Photo: Kristy Siegfried/PlusNews

NGOs will rely on foreign aid to plug gaps in government services

Mbabane,
12 January 2011 (IRIN) - While Swaziland's government considers
recommendations from the International Monetary Fund (IMF) aimed at
staving off economic disaster, the impacts of a growing financial crisis
are already being felt by the country's poor.

Thabsile Ndlovu, a widower in the mountainous northern Hhohho region
has not been able to pay her children's school fees because she cannot
travel to town to sell vegetables from her garden.

"The buses are not coming to my area because the roads are now so bad," she said.

Recent heavy rains have made some roads impassable but the
government announced this week that its fleet of road graders was
inoperative because it lacked money to buy spare parts.

"At the start of the financial crisis government told us that
education and health would not be affected, but we find there are many
ways these can be affected," said Stanley Dube, a financial consultant
in the central commercial town of Manzini.

He noted that while government clinics may still be providing basic
health services, many patients are finding it difficult to reach them.

Local humanitarian NGOs are also feeling the pinch following a
government decision to cut financial support to such organizations by 14
percent.

"Just as prices are going up, government support is going down,"
Thembi Nkambule, director of the Swaziland Network of People Living with
HIV and AIDS (SWANEPHA), told IRIN.

SACU revenue down

Swaziland is among several smaller countries in the region that have
benefitted from a boom in revenue payments from the Southern African
Customs Union (SACU) in recent years.

SACU, which comprises Botswana, Lesotho, Namibia, South Africa and
Swaziland, applies a common set of tariffs and disproportionately
distributes the revenue to member states. It has provided an economic
lifeline to Lesotho and Swaziland, in particular, which have small
impoverished populations, large numbers of HIV-infected people, and few
or no natural resources.

In 2009, SACU revenue accounted for about 20 percent of Swaziland's
gross domestic product (GDP). However, the global economic crisis saw
SACU revenue drop by about 70 percent in 2010 and further drops are
expected over the next few years.

The IMF recently released a report proposing
various fiscal adjustment strategies the governments of Botswana,
Lesotho, Namibia and Swaziland should adopt in the face of lower SACU
revenues.

Job cuts

One of the key recommendations for Swaziland was to dramatically
reduce its disproportionately large public sector wage bill. The
government has responded by announcing that 7,000 public service jobs
will be cut in 2011, a move that may save money but is also likely to
compromise public service delivery and further contribute to an
unemployment rate that already stands at 40 percent.

Other fixes announced by the government have included the suspension
of new hiring, cosmetic cutbacks like an end to the purchase of
biscuits for bureaucrats' afternoon teas, and short-term borrowing.

The IMF report predicts that if government does nothing to confront
its economic problems public debt will jump from accounting for 19
percent of GDP in 2010 to 31 percent in 2011, eventually constituting 75
percent of GDP by 2015.

"That's a doomsday scenario; no country can survive with such a debt
load," said an economist with the Swaziland branch of a South African
bank who did not wish to be named.

However, he was unconvinced by IMF recommendations such as
introducing value added tax (VAT) to raise revenue to replace lost SACU
receipts.

"In a country where two-thirds of people live in absolute poverty... where are the consumers who can pay VAT?" he asked.

He was also skeptical that Swaziland's private sector would be able
to attract enough investment to mitigate the effects of the financial
crisis.

"While this would be ideal, private investment in Swaziland was on
the decline even before SACU receipts were cut and the global recession
occurred," he said.

NGOs to seek more foreign aid

On 12 January, government officials were due to meet key industrial
players to discuss ways to raise revenue. A corporate chief executive
officer invited to the meeting told IRIN that a proposal to increase
mining activity was on the agenda.

Read more

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Declining customs union revenues threaten AIDS response

A customs union to prevent failed states

Tackling one crisis at a time does not solve all

However, according to the IMF report, mining revenues, like SACU
revenues, are on a declining trend even in countries like Namibia and
Botswana which have considerably more mineral wealth than Swaziland. The
authors urged governments to consider "measures to bring down the level
of spending... before relying on measures to enhance revenue".

Several NGOs working to meet Swaziland's considerable humanitarian
needs, told IRIN they will be seeking more foreign assistance to address
expected disruption to government services.

"We do have foreign donors who are sympathetic but because of the
world economic situation they are cutting back. It's a dilemma," said
SWANEPHA's Nkambule.