Swaziland asks SA for bailout

Cape Town - Swaziland, Africa’s last absolute monarchy, has asked South Africa for a bailout to remedy a fiscal crisis that has sparked rare political protests, South African Finance Minister Pravin Gordhan said on Thursday.

Swazi dissident groups have reported that King Mswati III was looking for a R10bn loan from Pretoria, although deputy South African Finance Minister Nhlanhla Nene told Reuters this figure was probably too high.

"I'm not sure where the R10bn figure comes from and I don't foresee assistance amounting to that much," he told Reuters. "It is too early to put a figure to it until such time as the review and the assessment of Swaziland’s problems are done."

The sums of money are a drop in the ocean for South Africa, far and away the continent’s biggest economy, but, in a curiously African echo of the eurozone debt crisis, Pretoria fears it may be simply the first of a series of bailouts.

Like the International Monetary Fund (IMF), it will also baulk at lending anything to Swaziland, a landlocked nation of 1.4 million people, until the government takes the carving knife to what is Africa’s most bloated bureaucracy.

The IMF said last month the country was near financial collapse, with a budget deficit of 14.3% of gross domestic product (GDP) - similar to Greece -  and an economy stuck in the doldrums. Swaziland’s public wage bill amounts to 18% of GDP, more than any other country in Africa.

The IMF said the government could dig up $87m in cuts "swiftly" to improve the health of its finances, but described the commitment to reform as "mixed", rendering immediate budgetary assistance impossible.

South African aid is also complicated by the loathing felt towards Mswati’s notoriously inept and unaccountable regime - cabinet posts are administered on the whim of the king - by the ANC’s union allies.

The country’s fiscal troubles stem from a sharp decline in revenues from the regional Southern African Customs Union (Sacu), which has historically accounted for two-thirds of the government’s budget.

The drop-off is equivalent to 11% of Swazi output, but the IMF also said the government had exacerbated its problems through profligate state spending.

So far, the government has managed to keep its head above water by eating into central bank reserves and running up $180m in domestic arrears.