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.