July 8, 2004

Unemployment continues to grow

The number of unemployed in Swaziland has continued to grow reflecting shrinkage in the formal sector, according to a report by the Ministry of Economic Planning and Development released this week. Despite the benefits for Swazi textile factories of the renewal of the US government's African Growth and Opportunities Act (AGOA), which opens its market to tariff free exports, unemployment is officially over 40 percent. Government blames the closures of some long-established business in Swaziland, including an automotive and a hardware franchise for the high unemployment rate. The report also identified the strength of the South African rand, to which the Swazi currency, the lilangeni, is linked, as having affected the profitability of the private sector. "As formal sector jobs diminish, there is an impact on the informal sector, which will continue growing by 13.2 percent per annum. The trend reflects that over and above [formal sector] retrenchments, households are shifting from farming to non-farm small and medium enterprises," the report said.

Although the continuation of Swaziland in AGOA has been a relief to the mainly Asian-owned garment industry that has set up shop in the kingdom, it is apparently not enough. "The exchange rate appreciation, coupled with a rise in costs, high wages, and transport from the landlocked country, and low productivity, has resulted in the closure of four garment companies," said the ministry's report. Swazi garment workers now earn an average $130 a month, compared to $82 a month two years ago. The growing informal sector poses "a structural challenge if it continues bulging in relation to the size of the economy," said the ministry. According to Swaziland Federation of Trade Unions Secretary General, Jan Sithole, "the informal sector is no substitute for formal sector employment. There are no benefits, no pensions, no medical or retirements schemes, no safety or working regulations, and no taxes to benefit the national economy."

The trade unionist also criticised Swaziland's taxation system, which he said was the reason why skilled Swazis had fled to neighbouring South Africa. "While people are made to pay high taxes, it is not clear how government uses the tax in order to benefit the taxpayers," Sithole added. The formal sector is also threatened by a possible cut in the price of Swaziland's main export, sugar. Swaziland enjoys guaranteed sales of sugar through a treaty with the European Union, which sometimes purchases the commodity at a price higher than the global market rate. Swazis are entitled to ask for a special preferencial sugar price of $523.7 per mt. The finance ministry, however, noted that negotiations for the lowering of the price to $290 per mt are ongoing. "This 45 percent decline is expected to affect sales and volumes," as well as employment, the ministry reported. (IRIN)


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