Admiring its beautiful mountainous landscape and lush forests, first-time visitors flying across Swaziland, nestled between South Africa and Mozambique, might think that they are arriving in Switzerland.
“Swaziland is fondly referred to as the 'Switzerland of Africa', a name that sits well with a country that boasts one of the best infrastructures in Africa,” the country's prime minister, Dr Barnabas Sibusiso Dlamini, tells fDi.
However, covering an area of nearly 17,500 square kilometres and having a population of more than 1 million, Swaziland is about half the size of Switzerland and seven times less populous. According to the World Bank, the gross national income per capita is about 26 times lower than Switzerland's, amounting to $2470.
From such a low base, there is plenty of room for growth. This is where foreign investors come in. Mr Dlamini explains that Swaziland has positioned itself as an export-oriented economy due to its small domestic market, which has expanded due to strategic market access agreements that the country has entered into, covering more than 450 million people in Africa alone.
In order to attract foreign investors to the country, the government set up the Swaziland Investment Promotion Authority (SIPA) in 1998, which facilitates foreign direct and local investment. It has also set up the Swaziland Industrial Development Company (SIDC), a joint venture with major international finance institutions which support investors in financing projects.
There have already been achievements. In the World Bank’s Doing Business 2011 report, Swaziland ranked 118th, compared with 126th in 2010. According to the report, investor protection has increased most, placing the country in 120th position, 60 places higher than in 2010.
Mr Dlamini boasts that the country has played host to a number of multinational corporations, such as the Coca-Cola concentrate factory, YKK Africa, Peterstow Aquapower and Cadbury. “Swaziland is also canning fruits for major retailers in Europe, the US and UK, such as Del Monte, Marks & Spencer and Tesco, among others,” he adds.
National priority sectors are manufacturing (including assembly and processing), tourism, agribusiness, pharmaceuticals, mining and power generation and international services.
In April last year, Peterstow Aquapower completed its manufacturing plant on a 129,499-square-metre site in Ngwenya, near the South African border, where the company employs more than 100 people.
“Swaziland has been an excellent location for our investment in a world-class manufacturing facility," says Douglas Barrows, chairman of Peterstow. "It has excellent transport links to Durban for our international exports and to key parts of southern Africa, and is close to our gold and platinum mining customers in South Africa,” he adds.
Manufacturing in the country has also proved profitable for fastener producer YKK Swaziland, part of Yoshida Kogyo Kabushikikaisha Group, which has been in the country for 35 years. “The business has grown tremendously. We used to manufacture about 1.5 million to 2 million pieces... We now produce about 55 million pieces," says Lester Davis, production director at YKK Swaziland.
Swaziland has a sound rail and road infrastructure – 80% of its roads are paved – that connects it to the port of Maputo in Mozambique, as well as Richards Bay and Durban in South Africa. There is one airport, in Manzini, which links the country with Johannesburg. Construction began on Sikhuphe International Airport in 2003 and it is scheduled for completion by the end of this year, though it has been subject to several delays.
Tineyi Emmanuel Mawocha, managing director at Standard Bank Swaziland, confirms the interest of foreign investors in the country. “They have a very positive attitude towards Swaziland once they have visited the country. They cite the climate, the people, infrastructure and generally high literacy level,” he says.
According to government statistics, Swaziland has an overall literacy rate of 87%. “The labour force is easily trainable, drawing from the ability and ease of communicating in English,” adds Mr Dlamini.
Mr Davis at YKK has no problem with finding semi-skilled workers. “It is skilled people [that] are very difficult to find. When I say skilled people, I mean mechanical and technical people and management," he says.
However, the Swaziland government allows investors to bring in expatriate technical and senior staff. On top of that, the lack of highly qualified employees can be made up for by low labour costs. At YKK Swaziland, for example, a semi-skilled worker earns about 2000 lilangeni ($290) a month.
“Swazis have a good work ethic and are generally committed. With unemployment on the rise, people are ready and willing to work in new companies,” says Standard Bank's Mr Mawocha.
Currently, 40% of the country’s population are unemployed and about 70% live on less than $2 a day. The prevalence rate of HIV/AIDS has reached 34.2% among those aged 15 to 49. The incidence of tuberculosis is 1257 cases per 100,000 people – one of the highest in the world.
Impact of recession
Like most countries, Swaziland did not escape the global turmoil and recession, though it reached the country later than it did in most places.
Jan Duvenage, global markets analyst at Standard Bank South Africa, wrote in a recent report: “The impact of the financial crisis was delayed [in Swaziland] as the transmission channel was not directly through the banking and financial sectors, but rather indirectly through the macroeconomic channel.”
Swaziland’s economy is closely linked to that of South Africa with more than half of exports going to the neighbouring country. Recently, the country suffered a 60% drop in income from the Southern African Customs Union, which accounts for two-thirds of state revenues.
In a recent report, the International Monetary Fund (IMF) said Swaziland's double-digit growth rate of the 1980s and 1990s had dropped to about 2% per year since 2000. The IMF expects the budget deficit to reach 13% of GDP in the fiscal year 2010/11, compared with 7.1% of GDP in 2009/10. Half of all state spending in Swaziland goes to pay the salaries of its 35,000 civil servants.
The World Bank has been in talks with the Swaziland government about a programme of support to introduce measures to limit the fiscal deficit and provide some additional financing, working closely with the IMF and the African Development Bank.
“These discussions are ongoing and while no firm estimate of needs has been arrived at as yet, we hope that Swaziland can take the concerted steps necessary to encourage private sector-led growth and place the economy on a sustainable footing,” says Jean Van Houtte, senior country economist at the World Bank.
Public sector protests
In March, reports that the government was planning to cut jobs and salaries to comply with IMF demands brought thousands of teachers, nurses and students out in protest.
“The recent mass protests were focused on the worsening economic situation in the country and corruption in the public sector. A significant number of Swazis would like to see political parties recognised and for citizens to have the freedom to openly associate. This, however, still appears to be a grey area in terms of the government’s stance and the relationship between political expression and the traditional structures,” says Mr Mawocha.
On April 12 the protests turned into an uprising, which coincided with the 38th anniversary of King Sobhuza II, the father of the ruling sovereign King Mswati III, rejecting the previous constitution and holding absolute power. However, the government had prepared for the demonstrations and arrested most of its leaders before they left home that day.
Mary Pais Da Silva of the Swaziland Democracy Campaign, who on that day was questioned by police, says that since April there have been many incidences of violence and a great number of people have been arrested. “There are still no changes made by the government but it’s something usual for them. We have agreed to have other protests in June,” she tells fDiMagazine.
Lucky Lukhele Magangeni, spokesperson for the Swaziland Solidarity Network, adds: “[The people] are very much resolute in demanding what is right for them and that is a democratic Swaziland.”