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Fiscal crisis coming, companies warned

image STRATEGISE: FESBC President Henry Du Pont.

THE Federation of the Swaziland Business Community (FESBC) has warned local companies to start restructuring in light of the recent pronouncement that South Africa has gone into recession.

THE Federation of the Swaziland Business Community (FESBC) has warned local companies to start restructuring in light of the recent pronouncement that South Africa has gone into recession.

The last time South Africa went into recession the Kingdom suffered a fiscal crisis two years later.

In this regard, the FESBC President Henry Du Pont said companies will be left with no option but to make some adjustments to minimise expenses and ensure survival.

South Africa moved into recession after recording a decrease of 0.7 per cent in gross domestic product (GDP) during the first quarter of 2017, on the back of a 0.3 per cent contraction in the fourth quarter of 2016.

In an earlier interview with this publication, Minister of Finance Martin Dlamini said a recession refers to negative growth rates. In a nutshell, he said it means production has come to a standstill and employment has declined.

The minister said the status of the republic will have a negative impact in the country’s economy; hence growth was projected to be less than one per cent. 

Explaining further he said this means exports, which are the main drivers of different sectors, will be affected in terms of demand.

Du Pont said businesses have already felt the brunt of the declining economy as they started recording low sales. 

Going forward, he said they anticipate the pinch to be felt at a much higher degree. 

He said this was because Swazi businesses trade mainly with their South African counterparts on a daily basis.  However, he said even though there were signs of weak growth detected some time ago, they remain optimistic and hope that the situation will somehow improve. “If you were getting higher profits, but now record lower profits or losses, the alternative is to do some adjustments to cut costs. This restructuring may have effects which might be negative, but I would not like to pre-empt what the businessmen will do,” he said. 

The minister further said the republic’s recession will affect the country’s job creation prospects and further challenge both the monetary and fiscal policies.

Therefore, he said in this case  the country should ensure both a monetary policy that will initiate growth and a developmental oriented fiscal policy.  Dlamini said South Africa’s recession would also affect the Southern African Customs Union (SACU) revenue pool. 

“This is a common phenomenon which of course over the next few years will have an implication on the SACU revenue pool, because if there is a recession, imports within SACU will also decrease. This will further hold back job creation,” he said. 

The minister, therefore, said the situation could be addressed by the policies that the South African government has to come up with.

“But, we also need to diversify our economy so that we cannot rely too much on exports to South Africa,” he said.  

This is because if South Africa doesn’t buy the 65 per cent exports that we send to the her, then that means our country will be at a standstill,” he said.

He said the country was also almost in recession as the growth rate was projected to be less than one per cent.  “Fortunately, because we are a smaller country, the impact will be not that massive except that for a long time now having experienced less than three per cent growth rates, the rate of unemployment has increased. 

“So we need strategies to create jobs and increase our production so that the country can grow,” he said. 


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