As a small nation of just over one million, Eswatini is working to position itself as an exporter that is open for business. Landlocked between South Africa and Mozambique, Eswatini is a member of 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). Eswatini has historically had a service-based economy with companies from South Africa among the major employers, however due to developments in the Africa Continental Free Trade Area (AfCFTA), strategic manufacturing for export will create new enthusiasm towards foreign market opportunities.
Eswatini is an AGOA eligible country; in 2021, the Government of the Kingdom of Eswatini (GKoE) issued a comprehensive three-year strategy to maximize the opportunities presented under the program. In 2022, government issued the National Development Plan, outlining challenges and opportunities aimed to bring Eswatini to first-world status nations by 2028. The Eswatini Investment Promotion Authority (EIPA) advocates for foreign investors and facilitates regulatory approval. Recent positive developments include the start-up of a 15,000 sqm factory that began production this year of food products for the local and export markets. Although the official government policy is to encourage foreign investment to drive economic growth, the pace of reforming investment policies is slow. The policies and reforms the country’s energy (ESERA) and telecommunications (ESCCOM) regulators are pursuing to promote innovation and competition in their industries will be important barometers on the extent to which those markets will prove friendly for international investors.
Policies are conducive to U.S. investment. The Eswatini Investment Promotion Authority (EIPA) advocates for foreign investors and facilitates regulatory approval but generally lacks the political clout to achieve its core functions. Positive investment climate factors include the eligibility of Eswatini to the African Growth and Opportunity Act (AGOA), the enactment of the Special Economic Zones (SEZ) Act, updated intellectual property legislation passed in 2022, and favorable World Bank rankings on the Ease of Doing Business.
The civil unrest experienced in 2021 and the unsettled socio-political environment are current significant negative factors dampening the investment climate as the country awaits a national dialogue and national parliamentary elections in the fall of 2023. After the murder of public security officers, a traditional chief, and prominent human rights activist Thulani Maseko in January 2023, the human rights environment is under scrutiny by international observers, including the International Parliamentary Union (IPU), who have expressed concerns about the incarceration and trial of two elected members of parliament who, the IPU states, were exercising their freedom of speech. With overall unemployment at 33%, the labor environment is largely untapped, and generally considered stable. Russia’s war against Ukraine has resulted in increased costs of production due to the high cost of intermediate inputs, particularly fuel, farming inputs such as fertilizer, medical services, and food, and non-alcoholic beverages. Inflation is estimated at 12% in 2022-2023 for food basket, with a disproportionate impact on poor households and unemployed youth, estimated at 58%.
Eswatini is seeking to redefine itself through the economic recovery strategy as an export-oriented, private sector led economy. Over the last year, overall investment trends in Eswatini include an emphasis on attracting and expanding international companies investing in Eswatini. King Mswati III has traveled in the last 16 months to New York City, Singapore, Taiwan, Tunisia, Rwanda (for Commonwealth Nations), Indonesia, Bangladesh, Qatar, and the United Arab Emirates as part of a government foreign direct investment campaign.
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 backed by a sovereign guarantee. Eswatini generally imports 80 percent of its power from South Africa and Mozambique. With both South Africa and Mozambique experiencing electricity shortages, Eswatini aspires to become energy independent by increasing its own energy generation using renewable sources. Policies are in place for renewable energy to reach 50% by 2030, however there are no incentives yet announced. 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. ICT is still an emerging sector, which Eswatini has supported through digital initiatives such as cross-functional e-governance, the Royal Science and Technology Park, and cloud-based systems. The digital migration program of the Southern African Development Community (SADC) presents ICT opportunities in the country. The country is poised for Open Radio Access Network (ORAN) 5G development and space-based low earth orbit satellite technology applications as alternatives to terrestrial internet services.
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. 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 most rural land is “held in trust for the Swati nation,” discourages long-term investment in commercial real estate and agriculture.