Why did the South African government feel compelled to bailout Swaziland at the tune of R2.4bn, and with such weak conditions attached to the loan? In his unconvincing justification for this extravagance, the Minister of Finance Pravin Ghordan argued that, “It is not in our interest to leave an economy in trouble that could place a burden on the South African government”. How does Swaziland become a burden of South Africa when it claims to be a sovereign state, and not one of its provinces? South Africa’s messianic approach towards Swaziland is at the expense of its own tax payers and the welfare of its own citizens. It is a strategic blunder the country may come to regret in future.
The majority of South Africans who are poor do not even dream of the opulent lifestyle the Swazi King Mswati III bathes in; and their level of comfort is nowhere closer to that enjoyed by Swazi civil servants who, for the past three years, have been getting increase in their salaries. Thanks to the South African government they will continue to live in comfort while South Africa’s own poor stares a bleak future as levels of unemployment mount.
There is no guarantee that the money South Africa has loaned to Swaziland will be used prudently to stabilise that country’s public finances. Swaziland has for the most part been heavily dependent on the revenue transfers from the Southern African Customs Union (SACU), which is effectively money that belongs to South Africa and is transferred to SACU countries under the guise of ‘’revenue-sharing”.
The Swazi government relies on fiscal transfers from the National Treasury for over 60 percent of its budget annually, and most of this goes towards paying that country’s civil servants. It is bizarrely from these transfers that Swaziland will, supposedly, be repaying its loan to South Africa. Essentially, Swaziland is not expected to repay the loan; South Africa will be repaying itself from its own coffers in the form of the annual revenue transfers that it gives to Swaziland and other SACU members. No wonder the International Monetary Fund and the African Development Bank refused to fall for this scam, and left it to South Africa to play the fool.
There is no doubt that Swaziland will struggle to stabilise its finances even after the succour from South Africa. It is possible that South Africa may soon be requested again to extend the loan amount and simply increase what it withholds from its annual aid (SACU revenue transfers) to that country.
Given the magnitude of the problem, as Gordhan dramatizes it, surely South African citizens should have a say on how their public finances are utilised across the border, especially in financing a country that is known for terrorising its citizens? That the South African parliament has not even had an opportunity to debate this financing arrangement and provide guidance on it is a grotesque insult to South Africa’s democracy.
How does South Africa justify such misguided moral obligation when the majority of its own citizens are languishing in poverty, and with high levels of unemployment? Gordhan may well have been moved by the self-inflicted injuries of the Swazi government in his pious remarks, however these unjustified transfers communicate a sense of indifference to South Africa’s own mounting socio-economic challenges and the vulnerabilities that workers are exposed to as they face increase lay-offs and with no social adjustment measures in place. Poverty too is on the rise.
South Africa is not the only party that Swaziland has approached with a begging bowl. The European Union, the African Development Bank and the World Bank are some of the institutions that it solicited financial and technical support from. They all turned it down for legitimate reasons. Significantly, the IMF refused to extend credit to Swaziland because of its blatant irresponsibility in handling its budgetary processes.
The Swazi government refused to implement comprehensive fiscal reforms required by the IMF because it feared that these would trigger widespread revolts. More chilling, according to the 2010 IMF Article IV assessment of Swaziland, the Swazi government adopted a supplementary budget despite the parlous state of public finances, in order to increase ‘non-priority’ spending. This is a creative use of words by the IMF to refer to budget increases to finance the already bulky and highly costly royal household.
By some accounts this increase has set the bill for the household at R503 million, which includes R158 million for the recurrent budget for the Swazi National Treasury under the King’s office; an amount of R125million usual allocation for state houses; and R50 million to pave roads to the royal residences. Yet in the midst of this opulence, the ordinary Swazi’s are starving, and the South African government happily throws a life-line to a regime that suffers a serious credibility crisis.
In one part of the 2010 Article IV Report on Swaziland, the IMF sounds an alarm: ‘The Swaziland economy is at a crossroad’. Strangely, South Africa decides to act as a lender of last resort, thereby rescuing unaccountable elite in Swaziland and emboldening it against social groups that have been advocating for progressive change. More surprising, the South African government imposes very weak or no conditionalities at all. And this is despite persistent protestations by trade unions and other civil society movements in South Africa that such a bailout is morally reprehensible. Essentially, South Africa has helped to postpone the radical political changes that are required to take place and that will guarantee Swaziland’s long-term sustainability.
The conditions that South Africa has set for Swaziland are too weak to ensure meaningful economic reforms in that country. These conditions are framed in terms of four vacuous pillars: confidence building measures by the Swazi government; adherence to fiscal and related technical reforms requested by the IMF; capacity building support by the South African government; and cooperation in multilateral agreements. It is baffling why Ghordan decided to stake his credibility on a patently shoddy deal.
First, the confidence building measures highlighted in the agreement are to be based on existing bilateral relations between South Africa and Swaziland. They do not confer new obligations on Swaziland. This suggests that the problems that Swaziland suffers currently could have been addressed a long time ago through the joint bilateral mechanism that the two countries participate in. This is an ineffective mechanism that is unlikely to yield any progress. If it did not help in the past why would it create a magic now?
Second, South Africa does not have a unique set of conditions of its own apart from those already communicated by the IMF, the African Development Bank, and the World Bank to the Swazi authorities. Already Swaziland has failed to adhere to most of these conditions, hence it is failing to stabilise its public finances. South Africa should have ratcheted up these conditions, and included strong governance indicators as part of negotiating a loan deal.
Third, the pillar of capacity building at this stage will not help Swaziland to stabilise. This can only yield fruit in the long-term, and only if Swazis are forced to cooperate and take the necessary measures to trim the fat in the royal household and public service. Capacity building could have been administered a long time ago, and without a need for the loan.
If South Africa’s policymakers who are working on SACU issues were prescient enough, and if the South African President Jacob Zuma had the necessary guts, South Africa would have pushed strongly for the revamp of the SACU revenue mechanism into a more transparent and truly developmental fund. This would be then be complemented with capacity building efforts. Some of these problems could have been foreseen and acted upon early on if there was courage on the part of South African government.
Finally, cooperating on multilateral agreements is meaningless and will not deliver any concrete benefits in the immediate. In any case even if South Africa did not give it a credit line Swaziland was forced to cooperate on such agreement as it is in its interests to stabilise its public finances and avert a cauldron of social discontent. This cooperation agreement is unlikely to help get Swaziland to swallow the bitter pill, especially if South Africa does not tighten conditions to its loan. In other words, South Africa has no stick to sheppard Swaziland in the right direction.
What can be concluded from this farcical deal is that the South African government is wasting its taxpayers’ on an adventure that will not yield results. Swaziland has gotten its money for free as South Africa will repay it for them out of its annual aid transfers to that country. Further, the South African government has shown disdain for its own citizens and indifference to its population who daily countenance the chilly winds of poverty. This is as important an issue to be driven through backroom manoeuvring. Decency demands that government shows confidence to the public and the country’s democratic processes by allowing for debate of this issue.
Dr Mzukisi Qobo is Senior Lecturer in the Department of Political Sciences, University of Pretoria, and a member of the Midrand Group. A version of this article was published in the Sunday Independent, 7 August 2011.