EU trade sanctions on Swaziland will be disastrous - CNBC Africa

EU trade sanctions on Swaziland will be disastrous

Southern Africa

by Gary van Staden* 0

Swaziland landscape. Photo: Wikipedia

If the European Union (EU) acts on its latest warning, the consequences for Swaziland would be disastrous. The EU Parliament recently warned that the small kingdom must either get its political house in order or face potentially crippling trade sanctions. Such sanctions would have some spill over consequences for South African companies and financial institutions as well.

The EU has been ramping up the pressure on the regime of King Mswati III for some time, with its warnings of impending action growing steadily louder over recent months. Swaziland is extremely vulnerable to new trade restrictions following the decision by the US last year to suspend Swaziland’s eligibility for duty free trade access to the world’s largest economy under the African Growth and Opportunities Act (AGOA). At the core of both the EU and US concerns and actions are the issues of human rights and the often harsh repression by the Mswati regime.

Local media reports on Monday, August 31, quoted Swaziland Sugar Association (SSA) CEO Mike Matsebula as stating that, following consultations with the country’s EU ambassador, Nicole Bellomo, it was clear the EU Parliament’s warnings had to be taken seriously. Earlier in August, the EU Parliament called for the release of political prisoners, a stop to the intimidation of journalists, and an end to the suppression of worker and human rights.

The EU Parliamentarians warned that failure to address its concerns would cost Swaziland its export market for sugar, beef, citrus and other exports. It is sugar that carries the largest threat since supplies from other sources are readily available and the EU could easily fill the quota currently allowed Swaziland – a quota that accounts for roughly 50 per cent of its total sugar exports.

According to a United Nations (UN) report, the recently concluded Economic Partnership Agreement (EPA) negotiations between the EU and the Southern Africa Development Community (SADC) EPA states implied that Swaziland could continue to sell sugar on a duty-free and quota-free basis to the EU and that the country’s sugar exports to the EU could increase by about 10% to 390,000 tonnes in the 2015/16 season.

That is now in jeopardy given the record of the Mswati regime to brush off reform demands. The kingdom did nothing to try and negotiate with the US and lost its AGOA access in the process, so there is no reason to believe the Swazi government is going to bend to demands this time. According to their respective websites, South African companies Illovo and Tongaat Hulett have substantial sugar interests in Swaziland, and some South African-based financial institutions have investments in the sugar industry or they supply trade finance.

Illovo has a 60 per cent share in Ubombo Sugar Limited, with the balance of shares held on behalf of the Swazi nation by Tibiyo Taka Ngwane (Tibiyo). Ubombo is one of three sugar producers in Swaziland whose output is marketed and distributed by the SSA. Tambankulu Estates is an agri-business based on two agricultural estates astride the Black Umbuluzi River in north eastern Swaziland that Tongaat Hulett purchased in April 1998. Today, 3,767 hectares of fully irrigated cane is producing 62,000 tonnes of sucrose annually.

The critical issue here is whether the EU will carry out its threat and impose sanctions of the type that would harm the kingdom’s sugar industry – a major export earner, source of employment and government income through the sale of refined sugar and related edible goods. That assumes the Swazi regime will once again ignore the demands and go its own way. Whatever the benefits of AGOA, the EU sugar deal is more crucial to Swaziland’s economy, and a more sustained attempt to fend off even limited trade sanctions must be in the frame.

But Swaziland’s ability – let alone its willingness – to embrace fundamental political reform is open to serious (and justified) doubt. Unable to respond to the European demands, the Swazi regime may dig in its heels and refuse to budge should the EU Parliament follow through on its threat, with dangerous implications for stability in the country.

The longer-term prognosis is not positive as the most likely developments will see growing pressure and increased repression pushing political risk in Swaziland ever higher. How high it could go before the country explodes is the really big, but largely unanswerable question. Swaziland is on our ‘Potential Conflict Watch’ list along with Algeria, Burkina Faso, Ethiopia, Guinea-Bissau, Kenya, Madagascar, Mauritania, Togo, Tunisia, Western Sahara, and Zimbabwe.

*Gary van Staden, Senior Political Analyst, NKC African Economics

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