ESEPARC notes that the non-banking sector is growing faster than the banking sector in the country, which could present a financial risk if it is not regulated holistically.
By Ntokozo Nkambule
The Eswatini Economic Policy Analysis and Research Centre (ESERPARC) says the non-banking sector is growing faster than the banking sector in the country.
This is contained in the State Owned Enterprises Framework in Eswatini 2021 prepared by ESEPARC for the Ministry of Finance. ESEPARC says this could present a financial risk if it is not regulated holistically. The framework observes that the operations of the non-bank sector should be enshrined in regulations under the Central Bank of Eswatini (CBE).
“The Central Bank of Eswatini (CBE) is responsible for overall financial stability and so the operations of the non-bank sector need to be enshrined in the financial stability regulations under the CBE. Like the other regulators charging levies on the economy, the growth in Financial Services Regulatory Authority (FSRA) income is primarily driven by the growth in collections made through levies from various industries regulated by the FSRA.
Generally, for all regulators, there is a need to rationalize the number of levies charged against the value created by the regulation and to ensure that levies are by and large used to develop the sector they are levied on”
Meanwhile, in terms of key findings in the energy sector, the framework observes that Eswatini’s heavy dependence on energy (fuel and electricity) imports from South Africa make it difficult to regulate energy tariffs in the country. “In fact, fuel and electricity tariffs in Eswatini are influenced by decisions made in South Africa. This curtails the function of relevant regulatory SOEs such as the Eswatini Energy Regulatory Authority (ESERA). Relying on South Africa threatens the country’s secure energy supply and its reliability and quality and heightens the risk of increasing inflation”
The framework further asserts that the energy sector is challenging to regulate as it is considered a key driver in the socio-economic growth and development of the country, hence the need to ensure that any regulations take cognizance of the existing realities and are not seen to stifle this strategic sector.