2010 Investment Climate Statement - Swaziland

2010 Investment Climate Statement
Bureau of Economic, Energy and Business Affairs
March 2010


The Government of the Kingdom of Swaziland (GKOS) continues to strive to make the environment attractive to foreign direct investment by providing investment incentives. These include repatriation of profits, provision of factory shells at competitive rates, and exemption from duty on raw materials to manufacture goods to be exported outside Southern Africa Customs Union (SACU). Financial incentives for all investors also include generous tax allowances and deductions for new enterprises, including a 10-year exemption from withholding tax on dividends and a low corporate tax of 10 percent for approved investment projects. New investors also enjoy duty-free import of machinery and equipment.

The Companies Act of 2009, replacing the outdated Companies Act of 1912, was signed into law in October 2009. The new Act's main objective is to streamline the establishment, incorporation, and registration of companies. The act will also improve the management, administration and dissolution of companies and puts Swaziland's corporate laws in line with regional and international developments. The GKOS continues to work with the European Union, African Development Fund and the USAID/Southern Africa Global Competitiveness Hub in the development of its Investment Policy, creation of a Revenue Authority, and improvement of trade policies. Other bills drafted in 2009 to promote an investor friendly Swaziland are the Securities Bill, which provides for the establishment of an Investor Protection Fund, and the Financial Services Regulatory Bill, whose aim is to put in place an integrated regulatory system for the non-bank financial services, including insurance, retirement funds, building societies, capital markets and other similar institutions.

Swaziland's judicial system upholds the sanctity of contracts.

There are no formal policies or practices that are discriminatory to foreign-owned investors, and companies can be 100 percent foreign-owned. The new Constitution bars the vesting of ownership of land in foreign-owned companies or foreigners unless ownership was attained before the promulgation of the Constitution on February 8, 2006. However, the Constitution states that this provision "may not be used to undermine or frustrate an existing or new legitimate business undertaking of which land is a significant factor or base."

Foreign investment is screened to the extent that the specific Swazi financial institution which the investor employs will perform typical background checks. If the investors come in with their own funding from outside the country, there is no requirement for further screening. As a general rule, all investors are screened for credit worthiness and business ethics track record as well as criminal record. In 2007 a Competition Commission was established, but it does not review foreign investors for competition concerns.

There are no formal policies or practices discriminatory to foreign-owned investors and companies. Foreign investors are theoretically free to invest in all sectors of the Swazi economy, aside from the GKOS monopolies in telephones and water. Other areas in which the GKOS disallows investment are in the manufacturing of arms, chemical and biological weapons, radio-active materials, explosives and manufacturing involving hazardous waste treatment or disposal.

To date, implementation of Swaziland's Privatization Policy, approved by the Cabinet in December 2006, has been slow. In June 2007 the Ministry of Natural Resources and Energy began reviewing applications for private energy suppliers, but no licenses have been granted. In December 2007, the Swaziland Electricity Board (SEB) became the Swaziland Electricity Company, beginning the privatization process. Plans to privatize Swazi Post and Telecommunications Corporation (SPTC) are ongoing. The GKOS promulgated the National Information and Communication Technology (ICT) policy in August 2007. The policy is to help transform SPTC from a dual operator/regulator into two separate entities. The insurance industry was de-monopolized in 2006 and a regulatory office started operating in April 2007. Three players have come into the market. (Comment: The Insurance Act of 2005 required all local insurance companies to invest 30 percent of their assets in Swaziland by 2009.)

Upon their privatization, provisions of these services will, in theory, offer the possibility of joint ventures for foreign investors.

The mobile phone company MTN is still the sole cellular operator in the country, although MTN's monopoly expired in November 2008. SPTC granted MTN a ten-year license for GSM Mobile technology without the monopoly provision. SPTC had planned to be the second cellular provider in the country, and in 2009 started putting the infrastructure into place; conflicts among ministries, the royal family (who holds a large portion of the shares of MTN), MTN itself, and SPTC derailed the project, however, and are not yet resolved.

There is no discrimination against foreign investors after investment.

Any company wishing to do business in Swaziland must adopt articles of incorporation or association. This requirement is non-discriminatory.

Non-governmental organizations (NGOs) support foreign investment except when specific locally-owned businesses are threatened. NGOs may publicly protest and attempt to block award of licenses, but in light of the need for increased jobs and revenue, there is firm government commitment to foreign investment.

The GKOS has recognized the need to facilitate a faster business registration process and curb other bureaucratic delays. The Swaziland Investment Promotion Authority (SIPA), established to become a one-stop-shop for foreign investors and to design and implement strategies for attracting desired foreign investors, continued to work with the Southern African Competitive Hub in drafting an Investment Policy as recommended by the Investor Roadmap of 2005. An audit in 2009 by the Southern African Competitive Hub, however, demonstrated that government had only completed 19 percent of the recommendations detailed in the 2005 Investor Roadmap.

In the World Bank's "Doing Business 2010," Swaziland slipped to 115 from 114 in 2009, out of 183 countries, for ease of doing business, and ranked 158 in starting a business. Swaziland's economic freedom score is 59.1, making its economy the 89th most free in the 2009 Index. Over the past five years, Swaziland's annual economic expansion averaged 2.5 percent. Low productivity and sparse investment have contributed to sluggish economic growth. Corruption is one of the things that impact negatively on Swaziland's growth.

Index/Ranking 2009/2010

TI Corruption Index 79
Heritage Economic Freedom 89
World Bank Doing Business 115
MCC Government Effectiveness -0.34 (17 percent)
MCC Rule of Law -0.28 (17 percent)
MCC Control of Corruption -0.02 (47 percent)
MCC Fiscal Policy 5.3 (93 percent)
MCC Trade Policy 71.6 (32 percent)
MCC Regulatory Quality -0.51 (23 percent)
MCC Business Start Up 0.916 (14 percent)
MCC Land Rights Access 0.473 (9 percent)
MCC Natural Resource Management 52.70 (0 percent)


The Central Bank's prior approval is necessary for all capital transfers into Swaziland from outside the Common Monetary Area (CMA) to avoid subsequent repatriation of interest, dividends, profits and other income accrued, but no restrictions are placed on the transfers. In practice, approval is routinely granted when required for genuine investment activity, but frustrating bureaucratic delays are common. When converting funds, the investor's bank uses its discretion to decide if there is need to seek the Central Bank's approval.

No recent changes have been made to Swaziland's remittance policies.

There is a straightforward process for obtaining foreign currency. A resident requiring currency other than the Swazi emalangeni (E) or South African Rand (accepted as legal tender and equivalent to the emalangeni) for permissible purposes must apply through an authorized dealer, and a resident who acquires foreign currency must sell it to an authorized dealer for local currency within 90 days. No person is permitted to hold or deal in foreign currency other than an authorized dealer. Authorized dealers in Swaziland are First National Bank of Swaziland (FNB), Nedbank, Standard Bank, and Swazi Bank.

The average delay period for remitting investments is dependent on the mode for remitting funds. SWIFT transfers average a week while electronic transfers typically take less than a week.

Dividends derived from current trading profits are freely transferable on submission of documentation (including latest annual financial statements of the company concerned), subject to provision for the non-resident shareholders' tax of 15 percent. Local credit facilities may not be utilized for paying dividends. The GKOS does not issue dollar-denominated bonds. There are no limitations on the inflow or outflow of funds for remittance.

The Central Bank of Swaziland monitors the flow of foreign investment in and out of the country, as it follows all foreign exchange. The Central Bank has formal powers to screen and regulate foreign exchange and investment, but these powers are exercised in a formal, routine, and equitable manner. There have been no changes in policies or practices in recent years, even though there is now some concern that unscrupulous investors are taking improper advantage of the extremely liberal policies of the government.


Expropriation and nationalization are prohibited. There have been no known cases of a foreign business being expropriated. Swaziland's land tenure system can be confusing for investors. Approximately sixty percent of land is Swazi Nation Land, land held by the monarchy in trust for the people of Swaziland. Control of the use of this land is generally delegated to chiefs of the area. Settlement of disputes regarding traditionally held land can take years. Legality of land leases is sometimes unclear and uncertainty exists as to the details of land ownership rights. Clear titles can exist for non-Swazi Nation Land, located generally in municipalities. A Minister, with Cabinet permission, can publish in the government gazette a "notice of intention to take property," list the properties to be taken, and take them. Historically, this only affected properties with absent landlords. Recently, however, landowners in a township in the industrial area of Matsapha complained in the press that compensation the government paid for land to build an Information, Communication, Technology Park was not at market value. According to the Constitution, the Land Management Board will vet applications by non-citizens to acquire land in the country.

The Embassy does not believe the GKOS will engage in expropriatory actions in the near future.

There are no sectors that are at risk for expropriation or any similar action.

There are no laws forcing local ownership.

There are no cases of "creeping expropriation."


The government has a good record of handling investment disputes. Most investor disputes are employee-related. Official government intervention/arbitration is available upon request, but most investment disputes are handled within the judiciary system, usually via the Industrial Relations Court.

There have been a few investment disputes between foreign investors in the last few years, but there is no pattern to the disputes.

Swaziland has a dual legal system comprised of Roman-Dutch law and customary law. This parallel system can be confusing and has, at times, presented problems for foreign-owned businesses. In addition to a Western-style court system, Swaziland's traditional courts, with the King as supreme authority, are available for dispute settlement. Swazi employees have brought grievances against foreign employers to these traditional courts. Such disputes, however, can be transferred to the formal court system at the option of the foreign employer/investor. The Industrial Relations Act of 2000 created the Conciliation, Mediation and Arbitration Commission to resolve employer-employee disputes.

In general, the Swazi legal system has effectively enforced property and contractual rights. The court system is considered free and fair. Judgments of foreign courts are accepted and enforced. The Companies Act of 2009 outlines commercial law. Swaziland's bankruptcy law, the Insolvency Act of 1955, is silent on the currency used in monetary judgments; however international companies doing business in Swaziland include the currency to be used in the Memorandum of Agreement. The court has jurisdiction over the property of a person who has ordinarily resided in or carried on business for 12 months in Swaziland before the lodging of the petition.

The GKOS accepts binding international arbitration of investment disputes between foreign investors and the state. Any agreement with international investors/parties includes a clause stating where arbitration will take place and which laws will apply. Swaziland does not have a domestic arbitration body for investment disputes.

Swaziland is a member of the International Centre for the Settlement of Investment Disputes (ICSID) and the Multilateral Investment Guarantee Agency (MIGA). There is no specific legislation providing for enforcement of ICSID awards.


The GKOS does not maintain any measures which are alleged to violate the WTO's TRIMS text.

There are two performance requirements that may affect foreign business in Swaziland. Swazi government policy requires hiring qualified Swazi workers where possible. This has discouraged some business people from relocating to Swaziland, as it may present difficulties for spouses to find work. The other performance requirement affects only exporters who wish to label their product as made in Swaziland. Local export authorities require that the local content of such exports be at least 25 percent. This determination, however, is often difficult to make, and seems to be conducted on a case-by-case basis.

Investment incentives for qualifying investments, particularly those in export-driven manufacturing, mining, and international services, include: a tax rate of 10 percent for the first ten-year period, available for businesses that qualify under the Development Approval Order; no capital gains tax; 30 percent tax on profit; no withholding tax on declared dividends; factory shells rented at cost; a 150 percent training allowance; a potential tax rate of zero percent for new manufacturing companies, at the discretion of the Minister for Finance; imports of capital goods for productive investments are duty free; imports of raw materials are duty free, provided the final product is exported outside SACU; and losses may be carried forward indefinitely.

There are no performance requirements for establishing, maintaining, or expanding an investment. To receive duty free status on capital goods imports, the investment must be considered productive.

There are no requirements regarding the purchase or export of goods.

There is no requirement on composition of ownership, equity diversification, or that there is a technology transfer.

The GKOS does not impose "offset" requirements.

The government does require companies to employ Swazi nationals, unless they cannot find a qualified national.

There are no enforcement procedures for performance requirements. The updated Companies Act expects companies to lodge annual returns with the Registrar of Companies. The return should include the name of the auditors, nominal and issued share capital, names and addresses of members (in case of a private company), among other requirements. Investors are not required to disclose proprietary information as part of the regulatory process.

U.S. and foreign firms are not able to participate in government financed and/or subsidized research and development programs.

Residence and work permits are a major source of tension between the expatriate business community and a government otherwise friendly to foreign investment. All foreign nationals working in Swaziland require work and residence permits. Employers must apply to the Immigration Office for a work permit, demonstrating that no Swazi is available to fill the vacancy. Although they generally are awarded, expatriate business people complain that the process is cumbersome, exasperating, and is a reported source for unofficial "expedition" payments. Residence permits are good for five years for expatriate directors, senior management and key technical personnel of new companies, at which time they must be renewed. Recently, work permits for some prominent business people have not been renewed, with no reasonable explanation given.

There are no discriminatory or preferential export or import policies affecting foreign investors.


The majority of Swaziland's largest businesses are owned by foreign investors, either fully or with minority participation by Swazi institutions. There are no restrictions on foreign ownership that are discriminatory against foreign investors. Foreign firms in Swaziland most often dominate the sectors they are in and therefore receive preferential treatment in matters of supplies and other necessities, even where there are Swazi enterprises in the same sector. Both foreign and domestic private entities have a right to establish businesses, and acquire and dispose of interests in business enterprises.

There are no competitive equality standards.


The GKOS recognizes and enforces secured interests in property, both moveable and real. There is a recognized and reliable system of recording such security interests.

The legal system protects and facilitates acquisition and disposition of property.

Adherence to key international agreements on intellectual property rights is minimal.

Protection for patents, trademarks and copyrights is currently inadequate under Swazi law. Patents are currently protected under a 1936 act that automatically extends patent protection, upon proper application, to products that have been patented in either South Africa or Great Britain. The African Regional Industrial Property Organization in Harare assisted in drafting a new patent law. The draft law includes protection for pharmaceutical and agricultural chemical products.

Trademark protection is addressed in the 1994 Trademarks Act. Copyright protection is addressed under four statutes, dated 1912, 1918, 1933 and 1936.

Swaziland has an intellectual property rights regime inherited from the colonial era, under which copyrights, patents, and trademarks were somewhat protected under various acts promulgated by the colonial authorities. According to the Registrar General, the acts have not been implemented and copyright protection in Swaziland is "limited." There is a draft updated Copyright Act based on the World Intellectual Property Rights Organization (WIPO) standards. Swaziland does not have a bilateral copyright agreement with the United States.

There are no ongoing disputes with regard to patents, trademarks, or copyrights in Swaziland.

The government has acceded to the WTO TRIPS agreement. Implementation and enforcement are minimal due to the small number of patent disputes. The GKOS has not signed the WIPO Internet agreement.


In 2008, a competition bill to de-monopolize parastatals was passed and the GKOS has started to implement the law, including appointment of a board and recruitment of a Chief Executive Officer. The unit will be governed by the public enterprise unit law. It is the government's stated policy to foster a free market economy, and the government's actions and decisions in individual matters have generally upheld that objective.

Swaziland does not have other laws that distort or impede investment.

Bureaucratic procedures pose challenges for investors.

There are no informal regulatory processes.

Proposed laws and regulations are published in the government Gazette for public comment thirty days prior to a bill's presentation to Parliament. Ministries sometimes consult with selected members of the public and private sector.

While commercial bank accounting systems are generally transparent and consistent with international norms, legal and regulatory systems are more obscure and unpredictable.

There are no efforts to restrict foreign participation in industry standards-setting organizations.


Efficient capital markets in Swaziland are in their infancy, yet policy -- or rather an under-presence of policy -- supports the relatively free flow of financial resources in the product and factor markets. The Kingdom's financial market is closely tied to that of South Africa and operates under conditions generally similar to the conditions of that market. Commercial banks offer credit on market terms, but the rules of the Common Monetary Area forbid non-Swazis from raising domestic loan capital, although they can apply to the Central Bank for exception. This restriction has not greatly discouraged foreign capital flows into Swaziland in the past, but could increasingly sour the Swazi investment climate as regional competitors build investment regimes more attractive to foreign business.

At present, there is no effective regulatory system established to encourage portfolio investment, but the GKOS plans to enact laws that will strengthen the regulation of such investment, including the proposed Securities Bill No.8 of 2009, whose aim is primarily to facilitate and develop an orderly, fair and efficient capital market in the country. Swaziland has a small stock exchange with six companies currently trading two types of shares, equity shares and bonds.

The Central Bank supervises financial institutions, which grew to six during the year, including the First National Bank of Swaziland Limited, Nedbank, Standard Bank, Swazi Bank, Swaziland Building Society and the Blue Financial Services (Pty) Ltd. These are governed by the Financial Institutions Order of 1975. Total industry assets increased by 7.2 percent, from USD 640 million (E5.3 billion) in December 2007 to USD 670 million (E5.6 billion).

"Cross share-holding" and "stable shareholder" arrangements do not exist in Swaziland. There have been no hostile takeovers by domestic or foreign interests. Since Swaziland's financial markets are just emerging, a variety of credit instruments have yet to be developed.


Private enterprises and public enterprises operate in different investment climates. Public enterprises often are responsible for charging levies for supplies imported by private enterprise in which the public enterprise also competes. Examples of this occurrence include the milk, vegetable, and maize industries.

Senior management of SOEs report to a board which in turn reports to the line minister. A senior member of the ministry sits on the board. SOEs are governed by the Public Enterprises Act which requires audits of the SOEs and public annual reports.


In September 2008, political dissidents allegedly detonated a bomb prematurely under a highway bridge near the Lozitha royal residence and two people died at the scene. In 2009 there were no major incidents involving political violence to commercial prospects or installations in Swaziland. Labor unrest contains political overtones due to a restriction on political parties. As Swazi society becomes increasingly politicized, civil disturbances have increased. Labor protests occur, resulting from a mix of political and economic reasons. The Industrial Relations Act (IRA) does not permit "strikes;" however, it provides that employees who are not engaged in "essential services" have the right to participate in peaceful protest action to promote their socioeconomic interests. The law details the steps to be followed when disputes arise and provides penalties for employers who conduct unauthorized lockouts.


In 2007, the Prevention of Corruption law came into effect and an Anti-Corruption Commission was established. The Commissioner of the unit has said it lacks sufficient financing, transport and manpower. Some staff positions have been filled. By the end of 2009, no complaints had been prosecuted, contrary to promises made by Prime Minister Barnabas Sibusiso Dlamini. In his 2005 budget speech, the Minister of Finance estimated that the GKOS was losing USD E40 million (now USD 5.4 million) per month through corruption. Civil society believes the number is larger. The Coordinating Assembly for Non-Governmental Organizations (CANGO) believes E60 million (USD 8.2 million) is lost per month.

Swaziland is a signatory to the UN Anti-Corruption Convention, African Union Convention on Preventing and Combating Corruption and Related Offences, and the SADC Protocol against Corruption. It has not ratified the UN Anti-Corruption Convention. Swaziland is not a signatory to the OECD Convention on Combating Bribery.

Foreign and domestic businesses have indicated that corruption and bribery requests impact profits, contracts and investment decisions for their companies.

Corruption is particularly prevalent in government procurement. Giving or receiving a bribe is illegal. A convicted person faces a maximum of a 100,000 emalageni fine and ten years imprisonment. A convicted law enforcement officer or public prosecutor faces a maximum fine of 200,000 emalageni and twenty years in prison.


Swaziland has investment agreements with Great Britain, Germany and the European Union (EU). The Cotonou Agreement between the EU and the African, Caribbean and Pacific (ACP) countries expired on December 31, 2007. Swaziland has signed an interim Economic Partnership Agreement (EPA) with the EU. In 2008, SACU and the U.S. signed a Trade, Investment, and Development Cooperative Agreement.

Swaziland has bilateral investment protection agreements with Egypt, Germany, Taiwan, Mauritius, and the United Kingdom.

Swaziland does not have a bilateral agreement with the U.S. Swaziland tax policy is relatively straightforward and there are no issues of concern.


The Overseas Private Investment Corporation (OPIC), the U.S. Trade and Development Guarantee Agency, and the Multilateral International Guarantee Agency have been active in Swaziland and are sources for export financing and insurance. Blue Financial Services, a South African based finance services provider, opened in Swaziland in 2008. It announced that it plans to use USD 10 million (E75 million) of a USD 70 Million (E525 million) OPIC loan in Swaziland.

In 2009, the Embassy used approximately USD 4,769,268 million (E39,347,286 million) in local currency. The average exchange rate in 2009 was 8.25 emalangeni for one U.S. dollar. The Embassy purchases local currency at the official exchange rate. In 2009 the lilangeni (singular) depreciated by 0.92 percent, compared with an appreciation of 0.13 percent the previous year.


High HIV/AIDS prevalence rates, estimated at 26 percent of the populace, have impacted economic growth in Swaziland, and companies need to take illness among its employees into account when making management decisions. There is a high level of domestic underemployment and a severe shortage of technically skilled labor, resulting in a heavy reliance on expatriate technicians, accountants, and engineers.

Swaziland adheres to the International Labor Organization (ILO) conventions protecting workers' rights. Labor–management relations are generally amicable; strikes throughout the year did occur, but fewer compared to previous years.


Swaziland does not have any free trade zones, but supports four industrial areas. The largest is in Matsapha, located between the primary cities of Mbabane and Manzini. It has direct rail and road links. The Matsapha Industrial Estates dry port maximizes time and cost savings for importers and exporters using the ports of Durban and Port Richard's Bay, South Africa and Maputo, Mozambique.


The Central Bank tracks foreign direct investment (FDI) by type and sector. Revised data indicate a 1.7 percent increase in the overall stock of FDI into Swaziland, rising from USD 733.1 million in 2007 to USD 745.5 million in 2008. This was due to an increase in FDI channeled to investment, finance and service sectors. The equity component of FDI showed no movement from USD 97.2 million posted in the previous year, which confirmed that there is stagnation in FDI inflows into the country. Reinvested earnings recorded an 8.7 percent increase from USD 435.4 million in 2007 to USD 473.4 million in 2008. The manufacturing and services sectors previously affected by the negative impact of the lilangeni/dollar exchange rate recorded a slight recovery, due to the relatively stable exchange rate in 2009, which averaged E8.25 against the U.S. dollar.

Total Foreign Direct Investment into Swaziland:
By Type, 2004 - 2008

(USD Million)

- 2004 2005 2006 2007 2008
- (revised) (Preliminary)
Equity 90.52 96.61 102.26 107.05 107.05
Reinvested 372.49 352.97 418.20 479.60 521.42
- Earnings
Long-term 110.40 113.38 126.10 128.69 131.52
- Capital
Short-term 128.45 100.01 125.68 92.12 61.09
- Capital
TOTAL FDI 701.86 662.98 772.25 807.46 821.09

The following figures are in percentages:

Change in
Total FDI 9.3 -5.5 16.5 4.6 1.7
Earnings 9.3 -5.9 14.2 -7.4 -8.6
-Inflation 3.4 4.8 5.3 8.1 12.6

Source: Central Bank of Swaziland
ROE: USD1/E7.5

Total Foreign Direct Investment into Swaziland:
By Sector, 2003 – 2007: Change in percentages
(USD Million)

Sector 2004 2005 2006
- Stock Change Stock Change Stock Change

Manufacturing 458.66 10.2 414.84 -9.6 446.85 7.7
Services 63.56 10.0 44.96 -29.3 97.58 -19.1
Investment 24,09 29.0 16.54 -31.3 23.77 43.7
Agriculture 94.61 -9.9 129.42 36.8 140.22 8.3
Finance 38.7 5.2 46.86 21.0 49.77 6.2
Mining 22.20 198.4 10.33 -53.5 10.33 77.5
TOTAL 701.85 662.97 768.54

Sector 2007(revised) 2008(preliminary)
- Stock Change Stock Change

Manufacturing 451.65 1.1 468.85 3.8
Services 124.66 10.0 100.80 -19.1
Investment 33.12 39.3 57.76 74.4
Agriculture 130.66 -6.8 127.20 -2.7
Finance 57.00 14.5 56.08 -1.6
Mining 10.33 0.0 10.33 0.0
TOTAL 807.44 821.02

Source: Central Bank of Swaziland
ROE: USD1/E7.5

Generally, there is no policy of encouraging Swazis or Swazi business to invest abroad, but a handful of Swazi businesses invest abroad, primarily in South Africa.