India-Eswatini Ties on Higher Trajectory

By Radha Venkataraman
Radha Venkataraman is High Commissioner of India, Mbabane (Eswatini)

 

In a major boost to India – Africa relations, the Union Cabinet of India chaired by Prime Minister Narendra Modi approved the opening of new Indian Missions in 18 African countries on March 21 2018. It was decided that these Missions will be opened over a four-year period between 2018 and 2021. This decision was taken to enhance India’s diplomatic outreach in the African continent and allow India to engage with Indian diaspora in African countries.

On April 9-10, 2018, the Hon’ble President of India made the first ever State Visit to the Kingdom of Eswatini on the invitation of His Majesty King Mswati III. He was accompanied by the First Lady, a Minister of State from Gujarat and some members of Parliament and senior officials of the Ministry of External Affairs.

One of the commitments made during the visit by the President of India and duly recorded in the Joint Communique issued at the end of the visit has been fulfilled with the establishment of the first resident High Commission of India in Mbabane which came into existence on 13th August, 2019 on assumption of charge of Ms Radha Venkataraman as the High Commissioner of India to the Kingdom of Eswatini.

The High Commission of India, Mbabane can be accessed at www.hcimbabane.gov.in, on Facebook @ High Commission of India-Mbabane on twitter @IndiaEswatini, on Instagram @HCI Mbabane and on  Youtube @ High Commission of India, Mbabane Eswatini.

India’s relations with Eswatini (formerly Swaziland) are close, friendly and cordial. During the last decade several important visits have taken place between the two countries. Ministerial level delegations from Eswatini has participated regularly  at the various CII EXIM Bank conclaves. HM King Mswati III has visited India twice,  in 2015 and 2017.

Developmental cooperation and assistance including capacity building:

India’s development cooperation with Eswatini includes Lines of Credit to Eswatini: (i) US$20 million for setting up Royal Swazi Science &Technology Park (RSTP) (completed and inaugurated by Hon’ble Rashtrapatiji during his visit to Eswatini in April 2018);  (ii) US$37.9 million for  agriculture development and mechanization project (completed, leading to a six-fold increase in production of maize in the country) and two more namely,  (iii) Line of Credit of US$ 108.28 million extending technical and financial support for construction of the new Parliament building of Eswatini; Line of Credit of US$ 10.4 million for establishing Disaster Recovery Data Center at the Royal Science and Technology Park (RSTP), built earlier  under India’s Line of Credit; a cash grant of US$ 1 million to the National Disaster Management Agency (NDMA); in-kind donation of 700 tons of rice and 300 tons of beans for the NDMA and medicines and medical equipment worth US$ 3 million, grant assistance of US$ 400,000 for construction of irrigation infrastructure in Lubuyane in the Hhohho region, gift of essential medicines worth Rs. 1 Crore to combat COVID19 in June 2020 and a grant  of 20000 Covishield doses  in March, 2021.   Under the Indian Technical Economic Cooperation Scheme of MEA, New Delhi, Eswatini gets 50 slots per annum for short term training programmes in premier institutes in India.  eITEC courses have benefitted hundreds of Emaswati officers in 2020-2021.  Every year, ICCR offers 25 academic slots of students from Eswatini for higher studies in Universities in India.

Trade and commerce:

India has a trade agreement with Eswatini since 2002 whereby both the countries have granted Most Favoured Nation (MFN) status to each other.

Import-export: Figures in US$ million (Source: Dept. of Commerce, GOI):

  2016-17 2017-18 2018-19 2019-20
India’s total exports to Eswatini
Pharmaceuticals, distillate fuel, fertilisers and machinery and mechanical parts etc. 39.56 32.71 19.20 18.57
India’s total imports from Eswatini
Organic Chemicals etc. 39.24 8.92 9.60 7.03

 

Strategically situated between South Africa and Mozambique, the Kingdom of Eswatini offers a safe and peaceful atmosphere for business.  It boasts of natural advantages including exquisite landscape, rich natural resources and relatively well developed infrastructure in Africa.  The country is a competitive cost base for value added manufacturing coupled with educated and trainable workforce.  Its strategic linkage to leading regional and international markets including SACU, COMESA, SADC, AGOA, EPA, SACU, Mercosur, EFTA and the CFTA makes Eswatini the investors preference for export oriented manufacturing.  The strong trade relations between Eswatini and South Africa are enhanced by the Common Monetary Area which pegs the Swati Lilangeni one to one with the South Africa Rand.

Eswatini has positioned itself as an export oriented economy, a position enhanced by strategic market access agreement that the country has entered into that cover more than 450 million people in Africa alone.  The country is well positioned to act as a global export hub in an increasingly competitive market, where access to raw materials and time to market is crucial to maintaining a global supply chain.  Market access from Eswatini is guaranteed as the country is signatory to a number of agreements that ensure duty free access into the US, EU, regional and international markets.

The Kingdom has so far played host to a number of multinational corporations like the Coca Cola concentrate factory, Air Liquide, YKK Africa and Mondelez International to name a few.  Eswatini also cans fruit for major European, US and UK retailers through the fruit cannery based in Malkerns.  It is world’s Top 5 low cost sugar producers and has a comparative advantage in agro industries anchored by necessary support infrastructure.  In Eswatini there are several different classes of land for business site development.  These may be divided into three broad categories: title deed land from the private sector, title deed land from the Government and Swazi nation land.  SIPA facilitates land access for foreign companies investing in the Kingdom.  Matsapha is the largest and most active industrial site in the Kingdom with manufacturing activities of diverse types and sizes.

The country’s inland container dry port is also located in Matsapha, where most commercial cargo is cleared.  Nhlangano Estate, which is closest to South African Port of Durban is the second biggest industrial site.  The third site is Ngwenya Estate, which is just a km from the main border to South Africa, on the way to Johannesburg and serves as a rapidly expanding adjunct site.  More such industrial estates are planned in the country.  The industrial sites are fully serviced with reliable infrastructure and utilities including competitively priced factory buildings readily available from the Ministry of Commerce, Industry and Trade, the Swaziland Industrial Development Company and private developers.  A regionally linked electricity supply network provides a reliable and competitively priced service to all business. Eswatini has a well developed and robust telecom system and abundant and consistent water supply.

Investment opportunities

The country offers opportunities for investment in the following sectors:

  • Information & Communication Technology
  • Telemedicine
  • Education & Socio-Economic Development
  • Accessible and Affordable Internet infrastructure
  • Broadcasting Service & Local Content Development
  • E-commerce & Online Services
  • Strategic Partnerships
  • Network Modernization and Financial Online Services.

ICT is an emerging sector supported by the country’s transition to being an efficiency-driven economy. Eswatini has embarked on a number of initiatives to spur the growth of this key sector such as e-government and the construction of the Royal Science and Technology Park. The country boasts of a fixed network that is 100% digital and supported by a countrywide optical fibre network and increased skills pool for the sector through the introduction of IT courses in tertiary institutions.

 

Mining

Eswatini has been endowed with a wide array of valuable minerals such as iron ore, diamonds, coal and gold, among others. The government has estimated that the mining industry contributed roughly only 2% of the country’s gross domestic product. Over the years, the Kingdom of Eswatini has identified rich deposits of a number of precious stones and gems. The country has two operational mines which extract Gold in the North West of the country and Coal in the South East. Eswatini has over 760 million tonnes of unexplored minerals in different parts of the country.  Possibilities :

 

 

Agri Business

Agriculture has traditionally been the backbone of Eswatini’s economy, contributing 8% to the country’s GDP in 2017. The sector also provides raw material to the manufacturing sector through the processing of agricultural products such as timber, fruits and sugar cane. The sector is a major source of employment for over 70% of the rural population.

The country has diverse agricultural activities that include sugar cane, citrus fruit, cotton, maize and other cereal production, as well as forestry, livestock and other undertakings which generate foreign exchange earnings. Agriculture is successful because of the four climatic regions with fertile soils and rainfall averaging 130mm in summer and 10mm in winter and the availability of major dams for irrigation purposes.  Possibilities :

  • Increased local production of targeted products such as dairy, fruits, vegetables, meat and other agricultural produce
  • Value addition of agricultural produce (e.g. tomatoes, peppers, sweet corn, citrus, meat etc.)
  • To establish within the agribusiness special economic zone at the King Mswati III International Airport
  • Agricultural products marketing services

 

  •  Manufacturing

Manufacturing is one of the major sectors in the economy, contributing about 40% to the GDP and is the second largest employer after the Agriculture sector. Main products include food and beverages, textiles, zippers and apparel, timber, engineering and metal products, plastics and chemicals as well as refrigerators.  Possibilities :

  • Local manufacturing of essential medicines
  • Anti-snake venom manufacturing
  • Integrated waste management (green, non-burn technologies)
  • High-end fashion textile manufacturing
  • Wood processing
  • Downstream value added sugar products

Energy

Eswatini has 70% national coverage of electricity. Installed capacity for power generation is about 70 MW. Domestic energy sources are mainly hydropower and diesel power plants. The supply shortfall currently stands at 70–80% of the 230MW aggregate demand. The kingdom offers opportunities for the generation of sustainable power that can increase the base load generated locally and the potential for export to the Southern African power pool.

The government actively seeks investments by independent power producers who would invest in local generation by requesting solicited bids on biomass (40MW), solar (40MW) and hydro power generation.

 

Tourism :

As one of the few remaining monarchies in Africa, culture and heritage are deeply engrained in all aspects of Swazi life, ensuring an unforgettable experience for all who visit. The stunning scenery of mountains and valleys, forests and plains; plus wildlife reserves across the country that are home to The Big Five; and a fascinating mix of modern and traditional festivals, ceremonies and events, ensuring   visitor to the Kingdom to have all that’s best about Africa in one small but perfectly formed and welcoming country.  Possibilities :

Tourism, hospitality and recreation (high value investments in hotels, casinos and other recreational facilities like development of theme park, amusement park, hotair balloon, caves, zip lines, bungee jumping, museums and monuments, cable car and hot springs),

Organizing meetings, conventions, festivals & events, developing wellness spas & hot springs business  within the newly declared Lubombo Biosphere Reserve and Regional integration (SADC, COMESA).

As a free and open economy, investors can invest in various sectors of the economy guided by the National Investment Policy.  Country’s focus presently is on manufacturing (FCMGs), agriculture and agribusiness (high value cash crops and agro processing), energy (to develop thermal and renewable energy plants to reduce import of power which is about 80% now), biotechnology (biocosmetics, bio fertiliser, animal vaccine and biomedical products), mining (diamond, coal, gold zinc, and iron ore), light engg and assembly(including electronics, selected auto parts and light machinery), property development (commercial property, industrial buildings and warehouses), Life sciences (pharma and specialised healthcare products), ICT (call cnetres, computer software and hardware, ICT components assembly) and aviation services and training (opportunities available for aircraft services for regional connection flights linking to international connecting destinations like Middle East and Eastern AFrica) and tourism infrastructure as detailed above.

AfCFTA

As AfCFTA gains momentum, Eswatini has been ranked among the top 10 countries which exports products that are imported by fellow African countries as disclosed at the World Economic Forum in January 2021.  It was reported that latest statistics reflect that Eswatini exported up to E27.1 million (US $ 1845678) worth of products, which were imported by various African countries.  Eswatini’s exports accounted for three percent of the total share of Africa’s aggregation.  Exports by the Kingdom to the rest of the world was at 92 percent of its total exports.  Commenting on the report the Minister of Commerce, Trade and Industry Manqoba Khumalo remarked that this remarkable achievement shows that Eswatini’s strategy to make the Kingdom an export driven economy is working and reiterated its intention to maximise economic value that could be derived from all African markets.  Due to its small size and a population of around 1.2 million, it makes sense to focus on external markets.  The Government remains committed to improving the ease of doing business in order to ensure that we produce more and ultimately boost the economy for the better, he said.  The export sector was identified as an important driver for rapid economic growth and development.  Strategic Road Map  2019-2023 has identified the SMME’s and the private sector as the engine for economic growth and the export sector as the main means of ensuring a vibrant  and a self sustaining economy as it will contribute to job creation and reduction of poverty in the country.

Investment Incentives

The Government of Eswatini encourages foreign and local investment in all business sectors and offers the following incentives to lessen the cost of doing business:

Eswatini has joined other COMESA member states to legislate Special Economic Zones Act to bolster economic development and job creation.

Primarily, companies located in the areas designated as Special Economic Zones (SEZ) benefit from Exemption from corporate tax for the first 20 years. Thereafter a corporate tax shall be charged at a rate of 5%

Reductions of customs duty, value added tax and any other tax payable on raw materials, equipment and machinery

Exemption from foreign exchange control or restrictions for activities carried out in a SEZ.

Tax Incentives

 

  • Reduced corporate tax of 10% for 10 years to both local and foreign investments in manufacturing, mining, international services and tourism. A company eligible for this concession may also be provided with an exemption from withholding taxes on dividends during the same 10-year tax period.
  • Accelerated Capital Allowances
    Industrial Plant and machinery used in manufacturing: 50% initial allowance in the first year of use and a 10% annual allowance on the reducing balance method over the lifetime of the asset.

    Hotel construction and improvement allowance: 50% of the cost is deductible in the year in which it is incurred on the construction of a new hotel or beneficial improvements to an existing hotel. In addition, an annual allowance of 4% of such expenditure is allowed.

    Buildings (and improvements thereto) used to house manufacturing plant and machinery: 40% initial allowance in the first year of use and an additional 4% allowance.

    Employee housing allowance:  20% in the first year and 10% per annum for the next 8 years.

    Farming: Certain capital expenditure is tax-deductible, but the total deduction in any year of assessment is limited to 30% of the gross income derived by the farmer from farming operations. Any amount disallowed is carried forward and added to expenditure in the succeeding year.

  • Unlimited Provision for Losses – losses may be carried forward indefinitely.
  • Duty free access on Capital Goods imported as intermediate goods (to be used as inputs for final products).
  • Duty free access on Raw Materials used for the production of goods exported outside the Southern Africa Customs Union (SACU)
  • Full Repatriation of Profits and dividends in any currency without permission and without limitation after payment of income taxes. Repatriation is also allowed for capital repayments and salaries of expatriates after payment of income taxes.
  • Employee Training Allowance of 100% of the cost to be offset against tax liabilities.
  • Double Taxation Agreements offering relief for taxes paid abroad on income also subject to Swazi taxation.

 

Non Tax incentives

  • Export Credit Guarantee Scheme through which the Central Bank of Eswatini provides an Export Loan Guarantee scheme and a Small Scale Loan Guarantee scheme which grants guarantees to loans provided by commercial banks.
  • Legal Protection of Investments from undue expropriation under the Eswatini Investment Promotion Act of 1998 and the Constitution of Eswatini. In addition, Eswatini is a member of Multilateral Investment Guarantee Agency (MIGA) of the World Bank which provides added legal protection of foreign investments of member countries from expropriation.
  • Five Year Work and Residence Permits for expatriate Directors, Senior Management and key technical personnel of new enterprises.
  • Subsidized Rental on Government Factory Shells at rates dependent upon their location.

Special Economic Zones (SEZ) Incentives

Eswatini has joined other COMESA member states to legislate Special Economic Zones Act to bolster economic development and job creation. Primarily, companies located in the areas designated as SEZs benefit from the following:

  • Exemption from corporate tax for the first 20 years thereafter a corporate tax shall be charged at a rate of 5%.
  • Reductions of customs duty, value added tax and any other tax payable on raw materials equipment and machinery.
  • Exemption from foreign exchange control or restrictions for activities carried out in a SEZ.

Eswatini Trade Information Portal

The Eswatini Trade Information Portal (ETIP) is a one-stop shop for all information relating to import and export to and from Eswatini. The portal is in line with Article 10 of the World Trade Organization (WTO) Agreement which requires all WTO member states to publish procedures for importation, exportation, and transit required forms and documents and other necessary information. The ETIP is aimed at facilitating trade and reducing the cost of trade. The ETIP is hosted by the International Trade Department under the Ministry of Commerce Industry and Trade. The Portal  provides traders will all information relating to trade, including regulatory requirements, forms, procedures, and fees that are traders will be required to pay. This information should enable traders to swiftly carry out cross border transactions. (eswatinitradeportal.com)

The Ministry of Commerce Industry and Trade (MCIT) of the Kingdom of Eswatini  is the Ministry responsible for formulating policies and promulgation through its International Trade Department which is responsible for the implementation of the Trade Policy. The MCIT is also responsible for formulating policies and promulgation of laws and regulations that ensure fair trading a competitive environment in the economy of Eswatini. The Ministry of Commerce Industry and Trade is also responsibly developing a Regulatory and Quality Infrastructure to enhance and / or enable Eswatini products to compete favorably in the domestic and global market by demonstrating with set national and international standards and regulatory requirement. Additionally, MCIT is responsible for attracting, encouraging, facilitating and promoting local and foreign investment in Eswatini, while creating an enabling environment through streamlined and focused policies and legal instruments that will complement Government’s effort to growth of Small and Medium enterprises.  (www.gov.sz/ministries-departments/ministry-of-commerce).

The High Commission of India, Mbabane’s official website www.hcimbabane.gov.in under its India Eswatini Relations button on its home page provides almost all information and links pertaining to Eswatini.

 

 

 

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