The Minister of Finance, Neal Rijkenberg, has cautioned that the tariffs imposed by the United States of America (USA) on neighboring countries could indirectly affect Eswatini’s economy, due to the Eswatini Lilangeni being pegged to the South African Rand.
The Minister made these remarks during the recent Finance and Focus series.
“As a country, we find ourselves very fortunate that our trade balance between Eswatini and the USA is at about E2 billion. Meaning we have been importing more from the USA than what we’ve been exporting to the USA. This means that when the USA did their tariff calculations, they found that Eswatini was in the positive, and tariffs on us are not necessary because we buy more from them than what we sell to them. However, the kingdom’s economy is fluid, meaning that tariffs imposed on other countries in the region will indirectly affect the kingdom,” he said.
Worth noting is that tariffs imposed on South Africa by the USA stand at 30%, while for Botswana it is 37%, Lesotho 50%, Mozambique 16%, and Namibia 21%.
Rijkenberg emphasized that the kingdom’s economy is interconnected with its neighbors. Therefore, tariffs imposed on these countries that have a negative trade balance with the USA in the Southern African region will have a ripple effect on Eswatini, and many of the kingdom’s neighbors are in a negative position, placing the kingdom at risk.
Rijkenberg identified specific sectors that may feel the pressure, including textiles. He noted that while Eswatini’s sugar and arts and crafts exports are expected to remain stable, the textile sector could be vulnerable.
“Regarding specific sectors, sugar exports are unlikely to be affected, and discussions with the sugar association are ongoing. However, the textile industry seems like it will be affected, as we do have textile exports to the USA. It is important to remember that textile exports to the USA had a much higher volume before, but when we lost participation in the African Growth and Opportunity Act (AGOA) which ensures continued duty-free access to the U.S. market for eligible products, the textile industry experienced economic and significant job losses,” he said.
Despite the challenges, Rijkenberg highlighted potential opportunities to attract investors to establish supply bases for the U.S. in Eswatini. Additionally, sectors such as crafts and artisanal goods continue to perform well, supported by established supply chains, and these sectors will not be affected by the proposed tariffs.
The Minister concluded by stating that Eswatini’s economy is closely linked with South Africa’s. Any significant economic downturn in South Africa can have a ripple effect on Eswatini due to their intertwined economies and the currency’s link to the South African Rand.
“Government is continuously analyzing the situation to determine the best course of action, aiming to make informed decisions that benefit the nation while remaining vigilant,” he concluded.