Real GDP contracted an estimated 0.5% in 2018 after 1.9% growth in 2017. Growth was hampered by weak recovery in the raw materials extraction sector, a slowdown in the production sector, and contraction in the services sector. Agriculture has not yet fully recovered from the 2015/16 drought, and mining has declined. Production sector performance was expected to be dampened by decelerating manufacturing resulting from shrinking external demand, notably an underperforming textile industry and the September 2017 European Free Trade Association ban on selected eSwatini exports. The estimated 1.3% service sector contraction was due to anticipated consumer and government spending declines.
eSwatini’s fiscal challenges emanate from high public spending and heavy dependence on the volatile and declining Southern Africa Customs Union (SACU) revenue. The fiscal deficit declined to an estimated 7.4% of GDP in 2018 from 7.9% in 2017 and has been financed by domestic borrowing, accumulating domestic arrears, and international reserve withdrawals. Total public debt increased from 19.6% of GDP in June 2017 to 20.8% of GDP in June 2018.
With the eSwatini lilangeni pegged at par to the rand, authorities pursued a restrictive and steady monetary stance, maintaining the discount rate at 6.75% since March 2018. Inflation declined to an estimated 5.4% in 2018 from 6.2% in 2017, and gross official reserves averaged around three months of imports in 2018.
The current account registered a surplus of an estimated 0.4% of GDP in 2018, up from a deficit of 1.3% in 2017, spurred by merchandise trade surpluses and secondary income inflows. The country is overdependent on pulp, sugar, and cotton exports, with about 60% of exports going to South Africa and 80% of imports coming from that country
Tailwinds and headwinds
The economy faces ongoing fiscal challenges, exacerbated by a weak external position. But real GDP growth is projected to recover modestly to 1.7% in 2019 and 2.3% in 2020, driven by supply-side developments. In 2019, agriculture is projected to fully recover from the drought, construction will benefit from continued expansion (such as the Lower Usuthu Smallholder Irrigation [Phase II] Project), and manufacturing will regain the US African Growth and Opportunity Act market as well as new markets opened by other trade agreements. Improving the business climate and reforming the legal and regulatory framework for infrastructure development present opportunities for enhancing private development and unlocking the economy’s potential.
eSwatini faces potential headwinds from persistent fiscal challenges arising from low SACU revenue, a weak external environment, insufficient fiscal consolidation, and a challenging investment climate constraining private development. Growing domestic arrears, if unchecked, will continue to constrain business activity and may increase financial sector vulnerabilities as companies struggle to service their debts. The narrow export base and high market concentration make eSwatini vulnerable to external shocks, particularly those affecting South Africa. Average inflation is projected to be 5.4% in 2019 and 5.5% in 2020.
- The government securities yield curve extended to 10 years with four benchmark points along the curve (3-5-7 and 10 years).
- It has a Medium-Term Debt Strategy which is published after the budget speech.
eSwatini has a Medium-Term Debt Strategy which is published after the budget speech. Strategy: enhance availability of financing, by (i) reaching out to potential investors for auctions of government securities, (ii) issuing long-term bonds at floating interest rates, and (iii) bonds linked to specific projects.
Benchmarks issues (3-5-7 and 10 years) are sold in the market using the auction and Swaziland’s website reopening methods. The yield curve is indicative only. The yield curve is available on the Central Bank of Swaziland
Yield curve calculation models
eSwatini uses the Republic of South Africa’s yield curve plus spread.
There are no interpolation methods
Yield curve managed by
The Central Bank of Swaziland is in charge of calculating the yield curve on a daily basis.
The yield curve is available on the Central Bank of Swaziland’s website.
Challenges in building an efficient yield curve
The government faces the following challenges in building an efficient yield curve:
- Illiquid and limited secondary market
- Narrow investor base: Swaziland does not have foreign participation
- Lack of transparency in pricing, especially the primary dealers
Guide to Buying Bonds
Procedures for market participation
The primary market is open to institutional investors and individuals alike. Banks, non-bank financial institutions, stockbrokers, corporate, individuals and non-residents can all participate in the auctions. Investors must contact one of the Primary Dealers or go directly to the Central Bank to purchase Treasury bills (the process to purchase the securities at the Central Bank is more administratively cumbersome).
Foreign participation is limited, hence there were few funds repatriation after the global financial crisis.
There is no capital gains tax. Interest income is subject to a withholding tax of 10% for residents but the tax rate is 0% for non-residents.
Swaziland has double taxation agreements with the following countries: the UK, the US, Germany, Mauritius and Kuwait.
The settlement cycle for treasury bills is T+2.
Openness to international investors
The Swaziland Investment Promotions Authority (SIPA) guarantees the equal treatment between domestic and foreign investors. There are no discriminatory practices between domestic and foreign investors.
International investors may participate in the purchase of Treasury securities through Primary Dealers
There are no restrictions placed on the transfer of interest, profits, dividends and or other accrued income.
Restrictions on foreign exchange and profit repatriation
The Central Bank of Swaziland (CBS) is charged with monitoring the flow of foreign investment in and out of the country. It may screen and regulate foreign exchange and investments in the country.
The process of obtaining foreign exchange in Swaziland is fairly simple and straightforward. To obtain hard currency, one must apply through an authorized dealer. Rules also state that a resident holding foreign currency must sell it to an authorized agent or dealer for local currency within 3 months (90 days).
List of Primary Dealers
The primary dealers in the system are:
o Nedbank Swaziland Ltd
o Standard Bank Swaziland Ltd
o Swaziland Development and Savings Bank
Documents & Resources
Documents - Ministry of Finance
Documents - Central Bank
- Brochure: Investing in Swaziland T-bills (78 kB)
- Note issuance programme of Kingdom of Swaziland (377 kB)
- CBk_Swaziland-Dec_2014.pdf (1.50 MB)
- Swaziland_Issuance_Calendar__2014-15__-_Revised.pdf (446 kB)
- Investing_in_Swaziland_T-bills-brochure.pdf (78 kB)
- CBk_Swazi-Recent_Eco_Dpt-May_2014.pdf (1.61 MB)
Documents - Stock Exchange
- Swazi_Stock_Exch-Q1_2015.pdf (512 kB)