There has been a growing body of literature worldwide about the size and development of the shadow economy. This paper quantified the size and development of the shadow economy in Swaziland over a period of 16 years. Secondary data in the form of macroeconomic data was collected from government institutions for the period of 2000 to 2016. A structural equation model in the form of the MIMIC approach was employed to determine the drivers of the shadow economy in Swaziland and also to quantify its size.

The results show that direct taxation, indirect taxation, self-employment, the importance of the agricultural sector, and regulation were the causes for the development of the shadow economy in Swaziland. The results also indicated that the size of the shadow economy in Swaziland was at 37.4 % in 2016 and has been declining at a steady rate over time. This means that the current GDP of the country has been underestimated by E20.5 billion due to the exclusion of the shadow economy in the national statistics.

Download PDF