The simple unarguable truth about the Swazi loan

I don’t know that one can argue categorically for or against the loan to Swaziland. Yes, there are plenty of bad things going on in Swaziland and I’ve blogged about them before. On the other hand, the citizens of Swaziland will also hopefully benefit in some way from the loan.

I don’t want to get into whether the King should have authority, or pay taxes, or install his extended family into various positions of power. I think everyone agrees that serious change is required.

In fact, our government, in spite of granting the loan, also agrees. There are conditions attached to the loan. The conditions include financial and fiscal conditions and it seems also some “enhanced dialogue” or something.

What I can’t understand is why the loan wasn’t made contingent on the immediate and permanent unbanning of political parties. It is an easy step to take, can be enacted immediately and shows genuine commitment to societal reforms far above fiscal reforms.

The simple unarguable truth is that our government’s actions are not congruent with a commitment to democracy in Swaziland.

Then Gordhan says things like (from the TimesLive story linked above)

He said the money was not taxpayer’s money, but was provided by the SA Reserve Bank at a 5.5% interest rate.

Who do we think is going to bear the cost if Swaziland defaults? The Reserve Bank only exists by mandate to be the central bank of South Africa. It is disingenuous to pretend that it is not South African tax money. Apart from anything else, the loan offsets taxes that would otherwise be collected from Swaziland exports and therefore be able to build schools in South Africa.

Gordhan would have done better to focus on the knock-on impact on South Africa if the troubles in Swaziland increase. That point is one for debate. This smoke and mirrors that offer instead demonstrates the weakness of the real argument.

Published by David Kirk

The opinions expressed on this site are those of the author and other commenters and are not necessarily those of his employer or any other organisation. David Kirk runs Milliman’s actuarial consulting practice in Africa. He is an actuary and is the creator of New Business Margin on Revenue. He specialises in risk and capital management, regulatory change and insurance strategy . He also has extensive experience in embedded value reporting, insurance-related IFRS and share option valuation.

Leave a comment

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.