Eswatini: Investing

FDI in Figures

Despite its relatively small size compared to other countries in the region, Eswatini has been able to attract some FDI in recent years, particularly in the manufacturing and tourism sectors. According to UNCTAD's World Investment Report 2023, after returning around their pre-crisis level, at USD 117 million in 2021, FDI inflows dropped to USD 21 million in 2022. In the same year, the total stock of FDI was estimated at USD 4.1 billion, around 93% of the country’s GDP. The Annual Economic Review Report 2022/23 released by the Central Bank shows that the country’s FDI account posted a net of SZL 554.1 million inflow in 2022 due to inflows comprising a reduction of assets abroad and a rise in direct investment liabilities. The sub-account shows that assets recorded a reduction of SZL 284.7 million in 2022 from an increase of SZL 891.3 million in 2021. FDI liabilities, on the other hand, grew to SZL 269.5 million in 2022 - following a wider SZL 1.737 billion increase in the preceding year. Reinvested earnings improved by SZL 324.1 million in 2022 from SZL 983.3 million in 2021 - as companies ploughed back their receipts into the local economy. In terms of sectors, the main FDI flows into Eswatini have been in manufacturing, with a focus on textiles, clothing, and agribusiness. Other sectors that have received FDI include tourism, construction, and services. The main countries investing in Eswatini are South Africa, Taiwan, and the United States. South Africa, as Eswatini's neighbour and largest trading partner, accounts for a significant proportion of FDI in the country.

Eswatini benefits from good road infrastructure, electric energy (mainly imported from South Africa), and telecommunications. Investors are offered various incentives, such as repatriation of profits, fully serviced industrial sites, purpose-built factory shells at competitive prices, and exemptions from duties on raw materials used in the production of goods intended for export outside the Southern African Customs Union (SACU). Additionally, investors can benefit from financial incentives like tax allowances and deductions for new businesses, including a 10-year exemption from withholding tax on dividends and a low corporate tax rate of 10% for approved investment projects. New investors can also enjoy duty-free import of machinery and equipment. Investors in the Special Economic Zone (SEZ) may receive further benefits, such as a 20-year exemption from all corporate taxation (followed by taxation at 5%), full refunds of customs duties, value-added tax, and other taxes paid on goods purchased for use as raw material, equipment, machinery, and manufacturing, unrestricted repatriation of profits, and full exemption from foreign exchange controls for all SEZ operations. However, investments are screened by the government, and foreign investment in land is restricted. In addition, state-owned enterprises distort the economy. The Constitution provides for an independent judiciary power, but the king’s power to appoint judges limits judicial independence (The Heritage Foundation). Corruption is also a major issue. The Swati government has placed emphasis on the energy sector, with a particular focus on renewable energy. It has formulated a Grid Code and Renewable Energy and Independent Power Producer (RE&IPP) Policy to establish a transparent regulatory framework and encourage investment, supported by a sovereign guarantee. Overall, Eswatini ranks 130th among the 180 economies on the 2023 Corruption Perception Index and 107th out of 184 countries on the latest Index of Economic Freedom.

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Latest Update: May 2024