The following is a media release issued today (26 January 2011) from the Swaziland Solidarity Network (SSN). It criticises the Swazi Royal Family for using jobs in the kingdom’s civil service as a way of rewarding supporters. As the International Monetary Fund seeks 7,000 job losses among civil servants, SSN shanes those who are on the government payroll, courtesy of King Mswati III, sub-Saharan Africa’s last absolute monarch, but who do no work.
The IMF’s Recommends A Less Effective Civil Service as Mswati's Cronies Take Enemas at Tax Payers' Expense.
SSN PRESS RELEASE –
26th January, 2011
According to the latest Public Information Notice (PIN) released by the International Monetary Fund (IMF) on the 24th of January 2010,the kingdom of Swaziland has the second largest wage bill in sub-Saharan Africa after Lesotho. The country’s finance minister once reported that with this wage bill makes up 54% of the country’s overall budget.
Despite the fact that the IMF has recommended the reduction of this wage bill by taking drastic measures such as not hiring any new civil servants, implementing early retirement exit schemes and things continuing its privatization policy among other things, the government has stalled on implementing this recommendation out of fear that it will spark social upheaval.
What it has since done, however, is to claim to have cut overtime wages, freeze the hiring of civil servants and reduce ghost workers, the latter being a serious problem in the country’s civil service. The wage bill is artificially inflated by the fact that some unscrupulous civil servants draw salaries of nonexistent workers. This is one of the many fruits of the royal blanket covering corruption.
Due to the Royal family’s extended patronage systems many other registered civil servants draw salaries that they never work for. This is most prevalent in the armed forces, particularly in the defence force, which has gone to the extent of hiring the king’s two sons despite the fact that they are rarely ever in the country and do no soldier work.
The king’s brother in law, Sibusiso Mngomezulu is another well connected individual who draws a high salary in the country’s defence force despite the fact he has a job as a financial director at Chancellor House, the ANC’s private investment firm that recently bought a coal mine in Swaziland. All this rot is happening while both countries are struggling to create quality jobs for its citizens.
A large number of civil servants in less senior positions are also guilty of this grossly unprofessional behaviour. Many of them during this time of the year are found relaxing at the country’s natural hot spring in Lobamba bathing and taking enemas during working hours having told their superiors that they are on official royal duty.
As the financial crisis deepens in the kingdom these are the issues which should be dealt with immediately before any hard working and vastly experienced civil servants are pressured into taking early retirement schemes, a move that will render the civil service less effective than it currently is and in the end add to the country’s economic woes.
Issued by the Swaziland Solidarity Network [SSN] South Africa Chapter.
The Swaziland Government made the economic crisis in the kingdom worse by agreeing a supplementary budget in November 2010, according to an International Monetary Fund (IMF) report published yesterday (13 January 2011).
And the Government’s decision to increase spending on ‘non-priority’ areas means it must impose even harsher measures on the Swazi people than those already announced.The IMF wants more government services to be privatised and a squeeze on wages in the kingdom, where seven in ten of the population already earn less than one US dollar a day.
The IMF blamed the Swazi Government for helping to create the economic crisis in the first place. It said the Ministry of Finance, headed by Majozie Sithole, the Finance Minister in Swaziland for the past ten years, was not able to cope with the crisis and needed more help to build up its capacity.
Top of the reasons for the economic crisis is what the IMF calls ‘a high government service wage bill’, which has ‘contributed to making the Swaziland wage bill one of the largest in Sub-Saharan Africa’.
The economy generally in the kingdom ruled by King Mswati III, sub-Saharan Africa’s last absolute monarch, ‘continues to underperform other Southern African Customs Union (SACU) members, reflecting an overvalued exchange rate, continued structural impediments to growth, and the heavy toll of HIV/AIDS on economic activity’.
This lack of good management coupled with a reduction in cash receipts from SACU has led to the crisis, the IMF said.
‘The government also added to fiscal pressures by submitting a supplementary budget to parliament in November 2010 to clear capital expenditure arrears. The deficit has been financed through a drawdown of government deposits at the central bank and domestic arrears on all expenditure items, except wages and utilities,’ the IMF said.
IMF Directors said there would have to be ‘additional measures in the 2011/12 budget to compensate for recent increases in non-priority [Government] spending’. Although it did not mention the Sikhuphe Airport project by name, it must have had in mind the government’s decision in December 2010 to to spend another E350 million (about US$50 million) on King Mswati’s vanity project.
The government’s so-called Fiscal Adjustment Roadmap (FAR), put forward by Barnabas Dlamini, Swaziland’s illegally-appointed Prime Minister, and Sithole, the Finance Minister, will not be enough to rescue the economy, the IMF said.
It welcomed the FAR, which includes raising taxes from the poorest people in Swaziland, sacking 7,000 public servants and introducing Value Added Tax (VAT) on goods and services, ‘but emphasized the need for more ambitious and sustained efforts to revitalize Swaziland’s economic performance’.
The IMF welcomed the Government’s ‘intention to reduce the budget deficit to 2 percent of GDP by 2014/15. However, they considered that achieving this target requires bolder fiscal adjustment and budgetary reforms than envisaged in the current plan’.
It said, ‘additional technical assistance is also necessary to build up implementation capacity, particularly at the Ministry of Finance.’
The IMF said the Government should ‘mobilize additional domestic financing’. Although it did not spell out the consequences of this, it could mean new taxes, higher existing taxes and getting more from other forms of government revenue. It could also mean more government borrowing, but in a kingdom of one million people, where seven in ten are in abject poverty, there isn’t much money to borrow.
IMF Directors also ‘called for stepped up efforts to improve the business environment, including by reviving the government’s privatization program, reducing the cost of doing business, and keeping labor costs in line with those in the region’.
The International Monetary Fund (IMF) report came at the end of a visit it made to Swaziland, which ended on 10 January 2011. To read the full report, click here.
Swaziland, the kingdom that has been mismanagedby its ruler King Mswati III,sub-Saharan Africa’s last absolute monarch, and the governments he appoints, for years, faces one of the worst economic crises among nations in Southern Africa, a report just publishedby the International Monetary Fund (IMF) reveals.
And, Swaziland will probably never again return to the level of income it once enjoyed from the South African Customs Union (SACU).
The IMF-published report concludes that Swaziland must cut public expenditureseverely; especially its wage bills, and not let it rise to previous levels in the foreseeable future.
At the same time, the kingdom must increase its revenues (especially from taxes) to get out of the economic mess.
And on top of this, Swaziland will have to pay back money to the SACU that it received in the past. This is because from 2004 to 2007 the money collected by SACU was much higher than expected and ‘windfall’ payments were made to countries in the union, including Swaziland.
Swaziland considered this ‘windfall’ to be ‘a permanent increase and was thus used mostly to finance recurrent expenditures, including civil service wage increases,’ the report states.
But the report also states, ‘this boom turned out to be unsustainable’ and since 2008 revenues (especially customs duty collections) have been lower than expected, so that Swaziland will have to make repayments to the SACU (because of an agreement it made with the SACU in 2002). This means that until 2013 Swaziland will receive even less from the SACU than it expected, until the debt is repaid.
The report states that there will probably be a gradual improvement in Southern African economies from 2012, but in Swaziland it will take longer because of the relatively larger amount of money it owes SACU, compared to other countries.
The report points out that in other SACU countries, including Namibia and Botswana, some of the ‘windfall’ revenues were used to stimulate the economy (for example by building infrastructure and social programmes) whereas, ‘Most of the expenditure increases in Swaziland went into wage increases to civil servants.’
The report states that unless ‘substantial’ financial measures are taken immediately, in Swaziland, the debt-to-Gross Domestic Product (GDP) ratio, at 13.3 percent in 2009, is predicted to increase more than six-fold to 75.1 percent by 2015. As a comparison, the debt-GDP ratio of Namibia is calculated at 29 percent.
If financial measures are taken the prediction is that Swaziland’s debt-GDP ratio in 2015 will still be massive at 38.9 percent, nearly three times the 2009 level, but, according to the report, ‘manageable’.
To get out of the economic mess, the report concludes that Swaziland should introduce Value Added Tax (VAT) on goods and services, increase taxesand stamp duties and improve tax administration.
It also recommends Swaziland implements ‘well-planned permanent expenditure cuts,’ and ‘in particular, a comprehensive civil service reform to reduce the sizable wage bill seems a priority’. It also wants cuts in ‘non priority current spending’.
To read the report, In the Wake of the Global Economic Crisis: Adjusting to Lower Revenue of the Southern African Customs Union in Botswana, Lesotho, Namibia, and Swaziland, click here.
The Swaziland Government’s decision to increase public service salaries this year (2010) means its wage bill is likely to be the highest in sub-Saharan Africa. And that is a major reason why it has been unable to pay its bills and has gone running to the International Monetary Fund (IMF).
The government wanted to run a ‘budget deficit’ – that is spend more money than it had coming in from taxes and revenues from the Southern Africa Customs Union (SACU)
The government which has mismanaged the Swazi economy for years – long before the international banking crisis hit in 2008 – wanted to get a loan of E500 million (roughly US$50 million) from the African Development Bank to help pay for this deficit, but got turned down.
And that is the background to the economic meltdown that is facing Swaziland today.
Despite much of the coverage of the crisis in the Swazi media, it is difficult to get straightforward, unbiased, information about exactly what the deal was that the IMF and the Swaziland Government struck in October 2010 – there is surprisingly little in the public domain.
However, the IMF has released some background information about what is going on. The IMF is seeking to appoint two research assistants to help it monitor the Swaziland budget from January 2011. A document outlining the ‘terms of reference’ for the posts gives the background to the request the Swazi Government made to the IMF and how the IMF responded.
Much of the contents of this document was news to me (and may be to you too), so I am reproducing an extended extract of the document here.
The Kingdom of Swaziland is experiencing a fiscal crisis which is having serious financial, economic and social repercussions and needs to be addressed immediately. In March 2010, Government approved a deficit of 13 percent for the current financial year. This was based on the following financing plan; E1.5 billion would be sourced through a drawdown in the country’s foreign exchange reserves; another E1.5 billion sourced from the local market through Treasury Bills and Government Bonds and the remainder sourced as a budget support loan from the African Development Bank (AfDB). During the course of the year, the proposed plan did not materialize due to the fact that Budget Support Loan from the AfDB could not be approved pending Letter of Comfort from IMF and the finalization of the Bill increasing the domestic borrowing limit.
Due to the adjustment of the wage bill in the course of the year, the overall deficit for 2010/2011 financial year is expected to reach 16 percent of GDP in the absence of any remedial measures. This reflects an 11 percent of GDP decline in SACU transfers and the government’s decision to increase salaries this year. The wage bill for the current year is expected to reach close to 18 percent of GDP, the highest in Sub-Saharan Africa.
On realizing that the 2010/11 budget will not be sustainable, the Ministry of Finance approached the IMF and the World Bank to provide technical assistance to augment the financial assistance from the AfDB.
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The Swaziland Government and the IMF entered into agreement for an IMF Staff Monitored Programme (SMP), which is an arrangement that does not require IMF resources but only monitors the implementation of economic policies and provides advice for a period of six months.
[There were discussions between the IMF and Swaziland Government in Washington DC, US, in October 2010. The IMF undertook to make a mission to Swaziland government to assess the fiscal situation and agree on the next steps.]
The IMF made specific recommendations as follows:
1.The government should increase domestic debt as an alternative source to external financing. The approval of the domestic debt ceiling from E1 billion to E1.5 billion by Parliament will enable the government to issue debt to cover most of its financing needs, which is currently estimated at about E3 billion, until the end of the financial year.
2.On the revenue side, government should increase certain taxes which could bring additional revenue to the budget. These include: a) the fuel levy to bring it at par with South Africa; b) the tax on gambling from 4.5 percent to 15 percent; and c) the excise taxes on alcohol and tobacco. These measures once implemented will raise up to E40 million for the remainder of the fiscal year, and another E100 million can be realized in the next budget round.
3.On the expenditure side, all new government commitments should be suspended for the remainder of the current fiscal year. The Education and Health sector is exempted due to the government commitment to improve service delivery in the social sectors. The government would also suspend the capital projects that have not been started to date and purchase of new goods and services. Government will further slow down the implementation of existing capital projects in line with available financing.
4.Further recommendations on the expenditure controls include the immediate reduction of the wage bill. This could only be achieved by the implementation of the following measures; a) the government should freeze wage increases and hiring of new staff for the next three years and b) the immediate implementation of the voluntary retrenchment of 7,000 civil servants under the Enhanced Voluntary Early Retirement Scheme (EVERS). When these measures are undertaken as proposed, this measure will protect the government from the mandatory retrenchment of civil servants which can bring severe implications on the country which has the majority (67 percent) of its population living under the poverty line.
In view of the above, government is committed to the implementation of the fiscal adjustment program with the assistance of the IMF through an IMF Staff-Monitored Program. The Staff-Monitored Program will allow other donors to disburse budget support and would establish a track record for possible financial support from the IMF in the future.
[The IMF will monitor the budget outturn on a quarterly basis, monetary targets and the reforms that will be undertaken during October 2010 to March 2011.]
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The program will be reviewed in February and May 2011and if successfully implemented, the IMF will recommend the government’s request for a formal IMF arrangement in the second half of 2011, which will include financial assistance.
