Swaziland turns to South Africa for bailout

Reuters News
Posted: Jun 23, 2011 8:28 AM
Swaziland turns to South Africa for bailout

By Wendell Roelf

CAPE TOWN (Reuters) - Swaziland has asked neighboring South Africa for an emergency bailout to patch over a chronic national cash crunch that has sparked rare political unrest against King Mswati III, Africa's last absolute monarch.

Swazi dissident groups have suggested Mswati, who has at least a dozen wives and an estimated personal fortune of $200 million, is looking for a 10 billion rand ($1.5 billion) loan from Pretoria.

However, deputy finance minister Nhlanhla Nene said this figure was probably too high.

"I'm not sure where the 10 billion rand figure comes from and I don't foresee assistance amounting to that much," he told Reuters. "It is too early to put a figure to it until such time as the review and the assessment of Swaziland's problems are done."

The sums of money are a drop in the ocean for South Africa, far and away the continent's biggest economy, but, in a curiously African echo of the eurozone debt crisis, Pretoria fears it may be simply the first of a series of bailouts.

Like the International Monetary Fund (IMF), it will also baulk at lending anything to Swaziland, a landlocked nation of 1.4 million people, until the government takes the carving knife to what is Africa's most bloated bureaucracy.

The IMF said last month the tiny southern African country was near financial collapse, with a budget deficit of 14.3 percent of GDP -- similar to Greece -- and an economy stuck in the doldrums. Swaziland's public wage bill amounts to 18 percent of GDP, more than any other country in Africa.

The IMF said the government could dig up $87 million in cuts "swiftly" to improve the health of its finances, but described the commitment to reform as "mixed," rendering immediate budgetary assistance impossible.

South African aid is also complicated by the loathing felt toward Mswati's notoriously inept and unaccountable regime --cabinet posts are administered on the whim of the king -- by the ruling ANC's union allies.

The country's fiscal troubles stem from a sharp decline in revenues from the regional Southern African Customs Union (SACU), which has historically accounted for two-thirds of the government's budget.

The drop-off is equivalent to 11 percent of Swazi output, but the IMF also said the government had exacerbated its problems through profligate state spending.

So far, the government has managed to keep its head above water by eating into central bank reserves and running up $180 million in domestic arrears.

(Reporting by Wendell Roelf; writing by Ed Cropley; editing by Mark Heinrich)