2018/19 - Separc · (COMESA) region. The Centre also participated in numerous government processes, one of which was the formulation of the National Development Plan. As envisaged

Eswatini Economic Policy Analysis and Research CentreAnnual Report 2018/19

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2018/19

ANNUAL REPORT

ESEPARCESWATINI ECONOMIC POLICY

ANALYSIS AND RESEARCH CENTRE

Eswatini Economic Policy Analysis and Research Centre Annual Report 2018/19

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Board Members Capacity Building

Knowledge Dissemination

Graduate Development Programme

Chairman’s Remarks

PAC Members

Executive Director’s Remarks

Management

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ESEPARC at a Glance

Governance

ESEPARC Staff

Research and Policy Analysis

ESEPARC Evidence Translation

Corporate Social Responsibility

Through the lens

Our Global Footprint

Social Media Presence

ESEPARC APP

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Officers & Professional Advisors36

CONTENTS

Policy Dialogue26

Directors Responsibilities & Approval37

Report of the Independent Auditors38

Directors Report39

Financial Statements40


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Ms. W. Dlamini

Member

Ms. T.R. Zwane

Member

Prof. J.M. Thwala

Member

Mr. P.E. Ginindza

Member

Mr.D.E. Masilela

Chairperson

Mr. M. Dlamini

Member

BOARD MEMBERS

Mr. M.V. Sithole

Member

Ms.H. Motsa

Member

Mr. A.T. Dlamini

Member


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CHAIRPERSON’S REMARKS

ESEPARC’s mandate and purpose is to provide policy research and analysis on social and economic issues in the Kingdom of Eswatini. To achieve this mandate, the Centre conducts research, organises public seminars and conferences, publishes results in mainstream media and academic journals, and conducts policy and data analysis workshops. Guided by the strategic plan endorsed by the Centre’s directors, ESEPARC delivers on its mandate through both demand and supply driven studies. Demand driven studies include consultancies and government commissioned research projects while the Centre’s researchers initiate supply driven studies after having scanned the economic environment.

I am happy that the Centre has started preparations for the 2019 Eswatini Economic Conference, which will provide a platform for economists, policy-makers, and the public to discuss economic opportunities around the knowledge economy in Eswatini. The success of the 2017 Eswatini Economic Conference fuels my confidence that the up-coming Conference will contribute significantly to economic policy formulation in the Kingdom of Eswatini.

ESEPARC continues to deliver on its mandate despite limited financial resources. The Centre has not yet attained the full structure of its organogram. However, I am pleased that the Centre is constantly devising strategies to defy the odds. One such strategy is linking up with experts from other research institutions - including

universities across the world - in order to tap into the global brainpower for economic policy analysis and research.

I am very grateful to the Ministry of Finance for granting ESEPARC the permission to acquire its own office building. This has created opportunities for the Centre to host a larger number of visiting researchers, not only from Eswatini but also from other parts of the world.

On behalf of the ESEPARC Board, I would like to invite you to read our annual report, which not only demonstrates the strides made in the last year but also gives an indication of the Centre’s potential contribution to evidence-based policy formulation in Eswatini. Once again, we reinforce our promise to build sustainable national capacity that improves the quality and timeliness of public policies in the Kingdom.

Mr.D.E. Masilela

Chairperson


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Dr. Dumsile Dlamini

Member

PACMEMBERS

Ms. Bonsile Ntando

Member

Mr. Linda Hlophe

Member


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Dr.Thabo Sacolo

Acting Executive Director

EXECUTIVE DIRECTOR’SREMARKS

The financial year 2018/19 has been a memorable one for ESEPARC. We moved into our new offices and published six research papers in a peer-reviewed international journal, the African Review of Economics and Finance.

Once again, in collaboration with the Central Bank of Eswatini and the University of Eswatini, ESEPARC began preparations for the 2019 Eswatini Economic Conference (EEC). The theme for this Conference is ‘Knowledge, Innovation, and Development in Eswatini: Current and Future Prospects’.

The purpose of the Conference is to provide a platform to discuss and begin to materialise the knowledge economy Eswatini can become. Its aim is to bring together economic policy-makers, researchers, development practitioners, captains of industry, development partners, and other Eswatini stakeholders to discuss the opportunities and challenges of knowledge, innovation, and development on the country’s economy.

Insights emanating from this interaction are expected to contribute towards the country’s attainment of Vision 2022, the Sustainable Development Goals (SDGs), and the African Union Agenda 2063. The key here is to leverage the country’s bold initiative of building a science and technology park.

Building human capital remains key in attaining the country’s developmental objectives. One of the focus areas for the Centre is the education sector. In the 2017/18 financial year through to 2018/19, ESEPARC focused on understanding higher education in Eswatini, particularly technical and vocational education and training (TVET).

ESEPARC continued with the initiative of generating evidence to shape policy strategies aimed at improving the delivery of education in the country. In collaboration with the Self Help Action to Mitigate the Burden of HIV and Aids (SHAMBA) Trust, the Centre embarked on a Survey of Early Childhood Care and Development in Eswatini. The Centre also started working on another study aimed at evaluating the National School Feeding Programme in Eswatini. ESEPARC will continue to direct its efforts towards fully understanding the education system in Eswatini for an effective contribution towards improved policies in this sector.

In line with our strategic plan, ESEPARC also conducted studies at the regional level, one of which focused on understanding the energy demand in the Common Market for Eastern and Southern Africa (COMESA) region. The Centre also participated in numerous government processes, one of which was the formulation of the National Development Plan.

As envisaged in 2018, the Centre moved to a new office building in the outskirts of the city, Mbabane Township, during the second quarter of the 2018/19 financial year, and I would like to thank the directors for their unwavering support in this regard.

On behalf of the ESEPARC team, I would like to reassure all our stakeholders that the Centre shall without a doubt, remain committed to its mandate to generate empirical evidence aimed at shaping economic policy in Eswatini.


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Mangaliso Mohammed

Acting Senior Research Fellow

MANAGEMENT

Qiniso Mthethwa

Finance & Admin Officer

Teetee Zwane

Knowledge Mangaer

Dr.Thabo Sacolo

Acting Executive Director


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The Eswatini Economic Policy Analysis and Research Centre (ESEPARC) is a semi-autonomous think tank that specialises in economic policy research and analysis in Eswatini. The entity was established in 2008 through a joint funding arrangement between the Government of Eswatini and the African Capacity Building Foundation (ACBF). The overall goal of ESEPARC is to build sustainable national capacity that must improve the quality and timeliness of public policies in Eswatini, within the existing national policy and legislative framework.

The Centre’s staff compliment currently stands at 13, comprising the executive director, five researchers, a knowledge manager, and six administration staff. Since it began operations in 2012, ESEPARC has endeavoured to build the capacity for research and policy analysis within Eswatini through offering training opportunities for ESEPARC staff and officers from government ministries, parastatals, the private sector, and non-governmental organisations (NGOs) in order to ensure a performance driven workforce and leadership for the country’s future growth.

ESEPARC, in collaboration with the United Nations Development Programme (UNDP), offers a 12-month graduate research programme that gives graduates intensive on-the-job training to build their capacities in research skills, personal development, and leadership. The programme is designed for motivated, driven, and dedicated individuals with leadership potential for policy research. ESEPARC hopes that this training programme will provide interns with a solid foundation to pursue research careers and generate the necessary data and information for innovative policy solutions geared towards achieving national sustainable development.

ESEPARC AT A GLANCE


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ESEPARC PERFORMANCE 2018/19

The Centre falls under the Ministry of Finance portfolio and a Board of Directors governs it. The Finance Minister is responsible for appointing a Board chairperson. A Finance and Administration Committee (FAC) supports the Board. The Board oversees the governance of ESEPARC and prepares its strategy, while the FAC advises and guides the Centre’s management on financial and administrative aspects.

The Board has nine members from different key stakeholder institutions: the Ministry of Finance; Ministry of Economic Planning and Development; Eswatini Revenue Authority; Central Bank of Eswatini; University of Eswatini; Ministry of Commerce, Trade and Industry (Trade Promotions Unit); Eswatini Industrial Development Corporation (EIDC); Public Policy Coordination Unit (PPCU); non-governmental organisations (NGOs); and ESEPARC executive director, who acts as the board secretary.

GOVERNANCE


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CORPORATE PROFILE

ESEPARC is a semi-autonomous entity established in 2008 through a joint funding arrangement between the Government of Eswatini and the African Capacity Building Foundation (ACBF). The overall goal of ESEPARC is to build sustainable national capacity that must improve the quality and timeliness of public policies in Eswatini, within the existing national policy and legislative framework.

The Centre acquired new premises this financial year and its offices are now located at Plot 874 Mbabane Township, Siphefu Street.

VISIONTo be the think tank of think tanks.

MISSION STATEMENTAt ESEPARC, we generate evidence and knowledge on economic policy effectiveness to enable informed decision making in the Kingdom of Eswatini.

CORPORATE VALUESOur values are as follows:

Credibility: We conduct reliable, accurate, and impartial research that will enhance economic welfare for Eswatini.

Accountability: We hold ourselves responsible for delivering research of the highest standard, and to give policy advice that will enable effective decision-making.

Innovation: We find new ways to make our work more efficient, impactful, and user friendly, so that we can expand our footprint as the first-choice research provider in economic policy.

Holistic Approach: We deal with research problems in such a way that our solutions eradicate the root cause of each problem.

Reciprocal Relationships: We choose our relationships in such a way that all parties benefit.


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ESEPARC has a critical role to play in the recovery and development of the economy, especially in generating the much-needed evidence for policy formulation and decision-making.

The primary goal of ESEPARC is to improve economic governance in the Kingdom of Eswatini through generating evidence for use by government institutions responsible for various aspects of economic policy formulation and implementation, the private sector, civil society, and development partners to ensure functional public policy in Eswatini.

The Centre’s intent is to become a think tank that other think tanks will benchmark against and one that is a world leader in economic policy that leads to income generation and wealth creation.

To this end, the specific mandate of ESEPARC is to:

• Conduct economic research and policy analysis;

• Build capacity for economic research; and• Initiate public policy dialogue and

dissemination.

HUMAN RESOURCESESEPARC has a team of dedicated professionals who conduct work under two divisions:

• Research Department • Finance and Administration Department.

The Research Department - which comprises five researchers and a knowledge manager - performs the core duties of the Centre and has two sub-divisions: Macroeconomics and Microeconomics. The organisational structure of ESEPARC is such that associate researchers report to research fellows, who in turn report to the senior research fellow. The senior research fellow and the knowledge manager report to the executive director. The knowledge manager, who

also reports to the executive director, provides support to the Research Department as well as the Finance and Administration Department.

The Finance and Administration Department - which provides support to the Research Department – has a staff compliment of six. The finance and administration officer (FAO), who reports to the executive director, heads the department and is senior.

THE GOALS AND OBJECTIVES OF ESEPARC


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Teetee Zwane: Knowledge Manager

Tengetile Hlophe: Research Fellow

Mangaliso Mohammed: Acting Senior

Research Fellow

Gugulethu Mgabhi:Associate Researcher

Thembumenzi Dlamini:

Associate Researcher

RESEARCH

Dr Thabo Sacolo: Acting Executive

Director


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Qiniso Mthethwa: Finance & Admin

Officer

Comet Nkwanyana: Assistant Finance

Officer

FINANCE AND ADMINISTRATION

Nomkhosi Dlamini: Assistant Admin Officer

Esau Kunene: Driver

Sibongile Sithebe: Cleaner

Thuli Masilela: Personal Assistant to Executive Director


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The economy of Eswatini has not realised its true potential in recent years due to several factors. These factors include high and increasing levels of unemployment; low levels of foreign direct investment; slow pace of economic and legislative reform; lack of efficiency in public expenditure; the preponderance of subsistence agriculture over commercial agriculture; persistence poverty and unequal income distribution; and limited economic diversification and excessive commodity and market concentrations.

Factors that induce slow economic development include weak economic policy management; increased dependence on the Southern African Customs Union (SACU) revenues with high volatility; low rates of employment creation; non-conducive investment climate; droughts and unfavourable weather; and more. Against this backdrop, the Centre has strengthened its research mandate to focus on evaluating current development programmes to grasp the link between government programming, income generation, and wealth creation within Eswatini.

By emphasising on income generation and wealth creation, ESEPARC believes it will be better positioned to use its work to bring about a mind-set change throughout the government system and amongst stakeholders such that focus will shift from poverty eradication to income generation and wealth creation in Eswatini. The Centre has a critical role in the recovery and development of the economy, especially in generating the much-needed evidence for policy

formulation and decision-making. This is particularly so because there is overwhelming evidence supporting the fact that evidence-based policy making is vital to shape not only decisions on public spending within a context of resource constraints, but also to inform decision makers of key priority areas for growing their economies.

In this regard, all the efforts of ESEPARC aim at enhancing the implementation of the National Development Strategy (NDS) and the Poverty Reduction Strategy and Action Plan (PRSAP), as well as other national development policy frameworks and plans in support of the development of the private sector and civil society organisations.

A focus on income generation and wealth creation

ESEPARC EVIDENCE TRANSLATION


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Opinion Editorials

Conducting economic policy research is a long process. To disseminate the ideas generated by researchers at the Centre to the public and stakeholders, ESEPARC produces opinion editorials that are published in the local press, the Centre’s website and App (SEPARC Insights).

Over the period under review, five (5) opinion editorials were published in the Nation Magazine and the Sunday Observer:

1 Magongo, T., Mohammed, M. and Dlamini, T. S. (2018) ‘VAT on electricity might not be such a very good idea for ailing economy’, Nation Magazine, April 2018

2 Mohammed, M. (2018) ‘If it’s made Eswatini, it would be a vote with your Lilangeni’, Nation Magazine, May 2018

3 Hlophe, T. and Dlamini, T. S. (2018) ‘Tapping into the foretold future of artificial intelligence for development in Eswatini’, Sunday Observer, 10 June 2018

4 Mhlanga, Z. (2018) ‘Making irrigation schemes sustainable for agriculture and food security Eswatini’, Nation Magazine, November 2018

5 Hlophe, T. and Dlamini, T. S. (2019) ‘The prospects of indigenous knowledge systems (IKS) in Eswatini’, Sunday Observer, 03 February 2019


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This section presents the research activities undertaken by the Centre during the reporting period. At the close of the financial year, various projects were at different stages of completion, while some were still ongoing.

Demand Driven Research

• The Implications of Teenage Pregnancies in Eswatini: A Trend and Spatial Analysis

The study investigates the major causes of teenage pregnancies in Eswatini and to understand the economic costs on the national purse. It

identifies the areas in which teenage pregnancies are most prevalent, teenage mothers who are more vulnerable to have more babies, the factors associated with the number of previous pregnancies that teenagers have, and uses cultural stories to identify the unique key socio-economic factors in the areas experiencing high teenage pregnancy rates in Eswatini. Information from such an analysis is crucial in the development of policies and programmes that will help to address the issue as the study maps out the exact areas where teenage pregnancy is a problem and attach monetary losses on the economy.

• Inequality of Opportunities in Education in Eswatini

The study traces the causes and effects of inequality of opportunities in education in Eswatini over a 50-year period. This study identifies some of the major causes of inequality and seeks to identify potential sources of inequality at all levels of the general education system in Eswatini and how these interplay with learner achievement. The study also analyses and discusses the outcomes of the observed education and health inequalities,

particularly in relation to education.

• Assessing the Economic Impact of the Eswatini Small Scale Enterprise Loan Guarantee Scheme (SSELGS)

The purpose of this study is to evaluate/analyse the impacts of the Small Scale Enterprise Loan Guarantee Scheme (SSELGS) to SMEs, the economy and the banking sector in Eswatini since its initiation 26 years ago. The scheme was initiated to bridge the gap of access to financial services of SMEs from the financial institutions in the country. It is therefore fundamental to evaluate or analyse the extent to which the scheme has had an impact in bridging the gap. The study also seeks to find out if the scheme plays a role in promoting the development of SMEs and whether there are any programmes for support to SMEs, particularly in terms of access to financial services, at the macro level.

RESEARCH ANDPOLICY ANALYSIS

OPERATIONAL REVIEW

Completed Studies


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• The Impact of the Demographic Transition on Energy Demand in COMESA: A Pooled Mean Group Estimation

This study examines the impact of an increase in the working age population on energy demand in the COMESA region. It also highlights empirical evidence, which reveals that Africa is experiencing a demographic transition. An interrogation of the current method used by COMESA member states to estimate energy demand reveals that the current estimation procedure does not take into account the demographic structure of the population.

• Implications of Migration to Cost-reflective Tariffs in Eswatini’s Electricity Sector

Eswatini has witnessed significant reforms and restructuring within the electricity sector. One of the key changes that need to take place in the country is to restructure electricity tariffs to reflect true long-run marginal costs of electricity supply and the Government of Eswatini has since approved migration to cost-reflective tariffs. To understand the potential electricity consumption responses to future price changes, the study will ascertain whether the consumption behaviour that could be induced by cost-reflective tariffs will be consistent or incongruent to the overall goals of the National Energy Policy on affordability and positioning the electricity sector as a stimulant for

industrialisation and economic growth.

• Determinants of Households’ Primary Choice of Cooking Energy in Eswatini

Access to energy is crucial for any country’s economic development. It is an important input in the welfare of the consumers in any economy: from its role in providing extra hours for working and studying to reducing adverse health impacts by reverting from using wood fuel for cooking to using cleaner and health-friendlier stoves for cooking. This study attempts to identify the various factors that are associated with Eswatini households’ cooking fuel choices. It will examine the various forms of cooking energy available and used by households in Eswatini, determine the primary choice of cooking energy among households, and examine the factors that influence the choice of cooking energy among the households. The results will provide policymakers with information on the factors that can be altered in order to nudge households to use cleaner sources of energy.

• Factors Contributing to Success or Failure of Native versus Foreign Owned Retail SMEs in Eswatini

The study aims to assess the business operations, entrepreneurial behaviour, and determinants of success or failure among native versus non-native SMEs at firm-level. Descriptive method is used to explain and examine the operations and performance of SMEs run by natives and non-natives, as well as the entrepreneurial behaviours of the business owners. The findings of the study will provide specific local information on firm-level factors that enable or inhibit SME performance within the different sectors of the economy. Such information will assist policymakers to design strategies to improve native owned retail SMEs as well as finding ways to create a conducive business environment for SMEs.

Ongoing Studies


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• Trends of Women’s Participation in the Sectors of the Economy of Eswatini: Status and Disparity

The aim of this study is to examine the participation rate of women within the sectors of the economy. There is need to design strategies that will bridge the gender gaps and highlight the gender responsive interventions to enhance the likelihood of success of the Poverty Reduction Strategy Action Plan (PRSAP). Decreasing inequality and allowing everyone to be part of the productive system could improve the country’s development outcomes and make the economy grow faster in a smarter way. Therefore, the study will assist policymakers to identify the sectors that need improvement in terms of gender equality, which might be inhibiting economic growth.

• Opportunities for Growth in the Eswatini Economy: A Social Accounting Matrix Approach

A social accounting matrix (SAM) provides a first-hand view of the size and structure of an economy. This study presents a SAM of the Eswatini economy to characterise the sectors of production and their relative importance to income and wealth creation. The paper investigates the key features of the Eswatini economy and identifies the most important sectors of the economy in terms of production, value addition, capital formation, employment creation, and overall impact on household income. The study also calculates the positioning of each sector in terms of the inputs it demands from other sectors for the creation of gross domestic product (GDP). With information on all the economic activities accentuated and prominently distinguished, this paper will provide knowledge on Eswatini’s income and commodity flows and rank the key priority sectors for investment opportunities for the Eswatini economy.

• Innovation in Eswatini: Past, Present, and Future Prospects

This study looks at the history of innovation in the

country. Given the growth in the popularisation of innovation in national development, the study conducts a historical analysis of the innovations that have been part of Eswatini’s development. It examines how societies have evolved over the years and the stock of knowledge that has informed innovative activities in the country. The study tries to document a national perspective of innovation and understand the potential of innovation-driven economic development.

• Harnessing the Demographic Dividend to Fast-Track Industrialisation in Eswatini: A Case in the ICT Sector

Eswatini ranks very low in the Global Competitiveness Index (GCI). Conceivably, this draws from the fact that Eswatini is a consumer of goods and services produced from outside the economy. Consequently, this has robbed the country of the opportunity to exercise an industrial policy regime that puts small-medium enterprises at the centre of industrial development. This study analyses panel data of five African countries to illustrate that manufacturing in the ICT sector could contribute to increased economic growth, particularly if targeted towards technologies that are in high demand among the youth, such as smartphones, laptops, and other similar gadgets. The paper will come up with some considerations for industrial policy in Eswatini.

• The Role of Industry in Skills Development for Industrialisation in Eswatini

In a rapidly automated and technological world, skills and knowledge intensity are fundamental drivers of industrialisation. This study examines the current role played by industry in technical and vocational education and training (TVET). It correlates factors contributing to the skills gap between industry needs versus skills supplied by TVET institutions. The paper will contribute knowledge on the role of industry in closing the skills gap for the country’s current and future industries. It will identify the various institutional mechanisms created by industry that could play


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a critical role in upgrading technical skills in the country and transforming education and training into a process of continuous learning and lifelong job competencies.

• The Economic Benefits of Technical Vocational Education and Training in the Kingdom of Eswatini

This study covers public technical and vocational education and training (TVET) institutions, tracing the graduates with a view to assess the economic return to the government of Eswatini’s investment into the institutions. The purpose of the study is to investigate the economic benefits of TVET in Eswatini using the cost of training from 12 TVET institutions and the TVET graduates’ income covering a period of 17 years (2000 to 2017). The study hopes to close the gap of unavailability of literature on the economic benefits of TVET in Eswatini, Southern Africa, and Africa as a whole.

• Identifying Growth Opportunities within the Agriculture Sector of Eswatini

The study seeks to conduct the first agricultural sector review for Eswatini. The study aims to assess the performance of the agriculture sector in terms of investment (budget allocation to and within the agriculture sector), output growth, and changes in commodities (produced, exported, and imported). The need for review arises from

the fact that Eswatini, similar to and other African countries, needs to regularly assess progress made towards achieving its developmental objectives and provide such information to stakeholders, including but not limited to policymakers, academia, and the private sector (particularly investors in the agricultural sector). This information will be useful for planners and policymakers when prioritising investments within the agriculture sector of Eswatini.

• Stokvels: An Instrument for Income Generation and Wealth Creation?

This study seeks to evaluate the economic value of stokvels in Eswatini. The snowball sampling technique will be used to identify the stokvels and a regression model used to analyse their impact. The study is in line with the National Financial Inclusion Strategy which aims to reduce financial exclusion in rural areas from 27% to 15% by 2022. In determining the contribution of stokvel funds to income generation, wealth creation, and the features that make them successful, the study will add to knowledge on informal savings facilities to inform the review of rural financial development policies.

• Community-based Ecotourism: A Possible Pathway to Sustainable Natural Resource Management in Eswatini

Tourism has been recognised as a priority sector with the potential of catalysing economic growth in Eswatini. Community-based eco-tourism is being used as an engine for income generation and wealth creation for rural households in Eswatini. This study aims to quantify the economic benefits that accrue to the host communities, assess the perceptions of community members towards eco-tourism and whether their expectations from such projects are met. The results will highlight the strengths and weaknesses of selected community-based eco-tourism projects around the country and thus provide policymakers with information on the factors that need to be altered in order to improve the overall functioning and likelihood for success of these projects.


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• Assessing the Economic Impact of Brain Drain in Eswatini

Eswatini has a rich history of international migration and in spite of limited literature, emigration has played a significant role in the economy of the country. The purpose of this study is to assess and quantify the impact of brain drain on the economy of Eswatini. The goal is to understand the economic impact of the increasing emigration of educated and skilled citizens of the country, and the impact this has on GDP and the strengthening of human capital development.

• The Impact of Unemployment on the Youth: A Case of Mental Illness in Eswatini

This study examines the relationship between youth unemployment and mental health, in order to understand the link between increasing mental illness cases and rising youth unemployment in Eswatini. This understanding will allow for effective strategies that will break the cycle of poverty, unemployment, and mental illness which lead to long-term economic unproductivity. This study will assist policymakers to address the socioeconomic determinants of unemployment in different communities, understand the barriers that young people are facing, and how the unemployed youth can be channelled to productive economic activities.

• The Economic Impacts of the Lower Usuthu Irrigation Project

This is an impact study that was commissioned by the Eswatini Water and Agricultural Development Enterprise (ESWADE). It assesses the economic and social benefits derived from investment in dams in Eswatini. The focus is on the first phase of the Lower Usuthu Irrigation Project (LUSIP) administered by ESWADE. The study seeks to provide evidence on the impact of LUSIP on agricultural production and by default on households that would lead to the generation of useful information for the continued sustainability of the project into the future. It also provides evidence on the contribution of the project in empowering rural households and social development in the area, which will provide indispensable information for continued government programming.

Supply-driven Research

Completed Studies


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• The Potential Economy Wide Impacts of Introducing VAT on Electricity in Eswatini

The Eswatini Energy Regulatory Authority (ESERA) commissioned ESEPARC to undertake a study to determine the potential economic and social impact of introducing VAT on electricity on households, industry, and the country’s economy at large. The study sought to determine the short and long-term effect on national tax revenues of each position; the price elasticity of demand of electricity on the business and/or industrial customer; assess the potential impact of the proposed amendment on other economic indicators such as inflation and economic growth; and to recommend the best policy decisions to inform government on the issue.

• Survey of Early Childhood Care and Education in Eswatini

ESEPARC has been commissioned by the Self Help Action to Mitigate the Burden of AIDS (SHAMBA) Trust to conduct a survey that will provide baseline information on the status quo of Early Childhood Care and Education (ECCE) provision in Eswatini, as well as comprehensive policy and programme analysis on ECCE. The survey seeks to assess progress made since 2008

in access to ECCE centres providing pre-primary education, and to assess the gap between current provision, access, and the international and national targets of full access to quality ECCE, especially by the most vulnerable children.

• Evaluation of the Eswatini National School Feeding Programme

The Ministry of Education and World Food Programme (WFP) Eswatini has commissioned ESEPARC to evaluate the National School Feeding Programme (NSFP) in Eswatini. The study is to assess the effectiveness of the school feeding programme in achieving stated goals, and generate evidence on its contributions to education outcomes and other developmental objectives, including use of schools as centres of care and support. It will also document the cost of implementing the programme as well as identify and recommend design adjustments government needs to make in order to achieve its policy objectives.

• The Impact of Procurement on Sustainable Economic Development in Eswatini for Attainment of Vision 2022

The Eswatini Public Procurement Regulatory Agency (ESPPRA) has engaged ESEPARC to conduct a study on the impact of procurement on sustainable economic development in the country. The study is expected to demonstrate how Eswatini’s state owned enterprises (parastatals), the local and central government can use ESPPRA as an instrument in developing and strengthening the local economy. The study seeks to identify the core principles of public procurement that can be used as an accelerator for economic growth and recovery, and further recommend how these principles should be applied to drive local procurement to achieve domestic economic development.

Ongoing Studies


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ESEPARC hosted the following policy dialogues during the financial year under review:

(i) Culture Public Lecture

ESEPARC hosted a public lecture on July 26, themed ‘Knocking on Moral Values to Integrate Indigenous Knowledge with Development’ to spur on a conversation on some pertinent cultural issues that impact the lives of emaSwati. The guest presenter was Ms Joy Ndwandwe, a Heritage and Development Consultant.

(ii) Trade fair seminar

The Centre hosted a seminar during the Eswatini International Trade Fair 2018 under the theme; ‘Rekindling Made in Eswatini for the Next 50 Years of Trade… A Conversation’, to kick-start dialogue on how the country can achieve its developmental goals. The seminar was held on September 03.

iii) SME Public Lecture

On January 17 (2019), ESEPARC partnered with the Ministry of Commerce, Industry and Trade’s SME Unit to host a public lecture themed ‘SMEs and Industrialisation: Materialising SDGs 8 & 9 in Eswatini’, with support from UNDP Eswatini. The

guest presenter was Dr Paul Alagidede, a Professor of Finance at Wits Business School.

iv) Think Tanks Day

The Centre, in coordination with the Lauder Institute of the University of Pennsylvania’s Think Tanks and Civil Societies Programme, on January 31 hosted a breakfast meeting themed ‘Why Facts and Think Tanks Matter’. The guest speaker was Minister of Economic Planning and Development Dr Tambo Gina (represented by Minister of Tourism and Environmental Affairs Hon. Moses Vilakati). Other keynote speakers were Business Eswatini President Mr Andrew Le Roux and Editors Forum Secretary General Mr Jabu Matsebula.

The Centre’s capacity building activities focus mainly on workshops, seminars, and short courses. ESEPARC also offers training opportunities to undergraduate and graduate students to build capacity for research and policy analysis within Eswatini. During the year under review, the Centre hosted a number of workshops to capacitate officers in the public and private sectors.

POLICY DIALOGUE


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i) Interdisciplinary Science Workshop

On May 22 – 23, ESEPARC and the Royal Science and Technology Park (RSTP), in collaboration with the University of Arkansas (USA), hosted a two-day workshop on Interdisciplinary Science, Economic Development, and Sustainability in Eswatini. In total, there were 27 participants from the Ministry of Agriculture, Ministry of Economic Planning and Development, Ministry of Natural Resources and Energy, the University of Eswatini, RSTP, MTN Eswatini, Eswatini Christian University, Central Statistical Office, Southern African Nazarene University, Eswatini Post and Telecommunications Corporation, and ESEPARC.

ii) Cost-BenefitAnalysisWorkshop

ESEPARC engaged Conningarth Economists from South Africa to train government economists and planners, as well as the Centre’s graduate researchers on the Theory and Application of Cost-Benefit Analysis. In total, 23 participants received training on September 17 - 20. These were government officers from the Ministries of Economic Planning and Development; Finance; Public Works and Transport; Information, Communication and Technology; Agriculture; Education; and Deputy Prime Minister’s Office. Other participants were from the Eswatini Energy Regulatory Authority (ESERA), Central

Bank of Eswatini, and ESEPARC.

iii)ConsultativeResearchAgendaSettingWorkshop

ESEPARC hosted a consultative agenda setting workshop on economic policy research in Eswatini. The workshop held on February 12, 2019 was to solicit information to inform future economic policy research and to determine where gaps exist in economic policy research in the country. A total of 28 representatives from the public sector, parastatals,

CAPACITYBUILDING and the private sector participated and subsequently came up with a list of research priorities that may form the basis for ESEPARC studies in the 2019/20 financial year.


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i) Nedbank Breakfast Meeting

The Centre was invited by Nedbank Eswatini to deliver a presentation on ‘Opportunities and Value in the Current Economic Climate’ during the bank’s breakfast meeting on May 25, themed ‘Creating Value in a Constrained Economy’. Research Economist Mangaliso Mohammed delivered the presentation.

ii) Science, Technology, and Innovation Symposium

Associate Researcher Tengetile Hlophe represented ESEPARC at a Science, Technology, and Innovation Symposium and Exhibition hosted by the Royal Science and Technology Park (RSTP) and the Eswatini Environmental Authority on June 28 – 29, where she delivered a presentation on the ‘National System of Innovation in Eswatini’.

KNOWLEDGE DISSEMINATION

iii) Fifth COMESA Annual ResearchForum

A research paper produced by ESEPARC was one of 11 papers chosen for presentation and discussion at the Fifth COMESA Annual Research Forum held in Nairobi, Kenya on August 06 - 10. The paper titled ‘The Impact of the Demographic Transition on Energy Demand in COMESA: A Pooled Mean Group Estimation’ was co-authored by Associate Researcher Tanele Magongo and Senior Research Fellow Dr Thabo Sacolo (who presented it at the Forum).

iv) DisseminationofSADCInstruments on STI

ESEPARC Executive Director Dr Thula Sizwe Dlamini made a presentation on ‘The Role of STI in Eswatini’s Development’ at a seminar on the ‘Dissemination of SADC Instruments on Science, Technology, and Innovation (STI) held at the Royal

Swazi Spa on August 22 - 23.

v) Nedbank Eswatini Strategy Review

Research Economist Mangaliso Mohammed was invited by Nedbank Eswatini to deliver a presentation on the ‘Current Economic Climate in Eswatini’ during the financial institution’s Strategy Review held on September 04.

vi) 56thAEASAAnnualConference

Associate Researcher Thembumenzi Dlamini presented a research paper on the ‘Determinants of Choice of Credit Sources by Eswatini SMEs: A Focus on the Agriculture Sector’ at the 56th Agricultural Economic Association of South Africa (AEASA) Annual Conference. The conference was on September 25 – 27 under the theme, ‘Practicing Agricultural Economics in an Uncertain Neighbourhood’, at the Lord Charles Hotel in the Western Cape, South Africa.


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vii) Eswatini Science Week

The Executive Director was invited to deliver a presentation under the sub-theme; ‘Spotlight on Eswatini Scientific Discoveries: 50/50 Celebration’ during the Eswatini Science Week hosted by the Ministry of Information, Communication and Technology in collaboration with the University of Eswatini on September 24 – 28 at Sibane Hotel.

i) ESEPARC/UNDPGraduate Programme

ESEPARC has a Memorandum of Understanding (MoU) with the United Nations Development Programme (UNDP) Eswatini for funding support that enables the Centre to run a graduate research programme that offers qualified and eligible candidates the unique opportunity to acquire practical experience in policy analysis and research work under the direct supervision of experienced ESEPARC researchers.

The second cohort of three graduate researchers successfully completed their 12-month programme on November 30, 2018. Four new graduate research interns then joined the Centre and began their internship in January 2019.

PROFESSIONALDEVELOPMENT PROGRAMME

Studies produced under the programme in the 2018/19 financial year are:

• The Implications of Teenage Pregnancies in Eswatini: A Trend and Spatial Analysis by Nompulelo Dlamini

• Inequality of Opportunities in Education in Eswatini by Nhlanhla Zulu

• Assessing the Economic Impact of the Eswatini Small Scale Enterprise Loan Guarantee Scheme (SSELGS) by Maqhawe Zwane

ii) UNESWAresearchinterns

The Centre signed a Memorandum of Agreement with the University of Eswatini (UNESWA)’s Department of Agricultural Economics and Management to strengthen and broaden cooperation between the institutions. Among other activities, the institutions seek to work collaboratively to identify workable policy initiatives for the development of UNESWA and Eswatini, and maximise ESEPARC’s access to UNESWA technical expertise and assistance through cooperation in the development and pilot testing of agricultural innovations and policy options.

In January 2018, two students joined the Centre on internship for six months.

iii) University of Arkansas graduateinterns

The Centre collaborates with the University of Arkansas to take advantage of opportunities availed by the American institution’s graduate internship programme for developing countries. The University’s colleges - the Dale Bumpers College of Agricultural, Food and Life Sciences; and the Sam M. Walton College of Business – committed to bring graduate interns to companies and organisations in Eswatini, to assist in ongoing projects that could utilise and benefit from their expertise. The graduate students come from the university’s pool of international research programmes and made available for one to two months, depending on their levels of study and focus of their theses/areas of research.


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During the reporting financial year, the Centre hosted Erin Farmer and Lancaster Richmond for six weeks from June to July.

i) Job Shadow

As part of the Centre’s corporate social responsibility, ESEPARC hosts learners under the Junior Achievement (JA) Eswatini job shadow programme. In August 2018, the Centre hosted three learners from Ka-Boyce High School, Ngomane High School, and Mhlume High School.

ii) Schools Outreach Programme

During the reporting financial year, ESEPARC initiated a Schools Outreach Programme which sees the Centre’s staff visiting high school pupils to impart knowledge on available opportunities for undergraduate study within the country, regionally, and globally. A team from the Centre visited Mhubhe High School on April 06, Mlindazwe Secondary School on June 06, Sigangeni High School on June 13, Mbekelweni High School on July 11, Londunduma High School on February 13, 2019

and Bhunya High School on March 20, 2019.

CORPORATE SOCIAL RESPONSIBILITY


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THROUGHTHE LENS

Representatives of ESEPARC and UNISA during the signing ceremony of an MoU between the two institutions. The event was held at UNISA in Pretoria.

ESEPARC staff giving out water and fruits to runners at the FSRA Marathon, where the Centre had sponsored a water point.

Central Bank of Eswatini Governor Mr Majozi Sithole (c) officially launch-ing the Eswatini Economic Conference (EEC) 2019. Also present were representatives from ESEPARC and UNESWA.

People and faces captured at the ESEPARC exhibition stand during the Eswatini International Trade Fair 2018

Dr Thabo Sacolo (l) with Mangaliso Mohammed and Dr Thula Dlamini making a presentation at ESWADE.

Participants in discussions during ESEPARC’s Research Agenda Setting Workshop at Sibane Hotel.

We made it to the top!!!... ESEPARC staff at the summit of Sibebe Rock.

Indigenous Knowledge Expert, Joy Ndwandwe making a submission at the SME Public Lecture held at Happy Valley Hotel.

Acting Executive Director Dr Thabo Sacolo welcoming participants at the Research Agenda Setting Workshop hosted at Sibane Hotel.


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OUR GLOBAL FOOTPRINT

CANADA

UNITED STATES(12.59%)

(1.46%)

Based on statistics from Google Analytics.

As per ESEPARC’s strategic objective to increase the impact of our research outputs, the Centre piloted new ways of reaching wider audiences across the world by utilising the power of digital media platforms, particularly social media. In the 2018/19 financial year, the Centre revamped its website and mobile phone app (SEPARC Insights), created social media pages on LinkedIn, Facebook, Twitter, Instagram, and a YouTube channel. User traffic on the website and app increased exponentially by over 200%, while the social media platforms have played a major role in increasing the Centre’s global visibility and reach.

Website Traffic

Where our top 10 website visitors are based

SOUTH AFRICA CANADA INDIA UNITED KINGDOMUNITED STATES


33

UNITED KINGDOM

KENYA

SOUTH AFRICA

INDIA

CHINA

TAIWAN

PHILIPPINES

ESWATINI

(55.15%)

(11.86%)

(1.14%)

(0.90%)

(1.46%)

(1.05%)

(0.95%)

(0.81%)

UNITED KINGDOM CHINA TAIWAN KENYA PHILIPPINES


34

UNITED KINGDOM

SOUTH AFRICA

UNITED STATES

TAIWAN

NEW ZEALAND

87%

8%

3%

1.2%

0.3%MALAYSIA0.2%

INDIA0.1%

CANADA0.1%

OMAN0.05%

NETHERLANDS0.05%

LinkedIn top 10 locationsof post viewers globally

Also Follow us on these social media plartfoms...

Social Media Presence


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36

Country of incorporation and domicile

Eswatini

Nature of business and principal activities

Swaziland Economic Policy Analysis and Research Centre is a semi-autonomous economic and policy analysis and research centre established to conduct research in areas of economic policy formulation and management. It provides training to Government officials and policy advice to government and promote policy dialogue within Swaziland through dissemina-tion workshops, conferences and publications.

Directors

Chairperson: Mr. Dumisani MasilelaMembers:Mr. Phiwayinkosi Ginindza (Re-appointed on 02 May 2018) Ms. Thembi R Zwane (Re-appointed on 02 May 2018)Prof. Cisco M Magagula (Re-appointed on 02 May 2018) Mr. Majozi Sithole (Re-appointed on 02 May 2018)Mr. Abner DlaminiMs. Hlobsile Motsa (Appointed on 2 May 2018) Mr. Mluleki Dlamini (Appointed on 2 May 2018) Ms. Winile Dlamini (Appointed on 2 May 2018)Executive Director:Dr. Thula Sizwe Dlamini (Resigned 31 March 2019)

Business address Plot 874 Mbabane Township, Siphefu StreetMbabane, Swaziland

Postal address P. O. Box 8804, Mbabane, H100, Eswatini

Bankers Standard Bank Swaziland LimitedCentral Bank of Swaziland

Auditors Kobla Quashie and Associates Chartered Accountants (Swaziland) Manzini

OFFICERS & PROFESSIONAL ADVISORSfor the year ended 31 March 2019


37

The directors are required in terms of the Companies Act of 2009 to maintain adequate accounting records and are responsible for the content and integrity of the annual financial statements and related financial information included in this report. It is their responsibility to ensure that the annual financial statements fairly present the state of affairs of the centre as at the end of the financial year and the results of its operations and cash flows for the period then ended, in conformity with International Financial Reporting Standards. The external auditors are engaged to express an independent opinion on the annual financial statements.

The annual financial statements are prepared in accordance with International Financial Reporting Standards and are based upon appropriate accounting policies consistently applied and supported by reasonable and prudent judgments and estimates.

The directors acknowledge that they are ultimately responsible for the system of internal financial control established by the centre and place considerable importance on maintaining a strong control environment. To enable the directors to meet these responsibilities, the board of directors sets standards for internal control aimed at reducing the risk of error or loss in a cost effective manner. The standards include the proper delegation of responsibilities within a clearly defined framework, effective accounting procedures and adequate segregation of duties to ensure an acceptable level of risk. These controls are monitored throughout the centre and all employees are required to maintain the highest ethical standards in ensuring the centre’s business is conducted in a manner that in all reasonable circumstances is above reproach. The focus of risk management in the centre is on identifying, assessing, managing and monitoring all known forms of risk across the centre. While operating risk cannot be fully eliminated, the centre

endeavours to minimise it by ensuring that appropriate infrastructure, controls, systems and ethical behaviour are applied and managed within predetermined procedures and constraints.

The directors are of the opinion, based on the information and explanations given by management, that the system of internal control provides reasonable assurance that the financial records may be relied on for the preparation of the annual financial statements. However, any system of internal financial control can provide only reasonable, and not absolute, assurance against material misstatement or loss.

The directors have reviewed the centre’s cash flow forecast for the year to 31 March 2020 and, in the light of this review and the current financial position, they are satisfied that the centre has or has access to adequate resources to continue in operational existence for the foreseeable future.

The external auditors are responsible for independently reviewing and reporting on the centre’s annual financial statements. The annual financial statements have been examined by the centre’s external auditors and their report is presented on pages 4 to 5.

Chairperson: Mr. D. E. Masilela

Director

DIRECTORS’ RESPONSIBILITIES AND APPROVAL

for the year ended 31 March 2019


38

To the Board of Directors of Eswatini Economic Policy Analysis and Research Centre

We have audited the accompanying annual financial statements of Eswatini Economic Policy Analysis and Research Centre, which comprise the directors’ report, the statement of financial position as at 31 March 2019, the statement of comprehensive income, the statement of changes in equity and statement of cash flows for the year then ended, a summary of significant accounting policies and other explanatory notes, as set out on pages 8 to 21.

Directors’ Responsibility for the Financial Statements

The company’s directors are responsible for the preparation and fair presentation of these annual financial statements in accordance with International Financial Reporting Standards, and in the manner required by the Companies Act of 2009. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of annual financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors’ Responsibility

Our responsibility is to express an opinion on these annual financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the annual financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the annual financial statements. The procedures selected depend on the auditors’ judgement, including the assessment of the risks of material misstatement of the annual financial statements, whether due to fraud or error. In making those risk assessments, the auditors’ considers internal control relevant to the entity’s preparation and fair presentation of the annual financial statements in order to design audit procedures that are appropriate in the circumstances, but not

for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the annual financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Scope limitation/ Disagreement/ Inadequate disclosure/ Basis for Qualified Opinion

In our opinion, the annual financial statements present fairly, in all material respects, the financial position of the centre as of 31March 2019, and of its financial performance and its cash flows for the year then ended in accordance with InternationalFinancial Reporting Standards, and in the manner required by the Companies Act of 2009.

Emphasis of Matter

Without qualifying our opinion, we draw attention to a significant and unusual related party transaction disclosed in Note to the annual financial statements, which includes an appropriate description of the company’s sale of the office equipment division to a member of the company’s management team for L -.

Accounting and Secretarial Duties

Without qualifying our opinion, we draw your attention to the fact that with the written consent of all board of directors, we have performed certain accounting and secretarial duties.

Kobla Quashie and Associates Chartered Accountants (Swaziland) ManziniRegistered Auditor: Daniel Bediako

09 July 2019

REPORT OF THE INDEPENDENT AUDITORSfor the year ended 31 March 2019


39

The directors submit their report for the year ended 31 March 2019.

1. Review of activities

Main business and operations

BackgroundThe centre was incorporated on the 30th of April 2008. Eswatini Economic Policy Analysis Research Centre (ESEPARC) is a semi-autonomous economic policy analysis and research centre established to conduct research in areas of economic policy formulation and management. It provides training to Government officials and policy advice to government and promote policy dialogue within Eswatini through dissemination workshops, conferences and publications.

Funding of ESERPAC

The centre is funded by the Government of Eswatini. ESEPARC receives an annual subvention from the Government of Eswatini. ESEPARC has signed an agreement with UNDP to collaborate on areas of mutual interest specific to high level research and policy services, and in line with the UNDP Country Programme Document 2016-2020 and as implied under the Facility for Upstream Engagement Project for implementation from 2016 to 2020. UNDP will support ESEPARC wit financial and technical resources in line with mutually agreed national development objectives Annual Work Plans signed between the parties. This agreement will also enable key capacity development initiatives in the country to build the necessary capacities for research and building the technical expertise in the country in line with the Facility for Upstream Engagement Project Document, and through the ESEPARC Internship Programme.

The operating results and state of affairs of the centre are fully set out in the attached annual financial statements and do not in our opinion require any further comment.

2. Going concern

The annual financial statements have been prepared on the basis of accounting policies applicable to a going concern. This basis presumes that funds will be available to

finance future operations and that the realisation of assets and settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business.

The ability of the centre to continue as a going concern is dependent on a number of factors. The most significant of these are; the Swaziland Governance continuance to provide subvention to the centre and that the directors continue to procure funding for the ongoing operations for the centre .

3. Events after the reporting period

The directors are not aware of any matter or circumstance arising since the end of the financial year.

4. Directors

5. Auditors

The auditors are Kobla Quashie & Associates.

Chairperson: Mr. D. E. Masilela

Re-appointed on 02 May 2018

Member: Mr. P. E. Ginindza


Member: Ms. T. R. Zwane


Member: Prof. C. M. Magagula


Member: Mr. Majozi V. Sithole


Member: Mr. A. Dlamini

Executive Director: Dr. Thula Sizwe Dlamini

Resigned

Member: Ms. Hlobsile Motsa

Appointed

Member: Mr. Mluleki Dlamini

Appointed

Member: Ms. Winile Dlamini

Appointed

DIRECTORS’ REPORT



40

Figures in Lilangeni Note(s) 2019 2018

Assets

Non-Current Assets

Property, plant and equipment

2 5,047,889 4,542,098

Current Assets

Trade and other receivables 3 152,742 151,216

Cash and cash equivalents 4 1,520,299 4,071,0221,673,041 4,222,238

Total Assets 6,720,930 8,764,336

Reserves and LiabilitiesReserves

Share capital

5 2 2Revaluation Reserves 6 824,295 824,295

824,297 824,297

LiabilitiesNon-Current Liabilities

Borrowings

7 1,097,334 1,373,231

Current Liabilities

Borrowings 7 277,402 226,769

Trade and other payables 8 290,906 310,350Deferred income 9 4,042,729 5,814,409Provisions 10 188,262 215,280

4,799,299 6,566,808

Total Liabilities 5,896,633 7,940,039

Total Equity and Liabilities 6,720,930 8,764,336

STATEMENT OF FINANCIAL POSITIONfor the year ended 31 March 2019


41


Grant Income 8,124,198 8,175,495Other income 125,973 334,516

Operating expenses (8,250,171) (8,510,011)

- -

STATEMENT OF COMPREHENSIVE INCOME



42

Figures in Lilangeni Share Capital R Valuation Total equity reserves

Balance at 01 April 2017

Changes in equity

Total comprehensive income for the year

2

824,295

2

824,295Total changes 824,295 824,295

Balance at 01 April 2018

Balance at 31 March 2019

2

2

824,295

824,295

824,297

824,297

STATEMENT OF CHANGES IN FUNDSfor the year ended 31 March 2019


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Cash flows from operating activities

Cash used in operations 13 (1,647,275) (1,043,236)

Cash flows from investing activities

Purchase of property, plant and equipment 2 (678,184) (2,914,153)

Cash flows from financing activities

Movement in borrowings (225,264) 1,600,000Net cash from financing activities (225,264) 1,600,000

Total cash movement for the year

Cash at the beginning of the year

(2,550,723)

4,071,022

(2,357,389)

6,428,413Total cash at end of the year 4 1,520,299 4,071,024

STATEMENT OF CASH FLOWS



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1. Presentation of Annual Financial Statements

Eswatini Economic Policy Analysis and Research Centre is a Government parastatal established in terms of the Companies Act of 2009. It is a corporate body with perpetual succession capable of suing and being sued, subject to the provisions of the Act

The addresses of the office and principal place of business are disclosed in the introduction of the annual report on page 1.

1.1 Basis of preparation

a) Statement of compliance

The financial statements are prepared in accordance with the International Financial Reporting Standards (IFRS).

The following are the principal accounting policies adopted in the preparation of these financial statements as set out below. These policies have been consistently applied in all material respects with those of the previous year, unless otherwise stated.

b) Basis of measurement

The financial statements have been prepared on the histrocial cost basis.

c) Functional and presentation currency

These financial statements are presented in Emalangeni, which is the entity’s functional currency. All financial information presented in the Emalangeni have been

rounded to the nearest figure.

d) Use of estimates and judgements

In preparing the annual financial statements, management is required to make estimates and assumptions that affect the amounts represented in the annual financial statements and related disclosures. Use of available information and the

application of judgement is inherent in the formation of estimates. Actual results in the future could differ from these estimates which may be material to the annual financial statements. Significant judgements include:

Trade receivablesThe centre assesses its trade receivables for impairment at the end of each reporting period. In determining whether an impairment loss should be recorded in the income statement, the centre makes judgements as to whether there is observable data indicating a measurable decrease in the

estimated future cash flows from a financial asset.

1.2 New standards and interpretations not yet adopted

Amendments mandatory effective for the year ended 31

March 2019.

The following is a summary of the new and revised IFRSs that are mandatory effective for the annual periods beginning on or after 1 January 2018. IFRS 15 Revenue from Contracts with Customers Amendments to IFRS 15: Clarifications to IFRS 15 Revenue from Contracts with Customers Amendments to IFRS 1: Annual Improvements to IFRS 2014 - 2016 cycle IFRIC 22 Foreign Currency Transactions and Advance Consideration IFRS 9 Financial

Instruments

IFRS 15 Revenue from Contracts with Customers

IFRS 15 Revenue from Contracts with Customers is based on the principle that revenue is recognised when control of a good or service transfers to a customer. The centre has adopted IFRS 15 Revenue from Contracts with Customers from January 1, 2018 which resulted in changes in accounting policies. In accordance with the transition provisions in IFRS 15, the centre had restated comparatives for the 2018 financial year.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESfor the year ended 31 March 2019


45

Amendments to IFRS 15: Clarifications to IFRS 15 Revenue from Contracts with Customers

The amendments address three of the five topics identified (identifying performance obligations, principal versus agent considerations and licensing) and provide some transition relief for modified contracts and completed contracts. The IASB concluded that it was not necessary to amend IFRS 15 with respect to collectibility or measuring

noncash considerations

Amendments to IFRS 1: Annual Improvements to IFRS 2014 - 2016 cycle

The amendment deleted shortterm exemptions covering transition provisions of IFRS 7, IAS 19 and IFRS 10 which are no longer relevant. The amendments have no

impact on the centre’s financial statements.

IFRIC 22 Foreign Currency Transactions and Advance Consideration

IFRIC 22 Foreign Currency Transactions and Advance Consideration. The interpretation clarifies how to determine the date of transaction for the exchange rate to be used on initial recognition of a related asset, expense or income where an entity pays or receives consideration in advance for foreign currency denominated contracts. The amendment has no impact on the centre’s financial

statements.

IFRS 9 Financial Instruments

The centre has adopted IFRS 9 as issued by the IASB in July 2014 with a date of transition of 1 January 2018, which resulted in changes in accounting policies and adjustments to the amounts previously recognized in the financial statements. The centre did not early adopt IFRS

9 in previous periods.

Classification and measurement

The IFRS 9 standard includes changes in the classification and measurement bases of the centre’s financial assets to amortised cost, fair value through other comprehensive income or fair value through profit or loss. Amounts owing by related parties, trade and other receivables, other financial assets and cash and cash equivalents are measured at amortised cost. There is therefore no change to classification of these assets.IFRS 9 requires financial assets to be classified on the basis of two criteria: The business model within which financial assets are managed, and Their contractual cash flow characteristics (whether the cash flows represent solely payments of principal and interest).Financial assets are measured at amortised cost if they are held within a business model whose objective is to hold financial assets in order to collect contractual cash flows, and their contractual cash flows represent solely payments of principal and interest.Financial assets are measured at fair value through other comprehensive income if they are held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets, and their contractual cash flows represent solely payments of principal and interest. Other financial assets are required to be measured at fair value through profit and loss if they are held for the purposes of trading, if their contractual cash flows do not meet the ‘solely payments

1.2 New standards and interpretations not yet adopted (continued)

of principal and interest’ criterion, or if they are managed on a fair value basis and the centre maximises cash flows through sale. IFRS 9 allows an entity to irrevocably designate a financial asset as at fair value through profit or loss if doing so eliminates or significantly reduces a measurement or recognition inconsistency (that is, an

accounting mismatch).

Impairment calculation

The impairment model has been changed from an “incurred loss” model from IAS 39 to a forward looking “expected credit loss” (ECL) model under IFRS 9.IFRS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



46

9 outlines a “three stage” model for impairment based on credit quality since initial recognition, as summarized below:A financial asset / loan issued that is not credit impaired on recognition and has not undergone significant deterioration in credit risk (SICR) since initial recognition in classified in “Stage 1”. If a significant increase in credit risk since initial recognition has been identified, the financial asset is classified in “Stage 2” but is not yet deemed to be credit impaired. If the financial asset is credit impaired then it is classified in Stage 3.Within the centre the following definitions exist for the classification of financial assets and identification of SICR: Any financial asset which is performing and up to 30 days in arrears is considered Stage 1: Any financial asset with a maximum arrears level of between 31 and 90 days is considered Stage 2: Any financial assets with a maximum arrears level of greater than 90 days is considered credit impaired and stage 3: Once the portfolio has been classified into the three given stages, IFRS 9 loss allowances are measured on either of the following bases: Stage 1 : 12 month expected loss – A 12 month ECL implies the loss expected in the 12 months following reporting date Stage 2 and Stage 3 : Lifetime ECLs – that is, the loss expected over the lifetime

of loans falling within this category.

ECL Methodology

The methodology adopted by the centre to calculate Expected Credit Losses relies on historical cash flow data across all jurisdictions. This data allows for an accurate estimation of historical losses, given certain levels of arrears reached. This data takes into account any recoveries made from accounts which rectify from arrears, as well as written off amounts from accounts which failed to rectify. The historical data is distilled into Expected Credit Loss rates which are applied to individual accounts, based on the level of arrears for that account.

In addition to the historical cash flow modelling, Expected Credit Losses are subjected to forward looking adjustments based on “upside” and “downside” scenarios. That is, the final ECL value is a weighted average of the current impairment number (given current portfolio dynamics), a projected value based on favourable conditions and a projected value based on unfavourable conditions. This is based on the IFRS 9 requirement that

ECL estimates are based on multiple future scenarios encompassing with favourable and unfavourable economic conditions.

1.3 Property, plant and equipment

The cost of an item of property, plant and equipment is recognised as an asset when:• it is probable that future economic benefits associated

with the item will flow to the centre; and• the cost of the item can be measured reliably. Property,

plant and equipment is initially measured at cost.

Costs include costs incurred initially to acquire or construct an item of property, plant and equipment and costs incurred subsequently to add to, replace part of, or service it. If a replacement cost is recognised in the carrying amount of an item of property, plant and equipment, the

carrying amount of the replaced part is derecognised.

When an item of property, plant and equipment is revalued, any accumulated depreciation at the date of the revaluation is restated proportionately with the change in the gross carrying amount of the asset so that the carrying amount of the asset after revaluation equals its revalued

amount.

The revaluation surplus in equity related to a specific item of property, plant and equipment is transferred directly to

retained earnings when the asset is derecognised.

1.3 Property, plant and equipment (continued)

Property, plant and equipment are depreciated on the reducing balance method over their expected useful lives to their estimated residual value.

Property, plant and equipment is carried at cost less accumulated depreciation and any impairment losses. The useful lives of items of property, plant and equipment have been assessed as follows:



47

The residual value, useful life and depreciation method of each asset are reviewed at the end of each reporting period. If the expectations differ from previous estimates, the change is accounted for as a change in accounting estimate.

The depreciation charge for each period is recognised in profit or loss unless it is included in the carrying amount of another asset.

The gain or loss arising from the derecognition of an item of property, plant and equipment is included in profit or loss when the item is derecognised. The gain or loss arising from the derecognition of an item of property, plant and equipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the

item.

1.4 Financial instruments

Classification

The organisation classifies financial assets and financial liabilities into the following categories:• Loans and receivables

Classification depends on the purpose for which the financial instruments were obtained / incurred and takes place at initial recognition. Classification is re-assessed on an annual basis, except for derivatives and financial assets designated as at fair value through profit or loss, which shall not be classified out of the fair value through profit or loss category.

Subsequent measurement

Loans and receivables are subsequently measured at amortised cost, using the effective interest method, less

accumulated impairment losses.

Derecognition

Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the centre has transferred substantially all

risks and rewards of ownership.

Loans to managers and employees

These financial assets are classified as loans and receivables.

1.4 Financial instruments (continued) Trade and other receivables

Trade receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost using the effective interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in profit or loss when there is objective evidence that the asset is impaired. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the trade receivable is impaired. The allowance recognised is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the effective

interest rate computed at initial recognition.

The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in profit or loss within operating expenses. When a trade receivable is uncollectable, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against operating expenses in profit or loss.



Item Average useful life

Land and Buildings 0 years

Furniture and fixtures 11 years

Motor vehicles 5 years

Office equipment 11 years

Computer 3 years


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Trade and other receivables are classified as loans and receivables.

Trade and other payables

Trade payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These are initially and subsequently

recorded at fair value.

Bank overdraft and borrowings

Bank overdrafts and borrowings are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method. Any difference between the proceeds (net of transaction costs) and the settlement or redemption of borrowings is recognised over the term of the borrowings in accordance with the centre’s

accounting policy for borrowing costs.

1.5 Impairment of assets

The centre assesses at each end of the reporting period whether there is any indication that an asset may be impaired. If any such indication exists, the centre estimates the recoverable amount of the asset.

If there is any indication that an asset may be impaired, the recoverable amount is estimated for the individual asset. If it is not possible to estimate the recoverable amount of the individual asset, the recoverable amount of the cash- generating unit to which the asset belongs is determined.

The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs to sell and its value in use.

If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. That reduction is an impairment loss.

An impairment loss of assets carried at cost less any accumulated depreciation or amortisation is recognised immediately in profit or loss. Any impairment loss of a revalued asset is treated as a revaluation decrease.

1.6 Employee benefits

Short-term employee benefitsThe cost of short-term employee benefits, (those payable within 12 months after the service is rendered, such as paid vacation leave and sick leave, bonuses, and non-monetary benefits such as medical care), are recognised in the period

in which the service is rendered and are not discounted.

Pension obligationThe centre currently contributes pension to Aon Swaziland on behalf of employees. The centre pays contribution to a privately administered pension plan on a mandatory, contractural or voluntary basis. Once the contribution have been paid, the centre has no further payment obligation. The regular contributions constitute net periodic costs for the year in which they are due and as

such are included in staff costs.

Terminal benefitsTermination benefits are repayable whenever an employees’ employment is terminated before the normal retirement date or when ever an employee accepts voluntary redudancy in exchange for these benefits. The centre recognises termination benefits when it is demonstratably committed to either terminate the employment of current employees according to a detailed formal plan without possibility or withdrawal or to provide termination benefits as a result of offer made to encourage voluntary redudancy. Benefits falling due more than 12 months are discounted to present values.

Statutory obligationsThe centre contributes to a statutory fund, Swaziland



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National Provident Fund (SNPF) in accordance with the Swaziland National Provident Fund Order of 1974.

1.7 Revenue

Revenue is recognised when it is probable that the economic benefits associated with the transaction will flow to the centre and the amounts of revenue can be

reliably measured.

Government grantsGrants from Government are recognized at their fair value where there is a reasonable assurance that they will be received, and the centre will comply with the conditions applying to the grants. The balance of grants received but

not shown as income is classified as deferred income.

Interest incomeInterest is recognised, in the income statement, using the effective interest rate method. When a recievable is impaired, SEPARC reduces the carrying amount, being the estimated future cash flow discounted at original effective interest rate of the instrurment, and continues

unwinding the discount as interest income.

1.8 Related parties

The major related party to the centre apart from its directors is the Government of Swaziland who exercises a significant influence over its financial and operating decisions as it provides funding for its annual budget. The centre received a subvention of E5,400,000 (2018:

E5,400,000) for the year under review.




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Figures in Lilangeni 2019 2018

Cost / Valuation

Accumulated depreciation

Carrying value

Cost / Valuation

Accumulated depreciation

Carrying value

Land and Buildings 4,272,954 - 4,272,954 3,630,000 - 3,630,000Furniture and fixtures 561,397 (255,165) 306,232 561,397 (224,542) 336,855Motor vehicles 621,120 (483,542) 137,578 621,120 (449,148) 171,972Office equipment 194,668 (93,606) 101,062 194,668 (83,500) 111,168Computer equipment 866,727 (636,664) 230,063 831,497 (539,394) 292,103Total 6,516,866 (1,468,977) 5,047,889 5,838,682 (1,296,584) 4,542,098

Reconciliation of property, plant and equipment - 2019

Land and Buildings

Opening

Balance

642,954

Additions

642,954

Depreciation

-

Total

4,272,954Furniture and fixtures 336,855 - (30,623) 306,232Motor vehicles 171,972 - (34,394) 137,578Office equipment 111,168 - (10,106) 101,062Computer Equipment 292,103 35,230 (97,270) 230,063

4,542,098 678,184 (172,393) 5,047,889

Reconciliation of property, plant and equipment - 2018

Opening balance

Buildings -

Additions

2,805,705

Revaluations

824,295

Depreciation

-

Total

3,630,000Furniture and fixtures 356,894 13,210 - (33,249) 336,855Motor vehicles 214,965 - - (42,993) 171,972Office equipment 122,285 - - (11,117) 111,168Computer Equipment 312,940 95,238 - (116,075) 292,103

1,007,084 2,914,153 824,295 (203,434) 4,542,098

The land and buildings is situated on Plot 874, Mbabane Township.

3. Trade and other receivables

Shamba Trust 90,000 -Staff advances 10,500 7,823Prepayments 52,242 140,980Director’s advance - 2,413

152,742 151,216

NOTES TO THE ANNUAL FINANCIAL STATEMENTSfor the year ended 31 March 2019


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4. Cash and cash equivalents

Cash and cash equivalents consist of:Petty cash 5,000 3,000Bank balances 1,515,299 4,068,022

1,520,299 4,071,022

Bank balances

Standard Bank - Current a/c 372,327 2,563,559Central Bank of Swaziland - Fixed deposit a/c 1,140,000 1,500,000UNDP Current a/c 331 1,881African Alliance 2,642 2,582

1,515,300 4,068,022

5. Share capital Authorised

1000 Ordinary shares of E1.00 each 1,000 1,000

Issued

Ordinary 2 2

6. Revaluation reserves

Revaluation surplus

824,295 824,295

The revaluation surplus arises from a revaluation of property on Plot 874, Mbabane Township conducted by Ngwenya Wonfor, the property valuator.

7. Borrowings

Standard Bank Swaziland (Limited) mortgage loan 1,374,736 1,600,000

Non-current liabilities

At amortised cost 1,097,334 1,373,231

Current liabilities

At amortised cost 277,402 226,769

1,374,736 1,600,000

Standard Bank Swaziland Limited mortgage loan terms are as follows:

1. The loan facility is to be repaid in full no later than 60 months after the date of the initial draw down;

2. The loan facility is to be repaid in 60 monthly instalments of E35,600.00 inclusive of the interest rate, payable on the last day of each month.

3. The interest rate on the mortgage loan facility will be charged at the bank’s prevailing prime rate plus 1.5% per annum on the amount drawn down.

4. Security on the mortgage loan of E1,600,000.00 will be held over Plot 874, Mbabane Township, Mbabane valued at

E3,630,000.00 by Ngwenya Wonfor dated 4th December 2017.

STATEMENT OF CASH FLOWS



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8. Trade and other payables

Trade payables 290,906 310,350Trade and other payables

Trade payables

PAYE accruals

Accrued expenses

SRA PAYE penalties

109,483

111,298

-

-

60,627

76,234

2,500

170,990220,781 310,351

9. Deferred income

Opening Balance 5,814,408 7,023,655

Swaziland Government Grant 5,400,000 5,400,000

UNDP 347,418 745,414

Consultancy fees 596,000 774,450

Other Income 125,973 334,516

Provisions written off - 217,374

PAYE liability (late filing 2014 penalties)

9,102 (170,990)

Grant utilized (8,250,171) (8,510,011)

4,042,730 5,814,408

10. Provisions

Reconciliation of provisions - 2019

Opening balance

Additions Utilised during the year

Total

Contract commitments 133,000 48,982 (76,000) 105,982

Audit fees 82,280 82,280 (82,280) 82,280

215,280 131,262 (158,280) 188,262


Opening balance


Reversed during

the year

Total

Contract commitments 217,375 133,000 - (217,375) 133,000

Audit fees 74,800 82,280 (74,800) - 82,280292,175 215,280 (74,800) (217,375) 215,280

11. Sundry income

SEC Advert refund - 70,284

Swaziland Economic Conference - 65,000

Nedbank 5,500 -Eswatini National Provident Fund 28,325 -

NOTES TO THE ANNUAL FINANCIAL STATEMENTSfor the year ended 31 March 2019


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8. Trade and other payables

Trade payables 290,906 310,350Trade and other payables

Trade payables

PAYE accruals

Accrued expenses

SRA PAYE penalties

109,483

111,298

-

-

60,627

76,234

2,500

170,990220,781 310,351

9. Deferred income

Opening Balance 5,814,408 7,023,655

Swaziland Government Grant 5,400,000 5,400,000

UNDP 347,418 745,414


Other Income 125,973 334,516

Provisions written off - 217,374

PAYE liability (late filing 2014 penalties)

9,102 (170,990)

Grant utilized (8,250,171) (8,510,011)

4,042,730 5,814,408

10. Provisions


Opening balance


Total

Contract commitments 133,000 48,982 (76,000) 105,982

Audit fees 82,280 82,280 (82,280) 82,280

215,280 131,262 (158,280) 188,262


Opening balance


Reversed during

the year

Total

Contract commitments 217,375 133,000 - (217,375) 133,000

Audit fees 74,800 82,280 (74,800) - 82,280292,175 215,280 (74,800) (217,375) 215,280

11. Sundry income

SEC Advert refund - 70,284


Nedbank 5,500 -Eswatini National Provident Fund 28,325 -


12. Auditors’ remuneration

Fees 82,280 82,280

Audit fees

Kobla Quashie and Associates 82,280 82,28013. Cash used in operations

Surplus for the year

Adjustments for:

Depreciation and amortisation

-

172,393

-

203,435Movements in provisions

Changes in working capital:

Trade and other receivables

(27,018)

(1,526)

(76,895)

(99,610)Trade and other payables (19,444) 139,080Deferred income (1,771,680) (1,209,246)

(1,647,275) (1,043,236)

14. Related parties

Relationships

Parastal organisation Government of Swaziland

Donor UNDP

Members of key management Mr. D. Masilela (Re-appointed on 02 May 2018)

Mr. P. Ginindza (Re-appointed on 02 May 2018)

Ms. T. R. Zwane (Re-appointed on 02 May 2018)

Prof. C. M. Magagula (Re-appointed on 02 May 2018)

Mr. M. Sithole (Re-appointed on 02 May 2018)

Mr. A. Dlamini

Dr. T. S. Dlamini (Resigned 31 March 2019)

Ms. H. Motsa (Appointed on 02 May 2018)

Mr. M. Dlamini (Appointed on 02 May 2018)

Ms. W. Dlamini (Appointed on 02 May 2018)

Related party transactionsIncome

Government of Swaziland grant 5,400,000 Board expenses

Sitting allowances 231,186 203,848

15. Rent paid

Eswatini National Provident Fund 249,495 496,435

NOTES TO THE ANNUAL FINANCIAL STATEMENTS



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Income

Government grant 7,180,780 6,655,631


UNDP grant 347,418 745,414

8,124,198 8,175,495

Other income

Interest received 92,148 199,232

Sundry income 33,825 135,284

125,973 334,516

Operating expenses

Agenda setting workshops - 13,916

Auditors remuneration 12 82,280 82,280

Bank charges 100,632 91,816

Board expenses 236,886 203,848

CPIA Country Policy Institutional Assessment - 12,000

Computer expenses 69,121 113,530

Consultancy fund 97,212 488,156

Depreciation 172,393 203,435

Employee costs 4,737,318 4,105,621

Finance costs 164,733 -

Insurance 112,571 118,416

Motor vehicle repairs & maintenance 30,649 74,552

Municipal rates 86,857 -

Office expenses 135,850 118,566

Project Advisory Committee - 8,375

Publicity and communications 364,230 216,176

Rent 249,495 496,435

Repairs and maintenance 55,294 47,714

Research policy analysis costs 336,629 178,186

Resource centre and library - 91,580

Security 53,448 -

Staff welfare 187,448 258,000

Subscriptions 18,213 20,227


Swaziland Energy Regulatory Authority Study 22,500 21,203

TVET Industry Skills GAP Analysis - 122,074

Technical Sub-Committee Expenses - 274

Telephone 99,914 81,436

Training 366,448 145,027

Travelling expenses 66,253 72,793

UNDP 326,400 745,414

Utilities 59,553 38,500

Website development 17,844 31,095

8,250,171 8,510,011

DETAILED STATEMENT OF FINANCIAL PERFORMANCEfor the year ended 31 March 2019


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ESEPARCESWATINI ECONOMIC POLICY

ANALYSIS AND RESEARCH CENTRE

Plot 874, Mbabane Township,Eswatini, Siphefu Street

Contact: +268 2404 9077/3033/2823Email: [email protected]

Website: www.separc.co.szApp: SEPARC Insights

Documents

2018/19 - Separc · (COMESA) region. The Centre also participated in numerous government processes, one of which was the formulation of the National Development Plan. As envisaged