Swaziland's decade-long economic malaise took a sharp downward turn with the central bank's disclosure this week that growth had slowed to its lowest level in 40 years.
The Central Bank of Swaziland's governor, Martin Dlamini, said in a candid admission, "This year's unimpressive economic growth implies a deterioration of the standard of living as measured by per capita income," in the bank's annual report to the government, covering the period March 2005 to February 2006.
Swaziland, ruled by sub-Sahara's last absolute monarch, saw growth slow to 1.8 percent from the previous year's 2.1 percent, while the population increased by 2.9 percent. The bank estimated that annual economic growth of 3.5 percent was required to have any real impact on the low living standards of its roughly 1 million people, of which about two-thirds live on US$2 or less a day, according to the United Nations Development Programme. UNAIDS has put HIV/AIDS prevalence at 33 percent among sexually active adults, the highest in the world.
"The downward trend in economic performance is a reflection of the low growth rate in foreign direct investment, weaker performance of the manufacturing sector and low agricultural productivity," said the report.
Declining agricultural productivity, felt most acutely on communal Swazi Nation Land, where 80 percent of the population lives in chronic poverty on small farms under palace-appointed chiefs, was compounded by drought. The bank warned of serious food shortages, particularly maize, the staple food.
Government policies encouraging subsistence farmers to pursue commercially orientated farming practices to alleviate poverty have met with limited success in diversifying crops, but not in production results. The cultivation of more drought-resistant crops saw an increase in land devoted to cotton production from 2,795ha last year to 2,861ha this year, but cotton production fell by 1.3 percent.
Sugar, Swaziland's main export, performed slightly better, though this was at the expense of citrus, another principal agricultural export, after several citrus estates switched to sugar cultivation. Growth in the mining sector was impeded by government reluctance to issue new leases, which saw earnings drop by 36 percent, the bank said.
The closure of major companies and lower foreign direct investment in the manufacturing sector, most notably in the labour-intensive textile industry, contributed to a slowdown in manufacturing growth. The days when Asian-owned garment and textile businesses thrived in Swaziland under the US-sponsored African Growth and Opportunities Act trade scheme, creating tens of thousands of jobs, have become a distant memory.
Describing foreign direct investment as a crucial ingredient of economic growth, the central bank reported an annual decline in investment from an average of 4.7 percent between 1994 and 2002 to 2.5 percent in 2006.
"Although there have been no large disinvestments from Swaziland, some clothing and textile firms have closed down during the first six months of 2006, and job losses in the textile sector are estimated to be high. The sugar industry is also expected to shed a significant number of jobs during the course of 2006."
Efforts by government to encourage Swazis to replace lost formal-sector jobs with entrepreneurial activities are seen as a non-starter. "The unavailability of finance for this sector remains a prohibiting factor to a majority of indigenous Swazis to engage in self-employment activities," the report pointed out.
Swaziland's AIDS crisis continues to have a severe economic impact, with HIV-positive women attending ante-natal clinics increasing from 39 percent in 2002 to 43 percent in the period under review, while the growing number of HIV/AIDS orphans was putting a high burden on the elderly.
"The HIV/AIDS pandemic has continued to pose a major threat to economic growth, and has had a severe impact on poverty levels, which have been escalating over the years," the bank commented.
The economic malaise was worse for the poor, who were experiencing price inflation of 5.4 percent, compared to 4.7 percent for the middle classes. The Swazi currency's link to the strong South African rand was benefiting more financially secure people, because imported luxury cars and consumer goods could be purchased at reduced prices, although the stronger currency was seen as deterring international tourists.
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The Central Bank of Swaziland's governor, Martin Dlamini, said in a candid admission, "This year's unimpressive economic growth implies a deterioration of the standard of living as measured by per capita income," in the bank's annual report to the government, covering the period March 2005 to February 2006.
Swaziland, ruled by sub-Sahara's last absolute monarch, saw growth slow to 1.8 percent from the previous year's 2.1 percent, while the population increased by 2.9 percent. The bank estimated that annual economic growth of 3.5 percent was required to have any real impact on the low living standards of its roughly 1 million people, of which about two-thirds live on US$2 or less a day, according to the United Nations Development Programme. UNAIDS has put HIV/AIDS prevalence at 33 percent among sexually active adults, the highest in the world.
"The downward trend in economic performance is a reflection of the low growth rate in foreign direct investment, weaker performance of the manufacturing sector and low agricultural productivity," said the report.
Declining agricultural productivity, felt most acutely on communal Swazi Nation Land, where 80 percent of the population lives in chronic poverty on small farms under palace-appointed chiefs, was compounded by drought. The bank warned of serious food shortages, particularly maize, the staple food.
Government policies encouraging subsistence farmers to pursue commercially orientated farming practices to alleviate poverty have met with limited success in diversifying crops, but not in production results. The cultivation of more drought-resistant crops saw an increase in land devoted to cotton production from 2,795ha last year to 2,861ha this year, but cotton production fell by 1.3 percent.
Sugar, Swaziland's main export, performed slightly better, though this was at the expense of citrus, another principal agricultural export, after several citrus estates switched to sugar cultivation. Growth in the mining sector was impeded by government reluctance to issue new leases, which saw earnings drop by 36 percent, the bank said.
The closure of major companies and lower foreign direct investment in the manufacturing sector, most notably in the labour-intensive textile industry, contributed to a slowdown in manufacturing growth. The days when Asian-owned garment and textile businesses thrived in Swaziland under the US-sponsored African Growth and Opportunities Act trade scheme, creating tens of thousands of jobs, have become a distant memory.
Describing foreign direct investment as a crucial ingredient of economic growth, the central bank reported an annual decline in investment from an average of 4.7 percent between 1994 and 2002 to 2.5 percent in 2006.
"Although there have been no large disinvestments from Swaziland, some clothing and textile firms have closed down during the first six months of 2006, and job losses in the textile sector are estimated to be high. The sugar industry is also expected to shed a significant number of jobs during the course of 2006."
Efforts by government to encourage Swazis to replace lost formal-sector jobs with entrepreneurial activities are seen as a non-starter. "The unavailability of finance for this sector remains a prohibiting factor to a majority of indigenous Swazis to engage in self-employment activities," the report pointed out.
Swaziland's AIDS crisis continues to have a severe economic impact, with HIV-positive women attending ante-natal clinics increasing from 39 percent in 2002 to 43 percent in the period under review, while the growing number of HIV/AIDS orphans was putting a high burden on the elderly.
"The HIV/AIDS pandemic has continued to pose a major threat to economic growth, and has had a severe impact on poverty levels, which have been escalating over the years," the bank commented.
The economic malaise was worse for the poor, who were experiencing price inflation of 5.4 percent, compared to 4.7 percent for the middle classes. The Swazi currency's link to the strong South African rand was benefiting more financially secure people, because imported luxury cars and consumer goods could be purchased at reduced prices, although the stronger currency was seen as deterring international tourists.
jh/go/he/oa
This article was produced by IRIN News while it was part of the United Nations Office for the Coordination of Humanitarian Affairs. Please send queries on copyright or liability to the UN. For more information: https://shop.un.org/rights-permissions
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