini’s shadow economy accounted for approximately 37.4 per cent of GDP.”
He said the sector (shadow economy) largely fell outside of the tax net. The minister went on to say that government would address this problem through revenue diversification and a broadening of the tax base.
“This will include an increase in consumption taxes such as an increase in the tax on fuel and the implementation of Value Added Tax (VAT) on electricity,” he said.

Based on the budget speech, a source said the minister looked like he was all out to punish everyone for the emergence and subsequent prevalence of the shadow economy.
The source based his analysis on the mechanism put in place by government to address the issue.

According to a research paper by the Eswatini Economic Policy Analysis and Research Centre (ESEPARC), there has been a growing body of literature worldwide about the size and development of the shadow economy.
The ESEPARC paper quantified the size and development of the shadow economy in Eswatini over a period of 16 years. Secondary data in the form of macroeconomic data was collected from government institutions for the period of 2000 to 2016.
The results showed that direct taxation, indirect taxation, self-employment, the importance of the agricultural sector, and regulations were the causes for the development of the shadow economy in the country. The results also indicated that the size of the shadow economy in the kingdom was at 37.4 per cent in 2016 and “has been declining at a steady rate over time.”

However, the minister maintained it as a barometer to gauge the existence of the unofficial economy.
In 2016, according to the paper, the GDP of the country was underestimated by E20.5 billion due to the exclusion of the shadow economy in the national statistics.
Zithulele Gina, the Head of Strategy and Communications at Central Bank of Eswatini, said they would comment on issues relating to the budget after their post-budget debate to be held soon. Dumsani Masilela, the Commissioner-General of the Eswatini Revenue Authority (SRA), said it was true that the shadow economy was absolutely large, and a great cause for concern.

Post your comment

Your name:

Your e-mail address:

Add your comments:

Please enter the code you see in the image:

Image:

Code: