It has become abundantly clear that there needs to be a major mind-set shift in the way Eswatini’s private sector conducts business, if the country is to achieve economic growth levels above 5 per cent.
This is the message put across by Swaziland Economic Policy Analysis and Research Centre (SEPARC) Research Economist Mangaliso Mohammed to guests who attended a breakfast meeting hosted by Nedbank Swaziland last Friday (May 25, 2018) at the Royal Swazi Spa Convention Centre. Mohammed was invited to deliver a presentation on the ‘Opportunities and Value in the Current Economic Climate’ during the bank’s breakfast meeting whose theme was ‘Creating Value in a Constrained Economy’.
“It is important for us to understand some of the opportunities that exist in the economy, especially in times where our government is experiencing fiscal challenges and our economy is not growing as we would like it to be. The biggest question we have is: how can we position the private sector to be the key engine for economic development in our country?” he asked of the guests.
“When we talk of the economy, basically we are talking about GDP (gross domestic product); it’s not really about the many meetings or conferences we can hold or the policies we can set up for us to incite robust growth, it is really about us going out and producing the goods and services people consume on a daily basis. It’s about creating opportunities that will ensure that everyone participates in productive economic activities so that they are able to reach a status where we can actually experience growth. Our economy is very tightly linked to the South African economy and it seems to some extent this has become one of our limiting impediments as an economy. But we do find that our neighbour, like Mozambique, is able to reach economic growth rates above 5 per cent and here in Eswatini we are still struggling at around 1.9 per cent.”
“So what can the private sector do to actually tap into those value chains that can help us achieve growth? Can we learn something from Mozambique? What are they doing that we are not doing? I’m pretty sure we have the skills and we have what it takes as an economy to get to that level. So why is our economy not growing?”
Mohammed noted that Eswatini has a National Development Strategy (NDS), which is the country’s national development strategy that government established in 1997 at a time when the country was also experiencing very high poverty rates. He said as the country’s vision is to achieve inclusive growth, everyone must be involved in the national strategy that will see Eswatini to Vision 2022.
Further, Mohammed noted that in 2005, government established the Poverty Reduction Strategy and Action Plan (PRSAP). He argued that this was passed after it dawned on government that the country cannot go anywhere if a portion of the population is not participating in economic activities. He observed that the PRSAP is about income generation and wealth creation, which is key to economic development.
“At SEPARC we deliberately do not talk about poverty because that can be a limiting agent in terms of going forward, so we talk about income generation and wealth creation because that is key to moving us forward as an economy. Actually, Mauritius took our NDS and tailored it to their needs because their economy was similar to ours in terms of being dependent on sugar for trade. We are actually very good at developing good and workable national policies but what is the problem? Is it the private sector? I pose this question because we have all these good national development policies but it is so difficult to start up sustainable businesses. Or are we so happy with the status quo that we’re not willing to fund start-ups or to get out of the box and identify new businesses? Is it you or me? For instance, think about the food you ate this morning; were any of the items made in Eswatini? Do you buy most of your clothes in Eswatini, supporting merchandise made by Emaswati or are you just exporting our jobs to South Africa and the rest of the world?”
The research economist says Emaswati are not engaging in the painful activity of starting up new businesses in Eswatini, where they can focus on producing their own products, but instead it seems Emaswati are content with supporting the businesses found outside our borders at the detriment of Eswatini’s GDP?
“What we really need to do is to think about what other value chains can work for Emaswati. In the research we conduct at SEPARC, we identified about 50 sectors in which business activity takes place in Eswatini. We find that most of our GDP is trapped within the beverages sector where we have sugar concentrates, which contribute about E14.3 billion to our GDP. Our GDP is about E54 billion and we use about E32 billion of intermediate goods and services as inputs to produce this figure. We find that instead of having our economy spread across different sectors, the beverages sector takes up most of that economy and we find that the sector puts in about E358 million as intermediate goods and services for value addition to produce an estimated E14.3 billion, which amounts to about 40 times what they use as inputs,” he added.
Mohammed noted that the retail sector, which also contributes hugely to the country’s GDP has a lot of opportunities for value addition which small and medium enterprises (SMEs) can tap into. He further identified the social and business services sector as another stumbling block to the economy, where there is a lot of government activity with businesses competing for government tenders, hence when government tanks, so does the private sector.
“We need to make sure that we create a very robust private sector that can stand on its own and be able to function even when government is experiencing a fiscal crisis. The social services sector uses about E3.2 billion of goods and services to generate about E14 billion of our GDP, which is almost close to what the beverages sector does, but there are no value chains there.
“However, if we look at the construction industry and break it down, think about when you build a house, you need cement, roofing, and other materials that are already made, so there are opportunities there for some of our businesses, mainly our SMEs to engage in the production of these goods and services in that value chain. We need to make sure that our private sector is independent of government so that we are able to induce growth. Most of our economy has not diversified since 1968, we still rely on sugar and concentrates for our exports.”
Mohammed then highlighted some key opportunities the private sector in Eswatini should focus on:
- Entrepreneurship and business creation – we need to change the discourse shift where people need to start thinking about business to create instead of being employed.
- Creating indigenous value chains/made in Eswatini movement – we need to support locally produced goods, vote with your Lilangeni by buying goods produced by Emaswati.
- Youth Empowerment is also an important factor – the private sector needs to invest in the development of SMEs as well as enhance technical and vocational education and training (TVET) skills through supporting TVET institutions and offering graduates internships and apprenticeships.
- Leverage science, technology, and innovation (STI), as well as research and development to ready the country for the economy of the future. Instead of funding businesses of the past, financial institutions must fund businesses of the future through STI and research.
- The private sector must be clear about what it wants, we need a business sector roadmap to identify sectors where Emaswati can establish value chains and produce what is needed by the nation.