Eswatini urged to tap into E136bn insurance funds, cut foreign loans

Hhukwini Member of Parliament Alec Lushaba has proposed that the government tap into the E136 billion held by non-bank financial institutions, such as pension funds and insurance companies, instead of seeking external loans. This suggestion was made during a presentation of three loan Bills, through which the government intends to borrow over E3 billion for infrastructure, water, and economic development projects. Lushaba questioned why the government continues to seek external loans when substantial financial resources belonging to emaSwati are held locally.

The E136 billion held by non-bank financial institutions includes assets managed by pension funds, insurance companies, and other financial institutions. Lushaba challenged the Minister for Finance, Neal Rijkenberg, to engage with the Financial Services Regulatory Authority (FSRA) and explore the possibility of borrowing from these institutions on more favourable terms than international loans. He suggested that the ministry should engage with pension entities, such as MOPADO, which could potentially extend loans to the government.

Minister Rijkenberg acknowledged that Lushaba's suggestion was worth considering but cautioned that the E136 billion could not be treated as readily available for government borrowing. A significant portion of the assets held by non-bank financial institutions comprises insurance funds, which present particular challenges when it comes to imposing local investment requirements. Insurance companies need to diversify their investments geographically to protect policyholders against situations where a major catastrophe in Eswatini could affect the assets held by insurers.

Rijkenberg explained that imposing excessive local investment requirements on insurance companies could expose them to unnecessary risks. However, he revealed that the government is considering a proposal that could see non-bank financial institutions required to invest an additional 20 per cent of their funds in government treasury bills and treasury bonds. This proposal aims to strengthen the government's access to domestic financing while creating an additional layer of protection for investors and pension fund members.

The government is already requiring pension funds to invest 30 per cent of their funds locally. The proposed arrangement could help cushion investors against losses arising from the collapse or financial difficulties of investment entities, such as the Ecsponent matter. Rijkenberg stressed that the proposal is not yet government policy and is still being worked on with his team.

The three loan Bills presented by Minister Rijkenberg seek to secure financing exceeding E3 billion for different government programmes. The government intends to borrow up to E1.6 billion from Standard Bank. Lushaba's proposal and the government's consideration of alternative funding options reflect the ongoing efforts to manage the country's finances and explore more sustainable borrowing practices.

The debate on the government's borrowing practices and the potential use of local funds highlights the complexities of managing the country's finances. The government's decision on whether to tap into the E136 billion held by non-bank financial institutions and reduce its reliance on external loans remains to be seen.

Key points

• The Eswatini government is urged to reconsider borrowing from international lenders and explore using the E136 billion held by local non-bank financial institutions.