TOUGH TIMES AHEAD FOR EMASWATI

MBABANE – The cost of living for emaSwati is about to get tougher.

The Central Bank of Eswatini (CBE) has raised the discount rate by 50 basis points, (bps) from 6.75 per cent to 7.25 per cent. Banks are also expected to increase the prime lending rate for loans extended to businesses and individuals to 10.75 per cent. Headline inflation increased to 5.7 per cent in February from 5.3 per cent in the previous month. The CBE expects the cost of goods and services to increase moderately this year, as they have also revised their inflation forecast by 10 bps to 5.6 per cent.

Effective

The electricity tariff hike of 10.14 per cent will be effective today, which means E100 will now get you at least 48 units, down from 53 units. Prices of goods and services will continue to increase exponentially due to the above adjustments. Economists are of the view that people will now cut the number of items in their groceries, due to the escalating costs. They are also of the view that business revenues will decrease exponentially due to the increase in discount rate, which they said would lead to the decrease in money circulation and consumer confidence.

Economist Sanele Sibiya also noted that with the continuous hikes, vigorous negotiation circles will soon commence with discussion on adjustments to remuneration packages for employees. He said the recent hikes have increased mortgages and loan repayments for employees; hence, an adjustment was needed. “If we were to estimate, those with E1.2 million in bonds should expect an increase of about E5 000,” he said. Sibiya mentioned that Eswatini was currently on a normalisation drive - a period where the economy is trying to go back to pre-COVID-19 levels. Sibiya added that in the short-term, household consumption will decrease exponentially.

He further stated that the unemployed would be pushed below the poverty line. Sibiya said there was a need for government to ease the pressure by increasing zero-vetted commodities. CBE Governor Dr. Phil Mnisi said they held a meeting with the Monetary Policy Consultative Committee (MPCC) to consider the appropriate monetary policy stance. Mnisi said they then decided to increase the interest rate by 0.5 per cent, after taking relevant global and economic developments into consideration.

“We took into account economic development as well as the price and financial stability mandates, and the bank then decided to raise the discount rate by 25 basis points from 6.75 per cent to 7.25 per cent,” he said. Mnisi also mentioned that the geopolitical tensions continued to weigh on global growth prospects and that the tightening of global monetary policy in response to an elevated inflation outlook impeded economic growth.

Risk

“The International Monetary Fund (IMF) notes that the downside risk to global growth has worsened compared to its April 2022 assessment, the level of growth will be clarified in the next assessment,” he said. The governor mentioned that global supply chain disruptions, rising energy and other commodity prices would continue to weigh heavily on the global economic outlook. In the CBE monetary policy statement released yesterday, Mnisi said economic activity, as measured by the quarterly Gross Domestic Product (GDP) grew by 3.8 per cent on a year-on-year and a revised growth of 6.9 per cent in the third quarter of 2022.

Today, meanwhile, is the day when electricity tariffs in Eswatini rise by 10.4 per cent and consumers should start bracing themselves for a further eight per cent hike from April next year. The effective implementation of the tariffs follows an Eswatini Energy Regulatory Authority (ESERA) decision that was pronounced on February 1, 2023. The energy regulator did state that the rises were well below the levels that the power utility, Eswatini Electricity Company (EEC) had been seeking. Following the electricity hike announcement, domestic customers will now pay at least E2.08 for each electricity unit.

This means that for E100, domestic users will now have at least 48 units, down from the 53 units that one benefitted with the same amount previously.
That will apply in the 2023–24 financial year, and the units for E100 will go further down to 43 units in the 2024–25 financial year. This is informed by the increase of 10.14 per cent for 2023–2024 and an average tariff increase of 8.02 per cent for 2024–2025. ESERA Chief Executive Officer (CEO) Sikhumbuzo Tsabedze announced in February that the domestic tariff would increase by an average of 10.14 per cent and would come into effect on April 1, 2023.

Provisions

ESERA reviewed the tariff application from EEC in terms of the provisions of the Electricity Act of 2007, the Electricity Regulatory Act of 2007, and the Eswatini Tariff Methodology. The EEC had requested a revenue requirement of E2.93 billion for 2023–24 and E3.44 billion for 2024–25, translating to an average tariff increase of 21.31 per cent for each of the years under consideration. Businesses and consumers are expected to start enduring a gruesome day with the expectation of more hikes this year, especially the water tariff increase.

The Eswatini Water Services Corporation (EWSC) had initially proposed a three-year tariff increase, with the 2021/22 proposal being at 3.8 per cent. For the 2022–23 financial year, the corporation had proposed a tariff increase of nine per cent with an additional hike of 10.2 per cent for the 2023–24 financial year. The aforementioned proposal was not successful after the Parliament portfolio committee on natural resources and energy turned down the request by the EWSC to have a tariff increase of nine and 10.2 per cent between this year and 2024.

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