Swaziland

1Policy, Plans and Priorities

Poverty Reduction Strategy & Action Plan

PRSAP 2007 is aimed at reducing poverty by more than 50% by 2015 and eradicating poverty by 2022 through:

  • macro-economic stability and accelerated economic growth;
  • empowering the poor to generate income and reduce inequalities;
  • fair distribution of the benefits of growth through fiscal policy;
  • human capital development;
  • improving the quality of life for the poor;
  • improving governance and strengthening institutions.

A key aim of PRSAP is to attract more FDI inflows as well as to promote domestic investment through:

  • reducing the cost of doing business;
  • improving competitiveness;
  • developing and implementing a new set of investment incentives that are budget neutral; and
  • revising Foreign Direct Investment legislation to bring it into line with modern practices.

Private Sector and Growth

The Ministry of Commerce, Industry and Trade (MCIT) aims to create employment opportunities for the rural population, by decentralising industrial activities to rural areas, and help reduce poverty. The private sector is seen as the main engine of growth, with Government facilitating the process by creating an enabling environment. The decentralisation programme seeks to promote business linkages for small and medium-sized enterprises (SMEs).

Investment Policy Developed

Investment policy has not been expressed in a single comprehensive statement but an Investment Policy has been prepared and approved by Cabinet. Now awaits.

AECOM (2009) Swaziland Investment Policy report states “Several policies exist that relate in one way or another to investment. The Ministry of Commerce, Industry and Trade’s National Policy on the Development of Small and Medium Enterprises (SMEs) is one such policy. Published policies also exist on agriculture, energy, transportation, mining, education, telecommunications, public debt, and privatisation, to name but a few. Investment policy exists in Swaziland, although it may not yet be publicly expressed in a formal investment code. For example, foreign investors are guaranteed certain rights as expressed in the law that set up the Swaziland Investment Promotion Authority (SIPA). At other times, policy is espoused through membership in trade blocs such as the Southern Africa Customs Union (SACU); the Southern African Development Community (SADC); and the Common Market for Eastern and Southern Africa (COMESA). These yield substantial benefits to Swaziland and to Swazi companies, as do agreements such as African Growth and Opportunity Act (AGOA), which encourages clothing and other manufacturers to take advantage of the access that is offered to the United States (U.S.) market.”

National Export Strategy

The NES 2006 has a vision to achieve sustainable economic growth through enhanced competitiveness, value addition and export diversification in targeted sectors, and a strong Public Private Partnership (PPP) contributing to the prosperity of the people. Swaziland's trade policy objectives are:

  • to expand the export base and ensure an increased mix of exports, thus reducing the reliance on the sugar industry as the main foreign exchange earner;
  • to strengthen the existing relationships with current markets to ensure that Swaziland takes full advantage of preferences offered by these markets;
  • to enhance market access for exports from Swaziland through branding and improved product quality;
  • to improve trade facilitation through the establishment of strong public-private partnerships; and
  • to pave the way for technological innovations that will enhance the competitiveness of Swaziland's exports by ensuring the use of low cost production methodologies that do not compromise the national objective of employment creation.

The Central Bank of Swaziland (CBS), the Swaziland Investment Promotion Authority (SIPA) and the Central Statistical Office launched the first 2010 Foreign Private Capital and Investor Perception Survey in February 2010.

Economic Diversification Study

The Government of Swaziland with the assistance of the African Development Bank conducted an Economic Diversification Study to determine how diverse the Swaziland Economy is. The study has been completed and to be presented to Cabinet.

Investor Road Map

The Investor Road Map is a summary and implementation framework that relates to improvements that need to be undertaken in the country, with an ambitious target of being amongst the top 60 countries in terms of the World Bank Ease of Doing Business rankings, as per His Majesty’s launching remarks in April 2012. The Investor Road Map documents administrative, procedural and Regulatory barriers that may hinder investment in Swaziland and presents a total of 16 objectives that have been presented in order to guide the investment reform process in the country. The Investor Road Map is Government’s commitment in addressing the challenges faced by Swaziland regarding the business climate. Overcoming same will mean increased economic activity that will improve the livelihoods of all, including the profitability of our private sector.

Brand Swaziland

The launch of the Investor Road Map coincided with the launch of a national brand. This national brand is envisaged and it is supreme over and is used in communicating Government’s promise to improve the investment climate. Moreover, the national brand is meant to address and improve the national image locally, regionally as well as globally. In a nutshell, the brand signifies the promise by Government to the region and the world to make it easier to do business in Swaziland, thus it is called Swaziland; Africa’s New Promise.

Royal Science and Technology Park

The Royal Science and Technology Park (RSTP) was commissioned by His Majesty King Mswati III and he appointed a Board of Directors. The Board has since conceptualized the essential and desired characteristics of the RSTP. The RSTP will have a number of components including research facilities, meeting areas, centres of excellence, a biotech plant with incubators of researchers and business persons wishing to take advantage of the Park.The investor will have the freedom to choose from different types of buildings which best suit the specific of industry and business and all working space, from business office units of 3000m2 – 5000m2 factory buildings, are to be roomy and surrounded by the eco-environment. Targeted industries under the RSTP are Pharmacueticals, Agro-processing, Manufacturing and Assembly, etc.

2Investment Promotion

2.1Institutions

MCIT

The Ministry of Commerce, Industry and Trade is responsible for internal trade regulation, promotion of foreign and domestic investment, awarding licences to new businesses, registration of companies, intellectual property rights, domestic and export trade promotion and policy analysis. It is responsible for the sector, including formulating, implementing, and monitoring the industrial development policy, conducting industrial studies and surveys, establishing industrial estates, as well as development / expansion and sale of industrial land.

SIPA

The Swaziland Investment Promotion Authority is established by the Swaziland Investment Promotion Act 1998. SIPA's Mission is to "Promote and facilitate foreign direct and local investment in Swaziland, with the objective of creating the wealth necessary to enhance the Social and Economic Development of the Kingdom and its people."

SIPA Statutory Objects

The SIPA objectives set out in the Investment Promotion Act are:

  • to attract, encourage, facilitate and promote local and foreign investment in Swaziland;
  • to initiate, coordinate and facilitate the implementation of government policies and strategies on investment;
  • to provide a one-stop information and support facility to local and foreign investors; and
  • to advise the Minister on investment policies, strategies, proposals and suitable incentives for investors.

SIDC

Swaziland Industrial Development Corporation is a private development finance company formed as a joint venture between the government and several international and local financial institutions. The main objective of SIDC is to assist incoming companies by financing joint ventures, equity participation, asset leasing, and providing factory shells. It offers assistance in project appraisal and identification of local or foreign joint venture partners. It provides financial services including equity finance and medium-term and long-term loans at competitive interest rates and leasing of factory buildings, mostly at the Matsapha Industrial Estate. Participants in SIDC: Government of Kingdom of Swaziland 34.9%, German Investment and Development Company (DEG) 22.1%, International Finance Corporation (IFC) 13.7%, Commonwealth Development Corporation (CDC) 10.9%, Netherlands Development Finance Company (FMO) 10.2%, French Development Finance Institution (PROPARCO) 5%, Standard Bank of Swaziland 1.6%, Nedbank (Swaziland) Limited 1.6%.

SME Policy and MCIT, SEDCO, SIPA

The National Policy on the Development of SMEs defines small enterprises as having assets of E50,000 to E2m (US$6500- 260,000), 4 -10 employees, and sales of up to E3 million (US$395,000). Medium enterprises have assets valued at E2-5m (US$260,000-650,000), up to 50 employees, and sales of up to E8 million (US$1,040,000). (E = symbol of Swaziland’s currency Lilangeni (SZL).

At policy level, the SME Unit (6 staff members) in MCIT is responsible for researching and proposing changes to existing policy or developing new policy related to SMEs in such areas as finance and training. The Small Enterprise Development Company (SEDCO) (70 staff members) promotes provides business development services such as training on business management and registration of start-up ventures. SEDCO operates eight small industry estates and rents workshops to small business owners. The SME Development Unit / Domestic Investment Department in SIPA provides extensive support to SMEs as well as operating a linkages programme to help establish business relationship between SMEs and larger enterprises.

STA

The Swaziland Tourism Authority is responsible for the development of tourism. The National Tourism Development Plan indicates that new investment in tourism infrastructure is needed. The Government is seeking to greater cooperation between SIPA and STA to identify specific needs in this area.

Swaziland Sugar Association

Under the 1967 Sugar Act, the SSA is a statutory body representing all millers and growers and is responsible for sales and marketing of all sugar produced. It controls two thirds of the industry and is among the largest sugar exporters in Africa.

Swaziland Electricity Company

The Swaziland Electricity Company (SEC) provides uninterrupted power supply for major business users and all others including household electricity needs. The electricity supply is linked regionally to the electricity supply network known as the Southern African Power Pool which enables the country to obtain power at reliable and cost effective tariffs.

2.2Investment and Export Incentives

Swaziland and foreign investors may avail of incentive schemes.

Factory Shells

The Government provides additional support to qualifying investments and industries by making available competitively priced factory shells. This infrastructure eases the start-up hurdles for investors who are venturing into priority sectors.

Factory Shells

This tax incentive is available to investors qualifying as a “development enterprise” in terms of issued guidelines. These tax concesion allows for a reduction of the corporate tax to a minimum of 10% for 10 years and an exemption from withholding taxes on dividends for the same period.

Export Credit Guarantee Scheme

ECGS funds are held in treasury bills and term deposits monitored by the Central Bank of Swaziland (CBS). The CBS provides a guarantee to commercial banks lending to exporters. The scheme is administered by MCIT and enables exporters to finance working capital requirements and extend better credit terms to customers. A prospective exporter submits complete viable project proposals to a commercial bank to access ECGS funds. The exporter must be registered in Swaziland and present a business plan containing budgets and cash flow projections, audited accounts for the previous period (if already in operation), and the owner’s contribution (security or collateral) to financing the project, export orders contracts or letters of credit indicating the list of customers and volume of export trade anticipated, and any other information considered material or relevant by the bank.The ECGS covers 75% of the loan in the case of pre-shipment applications, and 85% in the case of post-shipment applications. The maximum guarantee to any one exporter is E2.5m (US$320,000). Interest is charged at the prime interest rate per annum and the CBS charges a premium of 0.53-2.33%, depending on the length and type of credit. The scheme is not widely used as few SMEs are involved in exporting and the scheme’s conditions are considered onerous.

Repatriation of Profits

The liberalized foreign exchange mechanisms also allow full repatriation of profits and dividends of enterprises operating in the country. Repatriation is also allowed for salaries of expatriate and capital repayments.

Five Year Work Permits and Visas

These are available for expatriate Directors, Senior Management and key technical personnel of new enterprises.

Investor Protection

Investments in Swaziland are protected from undue expropriation under the Swaziland Investment Promotion Act of 1998. In addition, Swaziland is a member of Multilateral Investment Guarantee Agency (MIGA) of the World Bank which provides for added legal protection of investments.

2.3EPZs, Freeports and other Special Economic Zones

There are no Export Processing Zones (EPZs) in Swaziland. WTO (2009) states that the creation of export processing zones was consider but were found not to be viable.

2.4Tax Incentives

  • The corporate tax rate is 27.5% for all companies. There is provision for unlimited carrying forward of losses for set off against future assessable income.
  • Development Approval Order: The Development Approval Order Notice, 2000 provides that in furtherance of the Income Tax Order of 1975, the Minister for Finance is empowered to issue development approval status to an investor which gives a concessional corporate tax rate of 10% for a period of 10 years. An investor that obtains this concession may be exempted from withholding tax on dividends during the 10 year tax period. The grant of a development approval order is only applicable to approved new investment, business or development enterprises in manufacturing, mining, international services and tourism and which will not unfairly compete with existing Swazi companies. Swaziland and foreign investors are eligible to apply for this incentive but the application must be made by a company incorporated in Swaziland.
  • Human resources training rebate: On approval by the Commissioner of Taxes 100% of training costs is permitted to be written off against tax liabilities.
  • Duty Free Imports: 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 SACU are exempt from import duties. The Department of Customs and Excise is responsible for monitoring this concession and determining any refund due. Refunds are normally issued as duty credits.
  • Initial depreciation allowance on new plant and machinery brought into use is 50% of cost.
  • Initial allowance on used machinery housed in a building that qualifies for an initial allowance, and not previously used in Swaziland, and not replacing other machinery is 50% of depreciated value.
  • Initial depreciation allowance on new industrial buildings (which includes hotel and company financed housing for employees) is 50% of cost.
  • Annual depreciation on cost of industrial buildings and on improvements to industrial buildings is at the rate 4% per year.

2.5International Trade & Export Promotion

Trade Promotion Unit

TPU within MCIT is the national focal point for trade promotion. The unit supports enterprises by promoting goods on world markets, identifying new export products and market opportunities, and helping enterprises participate in regional and overseas trade fairs and exhibitions by paying for the shipment costs of the exhibits and for the exhibition space. TPU is responsible for issuing certificates of origin under SADC, COMESA and GSP, while the Department of Customs and Excise issues certificates of origin for AGOA trade.

Import Permit and Export Levy

Under the Import Control Order of 1976 and Legal Notice No. 60 of 2000, 15 broad categories of products are subject to import permits issued by the Ministry of Finance: arms, automotive parts, drugs, electrical appliances, gold and other precious metals, mineral fuels, mineral oils, specified agricultural products (i.e. wheat, flour, dairy products, maize, and rice), used clothing, used earthmoving equipment, used footwear, used motor vehicles, used textiles, used tyres and tyres casings, and wild animal products. Import licensing is used to monitor the flow of licensed goods mainly for health, safety, and environmental reasons. Any individual, firm or institution may apply for an import permit, which is valid for one year (renewable for another year). Applications for import permits are submitted to the Import Permit Committee. First-time applicants must present a certificate of incorporation, memorandum and articles of association, trading licence, tax clearance certificate, original pro forma invoice for the articles to be imported, and most recent bank statement, and must agree to inspection of their premises. Subsequent applications need to be accompanied only by the current trading licence, tax clearance, and pro forma invoices. At the time of importing goods the importer must produce an invoice, bill of entry, bill of lading, and any other relevant documents. An administrative charge is levied on import permit goods.

A sugar export levy is charged on all sugar exported from Swaziland to countries outside of SACU members (Botswana, Lesotho, Namibia, and South Africa).

2.6Other Issues

Under the Swazi Economic Empowerment Initiative, a portion of sugar sold by the SSA in the regional market is reserved for local traders. The process is meant to assist traders develop exporting skills and experience.

3Access and Admission of Foreign Investors

3.1Foreign Investment & Capital Mobility

Constitution

Section 59(4) provides that foreign direct investment shall be encouraged subject to any law regulating investment.

National Treatment

The Investment Promotion Act provides for non-discriminatory treatment of investors and investment which means foreign investors are granted national treatment. There are no policies or practices that discriminate against foreign investment, and companies can be 100% foreign-owned. Foreign investment faces minimal screening, but is restricted from providing essential utilities e.g. water and electricity.