Attitude toward Foreign Direct Investment
The GOS regards foreign direct investment as a means to drive the country’s economic growth, obtain access to foreign markets for its exports, and improve international competitiveness. However, the government and the royal family also exercise considerable influence in the private sector through SOEs that compete with private companies and through the government and the royal family’s substantial shareholding in private corporations. All business sectors are open to foreign investment although government approval is needed. The Swaziland Investment Promotion Authority (SIPA) is charged with designing and implementing strategies for attracting desired foreign investors. SIPA is currently functional and helpful but it is not yet a one-stop-shop for foreign investors. The Swaziland Government continues its attempts to facilitate the ease of doing business in the country, but the pace of improvement has failed to keep up with other countries in the region. Foreign investors are confused by Swaziland's dual system of governance where approval is often required by traditional authorities as well as the various government ministries.
In general, there are no laws that discriminate against foreign investors. However, in practice most successful foreign investments require local partners - often the government or the royal family - to navigate the complex bureaucracy of the country. In addition, the majority of the land is owned by the king in trust for the Swazi nation and cannot be purchased by foreign investors. Foreign investors that require significant land for the enterprise therefore must engage the king directly in business negotiations. The mining sector mandates this practice by statute. 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. Mining companies are also expected to pay rent for the area where company mining is going on to the head of state. The Swaziland Government recognizes the significant potential of gold, iron ore, diamonds and coal and is placing renewed emphasis on the sector and is seeking foreign investors.
Other Investment Policy Reviews
Swaziland has been a World Trade Organization (WTO) member since 1995. There has been no investment policy review conducted by UNCTAD, WTO, or OECD. The GOS is continuing to work with the United States Agency for International Development (USAID) Southern African Trade Hub in reviewing and implementing the recommendations of the Swaziland Investor Roadmap, which can be found at pdf.usaid.gov/pdf_docs/Pnadw920.pdf.
Laws/Regulations of Foreign Direct Investment
Swaziland's legal and regulatory environment is underdeveloped, opaque, and unpredictable. But there are no efforts to restrict foreign investment by industry standards-setting organizations. The Competition Law of 2007 stipulates anti-competitive trade practices, requirements for mergers and acquisitions and protecting consumer welfare, and provides for an institutional mechanism for implementing these objectives. The country's Economic Recovery Strategy identifies the need to promote reforms in order to facilitate investment. The executive regularly interferes in court administration, case allocations, and judicial decisions. In cases involving the government or royal family, investors are unlikely to receive a fair hearing. However, the courts independently rule on purely private business disputes.
The Swaziland Investment Promotion Authority (SIPA) helps navigate the laws, rules, procedures and registration requirements for foreign investors. SIPA’s website is: www.sipa.org.sz/
Investors can access registration forms for their companies on this website.
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. SIPA is the agency that facilitates foreign investment and it is open to all investors.
Microenterprises are those employing up to 3 people with a capital investment up to E50,000 (US$3,170) and a turnover of up to E60,000 (US$3,800). Small enterprises are those employing 4 to 10 people with a capital investment from E50,000 to E2 million (US$3,170 to 127,000) and a turnover of up to E3 million (US$190,000). Medium enterprises are those employing 11 to 50 people with a capital investment from E2 million to E5 million (US$127,000 to $317,000) and a turnover of up to E8 million (US$507,000).
Other than the facilitation assistance provided by SIPA, there are no official government programs to attract investment.
Energy and Mining and Information Communications and Technology are two areas that the GOS is currently promoting.
Limits on Foreign Control and Right to Private Ownership and Establishment
Foreign investors own the majority of Swaziland’s largest businesses, either fully or with minority participation by Swazi institutions. There are no legal restrictions on foreign ownership that are discriminatory against foreign investors, but the government and the royal family's direct investment in industry is a practical limitation to foreign investment requiring a Swazi investor or joint venture. Both foreign and domestic private entities have a right to establish businesses and acquire and dispose of interest in business enterprises.
The only industries that have limits on foreign control are mining and real estate. According to the Mines and Minerals Act of 2011, in any mining company the king acquires 25 percent of shareholding without any monetary consideration and another 25 percent shareholding is allocated to the government. Foreigners cannot own the majority of the country’s land as it remains in trust for the Swazi nation and the King and chiefs have control over its use and allocation.
The International Monetary Fund (IMF) has advised the Swaziland government to privatize SOEs, particularly in the telecommunications sector and the electricity sector. In response, the Swaziland 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 Act establishes a Commission to regulate and supervise the operation of electronic communications networks and the provision of electronic communications services in the country, including the regulation of data protection in electronic communications. 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 Swaziland government is also working on producing its own electricity using renewable energy. Swaziland imports the bulk of its electricity from South Africa (80 percent) and approximately 10 percent from Mozambique. With both countries experiencing electricity shortages, Swaziland is working on producing its own energy using renewable energy. The government has developed a Renewable Energy and Independent Power Producer (RE&IPP) Policy with the help of USAID’s Southern Africa Trade Hub with the hope of incentivizing investors in this sector.
The Swaziland Energy Regulatory Authority regulates the sector, screening investors interested in establishing power generation facilities.
Screening of FDI
Any company wishing to invest in Swaziland must adopt articles of incorporation governed by the laws of Swaziland. Investors are screened for credit worthiness, business ethics, and criminal records. Foreign direct investment in manufacturing may need an environmental impact assessment. Investors complain about the amount of time the screening process takes and the cost involved.
U.S. companies have complained about the approval process with the Central Bank of Swaziland for capital transfers. While the law allows repatriation of profits, there have been instances where the regulatory approval process took a significant amount of time and effort.
With the implementation of the Swaziland Investor Roadmap 2005 that was re-launched in 2012, SIPA coordinates the screening of foreign investors. The Ministry of Commerce screens trading licenses, Registrar of Companies handles registration, and entry/work permits for investors are handled by immigration. The Central Bank of Swaziland reviews applications for offshore investment by companies registered in Swaziland. The reviewing authorities are generally found to be transparent. However, the various government ministries are not always responsive to investor inquiries and, therefore, SIPA must be heavily involved in this process.
The general purpose of the screening is for the government to manage risk associated with unknown foreign investors and to encourage domestic employment. According to the Companies Act of 2009, any person, company or other corporate body, aggrieved by any decision, ruling or order of the Registrar of Companies may bring the matter under review by the High Court.
At minimum, a foreign investor must supply the following documents for screening:
The requirement of a lease agreement can be problematic if a lease has not been signed pending the registration of the company. Companies have avoided this by having a condition subjecting its enforceability to the company registration.
The Swaziland Competition Commission reviews investment and its effect on specific industries, the effect on employment, and the ability of small businesses to be competitive. All mergers and acquisitions are subject to screening and approval by the Swaziland Competition Commission.