SWAZILAND FISCAL TRANSPARENCY 2010 REVIEW

UNCLAS SECTION 01 OF 02 MBABANE 000035

SIPDIS
SENSITIVE

DEPT FOR EB/IFD/OMA (BSANDERS); AF/S (MHARRIS)

E.O. 12958: N/A
TAGS: ECON EFIN EAID PGOV PREL WZ
SUBJECT: SWAZILAND FISCAL TRANSPARENCY 2010 REVIEW

REF: STATE 001923


1. (SBU) This cable responds to reftel's request regarding
information on Swaziland's fiscal transparency and USG FY2010
assistance.


2. (SBU) Under the FY 2010 SFOAA, Swaziland is allocated $100,000 in
IMET funding, which is not provided directly to the Ministry of
Defense but pays for expenses related to a variety of training
programs for the Umbutfo Swaziland Defense Force personnel.
Additional funding is utilized for training security officers at the
USG-funded International Law Enforcement Agency (ILEA) in Gaborone.
The USG President's Emergency Program for AIDS Relief (PEPFAR) has
allocated 28.8 million USD to Swaziland for FY 2010 programming to
fight the highest incidence of HIV/AIDS incidence in the world.
This funding overwhelmingly goes to non-governmental partners, but
includes some assistance to the Ministry of Health and the National
Emergency Response Council on HIV/AIDS (NERCHA),primarily in the
area of human resources and management. Public Affairs exchange
programs include some persons in government positions. Other
limited USG funding goes to small community organizations for
self-help projects, local schools for scholarships, and
non-governmental organizations for projects from water retention and
agricultural self-sustainability to civic education, rule of law and
good governance, which has included building the capacity of
parliament to analyze legislation and respond to its constituents.


3. (SBU) The government of Swaziland (GKOS) makes its annual budget
publicly available in book form, as well as supplemental budget
documents. These documents are not provided online.


4. (SBU) Incomes and expenditures are included in the
publicly-available budget. The GKOS held a series of public
stakeholder meetings to respond to questions about both the annual
budget and mid-year budget policy review.


5. (SBU) The published budget is meaningful and details revenues and
most expenditures, although challenges remain within sections of the
budget to discern which might be royal expenditures.


6. (SBU) Expenditures on the royal family fall under three main
budget sections, or "heads" in Swazi budget terms: 1) Head 01 -
Statutory Expenditure, which includes salaries; 2) Head 51 - Swazi
National Treasury, which includes payments for the traditional
courts and advisory committees; and 3) Head 60 - Central Transfers,
which includes funds for the upkeep of the royal residences.
Payments for royal travel generally fall under the Ministry of
Foreign Affairs section of the budget. The royalty also has
enormous "private" wealth from ownership in numerous parastatals and
corporations, investments, and income from land holdings. When the
king's advisors are asked about lavish expenditures, the common
response (except for obviously state-related events) is that the
king pays for them from his private holdings.


7. (SBU) When discussing the budget with Post, Finance Ministry
Principal Secretary Dumisani Masilela stated that reviewing Swazi
National Treasury monies is not a core government function, and that
it is unclear how the king's office uses this money. Internal
budget discussions on the Swazi National Treasury section are brief
and vague when setting budget limits and expenditures. The 2009/10
budget estimate for the Swazi National Treasury was 99,248,000
emalangeni (13,233,066 USD).


8. (SBU) Supplemental budgets, generally passed at the end of the
fiscal year, primarily serve to reallocate funds among ministries
that had money left over and those who had overspent, but also to
reflect increases in expenditures on items such as royal travel.
Such publicly-available supplemental budgets make analysis of the
initial budget more challenging, but do not pose insurmountable
problems regarding the budget's transparency.


9. (SBU) Since the 2009 review, Southern African Customs Union
(SACU) receipts, which accounted for approximately 60 percent of
government's revenue, have dropped dramatically. For FY 2010,
Swaziland's receipts were cut from 6 billion emalangeni (800 million
USD) to 1.9 billion emalangeni (253 million USD),due to losses in
customs revenue and Swaziland's obligation to repay overpayments by
SACU in previous years. The resulting budget gap has caused
government to review expenditures with greater scrutiny, reduce
current year budgets, and focus more attention on auditing.


10. (SBU) The Finance Ministry has put forward two bills that would
increase transparency in procurement and public finance. A
procurement bill, currently before cabinet, would provide necessary
reform to government's procurement system. The Public Finance
Management Act would update a 1967 law and impose more reporting
requirements on the ministries, as well as yearly strategic plans.


11. (SBU) Anti-corruption efforts by GKOS have intensified over the
past year. The Anti-Corruption Commission, which was created in

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2006 but has only had a commissioner since March 2008, reported an
increase in the number and quality of cases reported to the
Anti-Corruption Commission, largely due to news of corruption
arrests and reports. A media campaign to sensitize the public to
the Commission's work and encourage the citizenry to report cases is
currently underway. The Commission has not been able to bring a case
to court yet.


12. (SBU) Embassy Mbabane will continue to work directly with the
Government of the Kingdom of Swaziland (GKOS) to promote
improvements in fiscal transparency, more fully implement
transparency and anti-corruption tools it currently possesses, and
engage the king's office to provide greater transparency in the area
of expenditures on the royal family. Embassy Mbabane intends to:

- Utilize contacts within the Finance Ministry, Economic Planning
and Development Ministry, Foreign Ministry, and Anti-Corruption
Commission to educate GKOS on the need to address fiscal
transparency as a way to combat misuse of funds, improve its budget,
and empower its citizenry, as well as avoid the possibility of
losing USG development assistance.

- Urge the GKOS to respond meaningfully to the findings of the
annual Auditor General's reports and the parliamentary Public
Accounts Committee's (PAC) findings;

- Support GKOS efforts to combat corruption through its
Anti-Corruption Commission (ACC) and public education program (PEP),
and to start prosecutions of corruption cases. Reigning in
corruption will have a significant benefit to fiscal transparency
and accountability.

- Encourage the GKOS to institute an end-of-year outreach program to
inform civil society on the state of its budget expenditures after
passage of supplemental budgets, and motivate civil society groups
to focus on the budget in their activities and discussions with
government.

- Engage the king's office to consider itemizing more of the
expenses associated with the Swazi National Treasury.

- Continue implementation of the 2009 PEPFAR Partnership Framework,
which outlines areas of collaboration in regard to Swaziland's
response to HIV/AIDS from 2009-2013, in order to support greater
transparency in health expenditures. Through this Partnership, the
PEPFAR team will continue to engage the Ministry of Health, NERCHA,
other donors and stakeholders to coordinate resource allocations,
eliminate duplication, and increase transparency in the use of funds
to combat HIV/AIDS.


13. (U) Post will inform the GKOS and the king's office that future
development assistance from the United States is at risk if they do
not take concerted steps to increase transparency, and that post
personnel are available to assist in the process.
IRVING