III.  Economic Trends and Outlook

During the past ten years, the growth of the Swazi economy is
largely attributable to its status as an intermediary trader with
South Africa while that country was under economic sanctions.  (A
further source of growth and improvements in infrastructure was due
to the fact that for five years - between 1986 and 1992 - the
governmental budget was in significant surplus, this allowed
investment in infrastructure and also provided capital for private
investment.)  A sharp downturn in the economy came with the drought
of 1991-92.  Fiscal prospects are now much bleaker than they were
in the heyday of sanctions and general economic prospects are now
less promising than previously.

The fastest growing part of the Swazi economy is no doubt the
public sector and that is  bound to keep growing to fill the gap in
living standards between the population that now takes part in the
formal economy and the rest of the population.  Second to that is
the growth in small manufacturing and in services.  The natural
resources or extractive industry production in Swaziland is driven
by market conditions.  Coal deposits have been under exploited.
But at least one company is actively considering exploiting these
reserves.

The government actively encourages foreign investment and is
generally committed to an open market policy.  The public
utilities, larger transportation facilities, and the communications
system are in the hands of parastatals.  The government, however,
has plans for privatizing these parastatals.  The government had a
surplus in its budgets for five years running and, thus became a
major lender in the commercial banking system in Swaziland.
Besides the funds that the government holds and has, in part, used
more or less systematically to support private enterprise or
participate in private enterprise undertakings, the monarchy
itself, as separate from the government holds resources in trust
for the nation.  These trust funds stem from rents on natural
resources and land that are exploited by expatriate interests in
Swaziland.  These funds have been invested in private enterprise
and in real estate and are still a significant source of funding
for new ventures.  The royal/national funds are not administered by
the government but by an autonomous body largely controlled by the
royal family.  Aside from supporting private enterprise and being
a major player on the private market, the government and other
public authorities tend not to command the economy but rather to
regulate it.

There are very few, if any, formal or legal barriers to trade and
investment.  Swazis are well aware of their dependence on foreign
goods and markets.  The government seeks to lower and eliminate
such de facto impediments as there are to trade and investment.

As mentioned before only about a third of the Swazi population
takes part in the formal and modern economy of the society.  This
one third is reasonably well educated and generally the Swazis
respect education and strive for it.  Over 69% of the population is
said to be literate in English or siSwati.  The educational system
is fashioned after British models and criteria.  That structure in
itself is adequate but the educational system is strained by the
fast growth of the population, presently estimated to be 3.4% per
year.  The school system, both primary and secondary, is
inadequately funded for the large numbers it should serve.  School
financing comes in part through school fees which Swazi parents and
students sacrifice much to pay.  Tertiary education is still in a
fledgling state but technical education in and after high school
has provided the educational basis for the rapid growth in the
manufacturing sector in the last decade even though new foreign
entrants into the Swazi economy find that their work force needs
further training.  Expatriate businessmen who have been here for
some time complain that Swazis do not easily take on managerial
responsibilities nor show much enterprise.  Labor relations have
been peaceful in recent years.  Labor is unionized and the union
leadership has been fairly responsible, if at times a bit erratic.

Ties of the Swazi and South African economy are so strong and so
close that one is easily tempted to view the Swazi as a small and
developing part of the South African economy.  The overwhelming
South African presence in all of the formal economy, and the
general ties of all Swazi infrastructure to conditions and
structure in South Africa make it natural to consider South African
business as domestic competitors in the Swazi economy.   The entry
of American business into the Swazi economy should be viewed as an
entry into the South African economy specifically and into the
economy of all the Southern African region generally.  Similarly
the infrastructure as regards to distribution of goods and services
can be taken as part of a larger structure in South Africa.  What
does distinguish the Swazi economy from the South African is the
fact that Swaziland is a distinct political entity and from that
fact flow occasional opportunities in that part of the economy
which is under political control, eg. Komati River Dam and Public
works.