9 June 2011
Swaziland: Mswati back in Pretoria to plead for R10-bn bailout
King Mswati III is due in Pretoria next week to plead directly with President Jacob Zuma for a R10-billion (US$1,47-billion) loan to keep Swaziland from complete collapse.
South Africa is Mswati’s last hope. As pressure mounts from pro-democracy formations in Africa’s last absolute monarchy, both the International Monetary Fund (IMF) and the World Bank have in the past month declined to provide the short-term funds necessary to keep Swaziland going. The country does not have the funds to pay its civil servants at the end of June.
Monday’s scheduled meeting (13 June 2011) with Zuma is Mswati’s second such plea to South Africa (see SAR Vol 29 No 11). In February Zuma responded to Mswati’s first request with conditions the king then found unacceptable: opening of negotiations with pro-democracy organisations, led by the outlawed People’s United Democratic Movement (Pudemo) and the increasingly assertive trade unions.
Mswati’s proposed terms going into the meeting in Pretoria indicate the level of the king’s desperation: he is willing to have the loan, which he will undertake to repay over 10 years, administered by South Africa. This will give Pretoria significant leverage over Swaziland’s economic restructuring, fiscal policy and budgeting. Given Zuma’s response to the original request, it will almost certainly see Pretoria insisting on legalisation of political parties and the beginning of negotiations towards a democratic constitution.
South Africa has given some thought to the modalities of a bail-out. If it goes ahead, it is probable that it would facilitate it as a reworking of South African Customs Union (Sacu) revenue disbursements.
The breakdown of the R10-billion Swaziland says it needs gives a good indication of how badly Swaziland’s public finances have deteriorated since the country lost 60% of revenue from Sacu.
Proposed debt breakdown
Wage bill and budget support R5-billion
Repayment of domestic debt R2-billion
Support Llangeni-Rand parity R1-billion
Civil service restructuring R300-million
Agriculture & infrastructure R1,7-billion
The proposals include funds for the early retirement and voluntary redundancy of 7 000 civil servants, and support for the Swazi Lilangeni, part of the Rand money area, but increasingly under threat of de-linking and going into freefall as Swaziland’s crisis deepens.
It is unclear if Mswati hopes to use the “agricultural and infrastructure” projects component to persist with the capital intensive vanity projects, such as the building of the new international airport at Sikhuphe, the expansion of private highways to the royal palaces, the projected increase in state pocket money for Mswati from US$24-million to US$30-million (R168-million to R210-million), or defence spending. The details on how the loan will be used give no guarantees on such wastage, something that the IMF had alluded to in its admonitions to the Swazi cabinet in May. South Africa’s National Treasury is unlikely to be enthusiastic about these projects.
Ostensibly instructed by his royal council, the Liqoqo, the king’ s supplicatory visit to Zuma follows stern warnings from the IMF that Swaziland’s government will run out of ready cash by the end of this month. Despite recent - and increasingly unrealistic - suggestions by Swazi Prime Minister Sibusiso Dlamini that loans would shortly be forthcoming from the African Development Bank (AfDB) with IMF approval and from the World Bank, all three institutions have resolutely refused assistance to the Mswati government.
Without South African support, the prospects for Mswati and his catatonic government look decidedly bleak. Failure to pay civil servants in June could lead to a mass public sector walk-out. This could bring down the government and perhaps unseat the king.
There are indications that the king has considered setting his government up as a scapegoat, blaming it for the collapse, dismissing it and entering into direct negotiations with the trade unions and pro-democracy formations, paving the way to the new multi-party democratic dispensation.
Tension within Mswati’s administration is not yet at a point at which serious consideration has been given to deposing him, although elements within it and within the royal council are edging in that direction.
Mswati’s eleventh-hour mission to Pretoria comes in the wake of much irritable inertia within government following the IMF’s final warnings that the regime was failing to stick to its austerity formula. The IMF left Swaziland on 18 May. A leisurely nine days later, Mswati met with his Cabinet to find out what had transpired following the IMF visit. The king was more interested in why no road building and other “infrastructure development” were taking place - primarily referring to the stalled work on Sikhuphe airport and the highway that is supposed to serve it. The king responded furiously when it was clear that the government had nothing to report.
Enter Liqoqo, mouthpiece of the king but minus Mswati’s abrasive lack of finesse and decorum. The royal council took over talks with the government on 1 June at the instigation of the Queen Mother to establish what the cabinet, and particularly Prime Minister Dlamini, planned to do about getting back on track with the IMF-monitored spending cuts programme.
Dlamini reportedly clashed with the royal council over the revocation of two government edicts of last year, Circular 1 and 2, which provided for increases in expense payments for Cabinet members and MPs. The annulment of the circulars was one of the IMF’s repeated demands, persistently blocked by Dlamini, who cited loss of parliamentary support if they were withdrawn. This was a direct challenge to the king, who would be happy to see the circulars ditched.
Dlamini admitted to the Liqoqo that the state was out of pocket and that it needed to declare an “economic state of emergency” which would enable him to unilaterally cut the civil service wage bill. He was asked why the government had not approached South Africa for emergency aid, and replied that this would be raised when finance minister Majozi Sithole met South African counterpart Pravin Gordhan at an AfDB meeting. Arrangements were then made for Mswati to make a repeat performance of his February trip to Zuma to ask for cash.
This time around South Africa is far better placed to pressure Mswati to respond to pressure for democratic change.
On a wider level, the arrangement highlights the needs of regionally integrated solutions to the problems of Southern Africa’s nation states.