Inside Africa: The Kingdom's Quiet Fiscal Squeeze: How SACU Dependence Shapes The Politics No One Watches
When Eswatini's Finance Minister Neal Rijkenberg presented the 2025-26 budget in January, one number dominated the room. South African Customs Union (SACU) receipts were projected to fall by 20.4 percent, from E13.06 billion to E10.4 billion, a shortfall of E2.66 billion in a single year. For most countries, a customs revenue adjustment would be a technical footnote. For Eswatini, it is closer to a political earthquake in slow motion.
SACU, the world's oldest functioning customs union comprising Eswatini, South Africa, Botswana, Namibia, Lesotho, pools duties collected on imports from outside the bloc, and redistributes them by formula. For Eswatini, SACU transfers accounted for roughly 46 percent of total government revenue in 2024-25. In some years, they have exceeded 50 percent. South Africa contributes approximately 97.5 percent of the common revenue pool. Eswatini, in other words, runs its government substantially on a transfer from a neighbour's import tax receipts, and that neighbour's own economic performance, trade patterns, and policy choices set the tempo.
The structural challenges imposed by this dynamic are not new, but their implications keep compounding. The IMF's 2024 Article IV consultation noted that SACU transfers swung from 7.2 percent of GDP in FY 2022-23 to 12.9 percent in FY 2023-24, a difference of nearly six percentage points caused almost entirely by fluctuations in South Africa's trade volumes and excise collections. The IMF projects the fiscal deficit will widen to roughly 3.5 percent of GDP in 2025-26 and 2026-27 as the windfall subsides. The 2025 Article IV mission noted the deficit had already widened to 2.3 percent of GDP in FY 2024-25 despite a good SACU year, driven by rising recurrent expenditure that the government cannot easily cut.
That last point matters. The wage bill alone consumed 40 percent of recurrent budget expenditures in 2024-25, and a recruitment freeze lifted in January 2024 is already adding to it. Meanwhile, the government faces mounting arrears, a public debt ratio stabilising just above 50 percent of GDP, and reduced official development assistance following the dismantling of USAID, a double fiscal squeeze that Rijkenberg's Revenue Stabilisation Fund, holding E2.47 billion, can cushion but not cure.
None of this would be especially alarming for a country with a diversified economy and functioning political channels for adjustment. Eswatini, however, has neither. King Mswati III has ruled as absolute monarch since 1986. Political parties remain banned. Parliament's elected lower house serves, in the assessment of observers and activists, as advisory cover for royal prerogative. When the government needs to cut spending, it cannot do so through consensus-building among competing political interests. It does so by deciding which services quietly disappear, and the groups least able to push back bear the most.
The youth unemployment figures make that dynamic concrete. According to World Bank data, 58.2 percent of young people in Eswatini are unemployed. The World Bank estimates that 25,000 young people enter the labour market annually, while only 1,000 jobs are created in the same period. More than half the workforce holds informal sector employment. Against that backdrop, a fiscal shortfall is not a budgetary abstraction, it is a decision about whether schools stay open, whether social transfers reach vulnerable households, whether public sector hiring continues or freezes.
That is where the fiscal and political stories converge. The 2021 protests, sparked by the death of law student Thabani Nkomonye and the detention of pro-democracy MPs, were among the most serious civil unrest the country had seen in decades. The government's response — arrests, school closures, army deployment against student demonstrators — silenced the immediate movement but resolved none of its underlying causes. In January 2023, human rights lawyer Thulani Maseko was shot dead at his home, hours after King Mswati publicly warned that "mercenaries" would deal with those calling for democratic reforms. The International Commission of Jurists and UN experts condemned the killing; no independent investigation has followed.
The BTI Country Report 2026 notes that the generational divide is sharpening along lines of political expectation. Younger Swazis, most of whom have grown up entirely under Mswati III's rule, show markedly lower deference to traditional political structures and higher demand for multiparty democracy than older cohorts, yet face the same absolute ban on organised political activity. Blocked from formal participation in both traditional and urban spaces, they are increasingly without institutional outlets for their grievances. In a country where the budget is already strained and SACU transfers are heading down again, the pressure on social spending tightens just as that frustration deepens.
Eswatini's government has publicly acknowledged the need to diversify away from SACU revenue for years, the 2023-24 Fiscal Framework Paper refers to the volatility as a “persistent challenge" and states an ambition to “rely less on SACU revenue.” The 2024-25 budget's stated goals include addressing fiscal deficits, debt management, and reducing SACU reliance. But the path from stated ambition to structural reform requires investment in domestic revenue capacity, private sector development, and governance reforms that are difficult to pursue under fiscal pressure and impossible to pursue in a political environment that criminalizes organized opposition.
What happens in Eswatini does not generate much international attention. It is a small, landlocked kingdom of roughly 1.2 million people, sandwiched between South Africa and Mozambique, without oil or minerals to make it strategically interesting to outside powers. But it is a precise case study in how fiscal architecture shapes political possibility. When a government's budget depends more on a regional customs formula than on domestic taxation, the social contract between ruler and ruled is loosened, revenue does not require political accountability in the same way that taxing your own people does. When that external revenue source becomes volatile, the pressure lands on the most vulnerable citizens first, with no democratic mechanism to redirect it.
The next time South Africa's import volumes soften, or its tobacco excise collections dip, Eswatini's schools and clinics will feel it before its ministers announce it. That is the quiet fiscal squeeze, and it is political, whether or not anyone is watching.
