RECESSION HAS KICKED IN

Hard times lie ahead. VAT is set to increase by 0.5 per cent to add on to the hike in utilities, levy on fuel and the dwindling donor aid. All this on top of the anticipated 20 per cent decline in Southern African Customs Union (SACU) revenue receipts.

What is our plan to mitigate the impact of it all?
The world economy is entering dangerous territory and for small, trade-dependent nations like Eswatini, the coming storm could be devastating.
As global growth slows to its weakest pace in decades, the landlocked kingdom finds itself facing economic challenges that echo - yet exceed - those of the 2008 financial crisis. With its traditional lifelines of SACU revenues and foreign aid under threat, and without the economic drivers that facilitated recovery last time, Eswatini stands at a critical juncture. This analysis examines the gathering crisis, compares it to previous downturns and explores potential pathways to resilience in these uncertain times. 

Collapsed

When the global financial system teetered on the verge of collapse in 2008, Eswatini’s economy was hit with sledgehammer force. The kingdom’s heavy dependence on SACU revenues - which then accounted for nearly 60 per cent of government income - became its Achilles heel as international trade contracted sharply. Between 2010-2011, SACU receipts plummeted by nearly 60 per cent, forcing drastic austerity measures including public sector wage freezes, spending cuts and a failed attempt to secure an IMF bailout due to political resistance. 

The social costs were severe as poverty levels remained stubbornly high, unemployment soared (particularly among youth) and critical infrastructure projects stalled. When recovery eventually came, it was driven primarily by the rebound in SACU revenues as global trade recovered and South Africa’s massive infrastructure spending ahead of the 2010 FIFA World Cup, which boosted economic activity across the SADC region 
Today, the economic indicators show worrying parallels but with several critical differences that make the current situation potentially more perilous.
Finance Minister Neal Rijkenberg warned of a projected 20 per cent drop in SACU receipts - a devastating blow for a government that still relies on these revenues for nearly half its budget. Unlike 2008, there are no mega-projects like the World Cup to stimulate regional growth.

Slowdown

The IMF projects global growth to slow to just 2.7 per cent in 2025 - weaker than during the 2008 crisis period, much against the country’s eight per cent growth target. This slowdown is driven by multiple factors including rising inflationary pressures, ongoing supply chain disruptions, rising geopolitical tensions and the economic fallout from climate change.  Despite warnings after 2008, Eswatini has made limited progress in diversifying its economic base. Agriculture and manufacturing remain vulnerable to external shocks, while the promised transition to a more knowledge-based economy has stalled.  

Eswatini’s economic challenges are compounded by dramatic shifts in the global aid landscape. The Trump administration’s 2025 executive orders slashing foreign aid have had major impacts as numerous USAID-funded NGOs have closed operations and an estimated 1 500 jobs were lost in health, education and development sectors.

Traditional donors like the UK, Germany and France are redirecting development funds to military spending amid growing global tensions. The implications for Eswatini are severe as health budgets could lose up to 15 per cent of funding, while climate adaptation initiatives may be shelved.
We need to act quickly to avoid Eswatini becoming collateral damage.

With SACU revenues declining and aid shrinking, government faces several challenges such as the Debt-to-GDP ratio approaching dangerous levels (it is projected to exceed 50 per cent by 2026), the public sector wage bill remaining unsustainable and  a growing infrastructure maintenance backlog. The labour market is also under severe strain as formal sector employment is shrinking amid a high youth unemployment rate that is approaching 50 per cent. 

Poverty

The implications of all this could reverse poverty reduction achievements, worsen inequality and social stability may be undermined. While the challenges are daunting, other nations have shown possible ways forward through economic diversification strategies. The 2025 economic downturn presents Eswatini with its greatest challenge since independence. While the parallels with 2008 are clear, the current crisis occurs in a fundamentally different - and more dangerous - global context. The kingdom’s traditional economic model is being stress-tested like never before. 

Yet within this crisis lies opportunity. The same factors that make Eswatini vulnerable - its small size, tight-knit society and strategic location - could become assets in crafting nimble, innovative responses. By learning from both its own past and global examples, and by making tough but necessary choices now, Eswatini can emerge from this storm not just intact, but stronger and more resilient.

 The alternative - continuing with business as usual - risks consigning the nation to a prolonged period of economic stagnation and social strain. In this defining moment, leadership, vision and collective action will make all the difference. The world is changing rapidly. Eswatini must change with it. 

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