Conditions attached to Swazi loan

Thursday, August 4, 2011

Pretoria - South Africa could be in a tight spot if Swaziland does not honour the terms of a R2.4 billion loan, which include political reforms, Finance Minister Pravin Gordhan said on Wednesday.

"I think that Swazi authorities understand that they've got to deliver... within the agreed upon timelines and clearly the South African government would be placed in a difficult position if those timelines are not abided by," Gordhan explained.

This comes after government confirmed that it has granted Swaziland a conditional loan from the country's Reserve Bank to the Central Bank of Swaziland. The loan will be made available in three equal trenches, with the first payment at the end of August, the second in October and the final payment in February 2012.

The minister said negotiations of the loan had been in good faith, adding that "it is South Africa's anticipation" that the money would be used properly and not squandered in what some may term as opulent spending.

"The government of South Africa wants to emphasise that these are processes to be run by the government of the Kingdom of Swaziland and for the people of the government of Swaziland and with the participation of the people of the government of Swaziland."

The Swazi government had approached the South African government to offer financial assistance to its fiscal crisis that came about as a result of the decline in Southern African Customs Union (SACU) revenue of over 60%.

The loan is granted on condition that Swaziland takes on confidence building measures, which is guided by an agreement on the establishment of a Joint Bilateral Commission for Cooperation (JBCC) between the two governments. The JBCC promotes democracy and good governance.

Fiscal and related technical reforms, capacity building and cooperation in multilateral engagements are other premises of the loan.

The tabling of the Public Finance Management Bill by October 2011 is also part of the package of reforms.

Repayment of the loan will be done by debit order, which will be paid to that country through a debit order against the SACU account which is held by South Africa's Reserve Bank. The money was not taxpayers' money and is provided by the Reserve Bank on a 5.5% interest rate.

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