2018 Investment Climate Statements: Eswatini

Policies Toward Foreign Direct Investment

The Government of the Kingdom of Eswatini (GKoE) 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 not been very effective in implementing that policy. The government has largely left events to take their own course, following the trends, interests, and opportunities that the country’s location and resources offer. Eswatini does not have a single policy on investment, but rather investment facilitation is spread across various ministries and can be found in their relevant policies including the Small and Medium Enterprise (SME) policy, agriculture, energy, transportation, mining, education, telecommunications, and various other policies. Calls for more concerted action on these policies have intensified in the last few years as Eswatini has suffered from drought, fiscal challenges, and general economic recession.

The Swati constitution states, generally, that non-citizens and/or companies with a majority of non-citizen shareholders may not own land unless they were vested in their ownership rights prior to the enactment of the constitution in 2006. On the other hand, the constitution’s general prohibition “may not be used to undermine or frustrate an existing or new legitimate business undertaking of which land is a significant factor or base.” Furthermore, non-citizens and non-citizen majority-owned companies may hold long-term (up to 99 years) leases on Title Deed Land. Outside of land ownership laws, there are no laws that discriminate against foreign investors. In practice, most successful foreign investors associate local partners to navigate the complex bureaucracy of the country. In addition, the majority of the land is Swati Nation Land held by the king “in trust for the Swati Nation” and cannot be purchased by foreign investors. Foreign investors that require significant land for their enterprise must engage the Land Management Board to negotiate long-term leases on Title Deed Land.

The Swaziland Investment Promotion Authority (SIPA) is charged with designing and implementing strategies for attracting desired foreign investors. Eswatini’s Investment Policy (http://www.sipa.org.sz/images/documents/pdf/Swaziland_Investment_Policy_2012_2.pdf ) and Industrial Policy (http://www.sipa.org.sz/images/documents/pdf/Industrial_Development_Policy%202015_2022
_Swaziland_FINAL_AND_ADOPTED.pdf ) are available online. SIPA is currently functional and helpful, but it is not yet a one-stop-shop for foreign investors. SIPA services include:

• Attract and promote local and foreign direct investments
• Identify and disseminate trade and investment opportunities
• 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 Eswatini Government continues its attempts to improve the ease of doing business in the country through the Investor Roadmap Unit (IRU). The IRU engages with businesses and government 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. It is noteworthy that those investors that stay beyond the 5-year investment incentives generally offered by government have not only been retained but have not found a sufficient reason to relocate.

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. Foreign investors currently own the majority of Eswatini’s largest businesses, either fully or with minority participation by Swati institutions.

There are no general limits on foreign ownership and control of companies, which 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 investments are only screened for typical background and credit checks. Under the Money Laundering and Financing of Terrorism (Prevention) Act of 2011, investors must submit certain documents including proof of residence and source of income for deposits. SIPA also conducts general screening of FDI monies through credit bureau checks and Interpol. This screening is not a barrier to investing in Eswatini. There are no discriminatory mechanisms applied against US foreign direct investors.

Other Investment Policy Reviews

In 2015, the WTO performed a Trade Policy Review of the Southern African Customs Union which included Namibia, Botswana, Eswatini, South Africa, and Lesotho (https://www.wto.org/english/tratop_e/tpr_e/tp424_e.htm ). Eswatini’s portion of that review is available online: https://www.wto.org/english/tratop_e/tpr_e/s324-04_e.pdf .

Business Facilitation

Eswatini 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 the review and monitoring of business environment reforms. SIPA facilitates foreign and domestic investment opportunities and has a fairly modern, up-to-date website: http://www.sipa.org.sz/index.php/en/ . Certain GKoE application forms are available online at the SIPA website. However, despite online information to suggest the contrary, the Swati government does not currently have a functioning online business registration process. Instead, a company must reserve a unique name for itself by physically visiting the Registrar of Companies at the Ministry of Commerce Industry and Trade. The company must pay statutory fees, including a reservation of name and registration fee, to the Swaziland Revenue Authority (SRA) and obtain a tax clearance from the SRA. According to the Doing Business Report, the process of registering a company in Eswatini takes approximately 10 days. In practice, the process can take much longer for foreign investors.

Outward Investment

The government does not specifically promote or incentivize outward investment, as this is a relatively new phenomenon for Eswatini. There have been a few cases, such as in the retail sector, and the largest outward investment is currently being pursued by the Royal Swazi Sugar Corporation (RSSC) in acquiring land from South Africa for the growing of 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.

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

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

As Eswatini is also part of COMESA, SADC, and SACU, it is a party to other agreements in force such as the SACU-US TIDCA, SACU – Mercosur, SADC Investment Protocol, the European Free Trade Association (EFTA)-SACU FTA, the COMESA-US TIFA, and the SADC –EAC-COMESA TFTA. Eswatini does not have a bilateral taxation treaty with the United States.

Transparency of the Regulatory System

In general, the laws of the country are transparent, including laws to foster competition. The Swaziland 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 Competition Act of 2007. The legal and regulatory environment is underdeveloped, but currently growing as the GKoE has recently established additional regulatory bodies in the financial, energy, communications, and construction procurement sectors. These bodies generally attempt to emulate the regulatory practices of South Africa or Britain.

Eswatini’s 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. There are no regulatory processes managed by nongovernmental organizations or private sector associations.

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. Regulations are generally developed and reviewed through various stakeholder consultations. The use of science and data to inform regulatory reform is not widespread.

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.

International Regulatory Considerations

Eswatini 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 is primarily based on British law and has been domesticated accordingly into each context.

Eswatini is a member of the WTO and notifies all draft technical regulations to the WTO Committee on Technical Barriers to Trade. Eswatini signed and ratified the Trade Facilitation Agreement (TFA) in 2016 and has begun implementing its requisites. For example, in partnership with the World Bank, Eswatini is currently developing a trade portal to make reliable trade-related information accessible to the private sector.

Legal System and Judicial Independence

Eswatini has a dual legal system consisting of a set of courts that follow Roman-Dutch law and a set of national courts that follow Swati 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 Swati 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 currently 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 as outlined by the Swati constitution. 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, creating significant case backlogs.

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 prescribes 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.

In February 2018, the GKoE enacted the Special Economic Zones (SEZ) Act in an effort to attract foreign direct investment. The benefits for an SEZ investor include: a 20-year exemption from all corporate taxation, followed by taxation at the rate of 5 percent; full refunds of customs duties, value-added tax, and all other taxes payable in respect of goods purchased for use as raw material, equipment, machinery, and manufacturing; unrestricted repatriation of profits; and full exemption from foreign exchange controls for all operations conducted within the SEZ.

Competition and Anti-Trust Laws

The Swaziland Competition Commission (SCC) was established in 2007 to provide for the encouragement of competition in Eswatini’s economy by controlling anti-competitive trade practices, mergers and acquisitions, protecting consumer welfare and providing for an institutional mechanism for implementing these objectives. The Swaziland Competition Act  and Competition Commission Regulations  are available online. All entities must submit their merger and acquisition plans to the SCC for prior approval. Although the SCC has the power not only to investigate and regulate, but also to issue administrative decisions relating to mergers, competition and anti-trust, it has yet to issue a formal decision. There have been no rulings against foreign investors since the establishment of the Swaziland Competition Commission.

Expropriation and Compensation

The law prohibits expropriation and nationalization. The Swati constitution narrowly limits the GKoE’s powers to deprive a landowner of “property or any interest in or right over property,” except where “necessary,” conducted pursuant to a court order, and compensated by the “prompt payment of fair and adequate compensation.” Anyone whose property interests are threatened by expropriation is also expressly granted due process rights under the constitution. There have been no recent cases of foreign-owned businesses being expropriated, and, when disputes have arisen, there has been due process through Swati institutions and/or international tribunals.

In 2010, there was a dispute on a 99-year lease on title deed land with a company developing a tourist business in the southern part of Eswatini bordering South Africa. The disputed facility was a lodge and was supposed to be a trans-frontier wildlife park between Eswatini and South Africa. 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 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 it lost tens of millions of dollars.

Dispute Settlement

ICSID Convention and New York Convention

Eswatini is a member state of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention). It 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 Swati legal system has effectively enforced court decisions and international arbitration awards in the past.

Investor-State Dispute Settlement

Eswatini is a member state of the International Centre for the Settlement of Investment Disputes (ICSID Convention) and the Multilateral Investment Guarantee Agency (MIGA). Eswatini, as a member of SACU, signed a Trade, Investment and Development Cooperative Agreement in 2008 with the United States. 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 section above, but none involving U.S. citizens.

The Eswatini government accepts binding international arbitration of investment disputes between foreign investors and the state. All government agreements with international investors/parties include venue and choice of law provisions. Local courts recognize and enforce foreign arbitral awards issued against the government, but do not have jurisdiction against the king, who is constitutionally protected.

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. Eswatini 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.

SOEs are rarely involved in investment disputes. In the last 10 years, there has been only one case involving an SOE (telecommunications), and it was a trade restraint dispute in which the SOE lost the case. There have not been any complaints about the court processes, and court records are available online for public scrutiny at: https://www.swazilii.org/ .

Bankruptcy Regulations

The Insolvency Act of 1955 is the law that governs bankruptcy in Eswatini. 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 or 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.

The most widely used credit bureau in Eswatini is Transunion.

In the World Bank’s 2018 Doing Business Report, Eswatini ranks 114 out of 190 economies for ease of resolving insolvency.

Investment Incentives

At the discretion of the Minister of Finance, the Swati government 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 Eswatini guarantees loans raised by investors for export markets. There is also provision of loss cover that a company can carry over in case it incurs a loss in the year of assessment. Eswatini has a human resources training rebate that offers a tax credit for 150 percent of the cost of training.

Foreign Trade Zones/Free Ports/Trade Facilitation

In February 2018, the GKoE enacted the Special Economic Zones (SEZ) Act in an effort to attract foreign direct investment. The Act establishes two designated SEZs: the Royal Science and Technology Park and King Mswati III International Airport. According to the Act, investors may establish additional SEZs outside of these designated areas by satisfying the minimum requirements and submitting an application to the Minister of Commerce. Under the Act, foreign-owned firms have the same investment opportunities as Swati entities.

In order to operate within an SEZ, a beneficiary company must meet the following minimum requirements (among others): at least 90 percent of its employees must be paid at or above the threshold for income taxation (approximately USD 350/month); at least two thirds of its employees must be Swati citizens; and the minimum capital investment must be E30 million (USD 2.5 million) for sole companies and E70 million (USD 5.8 million) for joint ventures. The benefits for an SEZ investor include: a 20-year exemption from all corporate taxation, followed by taxation at the rate of 5 percent; full refunds of customs duties, value-added tax, and all other taxes payable in respect of goods purchased for use as raw material, equipment, machinery, and manufacturing; unrestricted repatriation of profits; and full exemption from foreign exchange controls for all operations conducted within the SEZ.

Performance and Data Localization Requirements

The Ministry of Labor and Social Security’s Training and Localization Unit requires the hiring of qualified Swati 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.

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 Eswatini, 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 encryption. The technology industry in Eswatini is still in its infancy.

Real Property

There are two major categories of land tenure: Swati Nation Land (SNL) and Title Deed Land (TDL), each subject to different rules and procedures. 56 percent of Eswatini’s territory is SNL, governed by the country’s traditional structures. SNL is “held in trust for the Swati people” by the king, who appoints chiefs to oversee its use. The chiefs keep records of who “owns” or resides on land in their chiefdom. For TDL, the Eswatini government recognizes and enforces secured interest in property and there is a reliable system of recording security interests. 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, on the other hand, is TDL. The law allows for eminent domain in limited circumstances, but requires prompt payment of adequate compensation.

In the World Bank’s 2018 Doing Business Report, Eswatini ranks 115 out of 190 economies for ease of registering property. This ranking refers to property in periurban areas, where TDL is widely available. SNL is not titled, and lending institutions are reluctant to use it as collateral.

Intellectual Property Rights

Protection for patents, trademarks, and copyrights is currently inadequate under Swati 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 pending bills to amend the Copyright Act of 1912 and the Trademarks Act of 1981. The Copyright and Neighboring Rights Bill of 2014 will change Eswatini’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 Eswatini.

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.

Eswatini does not track and report on seizures of counterfeit goods. Eswatini is not listed on the USTR’s 2017 Out-Of-Cycle Review of Notorious Markets, or in the 2018 Special 301 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

Eswatini’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 GKoE 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

Eswatini 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 Eswatini guarantees loans for the export market and for small businesses

Money and Banking System

Only 43 percent of the Swati adult population is banked. The Swati banking sector was stable and financially sound, but the asset quality deteriorated notably during the year with non-performing loans and advances expressed as a percentage of gross loans at 10.25 percent in March 2017, representing a significant increase from the 5.0 per cent recorded in March 2016. Furthermore, their profitability showed significant deterioration when compared to the previous year, mainly due to a severe drought that impacted negatively on economic growth, the volatile exchange rate market, and increased cost of borrowing, which resulted in low credit extension and high non-performing loans. Banking sector assets grew by 5.0 percent to E17.9 billion during the year ending March 2017, up from E17.0 billion at the end of March 2017. Eswatini’s banks are primarily subsidiaries of South African banks. Standard Bank is the largest bank by capital assets and employs about 400 workers. Eswatini has a central bank system.

Eswatini’s financial sector is liberalized and allows foreign banks or branches to operate under the supervision of the Central Bank’s laws and regulations (http://www.centralbank.org.sz/financialregulation/banksupervision/index.php ). 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 Policies

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. Eswatini is part of the Common Monetary Area (CMA) which also includes South Africa, Namibia, and Lesotho. All capital transfers into Eswatini from outside the CMA require prior approval of the Central Bank to avoid problems in the subsequent repatriation of interest, dividends, profits, and other income accrued. Otherwise, there are no restrictions placed on the transfers.

Eswatini mainly deals with three international currencies: the U.S. Dollar, the Euro, and the British Pound. The Swati Lilangeni is pegged to the South African Rand, which is accepted as legal tender throughout Eswatini. 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.

Because the Lilangeni is pegged to the Rand, its value is determined by 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 Eswatini do not exceed 60 days. The Eswatini 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 Eswatini, Tibiyo TakaNgwane. This fund is not subject to government or parliamentary oversight and does not provide information on assets or financial performance to the public. Tibiyo TakaNgwane 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 TakaNgwane 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 Swati 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 TakaNgwane invests entirely in the local economy and local subsidiaries of foreign companies. It 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.

Eswatini has over 30 SOEs, which are active in agriculture, ICT, energy, health, housing, tourism, education, business development, financial services, environment, and media. The Swati government defines SOEs as private enterprises, separated into two categories. Category A represents SOEs that are wholly owned by government. Category B represents SOEs in which 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. The Ministry of Finance’s Public Enterprise Unit (PEU) maintains a published list of SOEs, available on request from the PEU. There are no non-market based advantages that SOEs receive from government.

SOEs in Eswatini generally practice 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

The International Monetary Fund (IMF) has advised the Eswatini government to privatize SOEs, particularly in the telecommunications sector and the electricity sector. In response, the government has passed several laws, and privatization efforts are begin to advance. 2017 saw the launch of the private company Swazi Mobile, which already has had the effect of dramatically lowering prices and improving mobile and data offerings in the country. The Swaziland Communications Commission Act and the Electronic Communications Act came into effect on July 31, 2013. The Swaziland Communications Commission Act established 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 Act transferred regulatory powers from the SOE Swaziland Posts and Telecommunications Corporation to the Commission.

The government is also working to produce its own electricity using renewable energy. Eswatini imports the bulk of its electricity from South Africa and Mozambique, reaching 100 percent importation during a recent drought, since domestic production has come predominantly from hydropower. With assistance from USAID’s Southern Africa Energy Program (SAEP), the government has developed a National Grid Code and a Renewable Energy and Independent Power Producer (RE&IPP) Policy to provide a framework for the sector and incentivize investors. SAEP is currently providing technical assistance on two separate 10-megawatt photovoltaic projects that are projected to break ground in 2018.

Multinational enterprises in the country have robust standards for responsible business conduct (RBC), and consumers often recognize their efforts; however, smaller domestic companies are less likely to have RBC programs. The Development Approval Order, which is part of the income tax law, allows a company to receive a reduced tax rate of up to 10 percent if it makes significant RBC investments. Government enforcement is sporadic, but generally does not vary based on whether a company is domestic or foreign. 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 NGOs monitoring RBC. The Swati government encourages foreign and local enterprises to follow generally accepted RBC principles.

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 goods or services, however this prohibition does not extend to family members of officials, or to political parties. The Swaziland Public Procurement Agency (SPPRA) 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.

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

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

Foreign and domestic businesses have indicated that corruption and bribery solicitations impact profits, contracts, and investment decisions for their companies. There have been credible reports that a person’s relationship with government officials influences the awarding of government road construction and other contracts; the appointment, employment, and promotion of officials; recruitment into the security services; and school admissions.

Resources to Report Corruption

Contact at 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 2017, the Swati government enacted a new Public Order Act and amendments to the Suppression of Terrorism Act that have dramatically reduced restrictions on speech and expression. Through March 2018, the GKoE has honored the newly expanded legal freedoms. There are no examples from the past ten years of damage to projects or installations. Overall, Eswatini has a long record of political stability with sporadic nonviolent protest. However, poor living and working conditions, widespread poverty, income inequality, and a large and growing youth population continue to yield a political environment conducive to unrest.

The structure of the labor market and economic fundamentals in Eswatini are better developed than many 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. Nevertheless, although Eswatini 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 (0.51 Gini coefficient), poverty is widespread, the middle class is small, overall unemployment, including youth unemployment, is high, and female representation is low.

Eswatini has a shortage of technically skilled labor. The government has identified several sectors as priorities in terms of building skilled labor capacity: agricultural engineering, ICT, 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 Swati 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. In 2018, Eswatini enacted the Special Economic Zones (SEZ) Act in an effort to attract foreign direct investment. In order to operate within an SEZ, a beneficiary company must meet the following minimum requirements (among others): at least 90 percent of its employees must be paid at or above the threshold for income taxation (approximately USD 350/month); at least two thirds of its employees must be Swati citizens; and the minimum capital investment must be E30 million (USD 2.5 million) for sole companies and E70 million (USD 5.8 million) for joint ventures..

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. 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 Eswatini’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.

Eswatini has ratified the eight core 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 Eswatini 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, Eswatini 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.

In 2018, Eswatini enacted a new Public Order Act that substantially loosened restrictions on public gatherings, including eliminating the requirement for prior consent for gatherings of fewer than 50 persons and completely removing restrictions on private gatherings. A gathering no longer requires permission, but instead only requires notice that provides basic information as to time, place, date, and logistics. Demonstrators no longer have to provide information as to the content of their planned speech.

There is potential for an Overseas Private Investment Corporation (OPIC) program in Eswatini, particularly in the renewable energy industry. The GKOS has demonstrated a commitment towards encouraging private sector investment. However, there is not yet an OPIC agreement between Eswatini and the United States.

Table 3: Sources and Destination of FDI

Foreign direct investment position data are not available for Eswatini.

Table 4: Sources of Portfolio Investment

Portfolio investment data are not available for Eswatini.

Political/Economic Officer
U.S. Embassy Eswatini
+268-2417-9663
Mbabane-Pol-Econ@state.gov