The Eswatini government aims to privatise Royal Eswatini National Airways Corporation (RENAC), the parent of Eswatini Air (RN, Manzini King Mswati III International), along with four other state-owned enterprises, identified in a restructuring framework adopted by the Kingdom's cabinet in 2021.
This is according to the World Bank's August 2023 economic update of the Southern African kingdom bordered by South Africa and Mozambique.
According to the World Bank, RENAC has received USD48 million in direct state subsidies over the past five years, the second-largest beneficiary after the Eswatini Water Services Corporation amongst seven state-owned enterprises (SOEs). In 2020 alone, RENAC needed an equity increase of about USD22 million, it states.
RENAC oversees the national airline, offers charter brokerage and ground-handling services, and operates a subsidiary travel agency (Royal Eswatini Travel Agency). It is also mandated to manage two state aircraft and a VIP terminal at Manzini King Mswati III International.
"The authorities recognise the importance of Eswatini Public Enterprise (EPE) reform," the report reads. "The EPE restructuring framework adopted by Cabinet in 2021 aims to improve their effectiveness and enhance the business environment. Its measures include privatising the Pigg's Peak Hotel and Casino, Eswatini Bank, the airport operations of the Eswatini Civil Aviation Authority, Eswatini Railways, and the Royal Eswatini National Airways Corporation. However, implementation of the EPE framework has been slow. One reason could be that the strategic role of each EPE needs to be evaluated more carefully against the backdrop of the political economy in the country and in each sector," the World Bank states.
Eswatini's development strategy, the National Development Framework 2019–2022, includes reorganising the SOE sector. The framework sets objectives for containing the wage bill, fund transfers to SOEs, and improving their performance through streamlining and privatisation.
A fiscal adjustment plan aims to reduce fund transfers to SOEs, most of which rely wholly on government support for their recurrent and capital budgets. The plan seeks to reduce, cumulative to fiscal 2024, transfers to SOEs by about 4% of total revenue, or 1% of GDP.
According to the World Bank, a government roadmap for SOE reform includes improving their legal and institutional framework, imposing a performance monitoring framework for their boards and management, and strengthening corporate governance. "Implementation of the reforms has only just begun, and no significant advances have been made yet," it says.
Meanwhile, SOEs remain a drain on the fiscus. "The cumulative outflow to SOEs from the budget (grants/direct subsidies, and equity) over the past five years was USD158 million, whereas the inflow (dividends and income taxes) was only USD47 million. Both grants and equity injections drain budgetary resources and contribute to fiscal instability."
Overall, World Bank analysis shows that Eswatini needs to shift from a state-led to a private sector and export-led growth model, as the contribution from exports and private investment is low. Restructuring the SOE sector would increase the level and quality of private investment, reduce inefficiencies, and free up public resources for investment. Improving SOE management would lead to better investment decisions, boost competition, and encourage private-sector involvement.
