... CALLS FOR GOVT TO DIVERSIFY REVENUE SOURCES FROM SACU

MBABANE - There is a need to diversify government revenue sources from SACU by focusing on improving revenue management through improving tax collections and reviewing tax orders.

Growing the private sector will galvanise efforts to diversify revenue sources through income taxes and consumption taxes. Authorities should intensify domestic revenue mobilisation efforts through effective tax enforcement, widening the tax base and strengthening tax administration to close any revenue leakages by enhancing the capacity of the Eswatini Revenue Service (ERS), and raising public awareness.

While Eswatini is expected to raise a significant proportion of the resources, there is also a pressing need for increased external financing from public and private sources. For instance, external financial flows - including foreign direct investment (FDI’s), ODA, remittances and net portfolio investments. Eswatini’s share of global climate finance remains marginal, despite being a country that is extremely vulnerable to the effects of climate change. Eswatini’s estimated annual financing gap for structural transformation by 2023 and 2063 is estimated to be 14 per cent of gross domestic product (GDP), and 2.5 per cent of GDP, respectively. Estimates indicate that within Southern African Customs Union (SACU), Eswatini has the second lowest financial gap for structural transformation after South Africa.

Transformation

The required increase in tax-to-GDP ratio to close the estimated annual financing gap in Eswatini for structural transformation in 2030 and 2063 is estimated at 13.2 per cent, and 2.3 per cent respectively. The private sector should play a collaborative role in terms of value addition, investment and job creation, using the incentives and support provided by an improved business environment during implementation of the National Development Plan (NDP), 2023 – 2028. Private sector-led growth continues to be at the core of Eswatini developmental agenda, with private sector leading the path towards economic resurgence and the public sector following through with creating a favourable environment for businesses to flourish.

The private sector is key to unlocking the country’s development potential, job creation and poverty reduction. The country needs a new growth strategy that places the private sector at the centre of its economic transformation to address the challenges of slow growth, unemployment and poverty.  The first pathway to sustainable and productive growth is adopting an export-led private sector growth model, leveraging the current preferential access to regional, and global markets. Eswatini’s financing gap to achieve structural transformation by 2030 is estimated at 9.5 per cent of annual GDP. Its status as a LMIC presents challenges to unlocking adequate concessional finance to propel structural transformation.

The AfDB added that structural reforms to improve economic governance, quality of institutions and competitiveness will be key to attract private investment and propel the country to a higher growth trajectory. Reforms should focus on improving transparency, accountability and efficiency of the public sector; including, State-Owned Enterprises’  (SOEs), restructuring and strengthening of their governance, and oversight to facilitate private sector growth. Broader reforms aimed at streamlining business operations, addressing constraints on regulation and competition and reducing the cost of doing business will be key.  

Investment

Bureaucratic requirements make it difficult and even prohibitively expensive for small and medium-sized enterprises (SMEs) to set up and run a business. Addressing corruption and bolstering its legal frameworks and institutional arrangement will help in reducing business transaction costs and improve service delivery by the public sector.
These reforms will promote investment, support job creation and improve competitiveness through better governance and business environment.

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