Times Of Swaziland: PATH TO 8% GDP GROWTH IN 2025

PATH TO 8% GDP GROWTH IN 2025
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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.