After a decade studying and working in Australia, Swazi-born Roberto Russo had just been granted citizenship when he took a phone call from his father in Swaziland. The telephone conversation was to change his life’s trajectory overnight.
“I never thought of coming back to Swaziland. I was happy in Perth. But when my old man said to me he was thinking about selling the business I thought ‘what is the worst that can happen?’ I can always go back to Australia. I have not looked back,” says the 35-year-old Russo.
The lay of the land for entrepreneurs in Swaziland and Australia are poles apart. Australia is an open democratic society with a large middle class customer base, government support for emerging businesses, and perched on the doorstep of Asia’s huge and burgeoning economies.
Swaziland is an undemocratic feudal society ruled by sub-Saharan Africa’s last absolute monarch, King Mswati III. It has a population of 1.3 million, the majority living in poverty, unemployed or practising subsistence agriculture, and a government actively favoring international and local corporations at the expense of small and medium enterprises.
To compound its reputation as an entrepreneurial backwater, Swaziland’s tentative claim to being a stepping stone between the economies of South Africa and Mozambique is wishful thinking at best.
In reality, the construction of world class road infrastructure between the industrial and business hubs of Johannesburg and the port city of Maputo has left Swaziland out of the loop. The South African city of Mbombela boomed at Swaziland’s expense by servicing the trade route.
Swaziland’s national economy is habitually mismanaged for the benefit of Mswati and his expansive royal household and was one of the factors resulting in the country flirting with a financial meltdown in the wake of the global recession in 2008. A lifeline of a $335-million loan from neighboring South Africa was refused as the fine print included political reforms. Financial oblivion was only averted after the Southern African Customs Union (SACU), discovered that Swaziland, as a customs union member, was eligible for an $88 million windfall in 2012 and it came with no strings attached.
The financial crisis was caused by a drop of more than 50% in SACU receipts as a consequence of the recession and squeezed Swaziland’s public sector wage bill that accounts for about 18% of the approximately $4 billion GDP – the highest ratio on the continent.
Russo was clearly looking through a different lens at the business opportunities that existed when he decided to return home in the midst of the country’s financial crisis and swing for the entrepreneurial fences. In the eight years since buying out his father, his businesses have grown eightfold to record a $10 million annual turnover. Russo’s stable includes a paint manufacturer, tool supplier and advertising firm.
Swaziland’s proximity to Mozambique has proved an advantage against Russo’s South African competitors.
“We export seven to eight tons of paint daily to Mozambique. Purely on geography we are able to load two trucks in the morning and make delivery and they are back by 5PM,” he says.
Sandwiched between two countries allows for different business strategies for each, while also benefitting from lower water, electricity and labor costs. Mozambique provides for bulk paint sales, while the South African market offers a niche that sidesteps the competition from South Africa’s thousands of paint manufacturers.
The company supplies specialized paints to a Johannesburg-based architectural firm, including insect repellant paint for malarial areas and paint that can be applied in wet weather.
“We are small enough to be able to custom-make our product to fit client needs… the bigger guys would ask ‘look, how big is the project?’ and it would not be worth their while,” he says.
“One of the downsides of being such a small, isolated country is that you get comfortable at what you are doing, even though you do it well. It’s important to attend tradeshows and ensure we remain current, to give us a competitive advantage.”
Technical staff recruitment can also be difficult.
“There is only a small pool of paint chemists that you can get hold of in southern Africa… but people are quite naive. People in South Africa think that Swaziland is a small little farm town. People that do know the lifestyle we live in Swaziland would come at the drop of hat.”
Swaziland’s formal economy is dominated by corporates, from telecoms to sugar producers. At its center, and controlled by King Mswati III and his coterie, is the opaque Tibiyo TakaNgwane, meaning wealth of the nation, fund that has shares in many foreign and local corporates operating across diverse sectors.
Tibiyo was envisioned as a national empowerment vehicle and was established by Mswati’s father King Sobhuza II after independence in 1968. From its small beginnings, where every Swazi man was required to donate to it, usually a cow, the fund has grown to an estimated $2 billion. Like Mswati, whose personal fortune was put at $200 million by FORBES in 2008, the fund is exempt from tax, as well as civil and criminal scrutiny.
The fund’s rapid expansion is attributed to many factors, including eviction of small-scale farmers without compensation to grab some of the country’s best agricultural lands for the fund’s sugar interests and the government’s favoritism for contracts, tenders and beneficial regulations to foreign and local corporates the fund has stakes in.
Swaziland has the trappings of a democracy, but is not recognized as one. Mswati and his royal household, government and the state have become all but indivisible.
A small business owner based in Manzini with an annual turnover of R10 million ($770,000), who declined to be identified, says “If you fly too high, you are going to come short if you come up against businesses with government interests.”
“The main driver of business in Swaziland is the government. Pretty much everyone is dependent or indirectly dependent on government,” he says.
Lynette Fraser, Russo’s 38-year-old sister, established her own water bottling business, Viva Beverages, through purifying municipal water using reverse osmosis. She sells about 100,000 500ml bottles monthly and is able to compete with her South African competitors through lower transport costs. There was a business spike recently for sales of her five liter water bottles, after the capital Mbabane experienced debilitating water shortages, where Matsapha did not.
In recent years, she says there is a growing number of entrepreneurs opening businesses, where in the past “a lot of people would go to Johannesburg because the opportunities are just so vast.”
Excluding sugar production, about 90% of Swaziland’s economic activity occurs in the Mbabane, Matsapha, Manzini corridor and entrepreneurs recognize the benefits of businesses being concentrated within easy reach of each other.
But government business involvement remains a debilitating factor. Founder and Managing Director of the internet service provider Real Image, Ali Resting, has wrestled with government for deregulation of the sector, especially a legislative clause giving Swaziland Posts and Telecommunications Corporation (SPTC) exclusive rights for importing bandwidth, resulting in hugely inflated and uncompetitive internet costs stifling investment.
“The first question investors ask is if connectivity is reasonably priced? …It does deter investors if they are spending huge amounts of money towards connectivity, when they shouldn’t have to,” says Resting.
Deregulation would not only act as a lure for companies to invest in Swaziland, it would also benefit connectivity in the region.
“There is an opportunity for Swaziland to become a transit location between Johannesburg, Durban and Mozambique by using it as a conduit for fiber infrastructure. If you can position yourselves to have the shortest route, because the internet is distance sensitive, it makes more sense to go through Swaziland… it’s a huge opportunity,” says Resting.
For entrepreneurs in Swaziland, opportunities seem to be limited to the government.
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