DIVERSIFY FOR ECONOMIC RESILIENCE, SUSTAINABILITY – SARFED

MBABANE - A coordinated approach to economic recovery as characterised with strategic broadening of the tax base is critical for Eswatini’s economy to remain sustainable.

This is a call made by Southern African Research Foundation for Economic Development. The latter further urges the country to embrace diversification in these challenging times of COVID-19. 

Regional Coordinator George Choongwa said since countries’ declaration of lockdown, regional trade in Southern African Africa has suffered great loss.  

“Both large and small scale firms have been put out of normal cross-border trade, forcing them to make huge losses even to the point of completely fall out of business. This implication has resulted into reduction of Eswatini’s revenue earning from the balance of payment and trade.

“Drop in economic activities on both global and regional level puts Eswatini in a desperate state. From the global perspective, the country is expected to have a reduced competitive edge in its international trade, particularly the reduction in its SACU receipts as global commodity market is likely to have remained unattractive during the period of the COVID-19 pandemic,”  observed Choongwa. 

On the aspect of the country’s local trade, Eswatini’s supply and value chain is also said to be under pressure as economic activities have been slowed down, prompting a recession which is expected to disadvantage the country’s revenue base.  

Imports

“Some of Eswatini’s economic pressure has been that of its high dependence on imports from both South Africa and global markets; mainly through its trade links with the European Union (EU), United States of America (USA) and China, which later resulted in dwindling markets for the country’s exports. 

“Although the rest of the world is slowly reopening businesses to emerge from the global slowdown, research states that the trend in African economies, including Eswatini, entails the possibility of a deeper recession as they are likely to face further production and trade related constraints if limited interventions were put in place due to possible rise in the COVID-19 infection rate,” said Choongwa. 

Due to the uncertainties, Choongwa recommends effective tax resume as one of the most reliable measures that Eswatini can take into consideration even as it recovers from its negative effective performance for the years 2019/2020. 

“However, the government must ensure that the country’s tax system did not disadvantage certain sectors in the economy considering the fact that the country’s disposable income was already badly hit by the prevailing COVID-19. 

“Due to high levels of uncertainty  brought about by COVID-19, both firms and individuals develop measures of protecting their revenues  which to some degree leads to manifestation of other problems such as  tax avoidance and  profit shifting which might end up eroding the entire tax base of the country.  

It is therefore relevant that the government strengthen the current tax base by incentivising it through broadening it. Failure to this would result into unproductive shift of tax burden in all socioeconomic sectors of the country, which would eventually result into widening of the poverty gap,” shared Choongwa. 

Choongwa stressed that the current socioeconomic situation due to COVID-19 brought about the sluggish global, regional, and national economy.

Strategic

“The trend toward the spatial splitting up of production across wide geographic areas, and the emergence and growth of national value chains as a strategic competitive edge for the country’s regional and global markets as the country would craft new and effective ways to export tasks, services and other activities. 

“It must be understood that value chains have the potential to offer the country  a path out of the trap of having to specialise in whole industries, with all of the cost and risk due to high level of uncertainty created by COVID-19,” he said.

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