WHAT ANC’S WIN MEANS TO ESWATINI’S ECONOMY

sundayeditor@times.co.sz

MBABANE – As South Africans will be going to the polls this coming week, emaSwati must pray for just one thing - a strong win for President Cyril Ramaphosa’s ANC.
Why? 

A win for the ANC will be a huge boost to Eswatini’s ailing economy, as well as to the other members of Southern African Customs Union (SACU). SACU was formed by Botswana, Eswatini, Lesotho, Namibia, and South Africa in 1904, making it the oldest customs union in the world.

Both local and South African analysts are in agreement that a support of 60 per cent would give Ramaphosa the ‘political space to implement his modernisation agenda, including trying to effectively get the State-owned enterprises and a raft of economic reforms firmly in place’.

With South Africans scheduled to vote on May 8, opinion polls are suggesting the ruling ANC will win enough votes to remain in power. The margin of victory, however, is key to determining if Ramaphosa is able to deliver on pledges to revive flagging economic growth, bring rampant corruption under control and address a 27 per cent unemployment rate.

Were the ANC to reach the 60 per cent mark: “Then the market will be very bullish,” a local economist who elected to remain anonymous said. The economist went on to say anything below that level would limit Ramaphosa’s ability to make the changes he wants. The economist further told the Times SUNDAY that a resounding win by the ANC will strengthen the Lilangeni/Rand against major currencies and that would be a huge relief for our government. “Strengthening of the local unit is always a sigh of relief to government because it keeps the external low, but when it plummets, the debt balloons because government external liabilities are denominated in foreign currencies,” said the economist. 

According to the Central Bank of Eswatini (CBE) annual monetary policy statement which indicates that for the period ending February 2019, total public debt stood at E16.1 billion, an equivalence of 26.2 per cent of GDP.  The Bank said the increase in debt was mainly driven by the financing needs of government. Domestic debt increased by 60.5 per cent from E6.1 billion to E9.8 billion in the period under review. On the other hand, external debt increased by about 21 per cent from E5.2 billion to E6.3 billion.

boost to Eswatini economy

Detailing why he insists ANC’s win would be a boost to the Eswatini economy, the economist said: “The local unit opened the year at an average of E12.20 and it ended the year at an average of E14.20 to the US Dollar, following policy uncertainty in South Africa around the land policy and the slow pace, and weak political will in tackling corruption.”
The Central Bank noted that the local unit strengthened in the first quarter of 2018 against major currencies following a positive budget delivered in South Africa after a positive leadership in the ANC by Cyril Ramaphosa, hence the strong belief that a win would keep the Lilangeni/Rand strong.

On the flipside, if the ANC’s support falls to below 50 per cent, the country could soon be run by a coalition of political parties, forcing compromise on a number of key issues. And that might affect Eswatini as the local unit against major currencies can depreciate significantly. “Let’s put a hypothetical scenario: if the ANC can form a coalition with the EFF that can result into a paradigm shift altogether and that can result in the weakening of the Lilangeni/Rand, because the EFF is radical and is putting pressure on the ANC to expropriate land without compensation,” he said. 

According to the economist, in the third quarter of 2018, the local unit depreciated, further taking pressure from mixed communication by the ANC on land policy scaring investors, that the Constitution will be changed to allow expropriation of land without compensation. “It is therefore against this backdrop that the economy of the country can fall further,” he said.

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