Mbabane, Swaziland, February 12, 2008 — The World Bank has released the findings of its Investment Climate Assessment for Swaziland, a report that shows a relatively favorable situation, though the country faces some challenges, especially when compared to other countries in Sub-Saharan Africa.
In particular, as in other middle income countries in Southern Africa, business firms have few complaints about infrastructure and most aspects of regulation. Objective indicators of the investment climate are also relatively favorable in these areas—although often less favorable than in Namibia, South Africa or Botswana.
Both small, medium and large enterprises (SMLEs) and micro enterprises expressed concern about competition with informal firms, crime (theft), and access to finance. In addition, Swaziland has the highest rate of HIV/AIDS (26 percent) in the world which has compounded the country’s development challenges. Business appears to respond relatively vigorously to the problem.
Swaziland is a lower middle-income country with an economy that is closely linked to that of neighboring South Africa. Middle-income economies are those with a gross national income per capita of more than $875 but less than $10,726. Swaziland’s GNI per capita was $2430.00 in 2006.
Swaziland’s currency, the lilangeni, is pegged to the South African Rand (sixty percent of exports are destined for South Africa, and 80 percent of imports originate there). Swaziland enjoyed high levels of growth and investment during the apartheid era, with per capita growth averaging about two percent per year between 1975 and 1994 and foreign direct investment levels averaging about seven percent of GDP between 1985 and 1994.
Since South Africa’s transition to democracy in 1994, both have fallen in the absence of compensating reforms by the Swazi authorities. Between 1994 and 2006, per capita growth averaged about 0.7 percent per year. Between 1994 and 2000, FDI averaged about five percent of GDP per year, falling further to about two percent of GDP per year between 2001 and 2005.
About 66 percent of government expenditures are financed with South African Customs Union (SACU) receipts. Fiscal deficits have been financed by draw-downs on government financial assets, which is an unsustainable source of funding and which risks undermining investor confidence in the exchange rate parity with South Africa. Improving the investment climate will attract FDI, improve growth, and increase government tax revenues.
Investment Climate Assessments are comprehensive country reports that draw upon the results of Investment Climate Surveys and other available information. They are used to identify and prioritize investment climate constraints, benchmark reform progress, provide cross-country comparisons of investment climate indicators, and help countries forge broad consensus on priority areas for reform that can help spur growth and development. These assessments ultimately feed into World Bank operations and technical assistance.
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