Times Of Swaziland: PATH TO 8% GDP GROWTH IN 2025 PATH TO 8% GDP GROWTH IN 2025 ================================================================================ Sanele Sibiya on 27/11/2024 07:59:00 PATH TO 8% GDP GROWTH IN 2025 THE past couple of weeks have been heavy on economic data. We saw the Finance Minister, Neal Rijkenberg, table his Medium-Term Budget Review, also known as the Medium-Term Budget Speech. Shortly after, the governor of the Central Bank of Eswatini tabled his Monetary Policy Statement. The figures presented paint a relatively stronger economy, with a growth forecast for 2024 at 3.6 per cent and an ambitious 8.3 per cent in 2025. This raises the question: Is this feasible? Can we realistically build our expectations for 2025 on this figure? Allow me to weigh in on that discussion as we try to forecast and navigate what 2025 will look like. Eswatini growth story From 2000 to 2024, Eswatini’s annual GDP growth has experienced significant fluctuations. The early 2000s saw moderate growth, with rates around one-two per cent, followed by a notable increase to around four-six per cent from 2005 to 2007. The global financial crisis in 2008 led to a sharp decline, and more recently, the country faced negative growth of -1.56 per cent in 2020 due to the COVID-19 pandemic. The country rebounded with a strong recovery in 2021, achieving a growth rate of 10.68 per cent, but this was followed by a significant drop to 0.48 per cent in 2022. The statistics show a relatively volatile growth story with significant fluctuations. In recent years, Eswatini’s GDP growth has stabilised around four-five per cent, with projections indicating a growth rate of 4.6 per cent for 2024. These fluctuations reflect the country’s vulnerability to external shocks and internal economic challenges, including dependency on Southern African Customs Union (SACU) revenues and limited government investment in capital projects. Risks to manage To achieve the 8.3 per cent growth target or come close to it, the following risks must be managed: Cashflow problems: In his Medium-Term Budget Statement, the minister alluded to the rollout of the Integrated Financial Management and Information System (IFMIS) in the 2025/26 fiscal year. This system aims to synchronise expenditures with expected revenue inflows, ensuring that budget projections are realistic. Accurate timing of expenditures is critical to minimise downgrades in projected expenditures. Essentially, the government’s financial management systems need to function with the efficiency of a Fortune 500 company, ensuring the burn rate and execution rate are always in sync. Corruption: The nation is experiencing unprecedented levels of corruption. If not arrested, mega projects requiring billions of taxpayer monies, will fuel even greater corruption, resulting in significant revenue leakages and cost overruns. This could negatively impact the country’s burgeoning public debt. Serious anti-corruption measures are necessary in order to safeguard these investments. Public debt management: We have recently been rated somewhat positively by rating agencies, but this could change if we are reckless with public debt. The minister’s medium-term Budget Speech estimated public debt to be 40.5 per cent of GDP, while other documents estimate it at 36.5 per cent of GDP. My approximations place the figure at approximately 45 per cent of GDP, including the E4 billion bond listed at the JSE and additional loans. Debt servicing is already a significant expenditure item, presenting cashflow and service provision challenges. Clear modalities for financing mega projects are needed, such as considering private sector involvement on a build-operate-handover basis. Over-reliance on SACU receipts: This makes us vulnerable to external shocks. The SACU stabilisation fund might provide a buffer, but without new revenue sources, we could face the same problems as we did in 2010. Allowing recurring expenditures to increase alongside SACU receipts presents significant issues when these receipts decrease, as recurring expenditures are difficult to reduce. The Wage Bill continues to grow each year with SACU receipts. Growing the private sector to become the largest employer, rather than the government, is crucial. Efficient performance management systems are essential to manage this component effectively. Capital project execution: It has become a norm in Eswatini that when capital projects are commissioned, eventually at completion the costs would have over-run three to four times. We have always called on government to change the contracting modality within the capital projects landscape. Projects should be commissioned with a time frame and there should be a separate account for projects. Each project must be completed within the allotted time, if not the contractor should pay the government. To do this however, the government must commission capital projects once the funds have been raised, dedicated and put in a separate account which must only be utilised to fund activities of the project. If we do this, we would have scope for more capital projects since the cost overruns take from potential future projects and from potential social spending. Conclusion Achieving an eight per cent growth rate in 2025 seems like a pipe dream but is attainable if we are serious about fixing our fiscus and changing the way we do things. However, given the nation’s history and its ability to stick to commitments, the target is highly unlikely. For Eswatini to realistically achieve this ambitious growth, it will require robust economic reforms, enhanced governance, stringent anti-corruption measures, diversified revenue sources and effective public debt management. Only with a concerted effort and disciplined implementation can Eswatini hope to reach its growth aspirations. I will also caution that we need to start thinking of broad-base growth our people should also feel the economy grow.