2012 Investment Climate Statement
Bureau of Economic and Business Affairs
June 2012
Report

Openness to, and Restrictions Upon, Foreign Investment

The Government of the Kingdom of Swaziland’s (GKOS) continuing fiscal crisis, resulting from a drop in Southern African Customs Union (SACU) receipts and the global economic downturn, has reinforced the government’s desire to attract foreign direct investment (FDI) to help provide jobs and revenue. In order to deal with the drop in SACU revenues and the burgeoning wage salary expenditures, the GKOS crafted a Fiscal Adjustment Roadmap (FAR) that runs from fiscal year 2010/11 to 2014/15. In 2011, Swaziland's Ministry of Economic Planning and Development also drafted an economic recovery strategy (ERS), multi-year plan aimed at achieving economic growth and job creating. The ERS includes proposed reforms to encourage trade and investment. GKOS implementation of the FAR has been slow, however, and the ERS has not yet been formally adopted by the government.

Incentives to invest in Swaziland include repatriation of profits, provision of factory shells at competitive rates, and exemption from duty on raw materials to manufacture goods to be exported outside the SACU. Financial incentives for all investors also include generous tax allowances and deductions for new enterprises, including a 10-year exemption from withholding tax on dividends and a low corporate tax of 10 percent for approved investment projects. New investors also enjoy duty-free import of machinery and equipment.

The GKOS continues to work with the European Union, African Development Fund and the USAID/Southern Africa Trade Hub in the development of its investment policy, and improvement of trade policies. The Companies Act of 2009, which replaced the outdated Companies Act of 1912, came into force on April 1, 2010. The Act's main objective is to streamline the establishment, incorporation, and registration of companies. The Act will also improve the management, administration and dissolution of companies and put Swaziland's corporate laws in line with regional and international developments. The Financial Services Regulatory Act No. 2 of 2010 came into effect on June 1, 2010. The aim of the Act is to put in place an integrated regulatory system for the non-bank financial services, including insurance, retirement funds, building societies, capital markets and other similar institutions. In 2011, Swaziland's parliament passed additional legislation aimed at improving the business climate, including the Trading Licenses Act, which shortens the required advertising period for getting a business license from 21 days to 3 days, and the Shop Trading Hours Act, which allows shops to be open for 24 hours. Retail outlets were previously required to close at 5pm. The Swaziland Communications Commission Bill, which would affect the issuance of television licenses, and the Electronic Communications Bill, whose aim is to provide a framework for the development of electronic communications networks in Swaziland, have yet to be enacted.

Swaziland has a dual-legal system, and most investments are effected through and governed by Roman/Dutch law. Companies investing under traditional rules, possibly involving communal land controlled by a chief or the king, should be aware that they likely will not be able seek resolution from a Swazi court. Swaziland's judicial system generally upholds the sanctity of contracts; however, companies investing under the auspices of Swazi tradition and custom do not have the same judicial protections and remedies, as investments under the more commonly used Roman/Dutch based law.

There are no formal policies or practices that are discriminatory to foreign investors, and companies may be 100 percent foreign-owned. However, foreigners have run into trouble when attempting to register new business ventures as Swazi businesses (as opposed to foreign businesses registered as such in Swaziland). According to the Companies Act of 2009 Section 15 (3), “a company is deemed to be a local company if that company – (a) has Swazi citizens who hold more than one half of its issued share capital; (b) has Swazi citizens forming the majority of its shareholders who have control over the placement of the Board of Directors; and (c) has Swazi citizens forming the majority of its Board of Directors.” In 2011, the Swaziland Investment Promotion Authority (SIPA) worked with investors to register under the correct type of company under Section 15. The Swazi Constitution bars the vesting of ownership of land in foreign-owned companies or foreigners unless ownership was attained before the promulgation of the Constitution on February 8, 2006. However, the Constitution states that this provision "may not be used to undermine or frustrate an existing or new legitimate business undertaking of which land is a significant factor or base." Foreign companies looking to own land must attain approval from the Land Board. Any company wishing to do business in Swaziland must adopt articles of incorporation or association.

Investors are screened for creditworthiness and business ethics track record, as well as criminal record. If investors bring external funding, there is no requirement for further screening. Foreign investors are theoretically free to invest in all sectors of the Swazi economy, aside from sectors controlled by GKOS monopolies, such as water services. Other areas in which the GKOS disallows investment are in the manufacturing of arms, chemical and biological weapons, radioactive materials, explosives, and manufacturing involving hazardous waste treatment or disposal.

Privatization of the energy sector, as envisaged by the Swaziland Electricity Company Act of 2007, is beginning to take place. In 2011, two local sugar companies were granted licenses to produce power for their own use and sell the surplus to the national grid. Otherwise, the Swaziland Electricity Company continues to dominate the sector. The insurance industry lost its monopoly status in 2006 and a regulatory office started operating in April 2007. The liberalization of the insurance industry saw four companies establishing their operations in the country. The Insurance Act of 2005 also required all local insurance companies, retirement funds and other related institutions to invest 30 percent of their assets in Swaziland by 2009. Privatization of the insurance services offers the possibility of joint ventures for foreign investors. The ICT sector continues to be dominated by the Swaziland Posts and Telecommunications Company (SPTC) and mobile phone operator MTN Swaziland.

Non-governmental organizations (NGOs) support foreign investment except when specific locally-owned businesses are threatened. NGOs may publicly protest and attempt to block the award of licenses, but in light of the need for increased jobs and revenue, there is firm government commitment to foreign investment.

The GKOS has recognized the need to facilitate a faster business registration process and curb other bureaucratic delays. The Swaziland Investment Promotion Authority was established to become a one-stop-shop for foreign investors and to design and implement strategies for attracting desired foreign investors. In 2011, SIPA continued to work with the Southern African Trade Hub (SATH) in implementing recommendations of the Investor Roadmap of 2005. An audit in 2009 by the Southern African Competitive Hub demonstrated that government had only completed 19 percent of the recommendations detailed in the Roadmap. A follow-up review conducted by SATH in August 2011, after SIPA had finished round consultations with lead ministries and agencies, revealed additional but marginal progress. By November 2011, Swaziland had implemented 23 percent of the Roadmap’s recommendations. SIPA was more active in 2011 than in previous years and claimed it would spur other stakeholders to action.

In the World Bank's "Doing Business 2012," Swaziland ranked at 124 out of 183 countries, down one spot from 123 in 2011, for overall ease of doing business. It ranked 161 for starting a business, down from 157 in 2011. It also showed slightly lower rankings from the previous year in access to credit, enforcement of contracts, and protecting investors. The kingdom showed improvements in 2012 with respect to dealing with construction permits, getting electricity, and registering property. According to the Heritage Foundation's "Economic Freedom Index," Swaziland’s economic freedom score is 59.1, ranking its economy 97 out of 179 countries in 2011. It ranked 12 out of 46 countries in the Sub-Saharan Africa region.

Over the past five years, Swaziland's annual economic expansion averaged 2.3 percent. Low productivity and sparse investment have contributed to sluggish economic growth. Corruption has had a negative impact on Swaziland's growth. Transparency International ranks Swaziland 95 of 178 in the world in its Corruption Perceptions Index, with a rating of 3.1.

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Measure

Year

Index/Ranking

TI Corruption Index

2011

95

Heritage Economic Freedom

2011

97

World Bank Doing Business

2012

124

MCC Government Effectiveness

2012

-0.06 (45%)

MCC Rule of Law

2012

-0.02 (45%)

MCC Control of Corruption

2012

0.32 (69%)

MCC Fiscal Policy

2012

-6.0 (19%)

MCC Trade Policy

2012

69.7 (24%)

MCC Regulatory Quality

2012

-0.11 (41%)

MCC Business Start Up

2012

0.934 (30%)

MCC Land Rights Access

2012

0.505 (18%)

MCC Natural Resource Mgmt

2012

14.6 (18%)

Conversion and Transfer Policies

The Central Bank's prior approval is necessary for all capital transfers into Swaziland from outside the Common Monetary Area (CMA) to avoid subsequent repatriation of interest, dividends, profits and other income accrued, but no restrictions are placed on the transfers. In practice, approval is routinely granted when required for genuine investment activity, but bureaucratic delays are common. When converting funds, the investor's bank uses its discretion to decide if there is a need to seek the Central Bank's approval.

No recent changes have been made to Swaziland's remittance policies.

There is a straightforward process for obtaining foreign currency. A resident requiring currency other than the Swazi emalangeni (E) or South African rands (accepted as legal tender with an exchange rate on a par with the emalangeni) for permissible purposes must apply through an authorized dealer, and a resident who acquires foreign currency must sell it to an authorized dealer for local currency within 90 days. No person is permitted to hold or deal in foreign currency other than an authorized dealer. Authorized dealers in Swaziland are First National Bank of Swaziland (FNB), Nedbank, Standard Bank, and Swazi Bank.

The average delay period for remitting investments is dependent on the mode for remitting funds. SWIFT transfers average a week, while electronic transfers typically take less than a week.

Dividends derived from current trading profits are freely transferable on submission of documentation (including latest annual financial statements of the company concerned), subject to provision for the non-resident shareholders' tax of 15 percent. Local credit facilities may not be utilized for paying dividends. The GKOS does not issue dollar-denominated bonds. There are no limitations on the inflow or outflow of funds for remittances.

The Central Bank of Swaziland monitors the flow of foreign investment in and out of the country, as it follows all foreign exchange. The Central Bank has formal powers to screen and regulate foreign exchange and investment, but these powers are exercised in a formal, routine, and equitable manner. The Central Bank, in July 2011, increased the deposit reserves requirement for local banks from 2.5 percent to 6 per cent of deposit liabilities in order to maintain liquidity in the country.

Expropriation and Compensation

Expropriation and nationalization are prohibited. There have been no known cases of a foreign-owned business being expropriated. Swaziland's land tenure system can be confusing for investors. Approximately sixty percent of land is Swazi Nation Land, land held by the monarchy in trust for the people of Swaziland. Control over use of Swazi Nation Land is generally delegated to local chiefs. Settlement of disputes regarding traditionally held land can take years. Legality of land leases is sometimes unclear and uncertainty exists as to the details of land ownership rights. Clear titles can exist for non-Swazi Nation Land, generally located in municipalities. A Minister, with Cabinet permission, can publish in the Government Gazette a "notice of intention to take property," list the properties to be taken, and take them. Historically, this only affected properties with absent landlords. According to the Constitution, the Land Management Board will vet applications by non-citizens to acquire land in the country.

The Embassy does not think the GKOS will engage in expropriatory actions in the near future.

There are no sectors that are at risk for expropriation or any similar action.

There are no laws forcing local ownership.

There are no cases of "creeping expropriation."

Dispute Settlement

Swaziland has a dual legal system consisting of Roman-Dutch law and customary law. This parallel system can be confusing and has, at times, presented problems for foreign-owned businesses. In addition to a Western-style court system, Swaziland's traditional courts, with the king as supreme authority, are available for dispute settlement. Swazi employees have brought grievances against foreign employers to these traditional courts. Such disputes, however, can be transferred to the formal court system at the option of the foreign employer/investor. The Industrial Relations Act of 2000 created the Conciliation, Mediation and Arbitration Commission to resolve employer-employee disputes.

The government generally has a sound record of handling investment disputes, with most investor disputes being employee-related. Official government intervention/arbitration is available upon request, but most investment disputes are handled within the judiciary system, usually via the Industrial Relations Court. In 2011, a lawyers' boycott sparked by the Chief Justice of the Supreme Court's handling of the controversial firing of a well regarded Superior Court justice resulted in a judicial crisis in Swaziland lasting four months. It led to a backlog of cases, questions about the independence of the Swazi judiciary, and concerns with respect to individuals’ ability to access justice. The crisis affected the Industrial Court to a lesser degree than other courts and appeared to be resolved by the end of the year. There have been several investment disputes affecting foreign investors in the last few years, including challenges investors face when utilizing Swazi custom and law as the legal basis underpinning their contracts.

In general, the Swazi legal system has effectively enforced property and contractual rights. Judgments of foreign courts are accepted and enforced. The Companies Act of 2009 outlines commercial law. Swaziland's bankruptcy law, the Insolvency Act of 1955, is silent on the currency used in monetary judgments; however, international companies doing business in Swaziland include the currency to be used in the Memorandum of Agreement. The court has jurisdiction over the property of a person who has ordinarily resided in or carried on business for 12 months in Swaziland before the lodging of the petition.

The GKOS accepts binding international arbitration of investment disputes between foreign investors and the state. Any agreement with international investors/parties includes a clause stating where arbitration will take place and which laws will apply. Swaziland does not have a domestic arbitration body for investment disputes. Swaziland is a member of the International Centre for the Settlement of Investment Disputes (ICSID) and the Multilateral Investment Guarantee Agency (MIGA). There is no specific legislation providing for enforcement of ICSID awards.

Performance Requirements and Incentives

The GKOS does not maintain any measures that are alleged to violate the WTO's Trade Related Investment Measures requirements.

There are two performance requirements that may affect foreign business in Swaziland. Swazi government policy requires hiring qualified Swazi workers where possible. This has discouraged some business people from relocating to Swaziland, as it may present difficulties for spouses to find work. The other performance requirement affects only exporters who wish to label their product as made in Swaziland. Local export authorities require that the local content of such exports be at least 25 percent. This determination, however, is often difficult to make, and appears to be conducted on a case-by-case basis.

Investment incentives for qualifying investments, particularly those in export-driven manufacturing, mining, and international services, include: human resources training rebate – a rebate of 150% of the cost is written against tax for training; at the discretion of the Minister of Finance, a tax rate of 10 percent for the first ten-year period, available for businesses that qualify under the Development Approval Order; capital goods imported into the country for productive investments are exempt from import duties; raw materials imported into the country to manufacture products to be exported outside the SACU area are also exempt from import duties; repatriation of profits and dividends including salaries for expatriate staff and capital repayments; the Central Bank of Swaziland guarantees loans raised by investors for the export market. There is also provision of loss cover which a company can carry over in case it incurs a loss in the year of assessment.

There are no performance requirements for establishing, maintaining, or expanding an investment. To receive duty free status on capital goods imports, the investment must be considered productive.

There are no requirements regarding the purchase or export of goods.

There is no requirement on composition of ownership, equity diversification, or that there is a technology transfer.

The GKOS does not impose "offset" requirements.

The law does require companies to employ Swazi nationals, unless they cannot find a qualified national.

There are no enforcement procedures for performance requirements. The updated Companies Act expects companies to lodge annual returns with the Registrar of Companies. The return should include the name of the auditors, nominal and issued share capital, names and addresses of members (in case of a private company), among other requirements. Investors are not required to disclose proprietary information as part of the regulatory process.

U.S. and foreign firms are not able to participate in government financed and/or subsidized research and development programs.

Residence and work permits are a major source of tension between the expatriate business community and a government otherwise well disposed toward foreign investment. All foreign nationals working in Swaziland require work and residence permits. Employers must apply to the Immigration Office for a work permit, demonstrating that no Swazi is available to fill the vacancy. Although they generally are awarded, expatriate business people complain that the process is cumbersome, exasperating, and is a reported source for unofficial "expedition" payments. Residence permits are good for five years for expatriate directors, senior management and key technical personnel of new companies, at which time they must be renewed. Recently, work permits for some prominent business people have not been renewed, with no reasonable explanation given.

There are no discriminatory or preferential export or import policies affecting foreign investors.

Right to Private Ownership and Establishment

The majority of Swaziland's largest businesses are owned by foreign investors, either fully or with minority participation by Swazi institutions. There are no restrictions on foreign ownership that are discriminatory against foreign investors. Foreign firms in Swaziland often dominate the sectors they are in and therefore receive preferential treatment in matters of supplies and other necessities, even where there are Swazi enterprises in the same sector. Both foreign and domestic private entities have a right to establish businesses, and acquire and dispose of interests in business enterprises.

Protection of Property Rights

The GKOS recognizes and enforces secured interests in property, both moveable and real. There is a recognized and reliable system of recording such security interests.

The legal system protects and facilitates acquisition and disposition of property.

Adherence to key international agreements on intellectual property rights is minimal.

Protection for patents, trademarks and copyrights is currently inadequate under Swazi law. Patents are currently protected under a 1936 act that automatically extends patent protection, upon proper application, to products that have been patented in either South Africa or Great Britain. The African Regional Industrial Property Organization in Harare assisted in drafting a new patent law. The draft law includes protection for pharmaceutical and agricultural chemical products.

Trademark protection is addressed in the 1994 Trademarks Act. Copyright protection is addressed under four statutes, dated 1912, 1918, 1933 and 1936.

Swaziland inherited its intellectual property rights regime from the colonial era, under which copyrights, patents, and trademarks were somewhat protected under various acts promulgated by the colonial authorities. According to the Registrar General, the acts have not been implemented and copyright protection in Swaziland is "limited." In May 2010, a bill on The Copyright and Neighboring Rights was sent to parliament. Although not yet passed by parliament, the bill, when it becomes law, will repeal the 1912 Copyright Act. Swaziland does not have a bilateral copyright agreement with the United States.

There are no ongoing disputes with regard to patents, trademarks, or copyrights in Swaziland.

The government has acceded to the WTO TRIPS agreement. Implementation and enforcement are minimal due to the small number of patent disputes. The GKOS has not signed the WIPO Internet agreement.

Transparency of the Regulatory Systems

In general, Swaziland’s tax, labor, environment, health and safety, and other laws do not distort or impede investment. However, in many areas, the legal and regulatory environment is underdeveloped, opaque, or unpredictable. For instance, Swaziland does not have an approved trade policy, investment policy, or industrial policy. Also the lack of enabling legislation and an independent regulator allow for the continued monopolistic nature of the ICT sector. The country’s Economic Recovery Strategy specifically identifies the need to promote an enabling policy, regulatory, legislative and institutional environment in order to facilitate investment.

Proposed laws and regulations are published in the government Gazette for public comment thirty days prior to a bill's presentation to Parliament. Ministries sometimes consult with selected members of the public and private sector.

The Competition Commission whose duty it is to end the monopolies of parastatals is in place and the office is fully functioning. The Commission will be governed by the public enterprise unit law. It is the government's stated policy to foster a free market economy, and the government's decisions in individual matters have generally upheld that objective. At the same time, GKOS has not been active in promoting competition in certain industries, such as ICT.

There are no informal regulatory processes.

There are no efforts to restrict foreign participation in industry standards-setting organizations.

Efficient Capital Markets and Portfolio Investment

The kingdom's efficient capital markets are closely tied to those of South Africa and operate under conditions generally similar to the conditions of that market. Commercial banks offer credit on market terms, but the rules of the Common Monetary Area forbid non-Swazis from raising domestic loan capital, although they can apply to the Central Bank for an exception. This restriction has not greatly discouraged foreign capital flows into Swaziland in the past, but could increasingly sour the Swazi investment climate as regional competitors build investment regimes more attractive to foreign business.

At present, the GKOS is trying to put in place an effective regulatory system to encourage portfolio investment. In 2010, the GKOS enacted the Securities Act, which will strengthen the regulation of such investment. This Act’s aim is primarily to facilitate and develop an orderly, fair and efficient capital market in the country. Swaziland has a small stock exchange with six companies currently trading two types of shares, equity shares and bonds. Another related legislation is the Financial Services Regulatory Authority (FSRA) Act 2010 that came into force in June 2010. This act governs non-bank financial institutions including capital markets, insurance, retirement fund, building societies, micro-finance institutions and Savings and Credit Co-operatives.

The Central Bank supervises financial institutions, which include the First National Bank of Swaziland Limited, Nedbank, Standard Bank, Swazi Bank, Swaziland Building Society and the Blue Financial Services (Pty) Ltd. These are governed by the Financial Institutions Order of 1975.

"Cross share-holding" and "stable shareholder" arrangements do not exist in Swaziland. There have been no hostile takeovers by domestic or foreign interests. Since Swaziland's financial markets are just emerging, a variety of credit instruments have yet to be developed.

Competition from State-Owned Enterprises (SOEs)

Private enterprises and public enterprises operate in different investment climates. Public enterprises often are responsible for charging levies for supplies imported by private enterprise in which the public enterprise also competes. Examples of this occurrence include the milk, vegetable, and maize industries. A private enterprise that imports wheat and wheat products was given a monopoly.

Senior management of SOEs report to a board which, in turn, reports to the line minister. A senior member of the ministry sits on the board. SOEs are governed by the Public Enterprises Act which requires audits of the SOEs and public annual reports.

A sovereign wealth fund known as Tibiyo takaNgwane, which was created through royal charter, forms joint ventures with foreign investors. Tibiyo takaNgwane is held by the king in trust for the Swazi nation and is considered separate from the government. It is run as a corporate social investment entity.

Corporate Social Responsibility

Multinational enterprises in the country take their corporate social responsibility seriously, and consumers often recognize their efforts.

Political Violence

In 2011, there were no major incidents of political violence undertaken by dissidents or labor organizations aimed at destroying commercial installations in Swaziland. During the year, the country experienced a slight increase in labor protests, mainly from civil servants. Teachers and other civil servants took to the streets on multiple occasions in 2011 in attempts to influence government action to resolve the kingdom’s ongoing fiscal crisis. Angered by the prospect of certain proposed measures to reduce the country’s bloated wage bill, including salary reductions and retrenchments, civil servants staged protest marches. They also protested in favor of other measures, such as reversal of a decision to cut student allowances and action to reduce benefits paid to high-raking government officials. Although labor unrest mounted by labor unions contained political overtones due to restrictions on political parties, they did not result in destruction of commercial property.

In April 2011, two members of political formations were arrested for possession of explosives and are currently awaiting trial.

The trial of the survivor of the September 2008 highway bridge attempted bombing is ongoing in the country’s courts.

Corruption

In 2007, the Prevention of Corruption law came into effect and established an Anti-Corruption Commission. Again, in his 2011 medium-term budget policy, the minister of finance stated that corruption continued to be a major problem in the country and attributed the loss of E 80 million (USD 11.02 million) each month to corruption. While the finance minister promised additional resources for the Commission, Prime Minister Barnabas Sibusiso Dlamini expressed a lack of confidence in the institution. The prime minister continues to promise to fight corruption but without significant results. In 2011, only one major corruption case came before the courts.

Corruption is particularly prevalent in government procurement. For example, in May 2010 the general manager of Swaziland’s Central Transport Administration, Polycarp Dlamini, was arrested, along with three others, on charges of fraud. More than one year later, Dlamini pled guilty to and was convicted of defrauding the Swazi government of more than E12 million ($1.5 million). Dlamini admitted to authorizing payments to a private company – owned by one of the co-accused – for services never rendered. On August 23, 2011, the GKOS passed The Procurement Act whose aim is to provide regulation and control practice in respect of public procurement. Giving or receiving a bribe is illegal. A convicted person faces a maximum of a 100,000 emalangeni (USD 13,774) fine or ten years imprisonment. A convicted law enforcement officer or public prosecutor faces a maximum fine of 200,000 emalangeni (USD 27,548) or twenty years in prison.

Swaziland is a signatory to the UN Anti-Corruption Convention, African Union Convention on Preventing and Combating Corruption and Related Offences, and the SADC Protocol against Corruption. It has not ratified the UN Anti-Corruption Convention. Swaziland is not a signatory to the OECD Convention on Combating Bribery.

Foreign and domestic businesses have indicated that corruption and bribery requests impact profits, contracts and investment decisions for their companies.

Bilateral Investment Agreements

Swaziland has investment agreements with Great Britain, Germany, and the European Union (EU). The Cotonou Agreement between the EU and the African, Caribbean and Pacific (ACP) countries expired on December 31, 2007. Swaziland has signed an interim Economic Partnership Agreement (EPA) with the EU. In 2008, SACU and the U.S. signed a Trade, Investment, and Development Cooperative Agreement.

Swaziland has bilateral investment protection agreements with Egypt, Germany, Taiwan, Mauritius, and the United Kingdom.

Swaziland does not have a bilateral investment or bilateral taxation agreement with the U.S. The Swaziland Revenue Authority (SRA), the tax collection agency, opened its doors on January 1, 2011. Charged with improving the efficiency and rate of revenue collection in the kingdom, the SRA has been assertive in pursuing payments. The kingdom is due to implement a value-added tax of 14 percent in April 2012. VAT will replace the current sales tax.

OPIC and Other Investment Insurance Programs

The Overseas Private Investment Corporation (OPIC), the U.S. Trade and Development Guarantee Agency, and the Multilateral International Guarantee Agency have been active in Swaziland and are sources for export financing and insurance.

In 2011, the Embassy used approximately USD 7,162,565.65 (E 52,000,226.65) in local currency. The average exchange rate in 2011 was 7.26 emalangeni for one U.S. dollar. The Embassy purchases local currency at the official exchange rate. In 2011, the lilangeni (the singular form for the emalangeni) appreciated by 6.71 percent compared with the appreciation of 1.60 percent the previous year.

Labor

High HIV/AIDS prevalence rates, estimated at 26 percent of the adult population in 2007, have had an impact on economic growth in Swaziland, and companies need to take illness among its employees into account when making management decisions. There is a high level of domestic underemployment and a severe shortage of technically skilled labor, a fact that results in a heavy reliance on expatriate technicians, accountants, and engineers.

Swaziland adheres to the International Labor Organization (ILO) conventions protecting workers' rights. Labor–management relations are generally amicable. Strikes did occur periodically throughout the year. According to the Industrial Relations Act, workers can engage in a strike action if there is an unresolved dispute. The party that intends to go on strike needs to give notice to the employer, Labor Commissioner, and the Conciliation, Mediation and Arbitration Commission. Within seven days CMAC should arrange and supervise a secret ballot to determine whether the majority of employees are in favor of the strike action.

Foreign Trade Zones/Free Trade Zones

Swaziland does not have any free trade zones, but supports four industrial areas. The largest is in Matsapha, located between the primary cities of Mbabane and Manzini. It has direct rail and road links. The Matsapha Industrial Estates dry port maximizes time and cost savings for importers and exporters using the ports of Durban and Port Richard's Bay, South Africa and Maputo, Mozambique.

Foreign Direct Investment Statistics

The Central Bank tracks foreign direct investment by type and sector. Preliminary data indicate an increase in overall stock to USD 893.14 million (E 6,484.2 million) in 2010 reflecting a lower growth of 8.6 percent compared with the growth of 18.4 percent in 2009. Reinvestment of earnings and short term capital contributed to the 8.6 percent growth. Equity and long-term capital recorded negative growth of 28 percent in 2010. This is an indication that the economy lacks fresh inflows of FDI. An analysis of FDI by type reflects that reinvestment earnings are the major driver of FDI accounting for 64 percent of the total FDI in 2010. Some profitable companies ploughed back their profits for purposes of expansion. These companies reinvested their profits to generate their own power. This raised reinvested earnings by 51.5 percent to USD 573.42 million (E 4,163.1 million) in 2010. The closure of SAPPI (a wood pulp producing mill) played a pivotal role in the decline of stock of equity capital in 2010. The stock of equity capital fell by 21.8 percent to USD 62.16 million (E 451.3 million) from a marginal growth of 1.7 percent in 2009.

The opening up of the insurance industry in the country resulted in sizeable capital inflows from the region, mainly South Africa. This boosted FDI inflows to the insurance services industry which in turn had an impact on the services industry. The long-term capital component of FDI declined significantly by 59.6 percent to USD 110.7 million (E 803.7 million) during 2010 due to the loan repayments to parent companies by FDI enterprises. The manufacturing sector continues to be the leading contributor to the total stock of FDI, standing at USD 493.29 million (E 3,581.3 million), and it accounted for 55.2 percent of the total FDI in 2010.

There is no specific policy for encouraging Swazis or Swazi businesses to invest abroad. A number of Swazi businesses do have investments abroad, primarily in South Africa.

Total Foreign Direct Investment into Swaziland by Type, 2006-2010

(USD Million)

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2006

2007

2008

2009

2010 (prelim)

Equity

105.64

110.59

78.17

79.52

62.16

Reinvested Earnings

432.02

495.45

317.13

378.57

573.43

Long-term Capital

130.27

132.95

233.37

273.76

110.70

Short-term Capital

129.83

95.17

65.88

90.50

146.86

TOTAL FDI

797.78

834.16

694.56

822.34

893.14

Change in Total FDI (%)

16.5

4.6

-16.7

18.4

8.6

Change excluding reinvested Earnings (%)

14.2

-7.4

11.4

17.6

-28.0

Average Inflation (%)

5.3

8.1

12.6

7.5

4.5

Source: Central Bank of Swaziland

Note: Figures reported in historical E, converted using 2011 average exchange rate USD1/E7.26

Total Foreign Direct Investment into Swaziland by Sector, 2006-2010

(USD Million)

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2006

2007

2008

STOCK

CHANGE (%)

STOCK

CHANGE (%)

STOCK

CHANGE (%)

Manufacturing

461.62

7.7

466.59

1.1

369.70

-20.8

Services

100.81

117.1

128.79

27.7

91.26

-29.1

Investment

24.56

43.7

39.18

39.3

33.00

-3.5

Agriculture

144.86

8.3

134.98

-6.8

99.17

-26.5

Finance

51.42

6.2

58.89

14.5

100.73

71.1

Mining

10.68

0.0

10.68

0.0

4.99

-.69

TOTAL

793.95

834.13

694.56

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2009

(revised)

2010 (prelim.)

STOCK

CHANGE (%)

STOCK

CHANGE (%)

Manufacturing

416.74

12.7

493.29

18.4

Services

124.73

36.7

101.79

-18.4

Investment

35.08

6.3

36.54

4.2

Agriculture

198.93

0.0

161.75

35.8

Finance

127.42

26.6

90.27

-29.2

Mining

-0.80

-216.0

9.49

1,288.6

TOTAL

822.35

893.14

Source: Central Bank of Swaziland

Note: Figures reported in historical E, converted using 2011 average exchange rate USD1/E7.26

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