Budget Speech Analysis by Business Eswatini

By Business Eswatini

First and foremost, we would like to congratulate the Minister of Finance for delivering his sixth installment of the national budget speech today. His illustrious experience in the Ministry of Finance stood him in good stead in crafting a national budget that would advance the developmental aspirations of the nation.

Whilst Business Eswatini is yet to fully scrutinize the budget in the next coming days, we do, however, have our first impressions after seeing as we did the Minister deliver his speech yesterday morning. The Minister seemed rather upbeat this time around and stopped short of being idealistic; most probably emboldened by the positive economic projections for this year and the next. The 4.9% GDP growth projections for 2024/25 is not a figure to be sneezed at primarily because, if attained, it will positively alter the national fiscus ratios in the right direction, including the country’s debt to GDP which currently stands at 39% as well as well as our fiscal or budget deficit which is estimated to be E1.84 billion or 1.96% of GDP. If that is achieved it will create scope for government to maneuver through what seems like tight national cash flows. 

However, the Minister made sure he was unmistakably restrained in his posture ostensibly in recognition of the fact that unforeseen exogenous factors and economic headwinds could easily disrupt his buoyant projections for this budget cycle. His general posture though was clearly a far cry from the previous budget speech when the country was still reeling from the fresh wounds of the social unrest and the deleterious impact of the pandemic.  Business Eswatini will for now sum up the speech in a few salient words and say:

  • Sensible and unpretentious;
  • Cautiously optimistic budget with some modicum of foreboding due to unknown future events which could undermine the basis for the Minister’s projections.
  • Restrained and practical to a large degree: The Minister, thankfully, did not yield to the temptation of going gung-ho on new taxes – great move on his part.
  • Strong foundation: The Minister is starting off from a particularly stronger foundation this year than before. The fiscal deficit has come down to 1.8% of GDP from 4.8% which suggests that the Minister has been relentless in applying fiscal prudence throughout the year last year. Kudos to the Ministry for this achievement.

That being said, we further took note of the following points which are crucial to the business community:

  • Liabilities to suppliers: The Minister admitted that some E740 million is still owed to suppliers and these creditors are mainly Business Eswatini members. We are pleased that the Minister hopes to address this matter expeditiously, and Business Eswatini stands ready to provide any assistance the Minister may need in this regard. The scope of the debt book in the hands of the private sector is worrisome and will most definitely undermine economic growth if left unaddressed by way of settlement. This matter is particularly urgent in light of the recently introduced Market Price Reference Catalogue with ESPPRA which may erroneously presuppose that the Government settles its debts within 30 or 60 days which effectively negates the need by suppliers to front-load the quoted price-per-item to factor in the real prospects of delayed payment by Government.
  • Energy: the Minister committed to clean energy initiatives in keeping with the country’s Nationally Determined Contributions (NDCs) promised to COP28 regarding the reduction of greenhouse gases. Business Eswatini along with its allied partners have become prominent proponents of green power in the country and our members have projects already under assessment as part of their contribution to this national objective. The Minister mentioned various energy projects ranging from new hydro projects in Maguga Dam and Lower Maguduza including a major solar project for a 75MW plant. Our rough-and-ready calculations suggest that even if all these projects come on stream in 2024, the country will have an installed capacity of around 200MW which still leaves a gaping energy deficit of around 60MW. The private sector stands ready to fill this void.
  • Mining: mining holds great prospects for the country but somehow, and for some unbeknownst reasons, investors come here and make big promises and then we hear that they have changed their minds. The government needs to make an analysis of this behavior which should tell them why investors find our offering either unprofitable or less attractive than elsewhere. Perhaps studying the viability of the existing revenue-sharing model may be a good place to start. We are endowed with rich mineral resources but somehow, we seem to have failed to effectively leverage these resources for the economic and social development of our country. The money we need to move this country forward is sitting quietly underground.
  • Current account: the country has enjoyed a current account surplus of some E3.3 billion or 4% of GDP in 2023 which indicates the sheer vibrancy of our manufacturing sector. A trade surplus bodes well for our national forex reserves which are increasingly under pressure especially in recent months. We are seeing figures of less than 3 months of import cover more frequently than not despite the injection of SACU receipts.  Furthermore, the surplus is indicative of the good prospects for trade especially between our main trading partners which need to be enhanced going forward, especially through the National Trade Facilitation Committee (NTFC). It is however unclear whether or not the Minister provided a line item for the support of this great initiative.  If he has not, we feel it is not too late to rectify the oversight.
  • Ease of doing business: our rating in the world index has always been poor and we need to do much more to create a business-friendly environment for both foreign and local business projects. We recognize that the government has been making inroads into the situation but we feel more still needs to be done. We are excited that the Special Economic Zones Act is up for amendment and we hope this time that it will speak to the specific needs of investors. So far though, it has done little to change the complexion of our economy for the better, hence the urgent need for its overhaul.
  • Corruption: the Minister said: “We have real dragons to slay,” when referring to the pervasive scourge of corruption in the country. In this connection, we can only assure the Minister of the private sector’s support. Corruption is one of the leading causes of poverty and it must be strongly condemned wherever it is found. We wonder if the Minister is aware that there is a movie released in 1981 called The Dragon Slayer and it is a gory movie – go figure!
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