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Eswatini Market Assessment Report, February 2021

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Eswatini Market Assessment

I. Background

The poor performance of the agricultural season mainly due to recurrent drought and the late start the rainy season has resulted in increased food insecurity in the country. Data from the Eswatini Meteorological Services indicates that that the 2019/20 rainy season was delayed and poorly distributed in Eswatini, resulting in mixed accumulated rainfall leading to below-average crop performance. The 2020 Vulnerability Assessment and Analysis Report estimates cereal requirement at 252,560 MT, with a shortfall of 161,170 MT to be filled through imports and food assistance. Given the reduced production, markets are estimated to play a pivotal role in households’ ability to meet their food requirements during the 2020/2021 consumption period, especially in urban areas. Any shocks that affect market performance is thus expected to have a significant bearing on these households’ ability to access food.

The outbreak of the COVID-19 pandemic which was declared a National Emergency in March has worsened the underlying food insecurity challenges in the country. Key efforts to curb the spread of the virus which includes restricted movements has led to significant increases in vulnerability. Food prices have also increased thus greatly impacting the household’s ability to access food. Since January this year, an upward trend in food prices has been observed, with maize meal retail prices trending above the 5-year average. Prices of other key commodities such as beans, rice and vegetable oil are also trending above average.

1.1 The Economy

Data produced by the CSO reflects that the economy was in a technical recession in the first quarter of 2020 mainly as a result of the COVID-19 pandemic outbreak. The Central Bank of Eswatini has reported that economic activity, as measured by the Quarterly Gross Domestic Product (QGDP), fell by 6.5 percent on a year-on-year basis from a revised decline of 1.2 per cent in the last quarter of 2019. The observed slump in overall economic activity was largely attributed to poor performance in the secondary sector which contracted by a significant 19.3 per cent, year-on-year, in the quarter ended March 2020 owing to poor performance in the 'manufacturing', 'electricity supply' and 'construction' sub-sectors. Within the manufacturing sector, notable decreases in economic activity were observed in the 'manufacturing of beverages', 'manufacturing of textiles and wearing apparel' as well as 'manufacturing of wood and paper products. All of which was a result of the partial lockdown the country was subjected to as control measures for the COVID-19 pandemic. Fiscal cashflow challenges continued to weigh negatively on implementation of public infrastructural projects thereby resulting in constrained output in construction activity.

The medium-term economic outlook remains uncertain, as the impact of the pandemic is still evolving in the country. Opening up of the economy (easing of restrictive lockdown measures) observed in the second half of 2020, will likely lead to improved economic activity in the short-term. In addition, budget and humanitarian support received from multilateral institutions coupled with the implementation of the Post COVID-19 Recovery Plan, will support economic recovery in the short to medium term. However, the second-round effects of the pandemic, which are anticipated to manifest through a reduction in the Southern African Customs Union (SACU) revenues in subsequent years (particularly the financial year 2022/23), will lead to a deterioration in the fiscal position in the medium-term. Moreover, fiscal consolidation measures earmarked for the short-to-medium-term, will weigh on economic growth prospects. GDP is thus projected to increase by 4.5 per cent in 2021 before slowing down to 1.8 per cent and 2.8 per cent for 2022 and 2023, respectively (Figure 1).

1.2 Food Availability

Land under cultivation during the 2019/20 agricultural season under maize production, the stable food for the country was at 77,200 ha, an improvement of 10 per cent from the previous season. Erratic weather conditions characterized by prolonged dry-spells and the delayed start of the agricultural season coupled with persistent disease and pest outbreak i.e. the fall armyworm negatively affected overall agricultural production in the country. Maize production fell by 10 per cent from the previous season (95,988 MT) reaching 86,548 MT in the 2019/20 crop season.

The country has continually failed to meet its consumption requirement of the years mainly depending on imports and food aid to cover gabs. For the 2019/20 consumption period the domestic shortfall increased to 161.17 MT from 53,77 observed during the 2018/19 consumption period. With a consumption requirement of 252,56 MT, the country is able to cover 36.2 per cent of its cereal requirements from domestic resources. To cover for the massive shortfall in maize production, maize imports by the National Maize Corporation (NMC) from neighboring South Africa rose from 19,033 metric tonnes in the previous season to 38,158 metric tonnes in the 2019/20 marketing season. Local purchases by the NMC (as the buyer of last resort) decreased significantly by 44.7 per cent to 7,315 metric tonnes in the 2019/20 season, from 13,231 metric tonnes in the 2018/19 season. To encourage local supply to NMC, the gazetted maize price paid to farmers increased from E2,750/ton in 2018/19 to E2,800/ton in 2019/20. The gazetted maize price for farmers has since been increased further to E3,100/ton for the 2020/21 season. This is aimed at encouraging local maize supply to NMC.

Prospects for food (cereal) production remain restrained in the short to medium-term. The persistent COVID-19 pandemic will have adverse effects on the 2020/21 planting season. The limited operational status of a majority of firms and markets in South Africa is likely to result in shortages in the availability of farming inputs for local maize farmers in the 2020/21 planting season leading to higher prices. The above notwithstanding, however, production is expected to benefit from maize winter cropping to be initiated with contracted farmers coupled with the anticipated implementation of the food security project that is aimed at increasing production to sustainable levels for the country.

1.3 Food and Nutrition Security – Swazi VAC 2020/IPC

Food insecurity still remains high in the country. The Eswatini Vulnerability Assessment Committee for the period June – September 29 per cent (330,000) of the population were classified in IPC Phase 3 or worse for the period. For the period September 2020 - March 2021, the situation was projected to worsen, 32 per cent of the population expected to be classified in IPC Phase 3 or worse. The Lubombo and Shiselweni Regions still remained with the highest vulnerable population, where the impact of erratic rainfall, loss of livelihood and the impact of the COVID-19 pandemic identified as the key drivers for food insecurity in the country. There is also a note to increased food insecurity on urban areas mainly brought about by consistently high food prices, loss of income and livelihood for the urban population. With the advent of the COVID-19 pandemic the situation is expected to worsen for the population. Figure 3 shows the severity and magnitude of the food insecurity situation in the current and projected period.

Food security outcome overall have shown signed of deterioration across all regions in the country. Of the rural population, 53 per cent of the households have an acceptable food consumption, 29 per cent with borderline and 18 per cent with poor consumption. The Hhohho and Lubombo region had the highest population with poor consumption 25% and 30% respectively. Compared with the previous year, a drop increase on the proportion of households with poor consumption is observed indicating increasing food insecurity among the population. Urban areas had high consumption patterns, however sign of high copying observed (Figure 4 rural and Figure 5 urban).

A high use of crisis livelihood copying strategies has been observed in all regions which indicates increase stressed faced by households in meeting their food needs on daily bases. A shift in livelihoods patterns likely for most households given the current conditions brought about by the COVID-19 pandemic.