RESTRICTED
WORLD TRADE WT/TPR/G/38
2April 1998
ORGANIZATION(98-1306)
Original: English
TRADE POLICY REVIEW
SWAZILAND
Report bytheGovernment
Pursuant totheAgreement Establishing theTrade Policy Review Mechanism (Annex 3ofthe
Marrakesh Agreement Establishing theWorld Trade Organization), thepolicy statement bythe
Government ofSwaziland isattached.
Note:Thisreport issubject torestricted circulation andpress embargo untiltheendofthemeeting
oftheTrade Policy Review Body onSwaziland.Swaziland WT/TPR/G/38
Page 3
TABLE OFCONTENTS
Page
I. INTRODUCTION 5
II. ECONOMIC PERFORMANCE INTHE 1990s 5
(i) Economic Situation 5
(ii) Developments andTrends inTrade 6
III. TRADE POLICY FRAMEWORK 6
(i) Trade Policy Developments 6
(ii) Domestic Laws andRegulations 8Swaziland WT/TPR/G/38
Page 5
I. INTRODUCTION
1. TheKingdom ofSwaziland issituated inthesouthern partofAfrica. Itisbordered bythe
Republic ofSouth Africa inthesouth, westandnorth andbytheRepublic ofMozambique intheeast.
Swaziland hasanareaof17,000 square kilometres withanestimated population of912,876 asof
May1997.
2. Asasmall country withalimited domestic market, Swaziland relies heavily onexport-oriented
industries. Consequently, thecountry ishighly dependent onworld-wide growth trends andcommodity
prices. During the1980s thecountry sawahugeinflux offoreign direct investment, especially from
neighbouring South Africa, which wasatthetimesuffering theeffects ofeconomic sanctions imposed
onit.During thistime,industrialization inthecountry reached unprecedented heights andtheeconomic
growth rateshotuptoabout 9.5%. Inrecent years however, growth hasslowed down considerably
andSwaziland hasbeenexperiencing hugefluctuations inthegrowth rate. Anumber offactors have
contributed tothis: unfavourable climatic conditions (drought); theworld recession; thepositive
political changes inMozambique andSouth Africa; andtherecession inSouth Africa, which affected
thedemand forexports bythatcountry. Itshould benoted thatSouth Africa imports about 30%of
Swaziland 'sproducts.
3. Since theeconomy ispredominantly based onagriculture andtherefore dependent onclimatic
changes, suchfluctuations ingrowth experienced inSwaziland aretobeexpected. In1993/94 the
agriculture sector accounted for9.8% ofGDP at1985 factor prices. Although in1994/95 the
manufacturing sector expanded by4.7% compared to0.9% theprevious year,mostofthemanufacturing
industries areagro-based. Alarge proportion ofthemanufacturing sector 'svalue-added contribution
originates fromonlyfiveexport-oriented industries: unbleached wood pulp; processing ofsoft-drink
concentrate; fruitcanning; refrigerators; andsugar processing. Other important industries which
areagro-based include sweets andfoodprocessing.
II. ECONOMIC PERFORMANCE INTHE 1990s
(i) Economic Situation
4. The1990s sawasubstantial decline ineconomic growth withalowof1.2% in1992/93 and
aslight recovery thereafter. Overall, GDP growth inthe1990s hasaveraged around 2-3%.
5. Asaresult oftheslow-down inforeign direct investment inthe1990s, thedynamic growth
oftheSwazi economy hasbeengreatly reduced. Thestagnation inthecontribution ofmanufacturing
toGDP coincided withtherecession inSouth Africa, which resulted inalowdemand forexports.
Therecession didnotonlyhitthesouthern African region butthewhole international market. This
resulted inaslump inmost commodity prices. Thedomestic economy during thisperiod washit
byaseries ofdroughts, which resulted inlowperformance intheagriculture sector. Reduced production
inthesectors thatwere heavily affected bythedrought wasoffset bygrowth inother sectors such
asconstruction, irrigated agriculture andthegovernment sector. Thesituation improved slightly in
1994ascountries started coming outoftherecession andworld commodity prices started improving.
6. Inrelative terms, inflation hasnotbeenaserious problem forSwaziland. Inthelastfiveyears
ithasaveraged around 11%. Thispartly reflects thetightmonetary policy thathasbeenfollowed
bytheRepublic ofSouth Africa inrecent years, which hasadirect impact onthemonetary policy
inSwaziland, bothbeing partoftheCommon Monetary Area.WT/TPR/G/38
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7. Insummary, thecountry 'smaineconomic problems havebeen: slowgrowth oftheeconomy
caused partly bythedrought andtherecession; highpopulation growth; persistent increases inthe
public-sector deficit; andtheslow-down inforeign direct investment. Tothisend,theGovernment
isputtingtogetheralong-termNationalDevelopmentStrategywhichreviewsallsectorsoftheeconomy,
identifies problems andtriestooutline feasible long-term solutions. Atthesametime, theGovernment
hasembarkedonaninternaladjustmentprogramme,themainelementbeingaPublicSectorManagement
Programme. Thismeasure isaimed atimproving theefficiency ofmanagement ofpublic resources
bydirecting them towards clear development objectives andpriorities.
(ii) Developments andTrends inTrade
(a) Exports
8. Swaziland 'sexport sector hascontinued toexpand intonewmarkets andhasdiversified the
product base. Thetraditional agricultural exports ofsugar, wood pulpandcitrus, andexports from
themining sector haveexperienced slower growth thanthemore vibrant manufacturing andprocessing
sectors. Thecurrent highest revenue earner issoft-drink concentrates. Receipts fromthese exports
brought insubstantial revenues asaresult ofthedepreciation oftherand. Thedepreciation effects
largely offset thelowcommodity prices experienced ontheinternational markets.
9. Growthintheexport-orientedmanufacturingsectorwas25%in1996.Apartfromtheagro-based
industries, themanufacturing sector produces refrigerators, appliances, zippers, textile fabrics, clothing,
shoes andsecurity appliances, which arealldestined forconsumption ineither theSACU orSADC
markets. Theother agricultural exports, namely sugar, wood pulpandcitrus aredestined forthe
European Union andtheUnited States under special trading arrangements. Sugar inparticular, benefits
interms offavourable prices from trade withtheEuropean Union under theLomé Convention.
(b) Imports
10. Imports toSwaziland grew atanaverage of10-15% onayear-to-year basis from 1990-95.
More than85%oftheimports arefrom South Africa, thecountry 'smajor trading partner. Imports
intoSwaziland canbecategorized as:20%forfood, beverages, animals andedible oils; 25%for
chemicals, fuelsandcrude materials; while 55%relates tomachinery andmanufactured goods.
III. TRADE POLICY FRAMEWORK
(i) Trade Policy Developments
11. Over thepastfiveyears themajor developments inSwaziland 'strade policy havebeenthe
unilateral lowering oftariffs agreed under theUruguay Round, thebeginning ofnegotiations to
restructure theSouthern African Customs Union, andthenegotiations oftheSouthern African
Development Community Trade Protocol.
12. Swaziland isamember oftheSACU, therefore itsexternal trade policy isgoverned bythe
common external tariff(CET). theCETiscurrently setbySouth Africa andadministered byaSouth
African statutory body -theBoard ofTariffs andTrade.Swaziland WT/TPR/G/38
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13. Swaziland benefits from itsmembership oftheLomé Convention andfrom itsofficial
classification asadeveloping country interms ofitsduty-free access totheEuropean Union andits
qualification forGSPstatus.
(a) Unilateral tariff reform
14. Theunilateral tariffreform, implemented aspartofthecommitments under theUruguay Round,
ispartofaSACU policy aimed atencouraging amore efficient allocation ofresources, reducing anti-
export biasandencouraging countries todevelop insectors inwhich theyhaveacomparative advantage.
15. SwazilandisasignatorytotheCross-BoarderInitiativewhichencouragescross-borderinvestment
andunrestricted trade within theregion.
(b) Regional integration
16. Swaziland isamember ofboththeSADC andCOMESA.
17. Swaziland isasignatory totheSADC Trade Protocol which aims atestablishing a
WTO-compatible free-trade areawithin eight years oftheentry intoforce oftheagreement. The
SADC implementation schedule isstillunder negotiation. Swaziland willsubmit ajointoffer with
itsfellow SACU members.
18. Swaziland remains amember ofCOMESA, which iscommitted toremoving alltariffs ondirect
tradebetween member States bytheyear2000. Swaziland isunable toimplement anytariffreductions
duetoitsobligations under theSACU, although itcanimplement changes inadministrative measures
aimed atreducing thetransaction costs oftrade.
(c) Southern African Customs Union
19. InNovember 1994Swaziland, along withallitscustoms union partners, began torenegotiate
the1969Agreement withtheaimofrestructuring ittotakeaccount ofthechanged international trading
environment andtheradically changed political andeconomic realities within theregion.
20. Swaziland supports thebroad principles ofreducing thenumber oftariffbands andnarrowing
thespread oftariffs andwillcontinue tosupport suchpolicies within theSACU. Swaziland alsosupports
thephasing-out oftariff exemptions forcommercial imports thataredestined fortheSACU market.
However, thenegotiations havestalled overtheprecise structure ofanewinstitutional dispensation.
(d) Swaziland andpreferential trade agreements
21. ForeigntradeplaysanimportantroleinSwaziland'seconomy,accountingforahigherpercentage
ofitsGDP. Swaziland currently qualifies forpreferential market access totheEuropean Union under
theLoméIVConventionsignedbetweenthe15EuropeanmemberStatesand70ACP(Africa,Caribbean
andPacific) States in1989, aswellastheGeneralized System ofPreferences (GSP) under which
developed countries grant preferences todeveloping countries.
22. Swaziland willbeaffected bytheimpending free-trade agreement between theEuropean Union
andSouth Africa. Thisisexpected tobefinalized bymid-1998.WT/TPR/G/38
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(ii) Domestic Laws andRegulations
(a) TheCustoms andExcise Act
23. TheCustoms andExcise Actistheinstrument thatenables relevant Departments andMinistries
toimplement theprovisions oftheSouthern African Customs Union Agreement. TheAgreement
provides thatSouth Africa determines theexternal tariff inconsultation withtheBLNS.
(b) TheCereals Control Act
24. ThisActcontrols thepurchasing, importing andproduction ofmalt, andthemilling ofcereals
forcommercial gain. Itmakes itarequirement foranyone wishing toengage inanyofthelisted
activities tohavealicence. Authority togrant licences restswiththeMinistry forAgriculture and
Co-operatives.
25. Thepresent move intheagriculture sector istoliberalize themarketing andprocessing ofcereals
ingeneral, andmaize inparticular. Forinstance, since theearly 1990s, milling licences havebeen
issued freely onrequest andanumber ofnewmillers havecome intooperation, thusoffering consumers
awider choice inmaize products.
(c) TheDairy Act
26. ThisActaimsatregulating anddeveloping thedairy industry. Theregulation isdonethrough
theSwaziland Dairy Board (SDB) anditsmainfocus isadvising onproduct prices; prescribing handling,
testingandgradingstandards;maintenanceofpublichealthstandards;provisionofmarketinformation;
andindustry andmarket development. Anyone wishing toimport dairy products mustobtain animport
permit fromtheSwaziland Dairy Board butpermits areissued freely. TheDairy Board isaparastatal,
however theGovernment hasplans tostreamline theDairy Board intoaregulatory andacommercial
arm,which willbeindependent ofeachother. Theintension istoprovide aconducive environment
fortheprivate sector toeventually takeoverthecommercial functions oftheBoard.
(d) TheCitrus Board Act
27. ThisActestablishes theSwaziland Citrus Board, which isabody aiming atthedevelopment
ofthecitrus industry, aswellasinmarketing itsproduce. Itisthesingle channel Swaziland hasto
enforce quality andstandards onallfruitexports fromthecountry. TheBoard isentirely aprivate-sector
initiative. TheGovernment isconsidering reviewing thisAct.
(e) TheSugar Act1967
28. TheSugar Actestablished theSwaziland Sugar Association, which regulates theproduction,
marketing anddistribution ofsugar. TheGovernment regulates thepriceofsugar domestically. The
Actisbeing reviewed tokeepitinlinewiththedevelopments andchanges inregional andglobal
markets.
(f) Draft Competition Act1997
29. Thisisanactdesigned topromote commercial competition intheeconomy ofSwaziland.
Itdefines certain restrictive trade practices andprescribes ways todealwiththem. ItalsoprohibitsSwaziland WT/TPR/G/38
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businessacquisitionsthatresultinmarketdominance.Itisexpectedthatthisdraftlegislationwillbecome
lawandstartoperating early in1999.
(g) Draft FairTrading Act
30. Thisdraftactseeks toprohibit misleading anddeceptive conduct, falserepresentations and
unfair practices intrade. Itwillrunparallel tothecompetition actwhich isexpected toenter into
force atthesame timeasthefairtrading act.
(h) TheStandards andQuality Bill
31. Thisisalegalinstrument thatwillestablish theSwaziland Standards Authority anditsvarious
organs. Theactwillprovide fortheestablishment ofnational standards andthecertification ofproducts
andquality systems. TheStandards Authority willensure thatproducts conform toregional and
international standards andwillbecome effective before theendof1998.
(i) TheNational Agricultural Marketing Act
32. ThisActaimsatfacilitating theproduction, processing, storage, transportation, distribution
andsaleofstrategic agricultural products, suchasmaize andmaize products; rice;wheat andwheaten
products; some fresh fruitandvegetables; andpoultry. Permits forthese products areadministered
bytheNational Agricultural Marketing Board (NAMBoard) which normally charges alevyforthem.
TheGovernment ismoving towards liberalization inthisarea.
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