The Minister of Finance Senator Martin Dlamini has presented the 2015/16 National budget with emphasis on a strong and resilient economy, macroeconomic stability, private sector competitiveness, expanding trade and industry, agricultural modernisation and enhancing natural resource management. Extracts from the Budget Speech are included below.

This is the second budget of the 10th Parliament of the Kingdom of Swaziland. The budget is not just a collection of numbers as printed in the Budget Estimates Books, but also a reflection of the values and aspirations of the Government and the nation at large.

Milestones

Despite the various recent challenges including the loss of AGOA, the Kingdom has achieved significant milestones in its socio-economic transformation over the recent years. To highlight a few:-

i) Universal Primary Education now covers Grades 1 to 7, thus reaching the target we set ourselves in the Constitution;

ii) Anti-Retroviral Therapy take up has more than doubled since 2009, with about 105,000 people with HIV accessing free treatment;

iii) The proportion of Swazis with access to clean water has increased to 76 percent; and

iv) Our business and economic environment has generally improved, thanks to improved fiscal conditions and reforms, coupled with peace and security. This augurs well for our future economic growth prospects.

Challenges

The challenge going forward is to consolidate our past achievements and to ensure that we sustain this growth trajectory towards the desired social and economic transformation of the Kingdom. “Kungako sitsi lamaphakelo alonyaka, atawuba yincenye yesisekelo sentfutfuko yelive”.

This Budget is a continuation of our journey towards Vision 2022. To quote the Programme of Action, we aim for a Swaziland where ‘all citizens are able to sustainably pursue their life goals, and enjoy lives of value and dignity in a safe and secure environment.” The theme for the 2015/16 Budget is therefore “Achieving more with less spending: sustaining economic growth and protecting social development.”

The budget will focus on implementing priority development programmes over the next year and medium term, within a tightly constrained resource envelope. The main focus will be on education, health and agriculture; new roads; and measures to create the right conditions for private sector investment.

This Government believes that the Swazi nation can together build a future that is prosperous, just, and secure.

Economic performance and outlook

International developments

As a small open economy, the prosperity of Swaziland to a large degree is influenced by the strength of the global economy. At present, the world economy faces an uncertain future, and is still grappling with overcoming the effects of the recent global financial crisis. The world economy is expected to continue to grow modestly. According to the recent IMF’s World Economic Outlook, global economic growth was estimated at 3.3 percent in 2014, and stabilising at 3.7 percent over the medium term. This rate remains below the average recorded in the decade prior to the 2008 global crisis. On a positive note, the recent decline in international oil prices is good news for domestic inflation and trade prospects.

Regional developments

Projections indicate that the Sub-Sahara Africa’s economy will continue to grow. Growth is projected at 4.9 percent in 2015, rising to 5.2 percent in the medium term. We need to work harder to benefit from this strong regional growth.

South Africa is the destination for 63 percent of our exports. In 2014, the South African economy is projected to have grown by only 1.4 percent, against a target growth of 2.5 percent. Growth will be sluggish at 2.3 percent in 2015, increasing to 2.8 percent in the medium term. Their performance presents a significant challenge for our economy and reminds us of the need to diversify into other markets.

Domestic Developments

Real GDP Growth

On the domestic front, preliminary estimates indicate a slower pace of economic activity over the past year. Real GDP growth slowed down to 2.5 percent, in 2014 from an estimated growth rate of 3.0 percent in 2013. This slowdown has been largely due to a weak performance in mining and manufacturing sectors. The mining sector contracted by 23 percent in 2014, compared with growth of 19 percent in 2013. Falling commodity prices in the international market, and internal administrative issues were behind this weak performance. The manufacturing sector slowed down to 1.3 percent in 2014 from 1.9 percent the previous year. This stemmed from weakened performance in the textile industry, labour disputes and falling commodity prices in the sugar industry.

On the other hand, the 2.5 percent overall growth was supported by robust agricultural and construction sectors. Improved weather conditions and targeted interventions in the agricultural sector, under the LUSIP and food security programmes were the main drivers for growth in agriculture. The construction sector also remained buoyant, driven by major capital projects including the construction of roads, Information Technology and Biotechnology Parks, and the International Convention Centre and Hotel.

Over the medium term, the objective of Government as per the Programme of Action 2013-2018 is to attain real GDP growth of at least 5 percent per year. This is the minimum level of growth that could achieve the desired social economic transformation by 2022. Taking steps towards this goal will require continued implementation of economic reforms identified in the Investor Road Map.

Balance of Payments

Swaziland’s balance of payments continued to reflect strong performance in 2014 according to data for the first half of the year. The current account surplus more than doubled in the first half of 2014 compared with the year before. The current account surplus for the two quarters ending June 2014 stood at E1.2 billion. The trade surplus and high SACU receipts were the main factors contributing to the increase in the current account surplus.
22. Exports increased strongly, by 29 percent in the first two quarters of 2014 compared to the same period the previous year, whilst imports increased by a lower 13 percent over the same period. Our strong performance stems from the depreciating exchange rate during 2014, and is an encouraging sign of economic vitality.

Budget Strategy for 2015/16

His Majesty the King in His Speech from the Throne this year, counselled to ‘save for rainy days during good years’. Given our difficult fiscal circumstances, these are our priorities for Budget 2015/16:

i) A strong and resilient economy, with a particular focus on macroeconomic stability, private sector competitiveness, expanding trade and industry, agricultural modernisation and enhancing natural resource management;

ii) Enhancing human capital, with increased focus around access and quality of healthcare and education, and enhancing the welfare of the vulnerable;

iii) Enhancing service delivery, through improving institutional governance, transparency and accountability;

iv) Strategic infrastructure rehabilitation and expansion, focusing on roads, railway, aviation, water and sanitation, tourism and rural development.

This budget strategy is aimed at sustaining economic growth, employment and poverty reduction. The strategy also ensures that Government facilitates the private sector as directed by His Majesty the King in His Speech from the Throne, by implementing measures that improve efficiency and lower the cost of doing business.

Revenue and Expenditure for 2015/16

Revenue and grants

Total revenue including grants for 2015/16 is estimated at E14.6 billion compared with an estimated E14.8 billion in 2014/15. In GDP terms, this is a drop of three percentage points. SACU receipts have fallen from E7.4 billion in 2014/15 to E6.9 billion in 2015/16, a reduction of around E560 million. SACU receipts are again expected to decline further in 2016/17, as Swaziland will be required to effect a sizeable repayment during 2016/17, as indicated by the SACU Secretariat. External grants will amount to E270 million, a reduction from last year, as one-off European Union grants for agricultural developments fall.

Expenditure

Expenditure is estimated at E15.9 billion, including payments for public debt and other statutory obligations, which amount to E1.0 billion. Total expenditure for 2015/16 thus represents an additional E646 million above the appropriated level for 2014/15. The estimated budget deficit, of E1.3 billion, will be financed by a mixture of external loans to projects, of around E450 million net, and additional domestic borrowing of around E1 billion. This is a sustainable budget in difficult circumstances. A variety of revenue and expenditure measures have led us to a responsible budget for 2015/16, that prepares us for a difficult year in 2016/17.

Revenue Measures

Government is proposing various revenue measures. These will assist Government in mobilizing additional resources for protecting essential services, while SACU revenues fall in the medium term.

These initiatives include an amendment of the Income Tax regulations, including removal of the tax allowance exempting gains on the disposal of business assets. However, the amendments would also reduce taxation on medical aid for the private sector.

Other initiatives intended by the Income Tax Order include the introduction of taxation of residents on their worldwide income. Currently, residents are taxed depending on source, meaning that tax is imposed on income generated within Swaziland only. This has a limitation in that there is a growing trend of Swazi residents (including individuals and companies) earning income beyond our borders. Increasing tax justice is an idea whose time has come. Our neighbours, including South Africa, have already shifted from source-based taxation to world-wide taxation.

The VAT Refund Agreement between Swaziland and South Africa is ready. From the 1st of April 2015, residents simply declare the VAT of their purchases at any of our border posts, and Government receives the revenue from South Africa. This replaces the current arrangement where declaring residents are charged twice, and must retrieve refunds from South Africa, often months later. The projected additional revenue from increased declarations is over E120 million per year. I would urge all Swazis to declare their purchases, so that vital funding for Government services can be secured.

Furthermore, Government plans to review the Customs and Excise Act; and accommodate a number of modernization initiatives aimed at enhancing revenue collection and improving our Doing Business rank. I am pleased to observe that the SRA is introducing the accreditation of preferred traders. SRA will reward those taxpayers who have a proven record of tax compliance, by issuing certificates of accreditation which grants faster treatment at our borders. Lessening delays in the declaration, clearance and release of goods, and the ability to prepay, will reduce the cost of doing business in Swaziland. Upgraded trade software, which allows electronic signature and documentation, will reduce barriers to trade.

Appropriation

This budget concerns “Achieving more with less spending: sustaining economic growth and protecting social development.”

By virtue of the responsibility entrusted to me as Minister of Finance, I now present to this Honourable House, the Budget Estimates for financial year 2015/16, as follows:

1. Revenue plus grants: E14,606 million;

2. Appropriated recurrent expenditure (excludes Statutory): E11,737 million;

3. Capital expenditure: E3,217 million;

4. Total expenditure: E15,952 million; and

5. Deficit: E1,346 million.

Conclusion

There is a higher ambition than merely to stand superior in the world. It is to step down, and lift mankind a little higher than where they are. This Budget is a tough Budget. However, it has tried to focus our meagre resources towards those areas that will lift up Swazis a little higher than where they are currently.