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Country Brief

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Swaziland: Country Brief

The Kingdom of Swaziland is a Low Middle Income country. Swaziland’s economy is fairly diversified: agriculture, forestry, and mining account for about nine percent of gross domestic product (GDP); manufacturing (importantly textiles and sugar-related processing, metal works and light manufacturing) represents 27% of GDP; and services, particularly government services, constitute 64% of GDP.

The economy is very closely linked to South Africa, which accounts for over 90% of Swazi imports and about 64% of Swazi exports. As a small, open economy exports are important for Swaziland. Aside from the prevailing global uncertainty, the vibrancy of the export sector is threatened by growing competition from East Asian countries in textiles, and the phasing out of preferential prices for sugar in the European Union.

Development Challenges

Swaziland’s development challenges arise primarily out of weak fiscal management, slow economic growth, and the high prevalence of HIV/AIDS.
 
Swaziland has been facing a difficult fiscal situation since FY11 that is hurting growth and public service delivery, and threatens macroeconomic stability. The roots of the country’s fiscal difficulties lie in the excessive dependence on transfers from the Southern African Customs Union (SACU), and expenditure choices that have exacerbated budgetary rigidity, while curtailing the space for public investment in essential infrastructure and other poverty reducing expenditure. These weaknesses were brought to the fore by the sudden decline in SACU transfers in 2010 and 2011 that precipitated large fiscal imbalances. The government’s inability to achieve timely fiscal consolidation threatens the country’s macroeconomic position. A temporary increase in SACU transfers in 2012 provides Swaziland some relief in FY13, but does not change the urgent need to consolidate public expenditures and increase their efficiency.

While the Swazi economy was one of the fastest growing in the world in the 1980s, growth has slowed down significantly since. Some of the country’s growth challenges can be traced back to problems in access to land. The country’s Title Deed Lands - which account for the bulk of the country’s land in commercial and industrial use, and under high value crops (citrus, forestry and sugarcane) - are characterized by high levels of investment, irrigation, and productivity but are becoming increasingly scarce. Meanwhile, much of Swazi Nation Land is under subsistence agriculture and provides employment to about 75% of the population, but attracts little investment and suffers from low productivity because of issues with security of tenure. Swaziland’s myriad complex government regulations and processes, as reflected in its low rank in the Ease of Doing Business Index, also diminish Swaziland’s attractiveness as an investment destination.

In recent years, economic growth has also been dampened by the fiscal crisis. Even though real GDP growth in 2011 was estimated a 1.3%, the indicators for 2012 are not expected to be positive. The accumulation of arrears by the government to finance deficits has hurt business sentiments and dampened economic activity. At the same time, inflation has been rising in recent months driven by rising food prices that is likely to hurt the poor most.

Finally, Swaziland is the epicenter of an HIV/AIDS pandemic and finds itself facing a social disaster. A staggering one-third of Swazi children are orphans and vulnerable children (OVC), constituting the most vulnerable section of the population. However, with a sound strategy, a strong national HIV/AIDS institution, and considerable international support, the country has been able to stabilize the situation somewhat. Swaziland has made commendable progress in the prevention of mother-to-child transmission (PMTCT) of HIV. From 2004 to 2009, PMTCT services have scaled up significantly. The number of sites offering PMTCT services has more than tripled (from 44 to 150) extending coverage to 72%. HIV testing of pregnant women has increased from 15% to 81%, and maternal uptake of anti-retroviral prophylaxis has increased more than 76%, according to the 2010 Universal Access Report.

Despite these successes, Swaziland’s HIV prevalence rate among those ages 15-49 is the highest in the world at 26%, with an annual new infection rate of 2.9%. The country also suffers from the world’s highest death rate from HIV/AIDS and one of the lowest average life expectancies.

Since 1962, the World Bank has financed projects in several areas including agriculture, education, industrial development, and urban development. Cumulative commitments to date include US$105 million for 12 International Bank of Reconstruction and Development (IBRD) loans and US$8 million for two International Development Association (IDA) credits.

The most recent World Bank strategy for Swaziland was approved in March 2008. The Interim Strategy Note (ISN) for Swaziland covered the period 2008-2010. This was the first World Bank Group strategy for Swaziland since 1994. It was developed in close collaboration with the Swazi government and aligned itself with Swaziland’s development priorities. The three main areas of support include:

  • Fighting the world’s most severe HIV/AIDS pandemic
  • Improving governance
  • Increasing competitiveness

Under the ISN, the Bank prepared two new IBRD lending operations: a US$27m Local Government Project which aims to strengthen the capacity of local governments to improve delivery of basic services. Another US$20 million Health, HIV/AIDS and Tuberculosis Project, co-financed by the European Union, aims to improve access to primary health care, maternal health and tuberculosis/HIV integrated care, and increase social safety net for orphans and vulnerable children (OVC) through a pilot cash transfer mechanism. The project also supports Swaziland’s efforts to achieve the health-related Millennium Development Goals (MDGs) on HIV/AIDS, maternal mortality and under-5 mortality.

Both projects became effective in early 2012 and improve access to quality health services. Although the Bank’s overall program in Swaziland is small and young, it is now growing and deepening. Over the last year, the Bank has also engaged in providing technical assistance and analytical work in the areas of public financial management, social safety nets and assessing the investment climate.

As the Interim Strategy period has ended, the Bank intends to launch, in consultation with the Government of Swaziland and its development partners, preparation of a new assistance strategy by mid-2013.

The Bank has been providing analytical assistance focused on spurring private sector led growth, and improving fiscal management to alleviate poverty and maintain macroeconomic stability. A set of policy notes delivered to government in 2010 recommended structural and policy reforms to help Swaziland integrate better with regional and global markets and unleash the potential of promising sectors. The Bank’s integrated fiduciary assessment assisted the government to define and implement priority actions that mitigate key risks in achieving fiscal sustainability while increasing priority spending.

The Bank’s Rural Sector Review helped the government produce simple, easily implementable recommendations that can lead to rapid results in reducing rural poverty and contributing to broad-based economic development. Given that Swaziland’s rural growth is closely linked to the performance of the agricultural sector and that poverty reduction for most of the rural population depends on improved performance of smallholder agriculture, the study focused on recommendations that can enhance the role of agriculture, especially smallholder agriculture, in stimulating overall rural growth.

Maternal and child health is a priority for Swaziland. A Japan Social Development Fund Grant of US$2.57 million aims to bring essential maternal and child health care to vulnerable populations including orphans and vulnerable children (OVC) and improve accessibility, affordability and quality of maternal, neonatal and child care at the community level. The project is primarily being implemented in the underserved region of Lubombo.

Education and work force development are high on the government competitiveness agenda. In July 2010, the World Bank and Swaziland’s Ministry of Education and Training published a key report examining how the Swazi education system can be harnessed to foster socioeconomic growth and better equip and train young Swazi citizens for the labor market.

Finally, due to the high poverty rates, the government is increasingly recognizing the protection of the poorest and the vulnerable as priority. The Bank’s recently completed Social Safety Net Review to provide policymakers with a comprehensive analysis of the country’s existing safety net programs to use in shaping their social safety net strategy going forward.

World Bank Group

The International Finance Corporation (IFC) has invested US$48 million during the last decade. The Multilateral Investment Guarantee Agency (MIGA) extended a guarantee to a South African company for construction and operation of electricity transmission lines linking South Africa, Mozambique, and Swaziland.

Due to Swaziland’s middle-income status, there are few donors operating in Swaziland. The African Development Bank, United Nations system, European Union, International Monetary Fund, and the United States are major development partners. The World Bank and the European Union are jointly financing the Health, HIV/AIDS and Tuberculosis project.

Last updated October 2012




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