INVESTING IN SWAZILAND


Strategically situated between South Africa and Mozambique, Swaziland offers a safe, sensible, free market economy with some of the best infrastructure in Africa. In addition, its natural beauty and preserved culture coupled with a contemporary lifestyle make living and working in the country an enjoyable experience. Swaziland has a low cost base with natural, developed human and agricultural resources, and is well positioned to export under existing preferential trade agreements into the US, EU, and several African trading blocs (including COMESA and SACU). Excellent relations between Swaziland and South Africa place them in a common monetary area (CMA), pegging the Swazi Lilangeni one-to-one with the South African Rand. With a literacy rate of 82%, Swaziland’s labour force is skilled and trainable. Production costs compare favourably with other low-cost destinations internationally. Collectively, the benefits of setting up businesses in Swaziland have inspired such multi-national corporations such as Cadbury Schweppes, YKK Zippers, Coca Cola, Tex-Ray Industrial and others to establish operations in the country. These success stories illustrate the variety of opportunities available to potential investors.

Swaziland is able to compete in the investment market through a number of factors, including;
 Wide spectrum of investment opportunities
 Access to production resources - raw materials, land, finance, human resources
 Excellent road and communication infrastructure - fully digital, fibre optic telecommunications system
 Superb and affordable utility services - clean water and stable electricity
 Developed and solid financial services
 Wide regional and international market access
 Safe, secure, stable and profitable business environment
 Proximity to strategic international sea and air ports

Investment Trends
The Manufacturing and Processing sectors have been the major contributors to economic growth over the years. This is due to government’s commitment to increasing sectors contribution through a variety of incentives. Agriculture is the second leading sector and Tourism has recently been nurtured to advance as a sector whose potential is just being unleashed. In an endeavour to broaden and sustain the Manufacturing sector, Swaziland is shifting her focus to high value investments, mainly to attract efficiency seeking medium sized technical companies. Such investments are in a better position to sustain the economy and to absorb the available human resources as well as improve exporting. Areas of investment that are promoted include food processing and agri-business, BPO & Contact Centres, electronic components assembly (white goods), energy, mining, timber and value addition to sugar, pharmaceuticals and light engineering.

 

 

The Swaziland Investment Promotion Authority (SIPA)
The Swaziland Investment Promotion Authority (SIPA) was established in 1998 to promote and facilitate foreign and local investment in Swaziland. Its main objective is to create the wealth necessary to enhance the social and economic development of the kingdom and its people. Since it was launched, SIPA has facilitated numerous foreign and local investments, including the incorporation and licensing of companiesc and businesses, the facilitation of temporary and permanent work permits for crucial human resource, the provision of factory and office space, and assistance in sourcing of venture capital and operating finance. SIPA is renowned for advising on available and potential business investment opportunities in Swaziland, providing analysis of the cost of doing business in each sector. Additionally SMEs are linked with local and external institutions with the aim of encouraging skills and technology transfer. The organisation’s other role is to assist and encourage expansions and diversification through the provision of investment and sector profiles. Through collaboration with other key stakeholders SIPA has formed sound strategic relationships with chambers of commerce, investment promotion and other development related agencies within and outside Swaziland, including nongovernment and development finance institutions. In order to fulfill its mandate, SIPA operates through four professional well resourced departments:

Foreign Direct Investment:
This department is the first point of call for foreign direct investment. To date the unit has handled FDI stock totaling to US$1.1 billion. Swaziland’s competitiveness is marketed through this department.

Domestic Investments: SIPA has encourage and natured SMEs to grow to a competitive level. This department locates synergies with other local and external businesses through trade nursery mechanism. SIPA has fostered the local supply and sub-supply of enabling infrastructure for the SME sector through innovative means, thereby developing SME joint ventures, and outsourcing.

Investor Facilitation and Aftercare:
All foreign and domestic investments go through this department for the settlement and comfort of investors while doing business in the country. Several investors have enjoyed the services of this unit wherein it liaises with Government departments on various issues, making the investor either a temporary or permanent business resident in Swaziland.

Research and Policy Analysis:
This new department was set up to provide information that influences policy and formulates strategy for SIPA and Government to grow investment in Swaziland. Beyond conducting business and sector risk analysis, the unit also monitors and interprets macro and micro economics, including the social and political environments, in order to keep SIPA relevant to investors and Swaziland.

The Trade Promotion Unit
The TPU is a department under the Ministry of Commerce, Industry and Trade and is a focal point entrusted with the responsibility of promoting the growth of exports by functioning as a catalyst to motivate existing and potential exporters.

The TPU identifies new export products and services and related international market opportunities, and develops existing, emerging and potential global markets. It provides export-oriented services to exporters, as well as to those entities that service them. To this end, it distributes information on business opportunities in global markets and promotes international business orientation among local producers by undertaking trade promotions and publicity campaigns in foreign markets. The development of and lobbying for policies and legislation to support the sustainable development of export opportunities is a further function of the TPU, which continuously evaluates the global market and crafts appropriate strategies for the exploitation of these opportunities. The Trade Promotion Unit is guided by a set of values that hinge on professionalism, knowledge and the delivery of service in a friendly, accessible and helpful manner.

The Swaziland International Trade Fair The SITF is organised by the TPU and takes place over 10 days in August/September at the state-of-the-art Mavuso Trade and Exhibition Centre in Manzini. SITF receives support from Government and patronage from Their Majesties. The objective is to provide a strategic platform for large, medium and small businesses, including importers and exporters, to showcase their products and services to key buyers and potential trading partners within and outside Swaziland. SITF is open to the private and public sectors, with the primary focus being on increased private sector participation as the main driver for economic development. The centre accommodates over 250 exhibitors from local and foreign companies and governments. Many of the 35,000 plus visitors are decision makers in their organisations and as many buy on the spot, exhibitors enjoy improved cash flow as well as follow up business. The Trade Fair programme comprises seminars where prominent organisations and influential people are invited to make presentations on trade, finance, investment, tourism and ICT. It also provides entertainment that caters for all the family, including music festivals, fashion shows, children’s games, cars shows, cultural events and sports.

Investment Incentives
These include:
 Membership of several economic and trade agreements giving Swaziland’s export commodities preferential access to many markets.
 The Swaziland Investment Promotion Authority, which is outlined at the beginning of this chapter.
 The ongoing review of investment incentives and any legislation which creates bureaucratic obstacles.
 Updating the Companies Act by
producing the Companies Bill and the passing of the 2000 Industrial Relations Act.

 Reviewing general business regulations to ensure minimum bureaucracy, with no attempt to control trade.

 Greater efficiency in granting work and resident permits and citizenship.

 An infrastructure that is one of the best in sub-Saharan Africa.

 Ensuring that physical infrastructure is robust, reliable and competitive.

 The ongoing expansion of Matsapha and other industrial sites, including new developments at Ngwenya, and the constant upgrading of the country’s infrastructure.

 Commitment to free enterprise, a free market economy and private ownership with investment security assured: nationalisation and the forced taking of property are illegal.

 Various financial incentives and allowances, and the easy repatriation of profits and dividends subject only to a withholding tax.

 Ready access to export markets through excellent road and rail links as well as the Matsapha dry port.

 Professional services through banks and agents ensure that procedures are properly implemented.

 Readily available commodities, support services and professional people such as accountants, attorneys, engineers and architects.

 A plentiful and readily trainable labour force.

INVESTMENT PARTNERS
Various organisations with international connections and sound financial and professional status will advise and enter into partnerships with potential investors. These are significant co-investors in many of Swaziland’s industrial and agricultural activities. The major concerns are the Swaziland Industrial Development Company, and Tibiyo Taka Ngwane.

Swaziland Industrial Development Company
The Swaziland Industrial Development Company Ltd (SIDC) is a major contributor to Swaziland’s trade and investment. It is a development finance company that commenced operations in 1987 with the Swaziland Government as the major shareholder. SIDC “means business” through spearheading investment in the country by mobilising resources to finance private sector projects. This is achieved through project tailored finance products that include loan and equity, asset leasing, SME finance and industrial buildings. SIDC investments cover all sectors of the economy throughout the country in industry, agri-business, commercial activities, industrial property, mining and outsourced business activities. SIDC will invest in projects which are technically feasible, well managed, and financially and economically viable. During the financial year 2008/9 the company approved finance for 16 projects amounting to E47.5 million. SIDC will continue to give priority to developmental projects that generate foreign exchange, utilize local resources, upgrade manpower skills, transfer appropriate technology and link with existing industries.

Tibiyo Taka Ngwane
Tibiyo was formed by royal charter at independence in 1968 by His Majesty King Sobhuza II with the objective of complementing Government’s development efforts by fostering national economic development and self-sufficiency. It was formed with revenue derived from the soil when colonial miners were developing the country’s mineral sector. These mineral royalties were kept in the National Treasury, established and controlled directly by the King, and not in the Governmentadministered Central Treasury. Through skilful investment, Tibiyo has become one of the most successful and unique commercial operations in the region with a portfolio of some 17 interests in agriculture, agri-industrial processing, mining, manufacturing and tourism. Tibiyo was created with the mandates to buy back land from non-resident foreign owners on a willing buyer/seller basis, to promote tradition and culture and to undertake investments. In 1976 the King switched the mineral royal funds to its new sister organization Tisuka Taka Ngwane, whose main mandate is the construction of residential and commercial properties. By this time, Tibiyo had grown sufficiently to operate on profits and dividends from its investments: its assets grew from E604 million in 1999 to E1.13 billion in 2008, reflecting growth of 8% over the previous year. Tibiyo invests mainly in major joint ventures with foreign and local technical partners, taking equity stakes and occasionally providing shareholder loans not exceeding 50% of the total cost of the project. The technical partners are expected to provide management and staff. Through its social responsibility program Tibiyo promotes tradition and culture by supporting national ceremonies, such as the Incwala and the Umhlanga (Reed Dance) and furthers the education and training of the Swazi youth by sponsoring 1,000 secondary/high school children a year, and over 100 students at tertiary level, both locally and abroad. It also promotes the social welfare of the Swazi nation through donations to NGOs and community projects, such as school buildings, potable water and footbridges. Thus Tibiyo Taka Ngwane may aptly be described as a Swazi Nation organisation that is at the core of social, cultural and economic development.

SMALL & MEDIUM BUSINESS DEVELOPMENT
Investment in small to medium sized Swazi-owned businesses and their development are seen as essential to job creation and economic growth: this category could absorb up to 10,000 graduates and school leavers who enter the employment market each year. Various channels of support are available to assist Swazi entrepreneurs. The commercial banks, large organisations and special projects actively encourage this growing sector through finance, assistance with business plans, training and the provision of business premises, as well as donations and other assistance. Swazi entrepreneurs cover a wide spectrum of activities, including agriculture, manufacturing and food processing, retail, transport and civil works. The SME sector is supported by the public and private sectors, as well as by parastatals such as SIPA. The retail and service categories respectively account for 64.5% and 21.5% of SME projects while transport makes up 3.9% and manufacturing 5.7%.

Swaziland Development Finance Corporation
- FINCORP Background: When the Swaziland Development Finance Corporation (FINCORP) was established in 1996, it was not envisaged that it would expand to such unprecedented scale and scope. Over the last decade FINCORP has evolved to become what could be conservatively described as the “The lender of first choice for micro, small and medium entrepreneurs in Swaziland”, with the brand name has been elevated to the highest levels in the market place. FINCORP has experienced exceptional growth and demand for its services, far exceeding expectations and initial projections. Swazi empowerment, enterprise development, and the creation of wealth and jobs have been at the core of the operational guiding principles. All developing countries are in desperate need of major new job creation from the private sector and enterprise development is the only way towards significant and lasting poverty reduction. In an effort to deal with the innate social inequalities and the poverty scourge, His Majesty King Mswati III, officially launched FINCORP in 1994 when it was known as The Enterprise Trust Fund. The organisation opened its doors to the public in April 1996 and over the last decade has offered its service in a diligent, sustainable and conscientious manner.

Operations:
Over the years FINCORP has continuously undergone various policy and operational changes, with the main objective of matching the rapidly changing demands of its large target clientele. The organisation continues to operate across the entire spectrum of delivering financial services to local SMEs in an effort to meet their full business requirements. In 2009 FINCORP introduced a new product aimed at promoting grassroots micro-enterprises operating at rural and town markets throughout Swaziland. This is has been build up on the in-depth market research conducted by the institution on the financial needs of such micro-enterprises. It has always been entrenched in FINCORP’s policies that customer loyalty is best maintained and sustained only through continued and concerted efforts to meet customer needs as satisfactorily as possible. FINCORP currently offers a wide range of loan products including general business loans, asset lease finance, agribusiness, trade, services, invoice financing and micro loans. As a relatively young organisation, FINCORP has had considerable success in reaching large numbers of Small and Medium Enterprises. In cumulative terms the institution has, to date, provided financial and non-financial support services valued at around E900 million (USD$ 120 Million) to more than 50,000 clients.

Best Practice:
FINCORP is committed to international best practice principles in the management of its operations, as an organisation is only as good as its administration system and managerial capacity. Effective risk management is an integral part of the institution’s policies, hence it continually develops and enhances its risk management, operational and control procedures in order to maintain high sustainability levels. In response to the emerging global and knowledge economy, investment in institutional capacity building and the development of human capital has, over the years, been a high priority. FINCORP fully subscribes to the principles of open door policy, integrity and accountability in order to effectively and efficiently offer its services to Swazi entrepreneurs.

The Small Enterprises Development Company
SEDCO has operated in the SME sector for over 30 years, providing mini factories on estates throughout the country, business development services and marketing assistance to small and medium scale entrepreneurs in Swaziland. This government-supported entity is committed to the development and promotion of Swazi-owned SMEs and trains entrepreneurs in business management and provides legal and general counselling at subsidised rates. This enables new businesses to take off by reducing the setting up costs that are a barrier to selfemployment. SEDCO also provides assistance for entrepreneurs wishing to invest in franchise opportunities. The role that SEDCO plays is that of an apex institution in SME development. This means that the company does not directly deal with entrepreneurs but ventures into the development of intermediary institutions that are able to nurture SMEs into profitable businesses. SEDCO is also the voice of the SME sector in terms of lobbying for an enabling environment for their operations and can address the needs of the markets it serves. SEDCO is expected to play an active role in the Small Scale Loan Guarantee Scheme, which is under the management of the Central Bank of Swaziland, by supporting those SMEs seeking loans from the commercial banks under the scheme. A general policy is that businesses in the infancy stage occupy SEDCO-owned premises at affordable rentals for up to five years. During this period, they are groomed and guided by SEDCO until they are able to be independent. At this point, the business is expected to move to other premises, making room for further new entities. In a new development, SEDCO now sponsors the Enterprise Youth Scholar Competition within schools in an effort to identify and encourage aspiring entrepreneurs among young people. Entrants established small businesses and sold their goods at the September 2009 International Trade Fair. Four prizes ranged from E4000 to E1000.

Swaziland Enterprise & Entrepreneurship Program
SWEEP was launched in 2006 as a fiveyear economic development initiative in Swaziland funded by the United States Agency for International Development (USAID). The goal is to identify, grow and develop Swazi-owned SMEs in order to create more employment and income opportunities, thus driving Swaziland’s economic growth. The program is designed and implemented by TechnoServe, a nonprofit business development organisation focused on promoting economic growth in developing countries. Based in Washington, DC, TechnoServe has offices in 19 countries in Latin America, Africa and Asia and since it was founded in 1968, it has successfully used a private-enterprise approach to help low-income people in the developing world to build viable businesses. The main objectives of SWEEP are to support and strengthen entrepreneurs and SMEs; to plant the seeds for the entrepreneurs of tomorrow and to build sustainable local capacity. SWEEP offers three programs to assist entrepreneurs at each stage of their development. The Technical Assistance Program provides assistance to Swaziland’s “growth” businesses; the Business Plan Competition (Believe Begin Become) helps start-up businesses and the Emerging Entrepreneurship program aims to build skills among aspiring entrepreneurs. SWEEP has a team of business advisors who support individual entrepreneurs and their businesses throughout each stage of their development. It also works with financial institutions to help close the gaps between their products and SME clients, and is working to build sustainable local capacity to support future entrepreneurs and SMEs. SWEEP business advisors currently offer assistance to entrepreneurs in the cotton, feed and livestock, horticulture, handcrafts, tourism, and agro-processing (including honey) sectors. With the support of USAID and ComMark trust, SWEEP is expanding its assistance to the textile and apparel sector, helping to bring in more investment and helping existing investors be more productive. It also facilitates SME finance through a US$25 million loan guarantee facility from USAID. Clients are selected based on various criteria, including viability of the business/concept, commitment - including capital contribution, experience/skills and ability to serve as an example to other entrepreneurs. Swaziland’s National Business Plan Competition (Believe Begin Become) is an entrepreneurship development program which aims to identify, mentor, and improve the environment for entrepreneurs who will grow new businesses and create jobs and wealth. Winners are awarded seed capital for business start-up or expansion, as well as a range of ongoing services to ensure that they have the support that they need for success. To date, the Believe Begin Become program has trained over 200 entrepreneurs across four competitions that are starting businesses which are now impacting on the Swazi economy. The Emerging Entrepreneurship program comprises an after-school component for youth aged 16 to 26 years. Managed by the newly formed JA Swaziland, the School Age Youth Entrepreneurship program was launched in March 2007 at 16 schools, expanded to 48 schools in 2008, 77 schools in 2009 and is expected to reach 3000 students in 80 schools in 2010. Another Emerging Entrepreneurship program, The Business Place, is a one-stop-shop business center, launched early 2009, offering support to aspiring entrepreneurs and farmers, particularly in the sugar sector, in the Big Bend area.


Government Involvement
The Small and Medium Enterprise Department under the Ministry of Commerce, Industry and Trade focuses exclusively on SMEs. The department’s objective is to unify and coordinate the functions of organisations such as SEDCO and to facilitate the free flow of SME’s day to day business, enhance working relations among them and strategise their business environment. The SME Unit recently revised its policy, including the framing of a micro enterprise definition and defining the informal sector to create a broad understanding of the various categories of the lower business structure. It is also intended to develop SME clusters for capacity enhancement. A further development will be a micro finance facility to address the predicament of very small businesses with little or no access to finance. A draft Citizen’s Economic Empowerment bill was due to go to Parliament towards the end of 2009. This incorporates broadbased economic empowerment for SMMEs (small, medium and micro enterprises) so that targeted Swazi-owned businesses may be earmarked for assistance to upscale their operations and or encourage potential business owners to initiate their projects and get the guidance and help necessary to see them through to the growth stages. The SME Unit organises the Entrepreneur of the Year Award which continues to encourage many potential business people to enter the market. On behalf of Government, the Central Bank of Swaziland administers the Small Scale Enterprise Loan Guarantee Scheme. This encourages financial institutions to extend loans to small-scale enterprises that must be viable, fully licensed operations with Swazi majority shareholders in order to qualify, and be able to provide 25% security of the required loan. The loan period may not exceed 10 years and maximum credit is E150,000 per customer with a ceiling interest rate of 3% above prime.


Other Opportunities for Small Businesses Various institutions in Swaziland provide practical and business training for potential entrepreneurs. These include the Vocational and Commercial Training Institute (VOCTIM) at Matsapha; the Manzini Industrial Training Centre and Business Management Extension Program and its counterpart at Nhlangano; the Mpaka Vocational Centre; the National Handcraft Centre and Women in Development.