2017 Investment Climate Statements: Swaziland

Policies Towards Foreign Direct Investment

The Government of the Kingdom of Swaziland (GKOS) regards foreign direct investment (FDI) as a means to drive the country’s economic growth, obtain access to foreign markets for its exports, and improve international competitiveness. While the government has strongly encouraged foreign investment over the past 15 years, it has been less effective in translating this enthusiasm to tangible improvements in economic growth. The government has not had a coordinated or proactive approach in shaping the country’s investment policies. Rather, GKOS has largely followed the trends, interests, and opportunities that the country’s location and resources offer. Swaziland does not have a single policy on investment, rather, the government’s investment facilitation efforts are spread across various ministries and are part of policies on Small and Medium Enterprises (SME), agriculture, energy, transportation, mining, education, and telecommunications, and among others. Calls for more concerted action on these policies have intensified in recent years as the economy has suffered from a general recession and the country has faced a drought.

In theory, the government has not implemented laws that discriminate against foreign investors. However, in practice, most successful foreign investments require local partners to navigate the complex bureaucracy of the country. In addition, the majority of the land is held by the king “in trust for the Swazi Nation” and cannot be purchased by foreign investors. Foreigners that require significant Swazi National land for their enterprise must therefore engage with the king, through the Land Management Board, in order to secure a long-term lease, typically for 99 years.

The Swaziland Investment Promotion Authority (SIPA) is charged with designing and implementing strategies for attracting desired foreign investors. While SIPA is currently functional and helpful, it is not yet a one-stop-shop for foreign investors. SIPA services include:

• Identify and disseminate trade and investment opportunities
• Attract and promote local and foreign direct investments
• Provide investor facilitation and aftercare services
• Promote internal and external trade
• Undertake research and policy analysis
• Facilitate company registration and business licenses/permits
• Facilitate work permits and visas for investors
• Provide a one stop shop information and support facility for businesses
• Export product development
• Facilitation of participation in external trade fairs
• Buyer-Seller Missions

The GKOS continues its attempts to improve the ease of doing business in the country through the Investor Roadmap Unit (IRU). Since 2015, the IRU has been engaging with businesses and government twice per month to review and report on the progress and implementation of the investor roadmap reforms.

SIPA has an “aftercare” division which is a direct avenue for investors to communicate concerns they may have with the environment in which they operate. It is noteworthy that investors that choose to stay beyond the 5 years during which the government offers investment incentives, often plan to stay long-term and have not reported sufficient cause to relocate elsewhere.

Limits on Foreign Control and Right to Private Ownership and Establishment

Both foreign and domestic private entities have a right to establish businesses and acquire and dispose of interest in business enterprises. Currently, the majority of Swaziland’s largest businesses are foreign owned, such as Royal Swaziland Sugar Corporation, Coca-Cola Swaziland (Conco Ltd.), Illovo Sugar Ltd., Mondelēz International, and Tex-Ray Swaziland; of these firms, some are fully foreign owned or have minority participation by Swazi institutions.

There are no general limits on foreign ownership and control. Companies can be 100 percent foreign owned and controlled. The only industries that have limits on foreign ownership and control are mining and real estate. The Mines and Minerals Act of 2011 stipulates that the king will acquire 25 percent of shareholding without any monetary consideration and another 25 percent shareholding in any mining enterprise will be allocated to the government. There are also sector-specific exclusions that prohibit foreign control which include business dealings in firearms, radioactive material, explosives, hazardous waste, and security printing.

Foreign investment is only screened when a financial institution employed by the investor must conduct typical background and credit checks. If the investor has their own sources of funding, there is typically no additional screening required by the government.

Other Investment Policy Reviews

In 2015, a Trade Policy Review of the Southern African Customs Union (Namibia, Botswana, Swaziland, South Africa, and Lesotho) was conducted by the World Trade Organization (WTO), with more information available on the WTO website . Additional documents related to the review can be found here .

Business Facilitation

Swaziland does not have a single overarching business facilitation policy. Policies that address business facilitation can be found across the spectrum of relevant ministries. The IRU is the public entity that is responsible for investor facilitation through the review and monitoring of business facilitation mechanisms. SIPA facilitates foreign and domestic investment opportunities. Swaziland does not have an online business registration process. A company must reserve a unique name for itself through the Registrar of Companies at the Ministry of Commerce. The company must pay a reservation of name fee to the Swaziland Revenue Authority (SRA) and obtain a tax clearance from the SRA. The process of registering a company takes approximately 10 days. According to the World Bank’s 2017 Ease of Doing Business Report, Swaziland ranked 111 of 190 countries globally, with the report citing that it takes 12 separate procedures to start a business.

Outward Investment

GKOS does not specifically promote or incentivize outward investment, as this is a relatively new phenomenon for Swaziland. There have been a few cases, such as in the retail sector, and the largest outward investment is currently being pursued by the Royal Swaziland Sugar Corporation (RSSC) to acquire land from South Africa to cultivate sugarcane.

There are no restrictions on domestic investors from investing abroad. The only two exceptions may be the Public Service Pension Fund and the Swaziland National Provident Fund which are state-owned enterprises (SOEs) and are required by law to invest a minimum of 30 percent of their balance sheets in the domestic economy.

Swaziland has bilateral investment treaties in force with the United Kingdom and Germany. Swaziland has signed bilateral investment agreements with Egypt, Taiwan, Kuwait, and Mauritius, but these have not entered into force. Swaziland does not have a bilateral investment treaty with the U.S.

The European Union (EU) concluded negotiations on an Economic Partnership Agreement (EPA) on July 15, 2014, with the Southern African Development Community (SADC) group comprised of Botswana, Lesotho, Mozambique, Namibia, South Africa, and Swaziland. The EPA entered into force in October 2016.

As Swaziland is also part of COMESA, SADC, and SACU, it is a party to other agreements in force such as the SACU-US TIDCA, SADC Investment Protocol, the European Free Trade Association (EFTA)-SACU FTA, the COMESA-US TIFA, and the Cotonou Agreement with the EU.

Swaziland does not have a bilateral taxation treaty with the U.S

Transparency of the Regulatory System

In general, the laws of the country are transparent, including those to foster competition. However, the legal and regulatory environment is underdeveloped, and at times opaque and unpredictable. For instance, Swaziland does not have an approved trade policy, investment policy, or industrial policy.

There are no regulatory processes managed by nongovernmental organizations or private sector associations. Foreign investors coming into the country can join the Federation of Swaziland Employers and Chamber of Commerce (FSE&CC) on an equal basis with nationals of the country. This association is the link between the private sector and the government. There are no informal regulatory processes that apply to foreign investors. Local businesses who wish to establish trading infrastructure on Swazi Nation Land (SNL) must be members of the Swaziland Commercial Amadoda (who have had exclusive rights on trade and transport on SNL since 1947). Investors wishing to establish trade on SNL are normally facilitated by government through SIPA or the line ministry.

The rule-making and regulatory authority lies with the central government and may be allocated by the relevant line ministry to a department, parastatal, or board. The primary custodian of policy and regulation is the minister responsible for the relevant law. All laws, regulations, and policies are applied at a national level.

Proposed laws and regulations are published in the government Gazette and have a public comment period of thirty days prior to a bill’s presentation to parliament. Ministries sometimes consult with selected members of the public and private sectors through stakeholder meetings. Most draft regulations are not available online, but can be acquired in hard copy through the government printing office.

International Regulatory Considerations

Swaziland is part of four distinct economic blocks: the Common Monetary Area (CMA), the Southern African Customs Union (SACU), the Southern African Development Community (SADC), and the Common Market for Eastern and Southern Africa (COMESA). The standards of membership in these blocks are primarily based on British law and have been domesticated accordingly into each context.

Swaziland is also a member of the WTO and notifies all draft technical regulations to the WTO Committee on Technical Barriers to Trade.

Legal System and Judicial Independence

Swaziland has a dual legal system consisting of a set of courts that follow Roman-Dutch law and a set of national courts that follow Swazi law and custom. The former consists of a Court of Appeals (Supreme Court) and a High Court, in addition to magistrate’s courts in each of the four districts. The traditional courts deal with minor offenses and violations of traditional Swazi law and custom. Sentences in traditional courts are subject to appeal and review at the Court of Appeals and High Court. The western-style court system enforces contracts and property rights.

The country has various written commercial and contractual laws. Commercial and contractual disputes are handled in the magistrate court or High Court depending on the magnitude of the case. There are no specialized commercial courts, however, the government is in the process of incorporating a Small Claims Court as an additional resource in the judicial system. There is an Industrial Court that hears industrial relations matters.

The courts are generally independent of executive control or influence, however the judiciary has been subject to some criticism in recent years. The current judicial process is procedurally competent, fair, and reliable, although the capacity of the judiciary to handle cases in a timely manner is extremely limited and case backlogs are prevalent.

Enforcement of laws and regulations is appealable up to the Supreme Court.

Laws and Regulations on Foreign Direct Investment

The Swaziland Investment Promotion Act of 1998 established SIPA and provides for the freedom of investment, protection of investment, and non-discrimination on the part of the government with respect to investors. The Competition Act of 2007 stipulates anti-competitive trade practices, requirements for mergers and acquisitions, and protection of consumer welfare. The Economic Recovery Strategy identifies the need to promote further reforms in order to facilitate investment.

The Swaziland Investment Promotion Authority (SIPA) helps navigate the laws, rules, procedures, and registration requirements for foreign investors and is meant to be a “one-stop-shop” for investors, although in practice that it not a reality. SIPA’s website is: www.sipa.org.sz .

Competition and Anti-Trust Laws

The Competition Act came into force in 2007 and the Competition Commission Regulations came into effect in 2011. The Swaziland Competition Commission (SCC) is a statutory body charged with the administration and enforcement of the Swaziland Competition Act of 2007. However, it is still at the formative stage and currently only regulates mergers and acquisitions. It does not yet have the capacity to prosecute anti-trust and anti-competitive behavior.

Expropriation and Compensation

The law prohibits expropriation and nationalization. There have been no known cases of foreign-owned businesses being expropriated and generally, when disputes have arisen, there has been due process to the level of international tribunals. However, the land tenure system in Swaziland can pose challenges to foreign investors. There are two major categories of land tenure: Swazi Nation land and title deed land, with each subject to different rules and procedures.

In 2010, there was a dispute on a 99-year lease on title deed land with a joint South African/Swazi company developing a tourist business in the southern part of Swaziland bordering South Africa. The disputed facility was a lodge and was supposed to be a trans-frontier park between Swaziland and South Africa housing wildlife. The King tried to cancel the 99-year lease agreement with the foreign investor and the owners of the facility appealed to the High Court, but a settlement was never reached.

In 2014, a dispute emerged involving a foreign investor in the iron ore mining business. The investor was accused of misrepresenting his operational costs and complained he was driven out of the country by the king’s advisors. He accused the government and king of destroying the business to avoid repaying a loan the company had provided to the king. The mining business closed after three years in operation and the company complained that they lost tens of millions of USD in investment and lost earnings. The closure of the company also left many Swazi contractors with unpaid compensation amounting to over E40 million (approximately USD $3 million).

Dispute Settlement

ICSID Convention and New York Convention

Swaziland is a member state of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention). Swaziland is not a signatory to the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.

There is no specific legislation providing for enforcement of awards under international conventions, but the Swazi legal system has effectively enforced court decisions and international arbitration awards in the past.

Investor-State Dispute Settlement

Swaziland is a member state of the International Centre for the Settlement of Investment Disputes (ICSID Convention) and the Multilateral Investment Guarantee Agency (MIGA). As a member of SACU, Swaziland signed a Trade, Investment and Development Cooperative Agreement in 2008 with the U.S. There have been no claims under this agreement.

There have been at least two major investment disputes involving foreign investors in the past ten years, as described in the Expropriation and Compensation section above, but none involving U.S. citizens.

The Swaziland government 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. Local courts recognize and enforce foreign arbitral awards issued against the government, but do not have jurisdiction against the King, as he is constitutionally protected. This has become an issue in the few disputes that have arisen involving companies that are partly owned by the King and the GKOS that have invested in natural resources.

International Commercial Arbitration and Foreign Courts

The only alternative dispute resolution (ADR) mechanism available to settle disputes between two private parties is in the labor sector. The Conciliation, Mediation and Arbitration Commission (CMAC), which is governed by the Industrial Relations Act of 2000, resolves employer-employee disputes. This is the only domestic arbitration body; Swaziland does not have a domestic arbitration body to deal with investment or commercial disputes.

Local courts recognize and enforce foreign arbitral awards and judgments of foreign courts.

State-owned enterprises (SOEs) are not often involved in investment disputes. In the last 10 years, there has been only one case involving an SOE (telecommunications) and it was a restraint on trade dispute in which the SOE lost the case. There have not been any complaints about the court processes as their records are available for public scrutiny as well as further appeal.

Bankruptcy Regulations

The Insolvency Act of 1955 is the law that governs bankruptcy in Swaziland. The insolvent debtor or his agent petitions the court for the acceptance of the surrender of the debtor’s estate for the benefit of his creditors. Creditors need to petition with the court and provide documents supporting their claim.

Bankruptcy is only criminalized if the debtor, trustee, or sole owner does not comply with the requirements of the creditor. For example, if he/she fails to submit documents, declare assets, or if he/she obstructs or hinders a liquidator appointed under the Act in the performance of his functions, then he/she could be found guilty of an offense.

In the World Bank’s 2017 Doing Business Report, Swaziland’s ranking in the category of Ease of Resolving Insolvency dropped to 95 from 91 the previous year, out of 190 economies.

Investment Incentives

At the discretion of the Minister of Finance, the GKOS applies a reduced tax rate of 10 percent for the first ten-year period of operation, which is 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. The law allows for 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 markets. There is also provision of loss cover which a company can carry over in case it incurs a loss in the year of assessment. Swaziland also has a human resources training rebate in which 150 percent of the cost can be written against tax for training.

Foreign Trade Zones/Free Ports/Trade Facilitation

The government through the IRU is drafting legislation on the development of special economic zones in the country. As of May 2017, the bill has yet to be presented to Parliament.

Performance and Data Localization Requirements

The Ministry of Labor and Social Security (Training and Localization Unit) requires the hiring of qualified Swazi workers where possible, even at executive positions. The mandate of the Unit is to ensure the maximum utilization of local manpower resources and to formulate training plans in conjunction with industries so as to maximize employment. It also facilitates and provides information on the process of obtaining work permits. Foreign investors are required to apply for residence and work permits. Although they are generally awarded, business people complain that the process is cumbersome. SIPA is now supervising the application of these permits for incoming foreign businesses as part of the implementation of the Investor Roadmap.

There are no government-imposed conditions on permission to invest. The government does not follow a “forced localization” policy. However, in the manufacturing sector, if a company plans to label a product for export as made in Swaziland, the government requires that the local content of such export be at least 25 percent.

There are no requirements for foreign IT providers to turn over source code or provide access to surveillance (backdoors into hardware and software) or turn over keys for encryption. The technology industry in Swaziland is still in its infancy.

Real Property

For titled property, the GKOS recognizes and enforces secured interest in property and there is a reliable system of recording security interests. However, the land tenure system in Swaziland can pose challenges to foreign investors, and Swazis, alike. There are two major categories of land tenure: Swazi Nation land (SNL) and title deed land, each subject to different rules and procedures. Most land in the country is SNL and is governed by the country’s traditional structures. SNL is “held in trust for the Swazi people” by the king who appoints chiefs to oversee its use. The chiefs keep records of who “owns” or resides on what land in their chiefdom. The Constitution protects the right to own property, but most rural land is SNL and is not covered by this constitutional protection. Most urban property is title deed land. The law allows for eminent domain but requires compensation.

The World Bank’s 2017 Doing Business Report ranking for ease of registering property refers only to property in urban areas where there are title deeds for land; Swaziland ranks 117 out of 190 economies in this category. SNL is not titled and lending institutions are often reluctant to use it as collateral. Foreign businesses tend to have more difficulty accessing SNL than local businesses due to the very different processes required to be able to use it and lack of knowledge of the traditional structures that govern its use.

Intellectual Property Rights

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. Trademark protection is addressed in the Trademarks Act of 1981. Copyright protections are addressed under four statutes, dated 1912, 1918, 1933, and 1936.

There are bills that are pending to amend the Copyright Act of 1912 and the Trademarks Act of 1981. The Copyright and Neighboring Rights Bill of 2014 will change Swaziland’s intellectual property law. The new law would protect literary, musical, artistic, audio-visual, sound recordings, broadcasts, and published editions. It would also criminalize illicit recording and false representation of someone else’s work. The Act also gives the duration of copyright among other things. The Swaziland Intellectual Property Tribunal Bill of 2015 will establish an Intellectual Property Tribunal, which will be responsible for hearing all matters and disputes involving intellectual property in Swaziland.

The Trademarks (Amendment) Bill of 2015 will amend the Trademarks Act of 1981 and bring it into compliance with provisions of the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS), the Madrid Agreement concerning International Registration of Marks, and the Banjul Protocol on Trademarks. None of these proposed amendments have yet been passed into law.

Swaziland does not track and report on seizures of counterfeit goods. Swaziland is not listed in the U.S. Trade Representative’s Special 301 report, nor is it listed in the notorious market report.

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

Capital Markets and Portfolio Investment

Swaziland’s capital markets are closely tied to those of South Africa and operate under conditions generally similar to the conditions in that market. In 2010, the GKOS passed the Securities Act to strengthen the regulation of portfolio investments. The Act was primarily intended to facilitate and develop an orderly, fair, and efficient capital market in the country.

Swaziland has a small stock exchange with only six companies currently trading. In 2010, the Financial Services Regulatory Authority (FSRA) was established. This institution governs non-bank financial institutions including capital markets, insurance firms, retirement funds, building societies, micro-finance institutions, and savings and credit cooperatives. The royal wealth fund and national pension fund invest in the private equity market, but otherwise there are few professional investors.

Existing policies neither inhibit nor facilitate the free flow of financial resources. The demand is simply not present. The Central Bank respects International Monetary Fund (IMF) Article VIII.

Credit is allocated on market terms. The Central Bank of Swaziland guarantees loans for the export market and for small businesses.

Money and Banking System

Only 43 percent of the Swazi adult population is banked. The Swazi banking sector is healthy; non-performing assets were estimated at 6.6 percent in 2015. The total assets of Swazi banks are approximately E15.4 billion (approximately USD $1.2 billion). Swaziland’s banks are primarily subsidiaries of South African banks. Standard Bank is the largest bank by capital assets and employs about 400 workers. Swaziland has a central bank system.

Swaziland’s financial sector is liberalized and allows foreign banks or branches to operate under the supervision of the Central Bank’s laws and regulations. For more information, see the Central Bank’s website . There have been no bank closures or banks in jeopardy in the last three years. Hostile takeovers are uncommon.

Foreign Exchange and Remittances

Foreign Exchange

There are no limitations on the inflow or outflow of funds for remittances. Dividends derived from current trading profits are freely transferable on submission of appropriate documentation to the Central Bank, subject to provision for the non-resident shareholder tax of 15 percent. Local credit facilities may not be utilized for paying dividends. Swaziland is part of the Common Monetary Area (CMA) which also includes South Africa, Namibia, and Lesotho. All capital transfers into Swaziland from outside the CMA require prior approval of the Central Bank of Swaziland to avoid problems in the subsequent repatriation of interest, dividends, profits, and other income accrued. Otherwise, there are no restrictions placed on the transfers.

Swaziland mainly deals with three international currencies: the U.S. Dollar, the Euro, and the British Pound. The Swazi Lilangeni, denoted as E, is pegged to the South African Rand which is accepted as legal tender throughout Swaziland. To obtain foreign currency other than Rand one must apply through an authorized dealer and a resident who acquires foreign currency must sell it to an authorized dealer for the local currency within ninety days. No person is permitted to hold or deal in foreign currency other than an authorized dealer, namely, First National Bank of Swaziland (FNB), Nedbank, Standard Bank, or Swazi Bank.

As the Lilangeni is pegged to the South African Rand, its value is therefore determined by the Rand and the monetary policy of the CMA, which is most heavily influenced by the South African Reserve Bank.

Remittance Policies

There have been no recent changes to investment remittance policies. The average delay period in remitting investments is dependent on the mode of remitting funds. SWIFT transfers average a week, while other electronic transfers typically take less than a week. If all required documents are submitted, remittances in Swaziland do not exceed 60 days. The Swaziland government does not issue dollar-denominated bonds. Otherwise, there are no limitations on the inflow and outflow of funds for remittances of profits or revenue.

Sovereign Wealth Funds

In 1968, the late King Sobhuza II created a Royal Charter that governs the Sovereign Wealth Fund (SWF) in Swaziland, Tibiyo TakaNgwane (Tibiyo). This fund is not subject to government or parliamentary oversight and does not provide information on assets or financial performance to the public. Tibiyo publishes an annual report, but it is not required by law to do so. Similarly, the SWF obtains independent audits at its own discretion.

Tibiyo states in its objectives that it supports the government in fostering economic independence and self-sufficiency. The SWF widely invests in the economy and holds shares in most major industries, e.g., sugar, commercial real estate, beverages, dairy, hotels, and transportation. For its social responsibility practices it provides some scholarships to students. Tibiyo does not have any legal obligations other than the vague language of investing in assets “in trust for the Swazi nation”. Tibiyo is run as a private equity investment fund for the benefit of the King and the royal family. The SWF and the government co-invest to exercise majority control in many instances. Tibiyo invests entirely in the local economy and local subsidiaries of foreign companies. Tibiyo has shares in a number of private companies. Sometimes foreign companies can form relationships with Tibiyo, especially if the foreign company wants to raise capital and can manage the project on its own.

State-owned enterprises (SOEs) are active in agriculture, information and communication technology, energy, health, housing, tourism, education, business development, financial services, environment, and media. The Swaziland government defines SOEs as private enterprises despite the government ownership. They are separated into two categories; category A includes SOEs that are wholly owned by government, while category B includes SOEs in which the government has a minority interest or which monitor other financial institutions or a local government authority. These categories are further broken down into profit-making SOEs with a social responsibility focus, those that are profit-making and developmental, those that are regulatory, and those that are regulatory but developmental. SOEs purchase and supply goods and services to and from the private sector including foreign firms. Those in which government is a minority shareholder are subject to the same tax burden and tax rebate policies as the private sector. The Public Enterprise Act governs SOEs. The Boards of SOEs review the budget before tabling it to the line ministry, which, in turn, tables it to Parliament where it is scrutinized by the Public Accounts Committee. A published list of SOEs in Swaziland can be found under the Ministry of Finance, Public Enterprise Unit, at http://www.gov.sz . There are no non-market based advantages that SOEs receive from government.

SOEs in Swaziland generally follow standards set by the OECD Guidelines on Corporate Governance for SOEs. Senior managers of SOEs report to the board and in turn the board reports to a line minister. The minister then works with the Standing Committee on Public Enterprise (SCOPE), which is composed of cabinet ministers. SOEs are governed by the Public Enterprises Act, which requires audits of the SOEs and public annual reports. Government is not involved in the day-to-day management of SOEs. Boards of SOEs exercise their independence and responsibility. The Public Enterprise Unit provides regular monitoring of SOEs. The line minister of the SOE appoints the board and in some cases, the allocation is politically motivated. In some cases, the king appoints his own representative as well. Generally, court processes are nondiscriminatory in relation to SOEs.

Privatization Program

In 2003, the International Monetary Fund (IMF) advised the Swaziland government to privatize SOEs, particularly in the telecommunications sector and the electricity sector. In response, the government passed several laws, but privatization efforts remain slow. The Swaziland Communications Commission Act and the Electronic Communications Act came into effect on July 31, 2013. The Swaziland Communications Commission Act establishes a Commission to regulate and supervise the operation of electronic communication networks and the provision of electronic communication services in the country, including the regulation of data protection in electronic communication. The SOE, Swaziland Posts and Telecommunications Corporation (SPTC), besides being the provider of the service, was also the regulator. The Act now transfers the regulatory powers from SPTC to the Commission.

The government is also working to produce its own electricity using renewable energy. Swaziland imports the bulk of its electricity from South Africa and Mozambique, reaching 100 percent importation in times of recent drought, since domestic production is mostly from hydro power. The government has developed a National Grid Code and a Renewable Energy and Independent Power Producer (RE&IPP) Policy with technical assistance from USAID’s Southern Africa Trade Hub in order to provide a framework for the sector and incentivize investors.

Multinational enterprises active in Swaziland typically have robust standards for responsible business conduct (RBC) and consumers often recognize these efforts. However, smaller domestic companies are less likely to have RBC programs. To the extent possible, the government encourages both foreign and local enterprises to follow accepted RBC principles. The Development Approval Order, which is part of the income tax law, allows a company to apply to the Minister of Finance if it plans to make significant RBC investments in the country, and receive in return a reduced tax rate of up to 10 percent. Government enforcement of penalties to irresponsible companies is sporadic but generally does not vary based on whether a company is domestic or foreign. Minimum labor compliance requirements are not waived to attract foreign investment. The government does not have corporate governance, accounting, and executive compensation standards to protect shareholders. There are no independent non-governmental organizations that monitor RBC efforts.

The Prevention of Corruption Act and the Swaziland Public Procurement Act are the two laws that combat corruption by all persons, including public officials. The Public Procurement Act prohibits public sector workers and politicians from supplying the government with good or services, however this prohibition does not extend to family members of officials, or to political parties. The Swaziland Public Procurement Agency (SPPRA) has conducted capacity building exercises nationwide with both public and private companies to increase knowledge and encourage adoption of universally practiced purchasing systems. According to Section 27 of the Public Procurement Regulations, suppliers are prohibited from offering gifts or hospitality, directly or indirectly, to staff of a procuring entity, members of the tender board, and members of the SPPRA. While avoiding conflict of interest and establishing codes of conduct are policies that are encouraged, they cannot be effectively enforced. Some companies use internal controls and audit compliance programs to try to track and prevent bribery.

Swaziland is a signatory to the African Union Convention on Preventing and Combating Corruption and Related Offenses and the SADC Protocol against Corruption. Swaziland has signed and ratified the UN Anticorruption Convention, but it is not party to the OECD Anti-Bribery Convention.

Only the government’s Anti-Corruption Commission is legally allowed to investigate corruption. Government procurement is the most likely area to find corruption in Swaziland.

Foreign and domestic businesses have indicated that corruption and bribery offers impact profits, contracts, and investment decisions for their companies on a scale similar to what is found in South Africa.

Resources to Report Corruption

Contact at the government agency responsible for combating corruption:

Thanda Mngwengwe
Commissioner, Swaziland Anti-Corruption Commission
3rd Floor, Mbandzeni House, Mbabane
+268-2404-3179/0761
anticorruption@realnet.co.sz

There are few incidents of politically motivated violence in Swaziland. Police have been known to harass, arrest, and imprison critics of the government. In addition, the police routinely prevent or monitor meetings planned by labor unions and other organizations focused on political or socio-economic issues because they fear the groups’ political motivations will result in violence and instability. There are no examples, over the past ten years, of this sort of policy activity damaging foreign-run projects or installations.

Overall, Swaziland is generally stable with sporadic nonviolent protest. However, the low economic growth rate and lack of social protection has begun to politicize the otherwise apolitical rural majority. The pace of political transformation is slow, but likely certain, given social and economic demographics.

The structure of the labor market and economic fundamentals in Swaziland are in many ways much better developed than most other Sub-Saharan African countries. For example, GDP per capita is higher, the informal sector is smaller, exports are more diversified, the overall education level is higher, and the labor pool is predominantly domestic. The literacy rate in 2013 was 89 percent. According to the Swaziland Central Statistics Office the Unemployment Rate Relaxed stands at 40.6 percent while the Strict Definition stands at 28.5 percent. However, the youth unemployment rate is the highest at 42.3 percent. While Swaziland is considered a middle-income country, it has many characteristics of a low-income country. For example, the minimum wage is at a similar level, inequalities are high, poverty is widespread, the middle class is small, overall unemployment, including youth unemployment, is high, and female representation is low. Furthermore, it is estimated that 31 percent of 15-24 year olds have not completed primary education in Swaziland.

Swaziland has a shortage of technically skilled labor. The government has identified several sectors as priorities in terms of building skilled labor capacity: agricultural engineering, information and communication technology, medicine, medical imaging, and occupational health. Other priority fields that the government may sponsor include physiotherapy, paramedic studies, forestry, special education, clinical and dental science, and pharmacy.

The law requires that employers give first preference to Swazi nationals unless they cannot find candidates with the necessary qualifications.

The Employment Act states that if an employer contemplates adjusting employment to respond to fluctuating market conditions, the employer will give no less than one month’s notice to the Labor Commissioner and the trade union. The employer must provide the number of employees to be affected, their occupations and remuneration, the reasons for the adjustment, the effective date, financial statements and audited accounts of the company, and options that have been considered to avert the situation. Section 34 of the Employment Act says if the services of an employee are terminated other than being fired, a severance allowance amounting to ten working days’ wages for each completed year in excess of one year continuously employed by that employer is due. Layoffs are defined as temporary absence from work which is necessitated by the employer facing certain difficulties which are temporary in nature, while firing refers to the sacking of an employee. There are no social safety net programs for workers who are laid off.

Labor laws are not waived in order to attract or retain investment. Swaziland does not have foreign trade zones, but is in the process of drafting legislation to establish a special economic zone and it is not yet known whether there may be different labor law provisions for that zone.

Labor unions practice collective bargaining, but there are few industry associations and bargaining is conducted largely with individual employers in the private sector. Collective bargaining is common in the financial and textile sectors.

The Conciliation, Mediation and Arbitration Commission (CMAC) serves as Swaziland’s labor dispute resolution mechanism. Labor disputes generally start at CMAC with mediation and arbitration. Either party can refuse arbitration and bring the case to the Industrial Court, however, due to severe backlogs at the court the matter may not be heard for several years. According to the Industrial Relations Act, workers can engage in a strike action if there is an unresolved dispute. When disputes arise with civil servant unions, the government often intervenes to reduce the chances of a protest or strike action, which may not be legally called until all avenues of negotiation have been exhausted and a secret ballot of union members has been conducted.

Despite its legal recognition, the right to strike is strictly regulated. The party that intends to go on strike needs to give notice to the employer, the Labor Commissioner, and CMAC. CMAC must arrange and supervise a secret ballot to determine whether the majority of employees are in favor of the strike action. Strikes and lockouts are prohibited in essential services. Employees who are not engaged in essential services have the right to undertake peaceful protest actions to “promote or defend socio-economic interests” of workers, i.e., not for matters of a purely political nature. In the past year there have been two strike actions in which violence broke out between police and protestors. The government has been reluctant to publicly condemn the actions of the police and while investigations into the incidents have been ordered, no public reports have been released.

Swaziland has ratified the eight core International Labor Organization (ILO) conventions; however, compliance gaps with international labor standards continue to remain in both law and practice. The law provides that workers, except for those in essential services, have the right to form and join independent unions, conduct legal strikes, and bargain collectively. However, other laws restrict freedom of assembly, association, and expression in ways that can abrogate these rights. The law provides for the registration of unions and federations, but grants wide discretion to the Labor Commissioner with respect to determining eligibility for registration. Unions must represent at least 50 percent of employees in a workplace to be automatically recognized. The law also gives employers discretion to recognize a union as a collective employee representative if it has less than 50 percent membership, and furthermore, allows employers to set conditions for such recognition. The Department of Labor has inspectors who verify whether companies adhere to labor regulations, health and safety standards, and wage laws. The Minister of Labor sets minimum wages through the Wages Councils.

The ILO has identified areas where Swaziland is not in compliance with international labor standards and included the country in the ILO’s “special paragraph” in 2015 for failing to allow freedom of association of workers. In 2012, Swaziland deregistered federations, which also attracted the attention of the ILO, citing that the Industrial Relations Act did not provide for the registration of federations. After years of international pressure, in 2014, an amendment to the Industrial Relations Act was passed providing for the registration of federations, but it took another six months to actually have them officially registered.

No new labor laws or regulations have been enacted during the course of this past year.

Swaziland has not signed an agreement with the Overseas Private Investment Corporation (OPIC), and there are not currently any other investment insurance programs in the country.

Table 3: Sources and Destination of FDI

Foreign direct investment position data are not available for Swaziland.
Table 4: Sources of Portfolio Investment

Portfolio investment data are not available for Swaziland.

Political/Economic Officer
U.S. Embassy Swaziland
+268-2417-9000
Mbabane-Pol-Econ@state.gov