Business, Economics and Jobs

Why is South Africa bailing out Swaziland?


The government of Swaziland's King Mswati III is negotiating with South Africa for a $355 million financial bail out loan.


Paballo Thekiso

Why is South Africa bailing out Swaziland?

In terms of international bailouts, the $355 million loan to Swaziland is tiny. But there are huge questions over why President Jacob Zuma’s government is throwing an economic lifeline to the profligate, undemocratic regime of King Mswati III.

For years Swaziland has enjoyed a reputation as a picturesque tropical mountain kingdom, far removed from the tumult of African politics and the woes of the modern world economy. The landlocked country of 6,700 square miles — about the size of New Jersey — is wedged between South Africa and Mozambique.

King Mswati, Africa’s last absolute monarch and a playboy polygamist in power for 25 years, lives in luxury while more than 70 percent of Swaziland’s 1.2 million people live on $1.25 a day or less.

Mswati, 43, has 13 wives, each of whom has her own palace, and 27 children.

The king likes fancy cars. In 2005 he bought a $500,000 Mercedes Maybach limousine and new BMWs for each of his wives.

This all costs the Swaziland taxpayer. Although Mswati’s personal fortune is estimated by Forbes to be about $100 million, much of his annual expenditure comes from the Swazi budget. Swaziland’s Finance Minister, Majozi Sithole, boosted the royal household budget by $5.8 million for the 2011-12 financial year, taking it to $30 million out of the total budget of $1.2 billion.

Swaziland has the world’s highest HIV infection rate, estimated at 26 percent of the adult population. The financial crisis has caused the country to run low on supplies of antiretroviral drugs and other critical medicines, according to local reports.

The crisis has also caused the University of Swaziland to cancel classes.

Civil servants demonstated against proposed pay cuts. Swaziland has seen a series of demonstrations demanding reforms, including the ending of a ban on political parties. Mswati cracked down hard, using force to disperse the crowds and arresting scores of protesters.  

Swaziland’s GDP is $3 billion a year from agricultural and mining exports, as well as tourism earnings. Some 40 percent of Swaziland’s annual budget comes from the South African Customs Union, the agreement in which South Africa shares its customs duties with its small neighbors of Lesotho, Botswana and Namibia. In return their currencies are pegged to the South African rand.

The customs union was originally created by South Africa’s apartheid regime in order to buy the submission of its small but black-ruled neighbors. Apartheid has ended but the customs union lives on. Swaziland relies upon the customs union for 40 percent of its annual budget.

Swaziland blames its current financial crisis on the global economic downturn, which caused South Africa’s customs revenues to drop and Swaziland’s customs union income was reduced by 60 percent.

Yet King Mswati did not decrease his spending to adjust to the treasury’s reduced income. In fact he reportedly has insisted that Swaziland move ahead with the construction of a $200 million international airport.

Swaziland’s treasury must soon make a $145 million debt payment. Without the bailout, Swaziland risks running out of funds to pay civil servants, as well as for vital services such as hospitals. It had requested loans from the IMF and the African Development Bank, but was rejected.

But now South Africa has come to the rescue with its offer of a loan, although it is reportedly just 25 percent of what Swaziland requested.

The loan has been strongly criticized by South Africa’s opposition party, the Democratic Alliance, as well as key allies of the ruling African National Congress, such as the ANC’s own Youth League, the powerful South African Congress of Trade Unions and the South African Communist Party. They charge that the loan is propping up an undemocratic regime and they demand that Mswati must drop his ban on political parties and must allow basic freedoms.

South African Finance Minister Pravin Gordhan defended the loan saying that a bankrupt state on its borders would be bad for South Africa. He said Swaziland would have to implement financial reforms approved by the International Monetary Fund (IMF) to qualify for the loan.

Gordhan said he hoped King Mswati would "create space" for political dialogue, but added: "It's not our place to dictate to them."

The South African finance ministry issued a similar statement: “While the need for fiscal reforms is the primary objective, this has to be anchored by governance reforms,” said the finance ministry. It said it would encourage moves to promote “democracy, human rights and good governance, credible and effective leadership, development of a strong civil society and respect for universal human rights and the rule of law.”

The final negotiations for the loan are taking place this week in Pretoria, according to the Times of Swaziland, and so far it is known that the $355 million will come in three equal payments between August and February. There are reports that the Swazi delegation is balking at South Africa’s demands for sweeping democratic reforms.

King Mswati had earlier hailed the agreement from the Ludzidzini Royal Homestead, near the capital Mbabane. “We are thankful and also appreciate the assistance we have received from South Africa. This shows that they are good neighbors,” the king said, according to the Times of Swaziland.

But the monarch may find South Africa’s conditions more difficult to swallow than he expected.

Swazi opposition groups, however, remain adamantly critical of the loan.

"We have been sold out by the South African government," complains Mario Masuku, president of the People's United Democratic Movement (Pudemo), Swaziland’s main pro-democracy group that was banned by King Mswati in 2008. Masuku said the king does not deserve a "blank check to further loot the country."

Speaking from exile in Johannesburg, Swaziland Solidarity Network spokesperson Lucky Lukhele suggested another reason for the loan, saying that it was a result of "the close friendship between King Mswati and [South African] President Jacob Zuma." In 2002, Zuma, a noted polygamist himself, became engaged to Mswati's niece Sebentile Dlamini.