World Bank (Washington, DC)
24 May 2011
press release
Mbabane — At a seminar hosted by the Government of Swaziland and World Bank, “Swaziland’s Prospects for PrivateSector-Led Growth,” participants called for a stronger reform push to boost trade and attract foreign direct investment which are necessary to offset the effects of the global slowdown and lay the foundations for sustainable growth and recovery.
The timing of the seminar is opportune as the Government of Swaziland launches an economic recovery strategy to ease its fiscal crisis.
“The Government of Swaziland believes that the private sector is the engine for economic growth,” said HRH Prince Hlangusemphi, Minister of Economic Planning and Development, Swaziland in opening remarks declaring the meeting open. “The solutions for our country’s economic challenges have to be found by Swazis only, with guidance and support of our international and regional partners.”
To overcome weak growth, relative small size of its domestic market and benefit from its land-linked, geographically strategic location, Swaziland can accelerate structural and institutional reforms that draw on its comparative advantages including proximity to Africa’s largest economy, South Africa and favorable market access to regional blocs such as the Southern African Development Community (SADC) and Southern African Customs Union (SACU), among others.
“This is a time of crisis and it is easy to lose sight of the many opportunities that are within the reach of Swaziland,” said Ruth Kagia, World Bank Country Director for Swaziland. “The discussions at today’s seminar are timely and provide a meaningful set of policy options to boost trade, attract investment, and secure growth-enhancing linkages with neighboring countries.”
Some key findings discussed at the seminar include:
- Swaziland’s real GDP grew at just over 2.5 percent during 2003-10, compared with 3.7 percent during 1990-99. Economic growth in 2010 was 2.0 percent and is projected to be negative in 2011 as the recovery in global demand for agricultural and manufactured goods is offset by the need to restrain public expenditures;
- Swaziland received US$67 million in foreign direct investment during 1990-2000, dropping to just US$7.4 million over 2003-08. Recent flows remain modest, and are consistent with maintaining or replacing existing production capacity rather than undertaking completely new investments.
- Swaziland’s export growth has been modest. During 2003-2008, its annual average growth in exports of goods and services was just 5.7 percent. Consequently, the trade balance has moved into deficit as import growth (driven by high government expenditures on construction projects, rising oil prices and manufacturing inputs) has outpaced exports.
- Swaziland’s ranking in the Doing Business Indicators are generally lower than in other SACU countries.
“As Swaziland begins to map a strategy for regaining lost ground, it is essential that policy levers be matched by a comprehensive set of actions,” said John Panzer, World Bank Sector Manager for Poverty Reduction and Economic Management, Africa Region. “Assessing market opportunities, tapping into its comparative advantages, analyzing – and removing – hindrances to foreign investment are all proven methods for facilitating private sector-led growth.”
At the seminar, the discussion centered on the opportunities that exist for Swaziland to build on its latent sources of comparative advantage, making it attractive as a investment destination of choice. These include:
- Education: Swaziland’s labor force is English-speaking, well-educated with a literacy rate of 82 percent. Seven percent of its workers have average education levels of more than 12 years of schooling, compared to 5 percent in Mauritius and Namibia;
- Labor costs: Swazi wages are lower than those in South Africa, and close to other middle-income countries in the neighborhood;
- Labor relations: despite an uptick in strikes, labor relations are stable and better compared to neighboring South Africa;
- Sound infrastructure: Above average infrastructure, and well-developed road links with South Africa, easy access to the Durban port are all major plus points favoring Swaziland
- Supportive business environment: Access to finance in Swaziland is on par with SouthAfrica and other backbone business services are generally of a high standard.
- Swaziland is part of a rich market in SACU
- Swaziland has a degree of economic sophistication and diversification that can connect to the South African economy.
The primary purpose of the meeting was to present, share and discuss early results of the latest analytical work conducted by the World Bank with a view to informing policy-making. A policy note covering the main topics of the seminar will be finalized based on the inputs received and presented to Government of Swaziland. A summary of today’s meeting and presentations delivered will be available online on the World Bank Swaziland website, www.worldbank.org/swaziland
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