Gordhan defends Swazi bailout

Johannesburg - Finance Minister Pravin Gordhan on Thursday defended a decision to lend cash-strapped Swaziland R2.5bn, after critics said it threw a lifeline to an absolute monarch running the state as a personal fiefdom.

Gordhan said it was in South Africa’s best interests to have a stable neighbour and it would not force the political reforms on King Mswati III, who faces condemnation from global powers accusing him of autocratic rule and fiscal mismanagement.

“Swaziland is a sovereign country, we can only go so far. For the rest, our Swazi colleagues and citizens must use the opportunities rising from these sorts of agreements to ensure that democratic processes take place as they require them,” he said on Talk Radio 702.

Gordhan said the first slice of the loan to be delivered in three tranches would be dispensed this month, buying crucial time for Mswati whose unelected administration has been running through the central bank’s reserves to pay public sector wages.

South Africa said the money will “create space” for political dialogues and received pledges from Mswati for reforms. Critics said the money will be used by Mswati and his 12 wives to fund their lavish lifestyles, and will deter him from instituting much-needed political reforms and the unbanning of political parties.

They also said it was scandalous for the ANC - which was aided by international economic sanctions in bringing an end to apartheid - not to use its economic might to bring democracy to its neighbour.

“Instead of using Swaziland’s fiscal crisis to pave the way towards a democratic and transparent government that would repay its loan, South Africa has chosen to give away taxpayers’ money to a money drain,” said the Swaziland Solidarity Network, a dissident group based in South Africa.

Swaziland was plunged into a financial crisis following South Africa’s 2009 recession which triggered a collapse in revenues from the Southern African Customs Union, which has historically accounted for two-thirds of Swaziland’s budget.

The government has kept its head above water by using central bank reserves, which now stand at just over $500m, and running up at least $180m in unpaid bills.

In the face of a Greece-style budget crisis, Mswati tried and failed to get cash from the International Monetary Fund, which refused to hand over anything without seeing major cuts to what is officially Africa’s most bloated bureaucracy.