Eswatini is a small kingdom situated in one of the most dynamic and developed regions in Southern Africa. As a small nation of one million, Eswatini is working to position itself as an exporter that is open for business. Located between South Africa and Mozambique, Eswatini boasts of membership in two of the largest free trade regions on the continent: the Southern Africa Development Community (SADC) and Common Market for Eastern and Southern Africa (COMESA). An economic-minded cabinet installed in 2018 has pursued the challenge of reinvigorating Eswatini’s economy and improving the business climate. Eswatini is an AGOA eligible country; in March, 2021, the GoKE issued a comprehensive strategy to maximize the opportunities presented under the program. The Eswatini Investment Promotion Authority (EIPA) advocates for foreign investors and facilitates regulatory approval. Recent positive developments include the start-up of a 15000 sqm factory that began production this year of food products for the local and export markets.
The Swati government has prioritized the energy sector, particularly renewable energy, and developed a Grid Code and Renewable Energy and Independent Power Producer (RE&IPP) Policy to create a transparent regulatory regime and attract investment. Eswatini generally imports 80 percent of its power from the Southern African Power Pool. With both South Africa and Mozambique experiencing electricity shortages, Eswatini is working to increase its own energy generation using renewable sources. To that end, the country has launched a small handful of new photovoltaic projects, and has commissioned a 10 MW solar plant to reduce exports from South Africa. The Eswatini Energy Regulator in 2019 and 2020 issued Requests for Qualification for two independent power producers to supply electricity from solar and biomass. King Mswati III in February 2021 announced the development of a 300 MW thermal power plant at Lubhuku. Energy demand in Eswatini is estimated to be about 300MW. Information, Communications and Technology (ICT) is also an emerging sector, which Eswatini has tried to support through initiatives such as e-governance and the Royal Science and Technology Park. The digital migration program of the Southern African Development Community (SADC) presents ICT opportunities in the country such as cloud based storage systems.
With the emergence of Covid-19 the need for ICT business and infrastructure opportunities have found their way to the top of the priority list as ICT has become the core of the new normal.
Eswatini is seeking to redefine itself through the economic recovery strategy as an export-oriented, private sector led, economy.
Incentives to invest in Eswatini include repatriation of profits, fully serviced industrial sites, purpose-built factory shells at competitive rates, and duty exemptions on raw materials for manufacture of goods to be exported outside the Southern African Customs Union (SACU). Financial incentives for all investors include tax allowances and deductions for new enterprises, including a 10-year exemption from withholding tax on dividends and a low corporate tax rate of 10 percent for approved investment projects. New investors also enjoy duty-free import of machinery and equipment. In February 2018, the GKoE enacted the Special Economic Zones (SEZ) Act in an effort to attract foreign direct investment. SEZ investors may benefit from a 20-year exemption from all corporate taxation (followed by taxation at 5 percent); full refunds of customs duties, value-added tax, and other taxes payable on 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.
Royal family involvement in the mining sector has discouraged potential investors in that sector. Eswatini’s land tenure system, where the majority of rural land is “held in trust for the Swati nation,” has discouraged long-term investment in commercial real estate and agriculture.
Eswatini has historically been a services economy with companies from South Africa being among the major employers, however due to developments in the Africa Continental Free Trade Area (AfCFTA), it is likely that strategic manufacturing for export will again take the lead in the near future as there is new enthusiasm towards foreign market opportunities.
Recent legislative reforms such as the enactment of the new Public Order Act and Sexual Offenses and Domestic Violence Act have meaningfully improved the country’s legal framework. After requalifying as an AGOA beneficiary in January 2018, Eswatini turned its attention to trying to qualify for Millennium Challenge Corporation (MCC) support. To advance these efforts, the country has launched an effort to improve its relatively poor rankings on MCC indicators such as political rights, civil liberties, and business start-up.
1. Openness To, and Restrictions Upon, Foreign Investment
Policies Towards Foreign Direct Investment
The Government of the Kingdom of Eswatini (GKoE) regards foreign direct investment (FDI) as one of the five pillars of its Sustainable Development and Inclusive Growth (SDIG) Program, and 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 only recently adopted a formal strategy for achieving measurable progress. Eswatini does not have a unified policy on investment. Instead, individual ministries have their own investment facilitation policies, which include policies on Small and Medium Enterprises (SME), agriculture, energy, transportation, mining, education, and telecommunications. The Finance Minister in his annual state of budget address stated that the government aspires to have a one stop shop for business startups to streamline government processes to less than two weeks.
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 before the constitution entered into force 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 and Swati Nation Land. Besides land ownership laws, there are no laws that discriminate against foreign investors. In 2019, the government listed some of its title deed land to make it available for long-term leasing for commercial purposes.
In practice, most successful foreign investors work with local partners to navigate Eswatini’s complex bureaucracy. Most of the country’s land is Swati Nation Land held by the king 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.
The Eswatini Investment Promotion Authority (EIPA) is the state-owned enterprise (SOE) charged with designing and implementing strategies for attracting desired foreign investors.
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
The GKoE 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.
EIPA has an aftercare division for purposes of investment retention, which is a direct avenue for investors to communicate concerns they may have. Most investors who stay beyond the initial period during which the GKoE offers investment incentives have opted to remain long-term.
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 own several of Eswatini’s largest private 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 exceptions on foreign ownership and control are in the mining sector and in relation to land ownership. The Mines and Minerals Act of 2011 requires that the King (in trust for the Swati Nation) be granted a 25-percent equity stake in all mining ventures, with another 25 percent equity stake granted to the GKoE. There are also sector-specific trade exclusions that prohibit foreign control, which include business dealings in firearms, radioactive material, explosives, hazardous waste, and the printing of currency.
Foreign investments are screened only through standard 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. EIPA 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 U.S. foreign direct investors.
Other Investment Policy Reviews
There have been no Investment policy reviews for Eswatini in the last 3 years. Through its membership in the Southern African Customs Union, its ratification of the African Continental Free Trade Agreement and its participation in the work of the WTO, Eswatini continues to pursue the importance of trade to development In 2015, the WTO performed a Trade Policy Review of the Southern African Customs Union, which includes Namibia, Botswana, Eswatini, South Africa, and Lesotho. In 2016, the Trade facilitation agreement was ratified; Eswatini’s portion of that review is available online: https://www.wto.org/english/news_e/archive_e/country_arc_e.htm?country1=SWZ
Eswatini does not have a single overarching business facilitation policy. Policies that address business facilitation are spread across the spectrum of relevant ministries. The Investor Road Map Unit (IRMU) is the public entity responsible for the review and monitoring of business environment reforms. EIPA facilitates foreign and domestic investment opportunities and has a fairly modern, up-to-date website: https://investeswatini.org.sz/. Certain GKoE application forms are available online at the EIPA website. Recent developments in the business facilitation space include the online registration of companies via the link www.online.gov.sz. As of 2020, the final steps (payment of statutory fees and registration fee) are now available online. 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.
The main organization representing the private sector is Business Eswatini (www.business-eswatini.co.sz), which represents more than 80 percent of large businesses in Eswatini, works on a wide range of issues of interest to the private sector, and seeks to build partnerships with the government to promote commercial development. Through Business Eswatini, the private sector is represented in a number of national working committees, including the National Trade Negotiations Team (NTNT).
2. Bilateral Investment and Taxation Treaties
The government does not specifically promote or incentivize outward investment, which remains a relatively new phenomenon for Eswatini.
The GKoE generally does not restrict domestic investors from investing abroad. The only two exceptions apply to the Public Service Pension Fund and the Eswatini National Provident Fund, which are state-owned enterprises (SOEs), required by law to invest a minimum of 50 percent of their balance sheets in the domestic economy.
Eswatini has bilateral investment treaties in force with the United Kingdom, Taiwan, and Germany. Eswatini has signed bilateral investment agreements with Egypt, Kuwait, and Mauritius, but these have not entered into force.
Treaties signed but not ratified:
Treaties Negotiated but not yet signed:
Malawi, Lesotho, and United Arab Emirates (UAE)
Protocol on exchange of information with South Africa
Treaties under negotiation:
In 2019, Eswatini amended its tax treaty with Mauritius, on the assumption that the treaty is ratified, the amendments will come into effect January 2022.
Eswatini does not have a bilateral investment treaty with the United States but is currently negotiating a tax information exchange agreement 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. In March, 2021, the GKoE launched an implementation plan for the EPA.
As Eswatini is 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.
3. Legal Regime
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 the UK.
Eswatini’s rule-making and regulatory authority lies with the central government and may be delegated 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. Regulatory enforcement actions can be reviewed through the court system, and court rulings are publicly available.
Adherence to the International Financial Reporting Standard (IFRS) is required for listed companies, financial institutions, and government-owned companies. It remains optional for small and medium enterprises.
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 for a fee. 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 Business Eswatini on equal footing with Eswatini nationals. Business Eswatini often serves as the link between the private sector and the government. There are no informal regulatory processes that apply to foreign investors.
Eswatini public finance and debt obligations are published online through the budget estimates book as well as the Central Bank of Eswatini’s annual report.
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 are primarily based on British law and have 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. The TFA entered into force in February 2017 and requires prompt and transparent publication of trade-related information. Eswatini developed a trade portal in partnership with the World Bank to make reliable trade-related information accessible to the private sector. The GKoE approved the portal, which now is at the data collection stage and has a full time Secretariat.
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 of Eswatini. 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 amount in controversy. There are currently no specialized commercial courts; however, the government is in the process of establishing a Small Claims Bench. Specialized Industrial Courts hear industrial relations matters.
The constitution and law provide for an independent judiciary, and the courts are generally independent of executive control or influence in nonpolitical criminal and civil cases not involving the royal family or government officials. 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 EIPA 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 proscribes anti-competitive trade practices and specifies requirements for mergers and acquisitions, and protection of consumer welfare. The new economic recovery strategy (Revised National Development Strategy) has emphasized 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 encourage competition in Eswatini’s economy by controlling anti-competitive trade practices, mergers, and acquisitions; protecting consumer welfare; and providing an institutional mechanism for implementing these objectives. The Swaziland Competition Act (http://www.compco.co.sz/documents/Competition%20Act%202007%20scanned18%20Februry%202010.pdf) and Competition Commission Regulations (http://www.compco.co.sz/documents/Competition%20Commission%20Regulations%20Notice%202010.pdf) are available online. All entities must submit their merger and acquisition plans to the SCC for prior approval. The SCC has the power to not only investigate and regulate, but also to issue administrative decisions relating to mergers, competition, and anti-trust. 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 in the past, there has been due process through Swati institutions and/or international tribunals.
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, 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.
Eswatini has not had any reported incidents of extrajudicial action against foreign investors.
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 such dispute involving an SOE (telecommunications), and it was a trade restraint matter 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/.
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 2020 Doing Business Report, Eswatini ranks 121 out of 190 economies for ease of resolving insolvency.
4. Industrial Policies
Special Economic Zone (SEZ) investors have access to numerous investment incentives more fully described above in “Laws and Regulations on Foreign Direct Investment” and below in “Foreign Trade Zones/Free Ports/Trade Facilitation.” For non-SEZ investors, the Minister of Finance has the discretion to apply 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.
The GKoE issues guarantees for key sectors like transportation and energy. There have been no reports of government jointly financing FDI projects.
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.
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 330/month); at least two thirds of its employees must be Swati citizens; and the minimum capital investment must be E30 million (USD 2.1 million) for sole companies and E70 million (USD 5 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, businesses 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.
There are two major categories of land tenure: Swati Nation Land (SNL) and Title Deed Land (TDL), each subject to different rules and procedures. More than 60 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 2020 Doing Business Report, Eswatini ranks 104 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. Though foreign or non-resident individuals generally may not own land (with some exceptions), foreign-owned businesses are able to own or lease land. Legally purchased property cannot revert to other owners (must be “willing buyer, willing seller”).
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.
Laws enacted in 2018 have updated Eswatini’s intellectual property legal framework. The Copyright and Neighboring Rights Act of 2014 (replacing the Copyright Act of 1912) protects literary, musical, artistic, audio-visual, sound recordings, broadcasts, and published editions. It also criminalizes 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 Act of 2015 establishes an Intellectual Property Tribunal, which will be responsible for hearing all matters and disputes involving intellectual property in Eswatini.
The Trademarks (Amendment) Act of 2015 brings the (1981) Trademarks Act 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.
Eswatini does not track and report on seizures of counterfeit goods. Eswatini is not listed on the United States Trade Representative (USTR) Special 301 Report or the Notorious Markets List. 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/.
6. Financial Sector
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 a handful of 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 Central Bank respects International Monetary Fund (IMF) Article VIII. Credit is allocated on market terms. Foreign investors are able to get credit and equity from the local market. A variety of credit instruments are available to the private sector including Central Bank of Eswatini loan guarantees for the export markets and for small businesses.
Money and Banking System
The majority of the Swati adult population utilizes the banking system. Despite a slow rate of economic growth, the Swati banking sector remains stable and financially sound. Asset quality improved as the ratio of non-performing loans (NPLs) to gross loans, moved from 8.2 percent in 2017 to 7.7 percent in 2018.
The estimated total assets for the country’s banks is estimated at E19.4 billion (USD 1.4 billion) as of June 2018, up from E17.9 billion (USD 1.3 billion) in March 2017. Eswatini has a central bank system. 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’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). Foreigners may establish a bank account in Eswatini if they have residency in one of the CMA countries (Eswatini, South Africa, Lesotho, Namibia).
There have been no bank closures or banks in jeopardy in the last three years. Hostile takeovers are uncommon.
Foreign Exchange and Remittances
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 1:1 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 authorized dealers, namely, First National Bank (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 heavily influenced by the South African Reserve Bank.
There have been no recent changes to investment remittance policies. There are no specified time limitations on remittances. Once documentation is complete (e.g., latest company financial statements) and relevant taxes paid, SWIFT transfers require an average of one week, and other electronic transfers can take less than a week (SWIPPS offers real-time transactions).
SWIPSS, Eswatini’s Real Time Gross Settlement System, is an advanced interbank electronic payment system that facilitates the efficient, safe, secure and real-time transmission of high-value funds in the banking sector. Direct access to SWIPSS is limited to only the four commercial banks, and these banks act as intermediaries for other financial institutions.
As part of the government policy to attract foreign investment, dividends derived from current trading profits are freely transferable on submission of documentation (including latest annual financial statements of the company concerned) subject to provision for non-resident shareholders tax. 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 with financials, but it is not required by law to do so as it is not registered under the Companies Act of 1912. The annual reports are not made public or submitted to any other state organ for debate or review. The SWF obtains independent audits at the discretion of its Board of Directors.
Tibiyo TakaNgwane states in its objectives that it supports the government in fostering economic independence and self-sufficiency. It widely invests in the economy and holds shares in most major industries, e.g., sugar, real estate, beverages, dairy, hotels, and transportation. For its social responsibility practices, it provides some scholarships to students. 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 partnerships with Tibiyo, especially if the foreign company wants to raise capital and can manage the project on its own.
7. State-Owned Enterprises
Eswatini has over 30 SOEs, which are active in agribusiness, information and communication, energy, automotive and ground transportation, health, housing, travel and tourism, building education, business development, finance, environment, and publishing, media, and entertainment.
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 the respective SOEs review their budgets before tabling them to the relevant line ministry, which, in turn, tables them to Parliament for scrutiny 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. SOEs do not receive non-market-based advantages from government.
Eswatini SOEs generally conform to 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 appointments are politically motivated. In some cases, the king appoints his own representative as well. Generally, court processes are nondiscriminatory in relation to SOEs.
Eswatini SOEs operate primarily in the domestic market.
The International Monetary Fund (IMF) has long 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 have begun to advance. Recent years have seen the launch of several private telecommunications companies such as Swazi Mobile, which has lowered prices and improved mobile and data offerings in the country.
Sectors and timelines have not been prioritized for future privatization, although it is likely that some SOEs following the public launch of the Revised National Development Strategy.
The government is working to reduce the country’s dependence on foreign electricity by promoting renewable energy production. Eswatini imports the bulk of its electricity from South Africa and Mozambique, reaching 100 percent importation during a recent drought, since domestic production comes 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 provided technical assistance on a 10-megawatt photovoltaic project that was integrated into the grid in February 2021.
8. Responsible Business Conduct
The Swati government encourages foreign and local enterprises to follow generally accepted responsible business conduct (RBC) principles. Multinational enterprises in the country have robust standards for 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 tax rate discounted by 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 local courts are responsible for ensuring human rights, labor rights, consumer protection, environmental protections, and other laws/regulations intended to protect individuals from adverse business impacts. The courts have not demonstrated a bias against foreign-owned corporations.
The mining sector of Eswatini does not have enough economic significance to warrant special consideration by the government. It is treated consistently with other sectors of similar size.
The law provides criminal penalties for corruption by officials, but the government does not implement the law effectively. Officials are reported to engage in corrupt practices with impunity. Corruption continues to be a problem, most often involving personal relationships and bribes being used to secure government contracts on large capital projects.
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. The Eswatini Public Procurement Agency (ESPPRA) 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 ESPPRA. While avoiding conflict of interest and establishing codes of conduct are policies that are encouraged, they are not 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.
The Anti-Corruption Commission (ACC) is legally allowed to investigate corruption, and does so. The ACC does not provide protection to NGOs involved in investigating corruption. Given the Commission’s current capacity, “government procurement” is the most likely area to find corruption in Eswatini. The global competitiveness report ranks Eswatini 79 of 140 countries on incidence of corruption. Transparency International reports Eswatini as the 14th least corrupt country in Africa
Though no U.S. firms have cited corruption, the 2019 Africa Competitiveness report found that 12.8 percent of business owners saw corruption as a hurdle to doing business in Eswatini, impacting profits, contracts, and investment decisions for their companies. There is a public perception of corruption in the executive and legislative branches of government and a consensus that the government does little to combat it, according to the Corruptions Perceptions Index. There have been credible reports that a person’s relationship with government officials influenced the awarding of government contracts; the appointment, employment, and promotion of officials; recruitment into the security services; and school admissions. Authorities rarely took action on reported incidents of nepotism.
Resources to Report Corruption
Contact at government agency responsible for combating corruption:
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 assembly, association, and expression. Through April 2021, the GKoE has not imposed restrictions on 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 as serious challenges.
11. Labor Policies and Practices
The structure of the labor market and economic fundamentals in Eswatini are better developed than in 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. The minimum wage is low, inequality is high (0.51 Gini coefficient), poverty is widespread, the middle class is small, overall unemployment (especially 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 must 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 absences from work that are necessitated by the employer facing certain difficulties that 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 330/month); at least two thirds of its employees must be Swati citizens; and the minimum capital investment must be E30 million (USD 2.1 million) for sole companies and E70 million (USD 5.0 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.
Although the law permits strikes, the right to strike is strictly regulated, and the administrative requirements to register a legal strike made striking difficult. Strikes and lockouts are prohibited in essential services, and the minister’s power to modify the list of these essential services provides for broad prohibition of strikes in nonessential sectors, including postal services, telephone, telegraph, radio, and teaching. The procedure for announcing a strike action requires advance notice of at least seven days. The law details the steps to be followed when disputes arise and provides penalties for employers who conduct unauthorized lockouts. When disputes arise with civil servant unions, the government often intervenes to reduce the chances of a strike action, which may not be called legally until all avenues of negotiation are exhausted and a secret ballot of union members conducted. Workers will engage in protests or “go slows” that are not classified as official strikes.
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. The law provides for the registration of unions and federations but grants far-reaching powers to the labor commissioner with respect to determining eligibility for registration. Unions must represent at least 50 percent of employees in a workplace and submit their constitutions 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.
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.
12. U.S. International Development Finance Corporation (DFC) and Other Investment Insurance Programs
There is strong potential for a DFC program in Eswatini, particularly in the renewable energy industry; however, there has not yet been a DFC (or OPIC) project in Eswatini. The GKoE has demonstrated a commitment towards encouraging private sector investment.
13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source*
USG or international statistical source
USG or International Source of Data: BEA; IMF; Eurostat; UNCTAD, Other
Host Country Gross Domestic Product (GDP) ($M USD)
Table 3: Sources and Destination of FDI No detailed information is available on the IMF’s Coordinated Portfolio Investment Survey (CPIS) website and no information is available on outward direct investment from Eswatini.
Table 4: Sources of Portfolio Investment
No detailed information is available on the IMF’s Coordinated Portfolio Investment Survey (CPIS) website and no information is available on outward direct investment from Eswatini.