WAKE UP! ESWATINI HEADED FOR ECONOMIC RECESSION

Apparently, Eswatini faces a significant economic recession.

I am not an expert in economics, but I am a vigilant consumer who can see when things are not normal in our way of life. Those who studied economics say an economic recession is a period of economic decline characterised by a decrease in economic activity, a rise in unemployment and a drop in the stock market. They say a recession is also characterised by a sustained period of negative or weak growth in a country’s real gross domestic product (GDP). GDP is the value of all goods and services a country produces. I have observed that the production levels have declined and the country’s industrialisation policy, which aligns with that of Southern African Development Community (SADC), has yet to yield dividends.
Investopedia defines a recession as a significant, widespread and prolonged downturn in economic activity.

This situation is obtaining on the shores as the downturn has resulted in high unemployment rates, surging prices for essential commodities, prohibitive costs of education and housing, and weakened consumer purchasing power. It is important that the administration of Prime Minister Russell Mmiso Dlamini is made to understand and address these issues, which are pivotal for fostering economic recovery and sustainable growth, in this nation of approximately 1.3 million people.

It is common knowledge that Eswatini’s economy is highly dependent on the economies of neighbouring countries, particularly South Africa. Any economic downturn in these countries tends to have a ripple effect on our economy. I am looking forward to a time when our economy will remain resolute in the face of regional economic downturns. We have to be honest when we address issues of economic recession. Let us not pretend as if everything is normal. The nation experiences systemic challenges, including underdeveloped infrastructure, a large informal sector and excessive reliance on agriculture and exports, making it vulnerable to external market dynamics.

The government’s establishment of the mining company is a good idea if the minerals will benefit emaSwati, in terms of job creation and economic sustainability. I am not, in any way, suggesting that we must not rely on agriculture. Excessive reliance on it may limit us to one source of income. Exports benefit the economy, but over-reliance on international markets could lead to external shocks and fluctuations.

Growth strategies
As more countries adopt export-led growth strategies, competition in international markets intensifies, and Eswatini may need help to compete with the giants, like Brazil, India and Thailand, which produce the most sugar. Let us all remember the significance of political stability when addressing the challenges of the recession. Political unrest and calls for reform have occasionally disrupted economic activities and impacted investor confidence. Addressing these political issues is important. I have been duly advised that ineffective economic policies and poor public sector management contribute to fiscal imbalances and hinder economic performance. The global recession periods taught us something to constantly reflect on to prepare us for any calamity.

Notably, the 2008 financial crisis and the recent impacts of the COVID-19 pandemic have strained Eswatini’s financial systems and reduced international investment and aid. That is a fact we cannot dispute. This week, we were made to understand that the population grows by around 14 000 people annually. With the recession leading to a high unemployment rate, compounded by population growth, we need more jobs to stimulate economic activity. The lack of sustainable job creation exacerbates the issue, with few opportunities for youth employment. We have to be careful.

I cannot ignore the fact that inflation has led to rising prices for food and essential services, straining household budgets and disproportionately affecting lower-income families.
The cost of education and rent remains prohibitively high for many in Eswatini. This limits access to quality education and adequate housing, curtailing long-term developmental prospects. This may result in an unhappy society. An unhappy society is very dangerous. I have also been advised that economic recessions usually result in reduced consumer spending power, often driven by inflation, stagnant wages and high unemployment. Currency devaluation and inflation further weaken purchasing power, limiting access to goods and services. We have to ensure our local currency remains at par with the South African Rand; any attempt to delink it must be rebuked.

South Africa, at the moment, has a big economy, but it faces challenges as well. The unemployment rate in South Africa remained at 33.5 per cent in the second quarter of 2024 and is particularly high among young people. I have learnt that the labour market is also struggling with a mismatch between the workforce’s skills and employers’ needs. steadily declined
The South African National Treasury mentioned in its 2024 Budget Review and Economic Outlook that household consumption remains under significant pressure, after contracting for two consecutive quarters in 2023.

This reflects the effects of inflation and borrowing costs, weak consumer confidence and shrinking real incomes. Growth in credit extended to households have steadily declined since February 2023. The household consumption forecast for 2024 has been revised down to 1.3 per cent compared to 1.4 per cent. According to the National Treasury, risks to the near-term outlook remain skewed to the downside due to the possibility of elevated food prices for a large percentage of households, even as inflation declines and tight credit conditions ease.
Improvements in confidence, employment and real incomes, alongside an anticipated easing of interest rates by the end of 2024, will sustainably raise household spending over the medium-term.

South Africa has its challenges, but we cannot delink the Lilangeni from the Rand. The Common Monetary Area plays a crucial role in ensuring that regional imbalances do not create large-scale citizen migration. When addressing issues of economic recession, it is advisable to contrast with neighbouring countries. In Namibia, Botswana and Lesotho, the economic recessions vary but are influenced by a combination of domestic and global factors such as commodity prices, trade dynamics and policy responses as well. For instance, Namibia has faced economic challenges due to fluctuating commodity prices, particularly in the mining sector, a significant part of the economy.

However, recent efforts have focused on economic diversification and infrastructural development to stimulate growth. The government has also been managing public debt levels while addressing unemployment rates. Botswana’s economy has historically been heavily reliant on diamond mining. However, the country has made efforts toward economic diversification, emphasising sectors like tourism, agriculture and technology. The global demand for diamonds and commodity prices significantly affects its economic performance. The government continues to pursue policies aimed at sustainable growth and reducing inequality.

On the other hand, Lesotho’s economy is closely linked with South Africa, making it sensitive to economic developments in its neighbouring country. The textile industry is a key economic sector, alongside agriculture and remittances from Basotho working abroad. Lesotho has been working on economic reforms and infrastructure projects to drive growth, but challenges such as political instability and climate change impacts on agriculture persist. In all three countries, addressing socioeconomic issues such as unemployment and poverty appears to remain a priority alongside efforts to revitalise growth amid external pressures such as global market fluctuations and regional economic dynamics.

I have observed that companies struggling to maintain profitability in Eswatini often resort to retrenching workers, further intensifying the unemployment crisis and reducing household incomes. Existing companies must adopt diversification strategies to sustain core businesses. Let us work hard to keep the jobs in order to reduce the crime rate, with gender-based violence a significant cause for concern.  

Historically, the world has experienced significant recessions, such as the Great Depression in the 1930s, the 2008 global financial crisis, and the recent COVID-19-induced economic downturn. These events, typically, led to widespread job losses, reduced industrial output, and financial instability. In response, many countries employed tactics like monetary stimulus, fiscal policy adjustments and structural reforms to foster recovery. We can follow in those footsteps.

Lessons from other Countries
Countries like Germany and South Korea successfully navigated recessions by implementing comprehensive policy frameworks that included economic stimulus packages, supporting key industries and promoting technological advancements. These measures stabilised their economies and set them on a path to robust growth.

Solutions

Economic diversification is fundamental for the country to address the challenges. Reducing reliance on agriculture and broadening the monetary base by nurturing industries like tourism, manufacturing, and information technology can take us somewhere as a country. We must encourage small and medium-sized enterprises through favourable policies, accessible financing and business development support. This can spur job creation. The country must focus on healthcare, education and transport infrastructure investments. Such programmes can enhance productivity and attract foreign direct investment.

Eswatini needs to reform policy, implement effective governance and economic reforms to attract investor confidence and streamline public sector spending. The government must invest in education and skills development programmes that align with market needs, to ensure a skilled workforce that can boost employment and innovation. In conclusion, addressing the recession in Eswatini requires a multi-faceted approach involving strategic investments, structural economic reforms, and capacity building. By drawing from the experiences of other nations and adapting solutions to local contexts, Eswatini can overcome its recession challenges and build a resilient economy that serves all its citizens.

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