GOVT SPENDING TRAP

Sir,

When people spend money, their spending behaviour is usually driven by their basic needs and wants. For those with more money in their pockets, there is usually an extra element of their spending, which is to signal their wealth and to attain some social status. The same goes for government spending, even though it may seem a little more complicated as it involves spending very large amounts of money involving multiple national and international accounts. Governments of rich nations tend to spend money on things that will give them global power and status, while developing nations try to spread their last cent on investments that seek to eradicate poverty. An interesting observation about spending behaviour is that poor people around the world usually spend a significant share of their income on visible expenditure or ‘status goods’ often in order to ‘keep up with the Joneses’.

Implications

Unfortunately, spending on frivolous goods has negative implications on asset accumulation, household indebtedness, and investments on crucial life essentials, such as food, health and education. The point here is that it is easy to get trapped on spending on the surface for glitz and glamour while the core, which includes the necessities, simply withers away. In Eswatini, we are hanging in the balance; development is definitely happing in this country.

Trap

If you are not sure, look around: There is a new Hilton Hotel in Mbabane; a new hospital wing for Mbabane; a five-star hotel will soon be completed down the valley; a five-star Parliament building is in the pipeline; not to forget the five-star airport in Sikhuphe; and five-star road networks from Manzini all the way to Sikhuphe and beyond. This is all good – but it seems like we might be, as a country, running into the trap of spending on visible expenditures and status goods while social necessities take a backbench. In the country’s revised National Development Strategy, government emphasises inclusive development and inclusive economic growth, yet more and more of our taxes seem to be dedicated to capital projects that are draining government coffers and compromising spending on social development. Yes, capital spending is a necessary aspect of development and part of the economic engine for growth, but government needs to be careful that the development and growth it spends on do not leave 63 per cent of the Eswatini population behind.

What is clear is that the country’s current spending patterns cannot be sustained into the future. Government needs to spend money on developing its people, so that average emaSwati income increases rather than spending all efforts to take the little bit of money that people make. When government starts seeing its people as valuable human citizens– rather than cash cows – households will be in a better position to start saving and accumulating assets/wealth that will sustain the viability of the economy in the kingdom.  This is really simple. If more people are uplifted from poverty to participate in the economy, government will be in a better position to generate income and accumulate sustainable wealth in the long-run; and this will bring back peace in the country.

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