ESWATINI MUST BRACE FOR GLOBAL TRADE WAR FALLOUT, SARFED WARNS

MBABANE – The Southern African Research Foundation for Economic Development (SARFED) has issued a stark warning to Eswatini and its neighbours.

The institution has urged Eswatini to brace for economic turbulence as escalating trade tensions between the United States and the European Union (EU) threaten to plunge Africa into another era of recession and stagnation.

In his latest economic and policy commentary, SARFED Regional Coordinator and Economist Dr George Choongwa likens the looming crisis to a pandemic—coining it the ‘Trump Pandemic’—as he highlights the potential devastation of trade wars on Africa’s vulnerable economies.

Unlike the 2007/08 global financial crisis that originated from banking sector instability, this time the danger stems from increasing tariffs and the withdrawal of development aid, primarily by the United States under the administration of President Donald Trump.

insulated

Though geographically distant from the epicentres of the trade wars, African countries like Eswatini are not insulated from the global economic shocks.

Dr Choongwa warns that countries with high dependency on exports—such as South Africa, Nigeria and Lesotho—are expected to suffer a real Gross Domestic Product (GDP) decline of up to 1 per cent, a trend Eswatini could mirror due to its economic interdependence with these regional trade giants.

“Eswatini might escape the worst in the immediate term due to its recent 10 per cent increase in fiscal space for the 2025/26 budget,” he states. “However, the long-term sustainability of this move remains uncertain, especially if key sectors begin to underperform.”

The report paints a grim picture for key industries such as textiles, mining and agriculture—pillars of Eswatini’s export economy. Already contending with tight margins and fluctuating demand, these sectors could soon face collapsing international orders, surging costs and massive job losses.

potential

According to SARFED, the hardest hit industry continent-wide will be mining, with projections indicating a potential sector-wide contraction of up to 1.07 per cent.

Given the sector’s historic role as Africa’s economic backbone, the ripple effects will likely be felt across national economies, including Eswatini’s, where mining and related industries contribute significantly to governments revenue and foreign exchange earnings.

Textiles and apparel manufacturing, another cornerstone of Eswatini’s economy, also stand on precarious ground. Thousands of jobs could vanish across Southern Africa, with Lesotho, Mauritius, South Africa, Ethiopia and Eswatini listed as the most vulnerable nations. “The threat to job security is real,” Dr Choongwa emphasises.

“If trade barriers persist, mass unemployment could follow, particularly among low-income earners and women who dominate these industries.”

Agriculture, forestry and fisheries are similarly expected to take a hit, with SARFED estimating a decrease of 0.15 per cent, down from the current contribution of 1.11 per cent to GDP across the continent. For a country like Eswatini, where agriculture plays a crucial role in rural livelihoods, this could exacerbate poverty and social inequality.

aftermath

SARFED draws historical parallels with the 2007/08 global financial crisis, which saw sub-Saharan Africa’s average GDP growth slow from 4.7 to 4 per cent in its immediate aftermath. “Africa was not the epicentre, but it paid the price,” recalls Dr Choongwa, suggesting that the current geopolitical tensions may trigger even deeper long-term damage.

In 2008, many African nations were forced into emergency borrowing and austerity. Domestic savings shrank, capital accumulation dried up and investments stalled. These consequences, SARFED warns, could resurface—perhaps even more forcefully—if strategic policy actions are not urgently implemented. The Eswatini financial sector has remained relatively stable in the post-COVID-19 period.

deteriorate

However, Dr Choongwa expresses concern that the sector could weaken under the weight of reduced foreign direct investment (FDI), volatile markets and a squeeze on capital flows if the global economy continues to deteriorate.
The fallout from the COVID-19 pandemic left many African economies financially stretched. Emergency health financing measures were often funded through debt, leaving nations with limited fiscal manoeuvrability. Now, with trade wars on the horizon, SARFED fears a second blow to economic resilience is inevitable.

“The scars of COVID-19 are still fresh. Add to that the so-called ‘Trump Pandemic,’ and you have a recipe for prolonged economic stagnation,” the economist warns.

Amid the bleak projections, SARFED identifies one resilient sector: processed foods. Despite global slowdown pressures, this industry is expected to experience marginal changes, with a projected decrease of just 0.01 per cent.

For Eswatini, this presents an opportunity to strengthen local value chains and reduce dependency on raw material exports by investing in food processing and agro-industrial innovation.

“While many sectors may contract, processed food production offers a relatively stable avenue for sustaining domestic employment and bolstering food security,” says Dr Choongwa.

In light of the findings, SARFED urges immediate and strategic policy responses to cushion Eswatini and its neighbours from the worst of the economic fallout.

Among the recommended measures:

Cut non-essential subsidies: Reducing subsidies on non-critical sectors would free up resources and expand fiscal space, enabling governments to redirect funds towards stabilising the economy and supporting vulnerable industries.

Strengthen public-private partnerships: Building strategic capacity in both public and private sectors is key to financing recovery efforts and stimulating innovation. Collaborative investment models can help mitigate the strain on public coffers while maintaining momentum in critical development areas.

Accelerate supplier payments: Delayed payments in the procurement system continue to stifle private sector growth. SARFED recommends prompt settlement of government debts to avoid creating an underfunding trap that could destabilise the broader financial ecosystem.

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