SWAZILAND: Deteriorating living standards, poor economic growth

[ This report does not necessarily reflect the views of the United Nations]

MBABANE, 30 Sep 2005 (IRIN) - The welfare of the average Swazi continues to deteriorate due to the poor performance of the nation's economy, the Central Bank of Swaziland reported in its annual review.

"Official estimates put real GDP growth at 2.1 percent in 2004. Given the estimated population growth rate of 2.9 percent, the unimpressive economic growth implies a deterioration of the standard of living as measured by per capita income," the bank observed.

The downward trend in economic performance during 2004 was blamed on low foreign direct investment, diminished output by the manufacturing sector and low productivity, particularly on communal Swazi Nation Land, where 80 percent of Swazis reside under chiefs.

"The slump in agricultural production was a result of three consecutive drought seasons in the region, which resulted in a serious food shortage throughout the country. The development exacerbated the already severe problem of high unemployment, income inequity and poverty," the bank said.

The income disparity in the country was reflected in the bank's statistics. While the area of communal Swazi Nation Land devoted to the cultivation of maize, the Swazis' staple food, decreased from 71,504 ha in 2003 to 61,000 ha last year, automobile ownership rose in urban areas, where a fifth of the population lived - registration of new passenger cars in 2004/05 increased by 50 percent over the previous year.

Overall, agricultural production dropped 14 percent last year, and a record number of Swazis became dependant on food aid from international agencies, like the World Food Programme. Seven out of 10 Swazis derived their livelihood from agriculture, but agriculture's contribution to the national economy had dropped from 10.6 percent in 1999 to 8.6 percent at present.

Sectors largely servicing urban areas filled the void: retailers, hotels and restaurants, transport and communications, financial services and urban real estate were all contributing more to the national economy.

The economic dominance of the manufacturing sector dropped slightly from 36 percent to 35.2 percent last year, due to the declining fortunes of the textile industry. Swaziland's currency, the lilangeni, performed strongly against the US dollar, largely because it remained linked to the South African rand, making Swazi exports less attractive internationally.

Manufacturing output was also affected by increased competition from China in the textile sector.

"This sector is gradually seeing buyers, particularly from the US, moving orders to the Far East. The closure of the factories and the resulting loss of jobs are serious threats to continued economic growth," the bank reported.

The formal sector produced 62,000 jobs last year, a two percent drop from the year before. The closure of Asian-owned garment factories and large-scale retrenchments in the sugar industry were responsible for this, according to the report.

Despite the establishment of the Swaziland Tourism Authority, a new government agency, performance in the sector improved marginally, with overall receipts up by five percent from the year before. Again, the strong rand-linked lilangeni ensured that Swaziland was no longer the bargain it had been for international visitors in the 1980s and 90s.

A weaker rand was needed to turn tourism around, the bank commented.

King Mswati broke ground this week on a new resort that will employ 4,000 workers in the village of Lavumisa in the southern Shiselweni region near the border with South Africa. The area is among the hardest hit by drought and HIV/AIDS, with nearly all residents dependent on food aid.

The R4 billion (US $630 million) development is the largest tourism initiative in Swaziland's history, and represents significant new foreign direct investment, reversing the trend of the past three years.

[ENDS]