High Energy Prices To Increase Poverty in Eswatini-AfDB

By Avite Mbabazi

The Africa’s Macroeconomics Performance and Outlook 2023 notes that insufficient energy subsidies and lack of targeted cash transfers directly expose Emaswati to global energy price volatility.

Moreover, the publication warns that the main downward risks to the outlook on the continent in 2023 include political risks due to upcoming national elections in some African nations, losses and damages due to extreme weather events as well as dependence on commodity exports with limited value addition.

The Africa’s Macroeconomics Performance and Outlook by the African Development Bank (AfDB) Group is a publication which offers policymakers, global investors, researchers, and other development partners an up-to-date evidence-based assessment of the continent’s recent macroeconomic performance and short-to-medium-term outlook amid dynamic global economic developments.

According to the AfDB, between 2017 and 2019 Eswatini was highly dependent on imported cereals such as wheat, rice and maize. Eswatini’s cereal dependency ratio soared above the continent’s average of 29.6% standing at above 60%. Eswatini and the whole continent remain net importers of cereals with Zambia the only exception to the rule.

Meanwhile, when it comes to energy, Eswatini is part of the 40 African countries out of 53 on the continent whose consumers and producers receive little to no energy subsidy which according to the AfDB means that Emaswati are directly exposed to global energy price volatility that could lead to higher poverty in the country. The annual fossil fuel subsidy per capita in 2020 average was E386 (about 22.67 US Dollars) on the continent.

The Bank does however reveal that the cost of a subsidy policy is very high. “The estimated annual costs of such policy range from a median of E375 million per country under the 5% (subsidy) scenario to E1.5 Billion for the 20% scenario” the publication reveals.

Additionally, since 2010, the AfDB notes that several sectors of the continent’s economy have been affected by power cuts. Locally, average annual sales losses due to electricity outage have been just above 6% which is below the continent’s average of 7.6% but still puts the country in the top 20 countries on the continent whose sectors particularly businesses suffer losses because of power outages.

“Intermittent power losses force businesses to incur additional costs to procure backup diesel generators and purchase fuel resulting in losses in sales, productivity, and competitiveness” notes the AfDB.

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