Financial Stability Mandate

OF ESWATINI Umntsholi Wemaswati

Introduction uncertainty as trade tensions remain. On the trade front, the forecast reflects It gives me great pleasure to present to the May 2019 increase of US tariffs on the Minister for Finance, Eswatini USD200 billion of Chinese exports from citizens and other stakeholders the 10 per cent to 25 per cent, and retalia- second CBE Integrated Annual Report for tion by China. the financial year ended 31 March 2019. The Report provides a comprehensive Furthermore, technology tensions have overview of the operations of the CBE erupted, threatening global technology during the past financial year. It supply chains, and the prospects of a ‘no includes a summarised version of the deal’ Brexit have increased following financial statements. the appointment of new Prime Minister (PM) Boris Johnson in the United Coverage Kingdom. In addition, rising geopolitical tensions, especially relating to sanctions Matters included in the Report are on Iran, supply disruptions in Russia, aimed at informing and providing assur- Chile and Libya have roiled energy ance to stakeholders on the CBE’s ability prices and, in the process, affected to deliver on its mandate, commitment commodity exporters, despite a to sustained relationships and responsi- near-term strengthening of oil prices. 2018/2019 ble corporate citizenship. The issues of Overall, risks to the latest growth materiality pertain to price stability and forecast are mainly to the downside. broader stability of the financial sector Other negative developments include a INTEGRATED conducive to economic growth in the protracted increase in risk aversion that short, medium and long term. has exposed the financial vulnerabilities that continue to accumulate after years ANNUAL REPORT Materiality of low interest rates; and the mounting In ascertaining matters of materiality disinflationary pressures that increase for disclosure in this report, the Bank debt service difficulties, constraining has considered issues that either affect monetary policy space to counter down- or have potential to substantially affect turns, and make adverse shocks more our ability to perform and remain persistent than normal. relevant, our mode of operation, input factors as well as our ability to create The IMF highlights that, against the value over time. As indicated, issues of observed difficult backdrop in the first materiality pertain to those that direct- half of 2019, there were positive ly affect the Bank’s ability to achieve its surprises to growth in advanced econo- price and financial stability mandate. mies, but weaker-than-expected activity in emerging markets and developing Global developments economies. For advanced economies, growth is projected at 1.9 per cent in According to the International Monetary 2019 and 1.7 per cent in 2020. In Fund’s World Economic Outlook (IMF emerging markets and developing econ- WEO) Update released in July 2019, omies, growth is forecast at 4.1 per cent global growth is forecast at 3.2 per cent in 2019, picking up to 4.7 per cent in in 2019, before picking up to 3.5 per 2020. Investment and demand for cent in 2020. The softer projections consumer durables have been subdued follow a 3.6 per cent expansion record- across advanced and emerging market ed in 2018. Global growth remains economies as firms and households sluggish and precarious, with the dyna- continue to hold back on long-term mism in the global economy being spending. weighed down by prolonged policy

Budget estimates for 2019/20 show that social responsibility. The focus of the CSI As at the end of March 2019, the annual the fiscal gap has reduced to E3.0 billion Financial technology CBE top 10 risks Our strategy of the effectiveness of our regulatory advanced economies has softened below programme is three priority areas, target (for example, in the United inflation rate increased to 4.5 per cent (equivalent to a deficit of 4.5 per cent mandate. Most of the amendments have The range, prevalence and evolution of For the period under review, the Bank namely; community health programmes, States) or remained well below it (in the from 4.1 per cent in February, the of GDP) from an estimated outturn of Our ‘super-goal’ (V4 target) is to be an been concluded and quality assured. financial innovations have since identified, analysed and prioritised the educational initiatives (covering prima- Eurozone and Japan). highest inflation rate since December, 5.5 per cent in 2018/19. This contrac- agile, efficient and integrated central The next year will be focusing on the increased incredibly. In the light of top 10 corporate risks according to the ry school, high school, tertiary institu- amid a sharp rise in fuel prices. The tion was mainly due to the fiscal consoli- bank by the year 2021. We may achieve legislative stages that are outside of our these technological advancements for Bank’s process construct. The top 10 tions) and national research institu- policies and delegates to management 2019. This has, once again, been a The IMF projects inflation in emerging financial year ended with the South dation and proposed revenue measures all other strategic targets, but if we control. financial services, regulators and super- risks are based on the risk landscape tions. Total amount invested in this the detailed planning and implementa- difficult year, but the CBE has been able markets and developing economies, on African Reserve Bank (SARB) voting that the Government has put in place miss this one, our entire strategy will visors face the challenge of harnessing considered against the Bank’s capacity programme for the financial year was tion of the objectives and policies in to contend with the challenges present- average, to rise to 4.8 per cent in 2019, unanimously to hold its benchmark repo for the financial year. fail. In the previous year, we captured Financial sustainability the potential of Financial Technology to avoid and mitigate the likelihood of E1.7 million. accordance with acceptable risk param- ed. before declining to 4.7 per cent in 2020. rate steady at 6.75 per cent on 28 March our V4 targets for the 2018/19 financial (FinTech), while making sure not to the risk occurrence as well as the eters. The Board monitors compliance Core inflation has also dropped further 2019, as widely expected. Policymakers Public debt year. The programme did well in counteract- undermine consumer protection, integ- impact - should it occur. Mitigation Stakeholder engagement with policies and achievements against Supplementary reports below historical averages in many highlighted that the current stance on ing the negative effects of outflows in rity of financial markets and stability of measures were implemented during the set objectives by holding management emerging markets and developing econ- monetary policy remains accommoda- Total public debt stock was recorded at policy uncertainty as we come to grips FSC discharges its accountability The Bank identified four strategic areas the South African Rand (ZAR) portfolio. the financial system as a whole. course of the financial year, with strate- We have a Stakeholder Management accountable for its activities through As stand-alone reports, the Bank, along- omies, barring a few cases such as tive and monetary policy actions will E17.6 billion, an equivalent of 26.7 per with the freeze on increases in water through the publication of the annual of focus, namely; human dynamics, It also performed well in creating finan- gic and operational projects implement- Framework in place that guides stake- performance reporting and budget side the Integrated Annual Report, also Argentina, Turkey, and Venezuela – continue to focus on anchoring inflation cent of GDP at end of March 2019. This and electricity tariffs introduced by the Financial Stability Report. financial sustainability, regulatory cial efficiencies (per V4 financial The Eswatini FinTech strategy describes ed for transformation and to improve holder engagement activities and updates. publishes an Economic Review Report, contributing to the subdued headline near to the mid-point of the target reflects an increase of 35.4 per cent new Cabinet. The freeze on increases in reform and business intelligence. These efficiency targets). More interventions the country’s priorities in its journey to controls. Reasonable success was processes. During the reporting year, we Financial Stability Report and Audited inflation across this group of countries. range in the interest of sustainable from the revised figure of E13.0 billion the electricity tariff has been reflected Eswatini’s fiscal challenges still repre- strategic areas are overseen by a cham- will continue even in the next financial be the ‘leading FinTech hub in Africa’. achieved with slight delays in project developed a Meaningful Stakeholder In the year under review, the Board Financial Statements, which can be Core inflation has also dropped further growth. recorded in March 2018. The surge is in the inflation outcome for April 2019, sent a significant point of vulnerability pion. A total of fifteen programmes are year. Central Bank Digital Currency, partner- deliveries as a consequence of the Engagement Project as one of our finalised the external Board evaluation accessed on our website https://ww- below historical averages in many mainly attributed to continued issuance where it fell to a low of 1.8 per cent for the financial sector. Developments in run under these strategic areas, with ship with key stakeholders, the Innova- leadership uncertainty among other strategic activities. We developed a exercise with the Institute of Directors w.centralbank.org.sz. emerging markets and developing econ- KINGDOM OF ESWATINI of Government securities. The Bank down from 5.3 per cent recorded in South Africa (SA) present much closer each programme headed by a manager Where are we going? tion Committee, and creation of the operational inefficiencies. stakeholder engagement measurement (SA). omies, barring a few cases such as notes with concern that the country’s March 2019. risks to Eswatini’s financial stability due reporting to the relevant champion. Sandbox have all been put in place to tool to quantify the level of engage- Conclusion Argentina, Turkey, and Venezuela. GDP developments debt has been rising exponentially over to SA being the anchor economy for the This is the question we ask ourselves. allow the Bank to be able to accept and Corporate social investment ment, based on identified key engage- Following the ever-evolving corporate the year under review. As such, the The Bank’s inflation forecast for the Common Monetary Area (CMA). The With regards to performance against Assuming that success was a place, how foster innovation, which will then affect ment measurement indicators. Our governance developments locally and It has been a strong team effort, and I According to official provisional formulation of a Debt Sustainability year 2019 has been revised down to 2.67 banking sector remains stable, liquid strategy, the projects under the four would we know we are there? We thus South Africa the whole FinTech space in the country, Through its Corporate Social Investment stakeholders continue to be concerned internationally, which call for increased would like to extend my sincere thanks estimates by the Central Statistics Analysis and implementation of a per cent in September 2019, from the and adequately capitalised. However, strategic areas of focus can be summa- must speak to our most important goals while still protecting the consumer. (CSI) programme, the Bank pursues about Government’s fiscal position, slow regulation, greater transparency, and and appreciation to the Minister for According to preliminary indicators Office (CSO), the Gross Domestic Medium Term Debt Strategy is now vital. previous forecast of 2.83 per cent credit risk is increasing, thus affecting rised as follows: to be achieved in the next 12 months. excellence in community involvement regulatory reforms, compliance and more rigorous scrutiny of large institu- Finance and his officials, Board of Direc- published by Statistics South Africa on 4 Product (GDP), which is a measure of that are projected to perform poorly the local market as a long term objec- projected in July 2019. The proposed bank earnings, which will ultimately Again, we focus on our V4 Targets, Financial Technology in the world is and upholding generally accepted reputational implications. tions, the ethics and compliance tors, all staff of the Bank as well as June 2019, the annual estimate of real economic activity, is estimated to have include ‘Construction’, ‘Wholesale and tive to boost the level of reserves. The Balance of payments introduction of Value Added Tax (VAT) on affect solvency of banks. Human dynamics Process Outputs and Strategic Projects. growing at a rapid pace and the Bank is principles underlying good corporate function becomes integral to the strate- financial institutions and other key GDP for 2018 increased by 0.8 per cent expanded by 2.4 per cent in 2018 Retail’ and ‘General Public Administra- Bank will also continue to monitor electricity in the year poses an upside This is where we demonstrate ‘The 4 aligning accordingly to position the gic core of organisations gearing to stakeholders for their cooperation, following an increase of 1.4 per cent in compared to 2.0 per cent in 2017. This tion’. developments and offer appropriate In the financial year 2018/19, the coun- risk to overall inflation. Over the National payment systems The impact of this programme will be Disciplines of Execution’ approach, in maintaining public trust. Therefore, commitment and dedication to the increase is mainly accounted for by country towards attaining Vision 2022. Inflationary pressures remained contained in June 2017. The annual real GDP growth of 0.8 advice to the Government in order to try posted a deficit overall balance of medium term, inflation is projected at seen in the long term. However, that; beyond responding to changes in the attainment of price and financial stabili- strong positive developments in the 2019. Rates of increase in input costs and output per cent in 2018 was led by increased Going forward, GDP is projected to retain the reserves at levels above the E2.314 billion, triple the deficit of 4.31 per cent in 2020 and 5.29 per cent Operations of designated systemically projects like the ones on culture shift industry, the Central Bank of Eswatini ty in the Kingdom of Eswatini. I have no primary and tertiary sectors. Risk management approach charges both ticked lower and remained below economic activity in finance, real estate increase by 2.9 per cent in 2020 and threshold of three months cover of E799.3 million recorded in the 2017/18 in 2021. important national payment systems and stakeholder management have • We have not discarded any targets in continues to invest its efforts in creating doubt that I can continue to rely on and business services, which contribut- then retreat to 1.3 and 1.7 per cent in imports of goods and services. financial year. This necessitated a dent continued to run smoothly during the already identified gaps in the environ- the process of identifying our wildly their respective long-run averages. Average vendor The Bank closely monitors the operating a scalable ethics and compliance them for unwavering support and ed 0.4 of a percentage point based on High frequency data reflects that 2021 and 2022, respectively. in reserve assets, as a financing item for Monetary Policy Consultative Com- reporting period. ment and have also identified possible important goals. Instead, we allocat- lead times (a bellwether of supply-chain price environment using the risk exposure, ecosystem that will help meet its needs dedication in the execution of our growth of 1.8 per cent, and general economic activity expanded by 4.2 per Private sector credit the deficit recorded in the overall mittee interventions. As these roll out their ed weights to help us prioritize the pressures) also improved for the first time in six opportunities and process-efficiency today and in the future. mandate and objectives in the interest Government services, which contributed cent, on a year-on-year basis (seasonally balance of payments. In 2018/19, the During the period under review, the programme of action, we will start to targets. The weighting and prioritiza- years, as purchasing activity among manufacturers approach to identify threats and avoid of all Emaswati. 0.2 of a percentage point based on a 1.3 adjusted), in the first quarter of 2019 External reserves Growth in credit extended to the country benefitted from increased debt The Governor makes monetary policy Bank approved an application from see improvements. Areas where we did tion was based on an assessment of fell for five consecutive months (IMF WEO Update, these; as well as find and pursue oppor- Bank’s financial performance per cent rise. compared to 2.4 per cent in the previous private sector decelerated somewhat security holdings, which diluted the decisions after consultative meetings Eswatini Mobile to provide mobile not move as swiftly as we had anticipat- which targets assisted the Bank more July 2019). tunities in fulfilling its mandate. This is quarter. Sectors that recorded signifi- Eswatini’s external reserves continued from the double digit rate recorded in depletion in the country’s claims on with the Monetary Policy Consultative money transfer services to its custom- ed are in relation to the identification of towards achieving agility, efficiency attained through integrating the Bank’s Operationally, the Bank remained The South African economy shrank by an cant positive performance in the first to fall as the Government made draw- the past year to single digit. The growth other monetary authorities. Committee (MPCC). In 2018/19, the ers. Eswatini Mobile has partnered with future skills and improvement of the and integration. Global inflation and commodities overview strategy, risk and performance for profitable during the year, even though annualised 3.2 per cent quarter of 2019 included; ‘manufactur- downs on its deposits held at the Bank to was largely supported by increased MPCC held six bi-monthly meetings. In Eswatini Development and Savings Bank, performance management system. The its profit margin declined by 4 per cent Majozi V. Sithole, ing’, ‘wholesale and retail’, ‘transport effective planning and monitoring. The IMF reported that headline inflation has quarter-on-quarter in the three months cover the persistent cash shortfalls. In demand for credit towards ‘businesses’ Consumer inflation these meetings, the MPCC reviewed who will also be holding the required bottlenecks have been identified and in • We have developed both Lag Meas- to reach E190.1 million at end of March Governor to March 2019, following a 1.4 per cent and storage’ and ‘financial services terms of estimated imports of goods and and ‘other sectors’ (namely ‘other developments on inflation (including trust account for deposit-taking from the next financial year, better results ures and Lead Measures for all our remained subdued across most advanced and Risk management remains the main area growth in the previous period and excluding insurance and pension funds’. services, the reserves were sufficient to financial corporations’). The accelerat- The annual consumer inflation was forecasts) as well as other macroeco- agents. The service will provide finan- will be realised. Some projects have targets. This will make it easier for emerging market economies. These developments of focus and management is committed compared to market expectations of a Subsectors that performed poorly cover 2.0 months in March 2019, ed growth in credit to businesses is a relatively contained in the 2018/19 nomic indicators of the domestic, cial services to the banked, under- missed timeliness in terms of delivery, project teams to know what is have contributed, in part, to market pricing of to applying international best practice 1.7 per cent contraction. It was the included the following: ‘public adminis- remarkably below the three-month positive development as this sector financial year, averaging 5.0 per cent regional and international economies. banked and unbanked population. while others are on track. expected of them in the next 12 expected inflation dropping sharply in the United and standards to ensure that the effects sharpest quarterly decline since tration’, ‘construction’, ‘mining and threshold and also lower than the 3.2 drives domestic economic growth. compared to 5.5 per cent in the previous Over the reporting period, the MPCC months. States and the Eurozone. Consumer prices in of uncertainty on objectives are system- Q1-2009, mainly reflecting the effects quarrying’, ‘tourism activities’, ‘human months covered in the previous year. financial year. The moderation in recommended to keep the discount rate Financial sector development Business intelligence Committee meetings and Board advanced economies, on average, are projected to atically and continuously monitored. of power cuts on manufacturing and health, and social activities’. Fiscal Public finance consumer inflation mainly benefitted unchanged at 6.75 per cent. implementation plan • We have implemented monthly moni- meetings to hold each other account- rise to 1.6 per cent in 2019, edging up marginally This is done through periodic assess- mining. cash-flow challenges continued to weigh During the course of the financial year, from favourable food prices, which It has taken us a while to put the toring scorecards for the Projects and able, so that the goals do not natural- to 2.0 per cent in 2020. Consistent with subdued ments of strategic objectives, projects on implementation of public infrastruc- the Bank engaged in an exercise to buy The 2019/20 budget was presented recorded a deflation of 0.2 per cent in Financial stability The Bank continued to coordinate the foundation and frameworks in place for Change Management Committee and ly disintegrate in the whirlwind. growth in final demand, core inflation across and day-to-day processes, using various tural projects thereby resulting in lower foreign exchange originating from under an unprecedented economic the period under review down from 5.2 implementation of the Financial Sector this programme. A lot of research work the quarterly scorecards for the tools as prescribed in the CBE Enterprise output in construction activity. export proceeds from the local commer- crisis, where the country is faced with; per cent the previous financial year. The Bank, through its macro-prudential Development Implementation Plan was done to ensure that when the Board Capital Projects and Invest- Governance Risk Management (ERM) Framework. cial banks. The accumulation of these pressure on Government revenues, mandate, is committed to mitigate risks (FSDIP). projects take off, all processes are ment Committee, which will provide Incidents are recorded, analysed and Medium term GDP Projections funds has assisted to buffer the reserves accumulating arrears, depleted reserves Inflation outlook to financial stability. The Financial properly aligned. compelling scoreboards for tracking The Board maintains full and effective reported, and key risk indicators are portfolio against outflows. In the and sluggish growth. As such, restoring Stability Committee (FSC) complements The FSDIP has four pillars namely; finan- delivery. control over the operations of the Bank monitored and periodically reported to Economic activity is projected to decel- absence of this intervention, reserves prudent public finance management The inflation outlook, which remains a the price stability objective of the Bank cial stability, financial inclusion, diversi- Regulatory reform and is accountable and responsible for the risk governance structures to inform erate to 1.4 per cent in 2019 from 2.4 levels would have been significantly remains pivotal in helping the country predominant guide for monetary policy, through formulation and implementa- fication of the financial system and • We use information attained from its performance and compliance. The decision-making. per cent in 2018 largely due to worsen- lower. The Bank will continue with its towards sustainable and inclusive is on a downward trend with expected tion of appropriate macro-prudential modernisation of the financial system. The amendment of all the identified Departmental meetings, Management Board reviews the strategic priorities of ing fiscal challenges. The main sectors efforts to acquire foreign exchange from growth. upward risks towards the end of 2019. policy measures. After sufficient delib- More information, including FSDIP legislations is key for the improvement Committee meetings, Executive the Bank, determines investment The inflation trajectory swings hinge on erations on financial stability issues, the achievements, is reflected on page 26. Introduction mism in the global economy being weighed down by prolonged policy It gives me great pleasure to present to uncertainty as trade tensions remain. the Minister for Finance, Eswatini On the trade front, the forecast reflects citizens and other stakeholders the the May 2019 increase of US tariffs on second CBE Integrated Annual Report USD200 billion of Chinese exports from for the financial year ended 31 March 10 per cent to 25 per cent, and retalia- 2019. The Report provides a compre- tion by China. hensive overview of the operations of the CBE during the past financial year. Furthermore, technology tensions have It includes a summarised version of the erupted, threatening global technology financial statements. supply chains, and the prospects of a ‘no deal’ Brexit have increased follow- Coverage ing the appointment of new Prime Minister (PM) Boris Johnson in the Matters included in the Report are United Kingdom. In addition, rising aimed at informing and providing assur- geopolitical tensions, especially relat- ance to stakeholders on the CBE’s ing to sanctions on Iran, supply disrup- ability to deliver on its mandate, tions in Russia, Chile and Libya have commitment to sustained relationships roiled energy prices and, in the process, 2018/2019 and responsible corporate citizenship. affected commodity exporters, despite The issues of materiality pertain to a near-term strengthening of oil prices. price stability and broader stability of Overall, risks to the latest growth INTEGRATED the financial sector conducive to forecast are mainly to the downside. economic growth in the short, medium Other negative developments include a ANNUAL REPORT and long term. protracted increase in risk aversion that has exposed the financial vulnerabili- Materiality ties that continue to accumulate after years of low interest rates; and the In ascertaining matters of materiality mounting disinflationary pressures that for disclosure in this Report, the Bank increase debt service difficulties, has considered issues that either affect constraining monetary policy space to or have potential to substantially affect counter downturns, and make adverse our ability to perform and remain shocks more persistent than normal. relevant, our mode of operation, input factors as well as our ability to create The IMF highlights that, against the value over time. As indicated, issues of observed difficult backdrop in the first materiality pertain to those that direct- half of 2019, there were positive ly affect the Bank’s ability to achieve surprises to growth in advanced econo- its price and financial stability mies, but weaker-than-expected activi- mandate. ty in emerging markets and developing economies. For advanced economies, Global developments growth is projected at 1.9 per cent in 2019 and 1.7 per cent in 2020. In According to the International Monetary emerging markets and developing econ- Fund’s World Economic Outlook (IMF omies, growth is forecast at 4.1 per WEO) Update released in July 2019, cent in 2019, picking up to 4.7 per cent global growth is forecast at 3.2 per cent in 2020. Investment and demand for in 2019, before picking up to 3.5 per consumer durables have been subdued cent in 2020. The softer projections across advanced and emerging market follow a 3.6 per cent expansion record- economies as firms and households ed in 2018. Global growth remains continue to hold back on long-term sluggish and precarious, with the dyna- spending.

As at the end of March 2019, the Budget estimates for 2019/20 show The FSDIP has four pillars namely; prescribed in the CBE Enterprise Risk ment (CSI) programme, the Bank annual inflation rate increased to 4.5 that the fiscal gap has reduced to E3.0 financial stability, financial inclusion, Management (ERM) Framework. pursues excellence in community growth in final demand, core inflation per cent from 4.1 per cent in Febru- billion (equivalent to a deficit of 4.5 diversification of the financial system Incidents are recorded, analysed and involvement and upholding generally Our strategy Regulatory reform across advanced economies has ary, the highest inflation rate since per cent of GDP) from an estimated and modernisation of the financial reported, and key risk indicators are accepted principles underlying good softened below target (for example, in December, amid a sharp rise in fuel outturn of 5.5 per cent in 2018/19. system. More information, including monitored and periodically reported to corporate social responsibility. The Our ‘super-goal’ (V4 target) is to be an The amendment of all the identified the United States) or remained well prices. The financial year ended with This contraction was mainly due to the FSDIP achievements, is reflected on the risk governance structures to focus of the CSI programme is three agile, efficient and integrated central legislations is key in our drive to below it (in the Eurozone and Japan). the South African Reserve Bank fiscal consolidation and proposed page 26. inform decision-making. priority areas, namely; community bank by the year 2021. We may improve the effectiveness of our Governance its profit declined by 4 per cent to reach (SARB) voting unanimously to hold its revenue measures that the Govern- health programmes, educational initia- achieve all other strategic targets, but regulatory mandate. Most of the E190.1 million at end of March 2019. The IMF projects inflation in emerging benchmark repo rate steady at 6.75 ment has put in place for the financial Financial technology CBE top 10 risks tives (covering primary school, high if we miss this one, our entire strategy amendments have been concluded and The Board maintains full and effective This has, once again, been a difficult markets and developing economies, on per cent on 28 March 2019, as widely year. school, tertiary institutions) and will fail. In the previous year, we quality assured. The next year we will control over the operations of the Bank year, but the CBE has been able to average, to rise to 4.8 per cent in expected. Policymakers highlighted The range, prevalence and evolution of For the period under review, the Bank national research institutions. Total captured our V4 targets for the be focusing on the legislative stages and is accountable and responsible for contend with the challenges presented. 2019, before declining to 4.7 per cent that the current stance on monetary Public debt financial innovations have since identified, analysed and prioritised the amount invested in this programme for 2018/19 financial year. that are outside of our control. its performance and compliance. The in 2020. Core inflation has also policy remains accommodative and increased incredibly. In the light of top 10 corporate risks according to the the financial year was E1.7 million. Board reviews the strategic priorities of Supplementary reports dropped further below historical monetary policy actions will continue Total public debt stock was recorded policy, is on a downward trend with tive of the Bank through formulation these technological advancements for Bank’s process construct. The top 10 The Bank identified four strategic Financial sustainability the Bank, determines investment averages in many emerging markets to focus on anchoring inflation near at E17.6 billion, an equivalent of 26.7 expected upward risks towards the and implementation of appropriate financial services, regulators and risks are based on the risk landscape Stakeholder engagement areas of focus, namely; human dynam- policies and delegates to management As stand-alone reports, the Bank, along- and developing economies, barring a to the mid-point of the target range per cent of GDP at the end of March end of 2019. The inflation trajectory macro-prudential policy measures. supervisors face the challenge of considered against the Bank’s capacity ics, financial sustainability, regulatory The programme did well in counter- the detailed planning and implementa- side the Integrated Annual Report, also few cases such as Argentina, Turkey, in the interest of sustainable growth. 2019. This reflects an increase of 35.4 swings hinge on policy uncertainty as After sufficient deliberations on finan- harnessing the potential of Financial to avoid and mitigate the likelihood of We have a Stakeholder Management reform and business intelligence. Each acting the negative effects of outflows tion of the objectives and policies in publishes an Economic Review Report, and Venezuela – contributing to the per cent from the revised figure of we come to grips with the impact of cial stability issues, the Financial Technology (Fintech), while making the risk occurrence as well as the Framework in place that guides stake- of these strategic areas is overseen by in the South African Rand (ZAR) accordance with acceptable risk param- Financial Stability Report and Audited subdued headline inflation across this KINGDOM OF ESWATINI E13.0 billion recorded in March 2018. the freeze on increases in water and Stability Committee (FSC) discharges sure not to undermine consumer impact - should it occur. Mitigation holder engagement activities and a champion. A total of fifteen portfolio. It also performed well in eters. The Board monitors compliance Financial Statements, which can be group of countries. Core inflation has The surge is mainly attributed to electricity tariffs introduced by the its accountability through the publica- protection, integrity of financial measures were implemented during processes. During the reporting year, programmes are run under these creating financial efficiencies (per V4 with policies and achievements against accessed on our website: also dropped further below historical GDP developments continued issuance of Government new Cabinet. The freeze on increases tion of the annual Financial Stability markets and stability of the financial the course of the financial year, with we developed a Meaningful Stakehold- strategic areas, with each programme financial efficiency targets). More set objectives by holding management https://www.centralbank.org.sz. averages in many emerging markets securities. The Bank notes with in the electricity tariff has been Report. system as a whole. strategic and operational projects er Engagement Project as one of our headed by a manager reporting to the interventions will continue even in the accountable for its activities through and developing economies, barring a According to official provisional concern that the country’s debt has reflected in the inflation outcome for implemented for transformation and to strategic activities. We developed a relevant champion. next financial year. performance reporting and budget Conclusion few cases such as Argentina, Turkey, estimates by the Central Statistics been rising exponentially over the April 2019, where it fell to a low of 1.8 Eswatini’s fiscal challenges still repre- The Eswatini Fintech strategy improve controls. Reasonable success stakeholder engagement measurement updates. and Venezuela. Office (CSO), the Gross Domestic year under review. As such, the formu- per cent down from 5.3 per cent sent a significant point of vulnerability describes the country’s priorities in its was achieved with slight delays in tool to quantify the level of engage- With regards to performance against It has been a strong team effort, and I Product (GDP), which is a measure of lation of a Debt Sustainability Analysis recorded in March 2019. for the financial sector. Developments journey to be the ‘leading Fintech hub project deliveries as a consequence of ment, based on identified key engage- strategy, the projects under the four Where are we going? In the year under review, the Board would like to extend my sincere thanks South Africa economic activity, is estimated to main sectors that are projected to foreign exchange from the local and implementation of a Medium Term in South Africa (SA) present much in Africa’. The Central Bank of Eswati- the leadership uncertainty among ment measurement indicators. Our strategic areas of focus can be summa- finalised the external Board evaluation and appreciation to the Minister for have expanded by 2.4 per cent in perform poorly include ‘Construction’, market as a long term objective to Debt Strategy is now vital. The Bank’s inflation forecast for the closer risks to Eswatini’s financial ni, in partnership with other stakehold- other operational inefficiencies. stakeholders continue to be concerned rised as follows: This is the question we ask ourselves. exercise with the Institute of Directors Finance and his officials, Board of Direc- According to preliminary indicators 2018 compared to 2.0 per cent in ‘Wholesale and Retail’ and ‘General boost the level of reserves. The Bank year 2019 has been revised down to stability due to SA being the anchor ers established a regulatory Sandbox to about Government’s fiscal position, Assuming that success was a place, (SA). tors, all staff of the Bank as well as published by Statistics South Africa on 2017. This increase is mainly Public Administration’. will also continue to monitor develop- Balance of payments 2.67 per cent in September 2019, from economy for the Common Monetary foster innovation in the financial Corporate social investment slow regulatory reforms, compliance Human dynamics how would we know we are there? We financial institutions and other key 4 June 2019, the annual estimate of accounted for by strong positive ments and offer appropriate advice to the previous forecast of 2.87 per cent Area (CMA). The banking sector sector. This platform provides an and reputational implications. thus must speak to our most important Following the ever-evolving corporate stakeholders for their cooperation, real GDP for 2018 increased by 0.8 per developments in the primary and Going forward, GDP is projected to the Government in order to retain the In the financial year 2018/19, the projected in July 2019. The proposed remains stable, liquid and adequately opportunity to test innovative Through its Corporate Social Invest- The impact of this programme will be goals to be achieved in the next 12 governance developments locally and commitment and dedication to the Inflationary pressures remained contained in June cent following an increase of 1.4 per tertiary sectors. increase by 2.9 per cent in 2020 and reserves at levels above the threshold country posted an overall balance of introduction of Value Added Tax (VAT) capitalised. However, credit risk is solutions in a live environment whilst seen in the long term. However, months. Again, we focus on our V4 internationally, which call for increased attainment of price and financial stabili- 2019. Rates of increase in input costs and output cent in 2017. The annual real GDP then retreat to 1.3 per cent and 1.7 of three months cover of imports of payments deficit of E2.314 billion, on electricity in the year poses an increasing, thus affecting bank ensuring consumer protection. projects like the ones on culture shift Targets, Process Outputs and Strategic regulation, greater transparency, and ty in the Kingdom of Eswatini. I have no charges both ticked lower and remained below growth of 0.8 per cent in 2018 was led High frequency data reflects that per cent in 2021 and 2022, respective- goods and services. triple the deficit of E799.3 million upside risk to overall inflation. Over earnings, which will ultimately affect and stakeholder management have Projects. This is where we demon- more rigorous scrutiny of large institu- doubt that I can continue to rely on their respective long-run averages. Average vendor by increased economic activity in economic activity expanded by 4.2 ly. recorded in the 2017/18 financial the medium term, inflation is project- solvency of banks. Financial Technology in the world is already identified gaps in the environ- strate ‘The 4 Disciplines of Execution’ tions, the ethics and compliance them for unwavering support and lead times (a bellwether of supply-chain price finance, real estate and business per cent, on a year-on-year basis Private sector credit year. This necessitated a reduction in ed at 4.31 per cent in 2020 and 5.29 growing at a rapid pace and the Bank is ment and have also identified possible approach, in that; function becomes integral to the strate- dedication in the execution of our pressures) also improved for the first time in six services, which contributed 0.4 of a (seasonally adjusted), in the first reserve assets, as a financing item for per cent in 2021. National payment systems aligning itself accordingly to ensure interventions. As these roll out their gic core of organisations gearing to mandate and objectives in the interest years, as purchasing activity among manufacturers percentage point based on growth of quarter of 2019 compared to 2.4 per External reserves Growth in credit extended to the the deficit recorded in the overall the country attains Vision 2022. programme of action, we will start to • We have not discarded any targets maintaining public trust. Therefore, of all Emaswati. fell for five consecutive months (IMF WEO Update, 1.8 per cent, and general Government cent in the previous quarter. Sectors private sector decelerated somewhat balance of payments. In 2018/19, the Monetary Policy Consultative Operations of designated systemically see improvements. Areas where we in the process of identifying our beyond responding to changes in the July 2019). services, which contributed 0.2 of a that recorded significant positive Eswatini’s external reserves continued from the double digit rate recorded in country benefitted from increased Committee important national payment systems Risk management approach did not move as swiftly as we had important goals. Instead, we industry, the Central Bank of Eswatini percentage point based on a 1.3 per performance in the first quarter of to fall as the Government made draw- the past year to single digit. The debt security holdings, which diluted continued to run smoothly during the anticipated are in relation to the allocated weights to help us prior- continues to invest its efforts in creating Global inflation and commodities overview cent rise. 2019 included; ‘manufacturing’, downs on its deposits held at the Bank growth was largely supported by the depletion in the country’s claims The Governor makes monetary policy reporting period. The Bank closely monitors the operat- identification of future skills and itize the targets. The weighting and a scalable ethics and compliance ‘wholesale and retail’, ‘transport to cover the persistent cash shortfalls. increased demand for credit towards on other monetary authorities. decisions after consultative meetings ing environment using the risk improvement of the performance prioritization was based on an ecosystem that will help meet its needs Majozi V. Sithole The IMF reported that headline inflation has The South African economy shrank by and storage’ and ‘financial services In terms of estimated imports of goods ‘businesses’ and ‘other sectors’ with the Monetary Policy Consultative During the period under review, the exposure, opportunities and management system. The bottlenecks assessment of which targets assist- today and in the future. Governor remained subdued across most advanced and an annualised 3.2 per cent excluding insurance and pension and services, the reserves were (namely ‘other financial corpora- Consumer inflation Committee (MPCC). In 2018/19, the Bank approved an application from process-efficiency approach to identify have been identified and in the next ed the Bank more towards achiev- emerging market economies. These developments quarter-on-quarter in the three funds’. Subsectors that performed sufficient to cover 2.0 months at the tions’). The accelerated growth in MPCC held six bi-monthly meetings. In Eswatini Mobile to provide mobile threats and avoid these; as well as find financial year, better results will be ing agility, efficiency and integra- Bank’s financial performance have contributed, in part, to market pricing of months to March 2019, following a 1.4 poorly included the following: end of March 2019, remarkably below credit to businesses is a positive devel- The annual consumer inflation was these meetings, the MPCC reviewed money transfer services to its custom- and pursue opportunities in fulfilling realised. Some projects have missed tion. expected inflation dropping sharply in the United per cent growth in the previous period ‘public administration’, ‘construc- the three-months threshold and also opment as this sector drives domestic relatively contained in the 2018/19 developments on inflation (including ers. Eswatini Mobile has partnered its mandate. This is attained through timeliness in terms of delivery, while Operationally, the Bank remained States and the Eurozone. Consumer prices in and compared to market expectations tion’, ‘mining and quarrying’, ‘tour- lower than the 3.2 months covered at economic growth. financial year, averaging 5.0 per cent forecasts) as well as other macroeco- with Eswatini Bank, who will also be integrating the Bank’s strategy, risk others are on track. • We have developed both Lag and profitable during the year, even though advanced economies, on average, are projected to of a 1.7 per cent contraction. It was ism activities’, ‘human health, and the same time in the previous year. compared to 5.5 per cent in the previ- nomic indicators of the domestic, holding the required trust account for and performance for effective Lead Measures for all our targets. rise to 1.6 per cent in 2019, edging up marginally the sharpest quarterly decline since social activities’. Fiscal cash-flow Public finance ous financial year. The moderation in regional and international economies. deposit-taking from agents. The planning and monitoring. Business intelligence This will make it easier for project to 2.0 per cent in 2020. Consistent with subdued Q1-2009, mainly reflecting the effects challenges continued to weigh on During the course of the financial year, consumer inflation mainly benefitted Over the reporting period, the MPCC service will provide financial services teams to know what is expected of of power cuts on manufacturing and implementation of public infrastruc- the Bank engaged in an exercise to buy The 2019/20 budget was presented from favourable food prices, which recommended to keep the discount to the banked, underbanked and Risk management remains the main It has taken us a while to put the them in the next 12 months. mining. tural projects thereby resulting in foreign exchange originating from under an unprecedented economic recorded a deflation of 0.2 per cent in rate unchanged at 6.75 per cent. unbanked population. area of focus and management is foundation and framework in place for • We use information attained lower output in construction activity. export proceeds from the local crisis, where the country is faced with the period under review down from committed to applying international this programme. A lot of research work • We have implemented monthly from Departmental, Manage- commercial banks. The accumulation pressure on Government revenues, 5.2 per cent the previous financial Financial stability Financial sector development best practice and standards to ensure was done to ensure that when the monitoring scorecards for the ment Committee, Executive Medium Term GDP Projections of these funds has assisted to buffer accumulating arrears, depleted year. implementation plan that the effects of uncertainty on projects take off, all processes are Projects and Change Management Committee and Board meet- the reserves portfolio against reserves and sluggish growth. As such, The Bank, through its macro-pruden- objectives are systematically and properly aligned. Committee and the quarterly score- ings to hold each other Economic activity is projected to outflows. In the absence of this inter- restoring prudent public finance Inflation outlook tial mandate, is committed to The Bank continued to coordinate the continuously monitored. This is done cards for the Board Capital Projects accountable, so that the goals decelerate to 1.4 per cent in 2019 vention, reserves levels would have management remains pivotal in mitigate risks to financial stability. implementation of the Financial through periodic assessments of strate- and Investment Committee, which do not naturally disintegrate in from 2.4 per cent in 2018 largely due been significantly lower. The Bank will helping the country achieve sustaina- The inflation outlook, which remains a The financial stability mandate Sector Development Implementation gic objectives, projects and day-to-day will provide compelling scoreboards the whirlwind. to worsening fiscal challenges. The continue with its efforts to acquire ble and inclusive growth. predominant guide for monetary complements the price stability objec- Plan (FSDIP). processes, using various tools as for tracking delivery. CONTENTS

Introduction mism in the global economy being weighed down by prolonged policy It gives me great pleasure to present to uncertainty as trade tensions remain. the Minister for Finance, Eswatini On the trade front, the forecast reflects citizens and other stakeholders the the May 2019 increase of US tariffs on second CBE Integrated Annual Report USD200 billion of Chinese exports from for the financial year ended 31 March 10 per cent to 25 per cent, and retalia- 2019. The Report provides a compre- tion by China. hensive overview of the operations of the CBE during the past financial year. Furthermore, technology tensions have It includes a summarised version of the erupted, threatening global technology financial statements. supply chains, and the prospects of a ‘no deal’ Brexit have increased follow- Coverage ing the appointment of new Prime Minister (PM) Boris Johnson in the 04 Introduction to Central Bank of Eswatini Matters included in the Report are United Kingdom. In addition, rising geopolitical tensions, especially relat- Highlights aimed at informing and providing assur- 09 ance to stakeholders on the CBE’s ing to sanctions on Iran, supply disrup- 10 Governor’s statement ability to deliver on its mandate, tions in Russia, Chile and Libya have commitment to sustained relationships roiled energy prices and, in the process, 17 Monetary policy and responsible corporate citizenship. affected commodity exporters, despite 18 Economic review The issues of materiality pertain to a near-term strengthening of oil prices. price stability and broader stability of Overall, risks to the latest growth 24 Financial stability the financial sector conducive to forecast are mainly to the downside. economic growth in the short, medium Other negative developments include a 26 Financial sector development implementation plan and long term. protracted increase in risk aversion that 27 Business model has exposed the financial vulnerabili- Materiality ties that continue to accumulate after 28 Material matters and risk management years of low interest rates; and the In ascertaining matters of materiality mounting disinflationary pressures that 36 Stakeholder engagement and reporting for disclosure in this Report, the Bank increase debt service difficulties, 39 Our strategy and outlook has considered issues that either affect constraining monetary policy space to or have potential to substantially affect counter downturns, and make adverse 43 Performance our ability to perform and remain shocks more persistent than normal. 66 Governance relevant, our mode of operation, input factors as well as our ability to create The IMF highlights that, against the 78 Assurance value over time. As indicated, issues of observed difficult backdrop in the first materiality pertain to those that direct- half of 2019, there were positive 80 Human resources ly affect the Bank’s ability to achieve surprises to growth in advanced econo- 84 Remuneration its price and financial stability mies, but weaker-than-expected activi- mandate. ty in emerging markets and developing 85 Abridged financial statements economies. For advanced economies, Global developments growth is projected at 1.9 per cent in 91 Abbreviations 2019 and 1.7 per cent in 2020. In According to the International Monetary emerging markets and developing econ- Fund’s World Economic Outlook (IMF omies, growth is forecast at 4.1 per WEO) Update released in July 2019, cent in 2019, picking up to 4.7 per cent global growth is forecast at 3.2 per cent in 2020. Investment and demand for in 2019, before picking up to 3.5 per consumer durables have been subdued cent in 2020. The softer projections across advanced and emerging market follow a 3.6 per cent expansion record- economies as firms and households ed in 2018. Global growth remains continue to hold back on long-term sluggish and precarious, with the dyna- spending.

CBE Integrated Annual Report 2018/19 04

ABOUT THIS REPORT

Basis for preparation The Central Bank of Eswatini (the CBE or the Bank) is Introduction mism in the global economy being pleased to present its Integrated Annual Report (Report) This is the second Report prepared in accordance with weighed down by prolonged policy for the year ended 31 March 2019. The Report forms part the International Integrated Reporting Council’s (IIRC) It gives me great pleasure to present to uncertainty as trade tensions remain. of the CBE’s public accountability and responsibility to a Integrated Reporting ( Framework). We are continucontinu-- the Minister for Finance, Eswatini On the trade front, the forecast reflects broad range of stakeholders. ing with our journey and recognise that the full citizens and other stakeholders the the May 2019 increase of US tariffs on adoption of the framework will take time. The second CBE Integrated Annual Report USD200 billion of Chinese exports from The structure of this Report is informed by the Bank’s current Report reflects our drive and ability to internalinternal-- for the financial year ended 31 March 10 per cent to 25 per cent, and retalia- primary mandate and responsibilities, as well as the ise the framework to reflect on our current 2019. The Report provides a compre- tion by China. governance structures and enabling functions that underunder-- situation. The CBE remains committed to providing high hensive overview of the operations of pin its ability to sustainably execute its role in the econoecono-- quality reports throughout the journey. the CBE during the past financial year. Furthermore, technology tensions have my. It includes a summarised version of the erupted, threatening global technology Our adoption of is a reflection of our intention to: financial statements. supply chains, and the prospects of a Scope and Report boundary • Adopt a more cohesive and efficient approach to ‘no deal’ Brexit have increased follow- reporting. Coverage ing the appointment of new Prime The Report covers the operations of the Bank as governed • Better inform resource allocation through a Minister (PM) Boris Johnson in the by the Central Bank of EswatiniSwaziland (CBS) Order of 1974 (as value-creation approach. Matters included in the Report are United Kingdom. In addition, rising amended). The Bank’s existence, mandate and • Enhance accountability and stewardship. aimed at informing and providing assur- geopolitical tensions, especially relat- independence are entrenched in the Constitution of the • Promote integrated thinking. ance to stakeholders on the CBE’s ing to sanctions on Iran, supply disrup- Kingdom of Eswatini. ability to deliver on its mandate, tions in Russia, Chile and Libya have Our financial statements have been prepared in accordaccord-- commitment to sustained relationships roiled energy prices and, in the process, The Report reflects a holistic account of all relevant and ance with the requirements of International Financial and responsible corporate citizenship. affected commodity exporters, despite material financial and non-financial information to Reporting Standards (IFRS), except where IFRS conflicts The issues of materiality pertain to a near-term strengthening of oil prices. enable stakeholders to appreciate the performance and with the provisions of the CBS Order of 1974 (as amend-amend- price stability and broader stability of Overall, risks to the latest growth impact of the Bank’s operations when implementing its ed). In such instances, the CBS Order takes precedence. the financial sector conducive to forecast are mainly to the downside. mandate. The determination of material matters for economic growth in the short, medium Other negative developments include a inclusion in this Report is undertaken at executive level, Reporting suite and long term. protracted increase in risk aversion that with due consideration of stakeholders’ concerns and has exposed the financial vulnerabili- information requirements, with oversight provided by The following table describes the suite of reports that Materiality ties that continue to accumulate after the Board of Directors (the Board). have been produced by the Bank for the year ended 31 years of low interest rates; and the Board of Directors (the Board). March 2019. The suite of reports that have been In ascertaining matters of materiality mounting disinflationary pressures that produced are available on our websitewebsite: https://www.cen - for disclosure in this Report, the Bank increase debt service difficulties, Reporting philosophy and frameworks https://www.centralbank.org.sz.tralbank.org.sz has considered issues that either affect constraining monetary policy space to or have potential to substantially affect counter downturns, and make adverse our ability to perform and remain shocks more persistent than normal. relevant, our mode of operation, input Integrated Annual Economic review Annual financial Financial stability factors as well as our ability to create The IMF highlights that, against the Report report statements report value over time. As indicated, issues of observed difficult backdrop in the first materiality pertain to those that direct- half of 2019, there were positive Our primary Annual Our economic Our financial Our financial ly affect the Bank’s ability to achieve surprises to growth in advanced econo- Report to stake- report to stake- statements stability report its price and financial stability mies, but weaker-than-expected activi- holders provides a holders provides a provide a detailed provides a mandate. ty in emerging markets and developing holistic account of detailed review of account of the detailed analysis economies. For advanced economies, CBE’s strategy, international, Bank’s financial on the stability of Global developments growth is projected at 1.9 per cent in performance and regional and position and the financial 2019 and 1.7 per cent in 2020. In outlook and the domestic econom- performance. sector in Eswatini. According to the International Monetary emerging markets and developing econ- Bank’s ability to ic developments. Fund’s World Economic Outlook (IMF omies, growth is forecast at 4.1 per create and sustain WEO) Update released in July 2019, cent in 2019, picking up to 4.7 per cent value. global growth is forecast at 3.2 per cent in 2020. Investment and demand for in 2019, before picking up to 3.5 per consumer durables have been subdued cent in 2020. The softer projections across advanced and emerging market Feedback and suggestions follow a 3.6 per cent expansion record- economies as firms and households ed in 2018. Global growth remains continue to hold back on long-term The Bank welcomes feedback onon thisthis ReportReport toto informinform thethe continuous continuous improvement improvement of of its its communication communication to to stakeholders. stakehold- sluggish and precarious, with the dyna- spending. Yourers. Yourfeedback, feedback, comments comments and/or and/or questions questions regarding regarding the contentsthe contents of the of Reportthe Report can becan sent be sent to Mr. to ZithuleleMr. Zithulele Gina, Gina, Head ofHead Strategy of Strategy and Communication, and Communication, at [email protected]. at [email protected].

05 CBE Integrated Annual Report 2017/182018/19

Introduction mism in the global economy being weighed down by prolonged policy It gives me great pleasure to present to uncertainty as trade tensions remain. the Minister for Finance, Eswatini On the trade front, the forecast reflects citizens and other stakeholders the the May 2019 increase of US tariffs on Assurance second CBE Integrated Annual Report USD200 billion of Chinese exports from for the financial year ended 31 March 10 per cent to 25 per cent, and retalia- We have established an Project team, 2019. The Report provides a compre- tion by China. which has developed work plans with appropri- hensive overview of the operations of ate controls and oversight to prepare the the CBE during the past financial year. Furthermore, technology tensions have Report. The Project team reports to the Execu- It includes a summarised version of the erupted, threatening global technology tive Committee and the Report production is financial statements. supply chains, and the prospects of a overseen, reviewed and approved by the Board. ‘no deal’ Brexit have increased follow- The annual financial statements have been Coverage ing the appointment of new Prime independently audited by PriceWaterhouse- Minister (PM) Boris Johnson in the Coopers Inc., CBE’s external auditors. Matters included in the Report are United Kingdom. In addition, rising aimed at informing and providing assur- geopolitical tensions, especially relat- Board Approval ance to stakeholders on the CBE’s ing to sanctions on Iran, supply disrup- ability to deliver on its mandate, tions in Russia, Chile and Libya have The Board is ultimately responsible for oversee- commitment to sustained relationships roiled energy prices and, in the process, ing the preparation, presentation and integrity and responsible corporate citizenship. affected commodity exporters, despite of the Report. This was achieved through setting The issues of materiality pertain to a near-term strengthening of oil prices. up a sub-committee to oversee the reporting price stability and broader stability of Overall, risks to the latest growth process. The Directors confirm that they have the financial sector conducive to forecast are mainly to the downside. collectively reviewed the output of the report- economic growth in the short, medium Other negative developments include a ing process and the content of the Report. They and long term. protracted increase in risk aversion that believe that this Report addresses material has exposed the financial vulnerabili- issues and is a fair presentation of the integrat- Materiality ties that continue to accumulate after ed performance of CBE in accordance with the years of low interest rates; and the IIRC Framework and therefore approve this In ascertaining matters of materiality mounting disinflationary pressures that Report for release. for disclosure in this Report, the Bank increase debt service difficulties, has considered issues that either affect constraining monetary policy space to or have potential to substantially affect counter downturns, and make adverse our ability to perform and remain shocks more persistent than normal. relevant, our mode of operation, input factors as well as our ability to create The IMF highlights that, against the Majozi V. Sithole observed difficult backdrop in the first Governor and Chairman of value over time. As indicated, issues of the Board of Directors materiality pertain to those that direct- half of 2019, there were positive ly affect the Bank’s ability to achieve surprises to growth in advanced econo- 26 September 2019 Forward-looking statements its price and financial stability mies, but weaker-than-expected activi- mandate. ty in emerging markets and developing This Report may contain forward-looking economies. For advanced economies, statements with respect to CBE’s future Global developments growth is projected at 1.9 per cent in performance. While these statements 2019 and 1.7 per cent in 2020. In represent the Bank’s judgements and According to the International Monetary emerging markets and developing econ- future expectations, a number of risks, Fund’s World Economic Outlook (IMF omies, growth is forecast at 4.1 per uncertainties and other important factors WEO) Update released in July 2019, cent in 2019, picking up to 4.7 per cent could cause actual results to differ materi- global growth is forecast at 3.2 per cent in 2020. Investment and demand for ally from expectations. These include in 2019, before picking up to 3.5 per consumer durables have been subdued factors that could adversely affect the cent in 2020. The softer projections across advanced and emerging market Bank and the economy of Eswatini. follow a 3.6 per cent expansion record- economies as firms and households ed in 2018. Global growth remains continue to hold back on long-term sluggish and precarious, with the dyna- spending.

CBE Integrated Annual Report 2018/19 06

The 2018/19 to 2020/21 CBE Strategic Plan adopted by the Board on 28 March 2018 came out with a refreshed ultimate Vision. Our Mission remains unchanged, as it is still relevant. We redefined our Mandate to recognise the importance of stakeholder engagement and enhanced our Values, taking into ABOUT CBE account the ever-changing work environment.

Introduction mism in the global economy being weighed down by prolonged policy OUR VISION OUR MISSION It gives me great pleasure to present to uncertainty as trade tensions remain. the Minister for Finance, Eswatini On the trade front, the forecast reflects ‘To have a stable price and ‘To foster price and financial stability citizens and other stakeholders the the May 2019 increase of US tariffs on self-regulating financial system’. that is conducive to the economic USD200 billion of Chinese exports from development of Eswatini’. second CBE Integrated Annual Report for the financial year ended 31 March 10 per cent to 25 per cent, and retalia- 2019. The Report provides a compre- tion by China. MANDATE OF THE BANK hensive overview of the operations of the CBE during the past financial year. Furthermore, technology tensions have It includes a summarised version of the erupted, threatening global technology 1 To formulate and implement sound 6 To facilitate the development and monetary policy to achieve price and operation of an efficient national financial statements. supply chains, and the prospects of a financial stability. payment system. ‘no deal’ Brexit have increased follow- Coverage ing the appointment of new Prime 2 To regulate and supervise the financial 7 To act as lender of last resort to Minister (PM) Boris Johnson in the sector to the end of achieving a sound financial institutions and facilitate United Kingdom. In addition, rising and efficient financial system. the development of domestic Matters included in the Report are financial markets. aimed at informing and providing assur- geopolitical tensions, especially relat- 3 To issue and redeem currency (notes ance to stakeholders on the CBE’s ing to sanctions on Iran, supply disrup- and coins), which is legal tender in 8 To conduct research on monetary, ability to deliver on its mandate, tions in Russia, Chile and Libya have Eswatini. financial and economic matters to commitment to sustained relationships roiled energy prices and, in the process, support monetary policy formula- affected commodity exporters, despite 4 To hold and manage foreign exchange tion. and responsible corporate citizenship. reserves of the country. The issues of materiality pertain to a near-term strengthening of oil prices. 9 To strengthen stakeholder relation- price stability and broader stability of Overall, risks to the latest growth 5 To act as a banker, adviser and agent ships. the financial sector conducive to forecast are mainly to the downside. to the Eswatini Government on mone- economic growth in the short, medium Other negative developments include a tary and financial matters. and long term. protracted increase in risk aversion that has exposed the financial vulnerabili- Materiality ties that continue to accumulate after years of low interest rates; and the mounting disinflationary pressures that OUR VALUES In ascertaining matters of materiality Relevant and performance driven for disclosure in this Report, the Bank increase debt service difficulties, has considered issues that either affect constraining monetary policy space to We deliver timely, appropriate, innovative, and quality services, or have potential to substantially affect counter downturns, and make adverse to all our stakeholders. our ability to perform and remain shocks more persistent than normal. relevant, our mode of operation, input Accountability factors as well as our ability to create The IMF highlights that, against the value over time. As indicated, issues of observed difficult backdrop in the first We take ownership and responsibility for all materiality pertain to those that direct- half of 2019, there were positive actions and decisions, ly affect the Bank’s ability to achieve surprises to growth in advanced econo- and we always respond its price and financial stability mies, but weaker-than-expected activi- in a transparent manner. mandate. ty in emerging markets and developing economies. For advanced economies, Integrity Global developments growth is projected at 1.9 per cent in 2019 and 1.7 per cent in 2020. In We are guided by According to the International Monetary emerging markets and developing econ- honesty, ethics, upright- ness, and objectivity; Fund’s World Economic Outlook (IMF omies, growth is forecast at 4.1 per which means that we WEO) Update released in July 2019, cent in 2019, picking up to 4.7 per cent consistently do the global growth is forecast at 3.2 per cent in 2020. Investment and demand for right thing. in 2019, before picking up to 3.5 per consumer durables have been subdued cent in 2020. The softer projections across advanced and emerging market Open communication Respect follow a 3.6 per cent expansion record- economies as firms and households We give and receive feedback We appreciate every individual’s ed in 2018. Global growth remains continue to hold back on long-term from our stakeholders, and our worth, and conduct ourselves in sluggish and precarious, with the dyna- spending. communication is, at all times, a way that assures dignity for all. transparent, timely, and effective.

07 CBE Integrated Annual Report 2018/19

Basis of operations

The Bank is established in terms of the g) Promote monetary stability and a CBS Order of 1974 (as amended), which sound financial structure in Eswati- is also confirmed by the Constitution of ni. the Kingdom of Eswatini 2005. Section h) Foster financial conditions support- 206 (2) of the Constitution and Section Introduction mism in the global economy being ive of an orderly balanced economic 4 of CBS Order of 1974 (as amended) weighed down by prolonged policy give the Bank powers to, among other development of Eswatini. It gives me great pleasure to present to uncertainty as trade tensions remain. things: The Bank is wholly the Minister for Finance, Eswatini On the trade front, the forecast reflects The Bank is led by a Board of Directors, owned by the Gov- citizens and other stakeholders the the May 2019 increase of US tariffs on a) Be the only authority to issue the with the Governor serving as both second CBE Integrated Annual Report USD200 billion of Chinese exports from currency of the Kingdom. Chairman and Chief Executive Officer ernment of Eswatini, for the financial year ended 31 March 10 per cent to 25 per cent, and retalia- responsible for the execution of the but operates as an 2019. The Report provides a compre- tion by China. b) Be the sole custodian of public strategy and policy, as well as manage- autonomous institu- hensive overview of the operations of funds both in and outside the ment of the Bank, as provided for in the CBE during the past financial year. Furthermore, technology tensions have Kingdom, with power, by appropri- Section 11(3) (b) of the CBS Order of tion as provided for It includes a summarised version of the erupted, threatening global technology ate instrument, to delegate such 1974 (as amended). The Bank is wholly in Section 206 (5) of financial statements. supply chains, and the prospects of a owned by the Government of Eswatini, custody of funds as may be specified the National Consti- ‘no deal’ Brexit have increased follow- but operates as an autonomous institu- in that instrument. tution 2005. Coverage ing the appointment of new Prime tion as provided for in Section 206 (5) Minister (PM) Boris Johnson in the c) Maintain adequate external of the National Constitution 2005. The Matters included in the Report are United Kingdom. In addition, rising reserves in the Kingdom. Bank’s operations are not profit-driv- aimed at informing and providing assur- geopolitical tensions, especially relat- en, but serve the best interests of all ance to stakeholders on the CBE’s ing to sanctions on Iran, supply disrup- d) Formulate and implement appropri- sectors and the people of Eswatini. On ability to deliver on its mandate, tions in Russia, Chile and Libya have ate intervention policies in the 18 July 1979, the Order-in-Council commitment to sustained relationships roiled energy prices and, in the process, foreign exchange market. establishing the Bank was amended, and responsible corporate citizenship. affected commodity exporters, despite replacing the Monetary Authority of The issues of materiality pertain to a near-term strengthening of oil prices. e) Supervise the operations of finan- Swaziland with the Central Bank of price stability and broader stability of Overall, risks to the latest growth cial institutions in the Kingdom. Swaziland, now referred to as the the financial sector conducive to forecast are mainly to the downside. Central Bank of Eswatini. economic growth in the short, medium Other negative developments include a f) Issue securities in its own accounts. and long term. protracted increase in risk aversion that has exposed the financial vulnerabili- Materiality ties that continue to accumulate after years of low interest rates; and the In ascertaining matters of materiality mounting disinflationary pressures that for disclosure in this Report, the Bank increase debt service difficulties, has considered issues that either affect constraining monetary policy space to or have potential to substantially affect counter downturns, and make adverse our ability to perform and remain shocks more persistent than normal. relevant, our mode of operation, input factors as well as our ability to create The IMF highlights that, against the value over time. As indicated, issues of observed difficult backdrop in the first materiality pertain to those that direct- half of 2019, there were positive ly affect the Bank’s ability to achieve surprises to growth in advanced econo- its price and financial stability mies, but weaker-than-expected activi- mandate. ty in emerging markets and developing economies. For advanced economies, Global developments growth is projected at 1.9 per cent in 2019 and 1.7 per cent in 2020. In According to the International Monetary emerging markets and developing econ- Fund’s World Economic Outlook (IMF omies, growth is forecast at 4.1 per WEO) Update released in July 2019, cent in 2019, picking up to 4.7 per cent global growth is forecast at 3.2 per cent in 2020. Investment and demand for in 2019, before picking up to 3.5 per consumer durables have been subdued cent in 2020. The softer projections across advanced and emerging market follow a 3.6 per cent expansion record- economies as firms and households ed in 2018. Global growth remains continue to hold back on long-term sluggish and precarious, with the dyna- spending.

CBE Integrated Annual Report 2018/19 08

HIGHLIGHTS

Introduction mism in the global economy being weighed down by prolonged policy It gives me great pleasure to present to uncertainty as trade tensions remain. Economic activity, as measured by real GDP, the Minister for Finance, Eswatini On the trade front, the forecast reflects is estimated to have expanded by 2.4 per citizens and other stakeholders the the May 2019 increase of US tariffs on 2.4% cent in 2018 compared to 2.0 per cent in second CBE Integrated Annual Report USD200 billion of Chinese exports from 2017. for the financial year ended 31 March 10 per cent to 25 per cent, and retalia- 2019. The Report provides a compre- tion by China. The annual consumer inflation was relatively hensive overview of the operations of contained in the 2018/19 financial year, the CBE during the past financial year. Furthermore, technology tensions have 5.0% averaging 5.0 per cent. It includes a summarised version of the erupted, threatening global technology financial statements. supply chains, and the prospects of a Budget estimates for 2019/20 show a fiscal ‘no deal’ Brexit have increased follow- gap of E3.0 billion, translating to a deficit of Coverage ing the appointment of new Prime 4.5% 4.5 per cent of GDP. Minister (PM) Boris Johnson in the Matters included in the Report are United Kingdom. In addition, rising aimed at informing and providing assur- geopolitical tensions, especially relat- Economy Total public debt stock was recorded at E17.6 billion, an equivalent of 26.7 per cent of GDP ance to stakeholders on the CBE’s ing to sanctions on Iran, supply disrup- 26.7% as at end of March 2019. ability to deliver on its mandate, tions in Russia, Chile and Libya have commitment to sustained relationships roiled energy prices and, in the process, and responsible corporate citizenship. affected commodity exporters, despite Reserves were enough to cover 2 months of The issues of materiality pertain to a near-term strengthening of oil prices. imports of goods and services at end of March 2.0 price stability and broader stability of Overall, risks to the latest growth 2019. the financial sector conducive to forecast are mainly to the downside. economic growth in the short, medium Other negative developments include a Eswatini posted an overall balance of and long term. protracted increase in risk aversion that payments deficit of E2.3 billion in 2018/19, 2.3 billion has exposed the financial vulnerabili- triple the deficit of E799.3 million recorded ties that continue to accumulate after in the 2017/18 financial year. Materiality years of low interest rates; and the In ascertaining matters of materiality mounting disinflationary pressures that for disclosure in this Report, the Bank increase debt service difficulties, Financial stability Banking sector has considered issues that either affect constraining monetary policy space to or have potential to substantially affect counter downturns, and make adverse The CBE, through its macro-prudential The banking sector remains stable, our ability to perform and remain shocks more persistent than normal. mandate, is committed to mitigate risks to liquid and adequately capitalised. relevant, our mode of operation, input financial stability. For more information refer Banking sector assets grew by 4.9 per factors as well as our ability to create The IMF highlights that, against the to Financial Stability Report available on our cent to reach E20.1 billion in 2018. value over time. As indicated, issues of observed difficult backdrop in the first webpage https://www.centralbank.org.sz. materiality pertain to those that direct- half of 2019, there were positive ly affect the Bank’s ability to achieve surprises to growth in advanced econo- its price and financial stability mies, but weaker-than-expected activi- mandate. ty in emerging markets and developing Performance of the CBE economies. For advanced economies, Global developments growth is projected at 1.9 per cent in The CBE operated smoothly and remained 2019 and 1.7 per cent in 2020. In profitable during the year, even though its According to the International Monetary emerging markets and developing econ- profit declined by 4 per cent to reach E190.1 Fund’s World Economic Outlook (IMF omies, growth is forecast at 4.1 per million at end of March 2019. WEO) Update released in July 2019, cent in 2019, picking up to 4.7 per cent global growth is forecast at 3.2 per cent in 2020. Investment and demand for in 2019, before picking up to 3.5 per consumer durables have been subdued cent in 2020. The softer projections across advanced and emerging market follow a 3.6 per cent expansion record- economies as firms and households ed in 2018. Global growth remains continue to hold back on long-term sluggish and precarious, with the dyna- spending.

09 CBE Integrated Annual Report 2018/19

GOVERNOR'S STATEMENT

IntroductionIntroduction weighedmism in downthe globalby prolonged economy policybeing uncertaintyweighed down as trade by prolongedtensions remain. policy It Itgives gives me me great great pleasure pleasure to to present present to to Onuncertainty the trade front,as trade the tensionsforecast reflectsremain. thethe MinisterMinister forfor Finance,Finance, EswatiniEswatini theOn theMay trade 2019 front,increase the offorecast US tariffs reflects on citizenscitizens andand otherother stakeholdersstakeholders thethe USD200the May billion 2019 ofincrease Chinese of exportsUS tariffs from on secondsecond CBE CBE Integrated Integrated Annual Annual Report Report for 10USD200 per cent billion to 25 of per Chinese cent, exportsand retalia- from thefor financial the financial year ended year ended31 March 31 2019.March tion10 perby China.cent to 25 per cent, and retalia- The2019. Report The providesReport provides a comprehensive a compre - tion by China. overviewhensive ofoverview the operations of the operations of the CBE of Furthermore, technology tensions have duringthe CBE the during past the financial past financial year. year.It erupted,Furthermore, threatening technology global tensions technology have includesIt includes a summarised a summarised version version of of the the supplyerupted, chains, threatening and the prospectsglobal technology of a ‘no “Operationally, the Bank financialfinancial statements. statements. deal’supply Brexit chains, have and increased the prospects following of a remained profitable during the‘no appointment deal’ Brexit haveof new increased Prime Minister follow- the year even though its CoverageCoverage (PM)ing theBoris appointment Johnson inof thenew UnitedPrime profit declined by 4 per cent Kingdom.Minister In(PM) addition, Boris risingJohnson geopolitical in the to reach E190.1 million at MattersMatters included included inin thethe ReportReport areare tensions,United Kingdom.especially relatingIn addition, to sanctions rising end of March 2019. This has aimedaimed at at informing informing and and providing providing assur- assur- ongeopolitical Iran, supply tensions, disruptions especially in Russia, relat- once again been a difficult anceance to stakeholdersto stakeholders on the on CBE’s the ability CBE’s Chileing to and sanctions Libya onhave Iran, roiledsupply energydisrup- year, but the CBE has been toability deliver toon itsdeliver mandate, on commitmentits mandate, pricestions inand, Russia, in the Chile process, and Libya affected have able to contend with the tocommitment sustained relationships to sustained and relationships responsi- commodityroiled energy exporters,prices and, in despitethe process, a challenges faced.” bleand corporate responsible citizenship. corporate The citizenship. issues of near-termaffected commoditystrengthening exporters, of oil despiteprices. materialityThe issues pertain of materiality to price stability pertain and to Overall,a near-term risks strengthening to the latest of oil growth prices. broaderprice stabilitystability andof the broader financial stability sector of forecastOverall, arerisks mainly to theto thelatest downside. growth conducivethe financial to economic sector growthconducive in the to Otherforecast negative are mainly developments to the downside.include a short,economic medium growth and longin the term. short, medium protractedOther negative increase developments in risk aversion include that a hasprotracted exposed increasethe financial in risk vulnerabilities aversion that MAJOZI V. SITHOLE and long term. Materiality thathas continueexposed tothe accumulate financial vulnerabiliafter years- GOVERNOR Materiality ofties low that interest continue rates; to andaccumulate the mounting after In ascertaining matters of materiality disinflationaryyears of low pressuresinterest rates;that increaseand the forIn disclosureascertaining in thismatters Report, of materialitythe Bank debtmounting service disinflationary difficulties, pressures constraining that hasfor considered disclosure issuesin this that Report, either the affect Bank monetaryincrease policydebt spaceservice to counter difficulties, down- orhas have considered potential issuesto substantially that either affect affect turns,constraining and make monetary advers policye shocks space more to ouror haveability potential to perform to substantially and remain affect persistentcounter downturns, than normal. and make adverse relevant,our ability our modeto perform of operation, and remaininput shocks more persistent than normal. factorsrelevant, as well our modeas our of ability operation, to create input The IMF highlights that, against the valuefactors over as time. well Asas indicated,our ability issuesto create of observedThe IMF difficulthighlights backdrop that, againstin the firstthe materialityvalue over pertain time. Asto indicated,those that issuesdirect- of halfobserved of 2019,difficult there backdrop were in positivethe first ly materialityaffect the Bank’s pertain ability to those to achievethat direct its - surpriseshalf of to2019, growth there in advanced were positiveecono- pricely affect and financial the Bank’s stability ability mandate. to achieve mies,surprises but weaker-than-expectedto growth in advanced activi-econo- its price and financial stability tymies, in emerging but weaker-than-expected markets and developing activi- Globalmandate. developments economies.ty in emerging For marketsadvanced and economies, developing growtheconomies. is projected For advanced at 1.9 pereconomies, cent in AccordingGlobal developmentsto the International Monetary 2019growth and is 1.7projected per cent at 1.9 in per2020. cent Inin Fund’s World Economic Outlook (IMF emerging2019 and markets 1.7 per and cent developing in 2020. econ- In WEO)According Update to thereleased International in July Monetary 2019, omies,emerging growth markets is forecast and developing at 4.1 per econ cent- globalFund’s growth World is forecastEconomic at 3.2Outlook per cent (IMF inomies, 2019, growthpicking isup forecast to 4.7 perat cent4.1 perin in WEO)2019, Updatebefore releasedpicking up in toJuly 3.5 2019,per 2020.cent inInvestment 2019, picking and up todemand 4.7 per centfor centglobal in growth2020. isThe forecast softer at projections3.2 per cent consumerin 2020. durablesInvestment have and been demand subdued for followin 2019, a 3.6 before per cent picking expansion up to record-3.5 per acrossconsumer advanced durables and have emerging been subduedmarket edcent in in2018. 2020. Global The softergrowth projections remains economiesacross advanced as firms and emergingand households market sluggishfollow anda 3.6 precarious, per cent expansion with the recorddyna- - continueeconomies to ashold firms back and on householdslong-term mismed inin 2018.the globalGlobal economygrowth remainsbeing spending.continue to hold back on long-term sluggish and precarious, with the dyna- spending.

CBE Integrated Annual Report 2018/19 10

GOVERNOR'S STATEMENT

processes, using various tools as Through its Corporate Social Invest- The financial year ended with the Budget estimates for 2019/20 show The FSDIP has four pillars namely; prescribed in the CBE Enterprise Risk ment (CSI) programme, the Bank South African Reserve Bank (SARB) growthgrowth in final in demand,final demand, core inflation core inflation that the fiscal gap has reduced to E3.0 financial stability, financial inclusion, Management (ERM) Framework. pursues excellence in community voting unanimously to hold its bench- acrossacross advanced advanced economies economies has has billion (equivalent to a deficit of 4.5 diversification of the financial system Incidents are recorded, analysed and involvement and upholding generally Our strategy Regulatory reform mark repo rate steady at 6.75 per softenedsoftened below below target target(for example, (for example, in in per cent of GDP) from an estimated and modernisation of the financial reported, and key risk indicators are accepted principles underlying good cent on 28 March 2019, as widely the Unitedthe United States) States) or remained or remained well well outturn of 5.5 per cent in 2018/19. system. More information, including monitored and periodically reported to corporate social responsibility. The Our ‘super-goal’ (V4 target) is to be an The amendment of all the identified expected. Policymakers highlighted belowbelow it (in theit (in Eurozone the Eurozone and Japan). and Japan). This contraction was mainly due to the FSDIP achievements, is reflected on the risk governance structures to focus of the CSI programme is three agile, efficient and integrated central legislations is key in our drive to profitable during the year, even though that the current stance on monetary fiscal consolidation and proposed page 26. inform decision-making. priority areas, namely; community bank by the year 2021. We may improve the effectiveness of our Governance its profit declined by 4 per cent to reach policy remains accommodative and The IMFThe projects IMF projects inflation inflation in emerging in emerging revenue measures that the Govern- health programmes, educational initia- achieve all other strategic targets, but regulatory mandate. Most of the E190.1 million at end of March 2019. monetary policy actions will continue marketsmarkets and developing and developing economies, economies, on on ment has put in place for the financial Financial technology CBE top 10 risks tives (covering primary school, high if we miss this one, our entire strategy amendments have been concluded and The Board maintains full and effective This has, once again, been a difficult to focus on anchoring inflation near average,average, to rise to riseto 4.8to 4.8 per per cent cent in in 2019, year. school, tertiary institutions) and will fail. In the previous year, we quality assured. The next year we will control over the operations of the Bank year, but the CBE has been able to to the mid-point of the target range 2019, beforebefore declining declining to to 4.7 4.7 per per cent cent in 2020. The range, prevalence and evolution of For the period under review, the Bank national research institutions. Total captured our V4 targets for the be focusing on the legislative stages and is accountable and responsible for contend with the challenges presented. in the interest of sustainable growth. in 2020.Core inflationCore inflation has also hasdropped also further Public debt financial innovations have since identified, analysed and prioritised the amount invested in this programme for 2018/19 financial year. that are outside of our control. its performance and compliance. The droppedbelow further historical below averages historical in many predominant guide for monetary complements the price stability objec- increased incredibly. In the light of top 10 corporate risks according to the the financial year was E1.7 million. Board reviews the strategic priorities of Supplementary reports KINGDOM OF ESWATINI averagesemerging in many markets emerging and developing markets econ- Total public debt stock was recorded policy, is on a downward trend with tive of the Bank through formulation these technological advancements for Bank’s process construct. The top 10 The Bank identified four strategic Financial sustainability the Bank, determines investment and developingomies, barring economies, a few barringcases asuch as at E17.6 billion, an equivalent of 26.7 expected upward risks towards the and implementation of appropriate financial services, regulators and risks are based on the risk landscape Stakeholder engagement areas of focus, namely; human dynam- policies and delegates to management As stand-alone reports, the Bank, along- GDP developments few casesArgentina, such asTurkey, Argentina, and Turkey,Venezuela – per cent of GDP at the end of March end of 2019. The inflation trajectory macro-prudential policy measures. supervisors face the challenge of considered against the Bank’s capacity ics, financial sustainability, regulatory The programme did well in counter- the detailed planning and implementa- side the Integrated Annual Report, also and Venezuelacontributing – contributingto the subdued to the headline 2019. This reflects an increase of 35.4 swings hinge on policy uncertainty as After sufficient deliberations on finan- harnessing the potential of Financial to avoid and mitigate the likelihood of We have a Stakeholder Management reform and business intelligence. Each acting the negative effects of outflows tion of the objectives and policies in publishes an Economic Review Report, According to official provisional subduedinflation headline across inflation this group across of thiscountries. per cent from the revised figure of we come to grips with the impact of cial stability issues, the Financial Technology (Fintech), while making the risk occurrence as well as the Framework in place that guides stake- of these strategic areas is overseen by in the South African Rand (ZAR) accordance with acceptable risk param- Financial Stability Report and Audited estimates by the Central Statistics groupCore of countries. inflation has also dropped further E13.0 billion recorded in March 2018. the freeze on increases in water and Stability Committee (FSC) discharges sure not to undermine consumer impact - should it occur. Mitigation holder engagement activities and a champion. A total of fifteen portfolio. It also performed well in eters. The Board monitors compliance Financial Statements, which can be Office (CSO), the Gross Domestic below historical averages in many The surge is mainly attributed to electricity tariffs introduced by the its accountability through the publica- protection, integrity of financial measures were implemented during processes. During the reporting year, programmes are run under these creating financial efficiencies (per V4 with policies and achievements against accessed on our website: Product (GDP), which is a measure of Southemerging Africa markets and developing econ- continued issuance of Government new Cabinet. The freeze on increases tion of the annual Financial Stability markets and stability of the financial the course of the financial year, with we developed a Meaningful Stakehold- strategic areas, with each programme financial efficiency targets). More set objectives by holding management https://www.centralbank.org.sz. economic activity, is estimated to omies, barring a few cases such as securities. The Bank notes with in the electricity tariff has been Report. system as a whole. strategic and operational projects er Engagement Project as one of our headed by a manager reporting to the interventions will continue even in the accountable for its activities through have expanded by 2.4 per cent in AccordingArgentina, to preliminary Turkey, and indicatorsVenezuela. concern that the country’s debt has reflected in the inflation outcome for implemented for transformation and to strategic activities. We developed a relevant champion. next financial year. performance reporting and budget Conclusion 2018 compared to 2.0 per cent in published by Statistics South Africa on been rising exponentially over the April 2019, where it fell to a low of 1.8 Eswatini’s fiscal challenges still repre- The Eswatini Fintech strategy improve controls. Reasonable success stakeholder engagement measurement updates. 2017. This increase is mainly 4 JuneSouth 2019, Africa the annual estimate of year under review. As such, the formu- per cent down from 5.3 per cent sent a significant point of vulnerability describes the country’s priorities in its was achieved with slight delays in tool to quantify the level of engage- With regards to performance against It has been a strong team effort, and I accounted for by strong positive real GDP for 2018 increased by 0.8 per lation of a Debt Sustainability Analysis recorded in March 2019. for the financial sector. Developments journey to be the ‘leading Fintech hub project deliveries as a consequence of ment, based on identified key engage- strategy, the projects under the four Where are we going? In the year under review, the Board would like to extend my sincere thanks developments in the primary and cent followingAccording anto increase preliminary of 1.4 perindicators and implementation of a Medium Term in South Africa (SA) present much in Africa’. The Central Bank of Eswati- the leadership uncertainty among ment measurement indicators. Our strategic areas of focus can be summa- finalised the external Board evaluation and appreciation to the Minister for tertiary sectors. rised as follows: This is the question we ask ourselves. cent publishedin 2017. byThe Statistics annual Southreal GDPAfrica on 4 Going forward, GDP is projected to will also continue to monitor develop- Debt Strategy is now vital. The Bank’s inflation forecast for the closer risks to Eswatini’s financial ni, in partnership with other stakehold- other operational inefficiencies. stakeholders continue to be concerned exercise with the Institute of Directors Finance and his officials, Board of Direc- growthJune of 0.82019, per thecent annual in 2018 estimate was led of real year 2019 has been revised down to stability due to SA being the anchor ers established a regulatory Sandbox to about Government’s fiscal position, Assuming that success was a place, (SA). tors, all staff of the Bank as well as High frequency data reflects that increase by 2.9 per cent in 2020 and ments and offer appropriate advice to by increasedGDP for 2018economic increased activity by 0.8 inper cent Balance of payments 2.67 per cent in September 2019, from economy for the Common Monetary foster innovation in the financial Corporate social investment slow regulatory reforms, compliance Human dynamics how would we know we are there? We financial institutions and other key economic activity expanded by 4.2 then retreat to 1.3 per cent and 1.7 the Government in order to retain the finance,following real anestate increase and of business1.4 per cent in the previous forecast of 2.87 per cent Area (CMA). The banking sector sector. This platform provides an and reputational implications. thus must speak to our most important Following the ever-evolving corporate stakeholders for their cooperation, per cent, on a year-on-year basis per cent in 2021 and 2022, respective- reserves at levels above the threshold services,2017. which The annualcontributed real GDP 0.4 growth of a of 0.8 In the financial year 2018/19, the projected in July 2019. The proposed remains stable, liquid and adequately opportunity to test innovative The impact of this programme will be goals to be achieved in the next 12 governance developments locally and commitment and dedication to the InflationaryInflationary pressurespressures remainedremained containedcontained inin JuneJune (seasonally adjusted), in the first ly. of three months cover of imports of percentageper cent point in 2018based was on growthled by increasedof country posted an overall balance of introduction of Value Added Tax (VAT) capitalised. However, credit risk is solutions in a live environment whilst seen in the long term. However, months. Again, we focus on our V4 internationally, which call for increased attainment of price and financial stabili- 2019.2019. RatesRates ofof increaseincrease inin inputinput costscosts andand outputoutput quarter of 2019 compared to 2.4 per goods and services. chargescharges bothboth tickedticked lowerlower andand remainedremained belowbelow 1.8 pereconomic cent, and activity general in finance,Government real estate External reserves payments deficit of E2.314 billion, on electricity in the year poses an increasing, thus affecting bank ensuring consumer protection. projects like the ones on culture shift Targets, Process Outputs and Strategic regulation, greater transparency, and ty in the Kingdom of Eswatini. I have no cent in the previous quarter. Sectors and stakeholder management have Projects. This is where we demon- theirtheir respectiverespective long-runlong-run averages.averages. Average Average vendorvendor services,and whichbusiness contributed services, which0.2 of contribut- a Private sector credit triple the deficit of E799.3 million upside risk to overall inflation. Over earnings, which will ultimately affect more rigorous scrutiny of large institu- doubt that I can continue to rely on that recorded significant positive already identified gaps in the environ- strate ‘The 4 Disciplines of Execution’ leadlead timestimes (a(a bellwetherbellwether ofof supply-chainsupply-chain priceprice percentageed 0.4 pointof a percentagebased on a point1.3 per based on Eswatini’s external reserves continued recorded in the 2017/18 financial the medium term, inflation is project- solvency of banks. Financial Technology in the world is tions, the ethics and compliance them for unwavering support and performance in the first quarter of ment and have also identified possible approach, in that; pressures)pressures) alsoalso improvedimproved forfor thethe firstfirst timetime inin sixsix cent rise.growth of 1.8 per cent, and general to fall as the Government made draw- Growth in credit extended to the year. This necessitated a reduction in ed at 4.31 per cent in 2020 and 5.29 growing at a rapid pace and the Bank is function becomes integral to the strate- dedication in the execution of our 2019 included; ‘manufacturing’, interventions. As these roll out their years,years, asas purchasingpurchasing activityactivity amongamong manufacturersmanufacturers Government services, which contributed downs on its deposits held at the Bank private sector decelerated somewhat reserve assets, as a financing item for per cent in 2021. National payment systems aligning itself accordingly to ensure gic core of organisations gearing to mandate and objectives in the interest ‘wholesale and retail’, ‘transport programme of action, we will start to • We have not discarded any targets fellfell forfor fivefive consecutiveconsecutive monthsmonths (IMF(IMF WEOWEO Update,Update, The South0.2 of African a percentage economy point shrank based by on a 1.3 to cover the persistent cash shortfalls. from the double digit rate recorded in the deficit recorded in the overall the country attains Vision 2022. maintaining public trust. Therefore, of all Emaswati. and storage’ and ‘financial services see improvements. Areas where we in the process of identifying our JulyJuly 2019).2019). an perannualised cent rise. 3.2 per cent In terms of estimated imports of goods the past year to single digit. The balance of payments. In 2018/19, the Monetary Policy Consultative Operations of designated systemically beyond responding to changes in the excluding insurance and pension did not move as swiftly as we had important goals. Instead, we quarter-on-quarter in the three and services, the reserves were growth was largely supported by country benefitted from increased Committee important national payment systems Risk management approach industry, the Central Bank of Eswatini funds’. Subsectors that performed anticipated are in relation to the allocated weights to help us prior- GlobalGlobal inflationinflation andand commoditiescommodities overviewoverview monthsThe to South March African 2019, followingeconomy shranka 1.4 by an sufficient to cover 2.0 months at the increased demand for credit towards debt security holdings, which diluted continued to run smoothly during the continues to invest its efforts in creating poorly included the following: identification of future skills and itize the targets. The weighting and per centannualised growth in the3.2 previous perperiod cent end of March 2019, remarkably below ‘businesses’ and ‘other sectors’ the depletion in the country’s claims The Governor makes monetary policy reporting period. The Bank closely monitors the operat- a scalable ethics and compliance ‘public administration’, ‘construc- improvement of the performance prioritization was based on an TheThe IMFIMF reportedreported thatthat headlineheadline inflationinflation hashas and comparedquarter-on-quarter to market inexpectations the three months the three-months threshold and also (namely ‘other financial corpora- on other monetary authorities. decisions after consultative meetings ing environment using the risk ecosystem that will help meet its needs Majozi V. Sithole tion’, ‘mining and quarrying’, ‘tour- management system. The bottlenecks assessment of which targets assist- remainedremained subduedsubdued acrossacross mostmost advancedadvanced andand of a 1.7to Marchper cent 2019, contraction. following a It 1.4 was per cent lower than the 3.2 months covered at tions’). The accelerated growth in with the Monetary Policy Consultative During the period under review, the exposure, opportunities and today and in the future. Governor ism activities’, ‘human health, and have been identified and in the next ed the Bank more towards achiev- emergingemerging marketmarket economies.economies. TheseThese developmentsdevelopments the sharpestgrowth quarterlyin the previous decline sinceperiod and the same time in the previous year. credit to businesses is a positive devel- Consumer inflation Committee (MPCC). In 2018/19, the Bank approved an application from process-efficiency approach to identify social activities’. Fiscal cash-flow financial year, better results will be ing agility, efficiency and integra- havehave contributed,contributed, inin part,part, toto marketmarket pricingpricing ofof Q1-2009,compared mainly toreflecting market theexpectations effects of a opment as this sector drives domestic MPCC held six bi-monthly meetings. In Eswatini Mobile to provide mobile threats and avoid these; as well as find Bank’s financial performance challenges continued to weigh on realised. Some projects have missed tion. expectedexpected inflationinflation droppingdropping sharplysharply inin thethe UnitedUnited of power1.7 percuts centon manufacturingcontraction. Itand was the During the course of the financial year, economic growth. The annual consumer inflation was these meetings, the MPCC reviewed money transfer services to its custom- and pursue opportunities in fulfilling implementation of public infrastruc- timeliness in terms of delivery, while StatesStates andand thethe Eurozone.Eurozone. ConsumerConsumer pricesprices inin mining.sharpest quarterly decline since the Bank engaged in an exercise to buy relatively contained in the 2018/19 developments on inflation (including ers. Eswatini Mobile has partnered its mandate. This is attained through Operationally, the Bank remained tural projects thereby resulting in others are on track. • We have developed both Lag and advancedadvanced economies,economies, onon average,average, areare projectedprojected toto Q1-2009, mainly reflecting the effects foreign exchange originating from Public finance financial year, averaging 5.0 per cent forecasts) as well as other macroeco- with Eswatini Bank, who will also be integrating the Bank’s strategy, risk lower output in construction activity. Lead Measures for all our targets. riserise toto 1.61.6 perper centcent inin 2019,2019, edgingedging upup marginallymarginally As atof the power end cutsof Marchon manufacturing 2019, the and export proceeds from the local compared to 5.5 per cent in the previ- nomic indicators of the domestic, holding the required trust account for and performance for effective annualmining. inflation rate increased to 4.5 ous financial year. The moderation in regional and international economies. deposit-taking from agents. The planning and monitoring. Business intelligence This will make it easier for project toto 2.02.0 perper centcent inin 2020.2020. ConsistentConsistent withwith subduedsubdued Medium Term GDP Projections commercial banks. The accumulation The 2019/20 budget was presented per cent from 4.1 per cent in February, consumer inflation mainly benefitted Over the reporting period, the MPCC service will provide financial services teams to know what is expected of of these funds has assisted to buffer under an unprecedented economic for tracking delivery. the highest inflation rate since Decem- from favourable food prices, which recommended to keep the discount to the banked, underbanked and Risk management remains the main It has taken us a while to put the them in the next 12 months. Economic activity is projected to the reserves portfolio against crisis, where the country is faced with ber, amid a sharp rise in fuel prices. recorded a deflation of 0.2 per cent in rate unchanged at 6.75 per cent. unbanked population. area of focus and management is foundation and framework in place for decelerate to 1.4 per cent in 2019 outflows. In the absence of this inter- pressure on Government revenues, • We use information attained the period under review down from committed to applying international this programme. A lot of research work • We have implemented monthly from 2.4 per cent in 2018 largely due vention, reserves levels would have accumulating arrears, depleted from Departmental, Manage- 5.2 per cent the previous financial Financial stability Financial sector development best practice and standards to ensure was done to ensure that when the monitoring scorecards for the to worsening fiscal challenges. The been significantly lower. The Bank will reserves and sluggish growth. As such, ment Committee, Executive year. implementation plan that the effects of uncertainty on projects take off, all processes are Projects and Change Management main sectors that are projected to continue with its efforts to acquire restoring prudent public finance Committee and Board meet- The Bank, through its macro-pruden- objectives are systematically and properly aligned. Committee and the quarterly score- perform poorly include ‘Construc- foreign exchange from the local management remains pivotal in ings to hold each other Inflation outlook tial mandate, is committed to The Bank continued to coordinate the continuously monitored. This is done cards for the Board Capital Projects tion’, ‘Wholesale and Retail’ and market as a long term objective to helping the country achieve sustaina- accountable, so that the goals mitigate risks to financial stability. implementation of the Financial through periodic assessments of strate- and Investment Committee, which ‘General Public Administration’. boost the level of reserves. The Bank ble and inclusive growth. do not naturally disintegrate in The inflation outlook, which remains a The financial stability mandate Sector Development Implementation gic objectives, projects and day-to-day will provide compelling scoreboards Plan (FSDIP). the whirlwind.

11 CBE Integrated Annual Report 2018/19 Introduction mism in the global economy being weighed down by prolonged policy It gives me great pleasure to present to uncertainty as trade tensions remain. the Minister for Finance, Eswatini On the trade front, the forecast reflects citizens and other stakeholders the the May 2019 increase of US tariffs on second CBE Integrated Annual Report USD200 billion of Chinese exports from for the financial year ended 31 March 10 per cent to 25 per cent, and retalia- 2019. The Report provides a compre- tion by China. hensive overview of the operations of the CBE during the past financial year. Furthermore, technology tensions have It includes a summarised version of the erupted, threatening global technology financial statements. supply chains, and the prospects of a ‘no deal’ Brexit have increased follow- Coverage ing the appointment of new Prime Minister (PM) Boris Johnson in the Matters included in the Report are United Kingdom. In addition, rising aimed at informing and providing assur- geopolitical tensions, especially relat- ance to stakeholders on the CBE’s ing to sanctions on Iran, supply disrup- ability to deliver on its mandate, tions in Russia, Chile and Libya have commitment to sustained relationships roiled energy prices and, in the process, and responsible corporate citizenship. affected commodity exporters, despite The issues of materiality pertain to a near-term strengthening of oil prices. price stability and broader stability of Overall, risks to the latest growth the financial sector conducive to forecast are mainly to the downside. economic growth in the short, medium Other negative developments include a and long term. protracted increase in risk aversion that has exposed the financial vulnerabili- Materiality ties that continue to accumulate after years of low interest rates; and the In ascertaining matters of materiality mounting disinflationary pressures that for disclosure in this Report, the Bank increase debt service difficulties, has considered issues that either affect constraining monetary policy space to or have potential to substantially affect counter downturns, and make adverse our ability to perform and remain shocks more persistent than normal. relevant, our mode of operation, input factors as well as our ability to create The IMF highlights that, against the value over time. As indicated, issues of observed difficult backdrop in the first materiality pertain to those that direct- half of 2019, there were positive ly affect the Bank’s ability to achieve surprises to growth in advanced econo- its price and financial stability mies, but weaker-than-expected activi- mandate. ty in emerging markets and developing economies. For advanced economies, Global developments growth is projected at 1.9 per cent in 2019 and 1.7 per cent in 2020. In According to the International Monetary emerging markets and developing econ- Fund’s World Economic Outlook (IMF omies, growth is forecast at 4.1 per WEO) Update released in July 2019, cent in 2019, picking up to 4.7 per cent global growth is forecast at 3.2 per cent in 2020. Investment and demand for in 2019, before picking up to 3.5 per consumer durables have been subdued cent in 2020. The softer projections across advanced and emerging market follow a 3.6 per cent expansion record- economies as firms and households ed in 2018. Global growth remains continue to hold back on long-term sluggish and precarious, with the dyna- spending.

GOVERNOR'S STATEMENT

processes, using various tools as Through its Corporate Social Invest- The financial year ended with the Budget estimates for 2019/20 show The FSDIP has four pillars namely; prescribed in the CBE Enterprise Risk ment (CSI) programme, the Bank South African Reserve Bank (SARB) growth in final demand, core inflation that the fiscal gap has reduced to E3.0 financial stability, financial inclusion, Management (ERM) Framework. pursues excellence in community As at thevoting end ofunanimously March 2019, to thehold annual its bench - across advanced economies has billion (equivalent to a deficit of 4.5 diversification of the financial system Incidents are recorded, analysed and involvement and upholding generally Our strategy Regulatory reform inflationmark rate repoincreased rate steadyto 4.5 perat 6.75cent per softened below target (for example, in per cent of GDP) from an estimated and modernisation of the financial reported, and key risk indicators are accepted principles underlying good from 4.1cent per on cent28 March in February, 2019, as thewidely the United States) or remained well outturn of 5.5 per cent in 2018/19. system. More information, including monitored and periodically reported to corporate social responsibility. The Our ‘super-goal’ (V4 target) is to be an The amendment of all the identified highest expected.inflation ratePolicymakers since December, highlighted below it (in the Eurozone and Japan). This contraction was mainly due to the FSDIP achievements, is reflected on the risk governance structures to focus of the CSI programme is three agile, efficient and integrated central legislations is key in our drive to profitable during the year, even though amid athat sharp the rise current in fuel stance prices. on monetary The fiscal consolidation and proposed page 26. inform decision-making. priority areas, namely; community bank by the year 2021. We may improve the effectiveness of our Governance its profit declined by 4 per cent to reach financialpolicy year remainsended accommodativewith the South and The IMF projects inflation in emerging revenue measures that the Govern- health programmes, educational initia- achieve all other strategic targets, but regulatory mandate. Most of the E190.1 million at end of March 2019. African monetaryReserve policyBank actions(SARB) will voting continue markets and developing economies, on ment has put in place for the financial Financial technology CBE top 10 risks tives (covering primary school, high if we miss this one, our entire strategy amendments have been concluded and The Board maintains full and effective This has, once again, been a difficult unanimouslyto focus to holdon anchoring its benchmark inflation repo near average, to rise to 4.8 per cent in year. school, tertiary institutions) and will fail. In the previous year, we quality assured. The next year we will control over the operations of the Bank year, but the CBE has been able to rate steadyto the at mid-point6.75 per cent of theon 28target March range 2019, before declining to 4.7 per cent The range, prevalence and evolution of For the period under review, the Bank national research institutions. Total captured our V4 targets for the be focusing on the legislative stages and is accountable and responsible for contend with the challenges presented. 2019, asin widely the interest expected. of sustainable Policymakers growth. in 2020. Core inflation has also Public debt financial innovations have since identified, analysed and prioritised the amount invested in this programme for 2018/19 financial year. that are outside of our control. its performance and compliance. The highlighted that the current stance on dropped further below historical predominant guide for monetary complements the price stability objec- increased incredibly. In the light of top 10 corporate risks according to the the financial year was E1.7 million. Board reviews the strategic priorities of Supplementary reports monetaryKINGDOM policy remainsOF ESWATINI accommoda- averages in many emerging markets Total public debt stock was recorded policy, is on a downward trend with tive of the Bank through formulation these technological advancements for Bank’s process construct. The top 10 The Bank identified four strategic Financial sustainability the Bank, determines investment tive and monetary policy actions will and developing economies, barring a at E17.6 billion, an equivalent of 26.7 expected upward risks towards the and implementation of appropriate financial services, regulators and risks are based on the risk landscape Stakeholder engagement areas of focus, namely; human dynam- policies and delegates to management As stand-alone reports, the Bank, along- continueGDP to focusdevelopments on anchoring inflation few cases such as Argentina, Turkey, per cent of GDP at the end of March end of 2019. The inflation trajectory macro-prudential policy measures. supervisors face the challenge of considered against the Bank’s capacity ics, financial sustainability, regulatory The programme did well in counter- the detailed planning and implementa- side the Integrated Annual Report, also near to the mid-point of the target and Venezuela – contributing to the 2019. This reflects an increase of 35.4 swings hinge on policy uncertainty as After sufficient deliberations on finan- harnessing the potential of Financial to avoid and mitigate the likelihood of We have a Stakeholder Management reform and business intelligence. Each acting the negative effects of outflows tion of the objectives and policies in publishes an Economic Review Report, range inAccording the interest to officialof sustainable provisional subdued headline inflation across this per cent from the revised figure of we come to grips with the impact of cial stability issues, the Financial Technology (Fintech), while making the risk occurrence as well as the Framework in place that guides stake- of these strategic areas is overseen by in the South African Rand (ZAR) accordance with acceptable risk param- Financial Stability Report and Audited growth.estimates by the Central Statistics group of countries. E13.0 billion recorded in March 2018. the freeze on increases in water and Stability Committee (FSC) discharges sure not to undermine consumer impact - should it occur. Mitigation holder engagement activities and a champion. A total of fifteen portfolio. It also performed well in eters. The Board monitors compliance Financial Statements, which can be Office (CSO), the Gross Domestic The surge is mainly attributed to electricity tariffs introduced by the its accountability through the publica- protection, integrity of financial measures were implemented during processes. During the reporting year, programmes are run under these creating financial efficiencies (per V4 with policies and achievements against accessed on our website: Product (GDP), which is a measure of South Africa KINGDOM OF ESWATINI continued issuance of Government new Cabinet. The freeze on increases tion of the annual Financial Stability markets and stability of the financial the course of the financial year, with we developed a Meaningful Stakehold- strategic areas, with each programme financial efficiency targets). More set objectives by holding management https://www.centralbank.org.sz. economic activity, is estimated to securities. The Bank notes with in the electricity tariff has been Report. system as a whole. strategic and operational projects er Engagement Project as one of our headed by a manager reporting to the interventions will continue even in the accountable for its activities through have expanded by 2.4 per cent in According to preliminary indicators GDP developments concern that the country’s debt has reflected in the inflation outcome for implemented for transformation and to strategic activities. We developed a relevant champion. next financial year. performance reporting and budget Conclusion 2018 compared to 2.0 per cent in published by Statistics South Africa on been rising exponentially over the April 2019, where it fell to a low of 1.8 Eswatini’s fiscal challenges still repre- The Eswatini Fintech strategy improve controls. Reasonable success stakeholder engagement measurement updates. According2017. to Thisofficial increase provisional is mainly 4 June 2019, the annual estimate of year under review. As such, the formu- per cent down from 5.3 per cent sent a significant point of vulnerability describes the country’s priorities in its was achieved with slight delays in tool to quantify the level of engage- With regards to performance against It has been a strong team effort, and I estimatesaccounted by the forCentral by strong Statistics positive real GDP for 2018 increased by 0.8 per lation of a Debt Sustainability Analysis recorded in March 2019. for the financial sector. Developments journey to be the ‘leading Fintech hub project deliveries as a consequence of ment, based on identified key engage- strategy, the projects under the four Where are we going? In the year under review, the Board would like to extend my sincere thanks Office developments(CSO), the inGross the Domesticprimary and cent following an increase of 1.4 per ing fiscal challenges. The main sectors lower. The Bank will continue with its and implementation of a Medium Term in South Africa (SA) present much in Africa’. The Central Bank of Eswati- the leadership uncertainty among ment measurement indicators. Our strategic areas of focus can be summa- finalised the external Board evaluation and appreciation to the Minister for Producttertiary (GDP), sectors.which is a measure of cent in 2017. The annual real GDP that are projected to perform poorly efforts to acquire foreign exchange from Debt Strategy is now vital. The Bank’s inflation forecast for the closer risks to Eswatini’s financial ni, in partnership with other stakehold- other operational inefficiencies. stakeholders continue to be concerned rised as follows: This is the question we ask ourselves. exercise with the Institute of Directors Finance and his officials, Board of Direc- economic activity, is estimated to have Going forward, GDP is projected to will also continue to monitor develop- growth of 0.8 per cent in 2018 was led include ‘Construction’, ‘Wholesale and the local market as a long term objec- year 2019 has been revised down to stability due to SA being the anchor ers established a regulatory Sandbox to about Government’s fiscal position, Assuming that success was a place, (SA). tors, all staff of the Bank as well as expandedHigh by frequency 2.4 per datacent reflectsin 2018 that increase by 2.9 per cent in 2020 and ments and offer appropriate advice to by increased economic activity in Retail’ and ‘General Public Administra- tive to boost the level of reserves. The Balance of payments 2.67 per cent in September 2019, from economy for the Common Monetary foster innovation in the financial Corporate social investment slow regulatory reforms, compliance Human dynamics how would we know we are there? We financial institutions and other key comparedeconomic to 2.0 peractivity cent expandedin 2017. This by 4.2 then retreat to 1.3 per cent and 1.7 the Government in order to retain the finance, real estate and business tion’. Bank will also continue to monitor the previous forecast of 2.87 per cent Area (CMA). The banking sector sector. This platform provides an and reputational implications. thus must speak to our most important Following the ever-evolving corporate stakeholders for their cooperation, increaseper is cent,mainly on accounteda year-on-year for by basis per cent in 2021 and 2022, respective- reserves at levels above the threshold Inflationary pressures remained contained in June services, which contributed 0.4 of a developments and offer appropriate In the financial year 2018/19, the projected in July 2019. The proposed remains stable, liquid and adequately opportunity to test innovative The impact of this programme will be goals to be achieved in the next 12 governance developments locally and commitment and dedication to the strong (seasonallypositive developments adjusted), inin thethe first ly. of three months cover of imports of 2019. Rates of increase in input costs and output percentage point based on growth of Going forward, GDP is projected to advice to the Government in order to country posted an overall balance of introduction of Value Added Tax (VAT) capitalised. However, credit risk is solutions in a live environment whilst seen in the long term. However, months. Again, we focus on our V4 internationally, which call for increased attainment of price and financial stabili- primaryquarter and tertiary of 2019 sectors. compared to 2.4 per goods and services. 1.8 per cent, and general Government increase by 2.9 per cent in 2020 and retain the reserves at levels above the payments deficit of E2.314 billion, on electricity in the year poses an increasing, thus affecting bank ensuring consumer protection. projects like the ones on culture shift Targets, Process Outputs and Strategic regulation, greater transparency, and ty in the Kingdom of Eswatini. I have no charges both ticked lower and remained below cent in the previous quarter. Sectors External reserves their respective long-run averages. Average vendor services, which contributed 0.2 of a then retreat to 1.3 per cent and 1.7 per threshold of three months cover of triple the deficit of E799.3 million upside risk to overall inflation. Over earnings, which will ultimately affect and stakeholder management have Projects. This is where we demon- more rigorous scrutiny of large institu- doubt that I can continue to rely on High frequencythat recorded data significantreflects thatpositive Private sector credit lead times (a bellwether of supply-chain price percentage point based on a 1.3 per cent in 2021 and 2022, respectively. imports of goods and services. recorded in the 2017/18 financial the medium term, inflation is project- solvency of banks. Financial Technology in the world is already identified gaps in the environ- strate ‘The 4 Disciplines of Execution’ tions, the ethics and compliance them for unwavering support and economicperformance activity expanded in the firstby 4.2quarter per of Eswatini’s external reserves continued pressures) also improved for the first time in six cent rise. year. This necessitated a reduction in ed at 4.31 per cent in 2020 and 5.29 growing at a rapid pace and the Bank is ment and have also identified possible approach, in that; function becomes integral to the strate- dedication in the execution of our cent, on2019 a year-on-year included; basis ‘manufacturing’, (seasonally to fall as the Government made draw- Growth in credit extended to the years, as purchasing activity among manufacturers Private sector credit reserve assets, as a financing item for per cent in 2021. National payment systems aligning itself accordingly to ensure interventions. As these roll out their gic core of organisations gearing to mandate and objectives in the interest adjusted),‘wholesale in the firstand quarterretail’, of ‘transport 2019 downs on its deposits held at the Bank private sector decelerated somewhat The South African economy shrank by External reserves the deficit recorded in the overall the country attains Vision 2022. programme of action, we will start to • We have not discarded any targets maintaining public trust. Therefore, of all Emaswati. fell for five consecutive months (IMF WEO Update, and storage’ and ‘financial services to cover the persistent cash shortfalls. from the double digit rate recorded in an annualised 3.2 per cent compared to 2.4 per cent in the previous Growth in credit extended to the balance of payments. In 2018/19, the Monetary Policy Consultative Operations of designated systemically see improvements. Areas where we in the process of identifying our beyond responding to changes in the July 2019). excluding insurance and pension In terms of estimated imports of goods the past year to single digit. The quarter-on-quarter in the three quarter. Sectors that recorded signifi- Eswatini’s external reserves continued private sector decelerated somewhat country benefitted from increased Committee important national payment systems Risk management approach did not move as swiftly as we had important goals. Instead, we industry, the Central Bank of Eswatini cant positivefunds’. performanceSubsectors thatin the performed first and services, the reserves were growth was largely supported by Global inflation and commodities overview months to March 2019, following a 1.4 to fall as the Government made draw- from the double digit rate recorded in debt security holdings, which diluted continued to run smoothly during the anticipated are in relation to the allocated weights to help us prior- continues to invest its efforts in creating quarterpoorly of 2019 includedincluded; ‘manufactur-the following: sufficient to cover 2.0 months at the increased demand for credit towards per cent growth in the previous period downs on its deposits held at the Bank to the past year to single digit. The growth the depletion in the country’s claims The Governor makes monetary policy reporting period. The Bank closely monitors the operat- identification of future skills and itize the targets. The weighting and a scalable ethics and compliance ing’, ‘wholesale‘public administration’, and retail’, ‘transport ‘construc - end of March 2019, remarkably below ‘businesses’ and ‘other sectors’ The IMF reported that headline inflation has and compared to market expectations cover the persistent cash shortfalls. In was largely supported by increased on other monetary authorities. decisions after consultative meetings ing environment using the risk improvement of the performance prioritization was based on an ecosystem that will help meet its needs Majozi V. Sithole and storagetion’,’ ‘miningand ‘financial and quarrying’, services ‘tour - the three-months threshold and also (namely ‘other financial corpora- remained subdued across most advanced and of a 1.7 per cent contraction. It was terms of estimated imports of goods and demand for credit towards ‘businesses’ with the Monetary Policy Consultative During the period under review, the exposure, opportunities and management system. The bottlenecks assessment of which targets assist- today and in the future. Governor excludingism insurance activities’, and ‘human pension health, funds’. and lower than the 3.2 months covered at tions’). The accelerated growth in emerging market economies. These developments the sharpest quarterly decline since services, the reserves were sufficient to and ‘other sectors’ (namely ‘other Consumer inflation Committee (MPCC). In 2018/19, the Bank approved an application from process-efficiency approach to identify have been identified and in the next ed the Bank more towards achiev- Subsectorssocial thatactivities’. performed Fiscal poorlycash-flow the same time in the previous year. credit to businesses is a positive devel- have contributed, in part, to market pricing of Q1-2009, mainly reflecting the effects cover 2.0 months at the end of March financial corporations’). The accelerat- MPCC held six bi-monthly meetings. In Eswatini Mobile to provide mobile threats and avoid these; as well as find financial year, better results will be ing agility, efficiency and integra- Bank’s financial performance includedchallenges the following: continued ‘public to adminis- weigh on opment as this sector drives domestic expected inflation dropping sharply in the United of power cuts on manufacturing and 2019, remarkably below the ed growth in credit to businesses is a The annual consumer inflation was these meetings, the MPCC reviewed money transfer services to its custom- and pursue opportunities in fulfilling realised. Some projects have missed tion. tration’,implementation ‘construction’, of public‘mining infrastruc and - During the course of the financial year, economic growth. States and the Eurozone. Consumer prices in mining. three-months threshold and also lower positive development as this sector relatively contained in the 2018/19 developments on inflation (including ers. Eswatini Mobile has partnered its mandate. This is attained through timeliness in terms of delivery, while Operationally, the Bank remained quarrying’,tural ‘tourism projects activities’, thereby resulting‘human in the Bank engaged in an exercise to buy advanced economies, on average, are projected to than the 3.2 months covered at the drives domestic economic growth. financial year, averaging 5.0 per cent forecasts) as well as other macroeco- with Eswatini Bank, who will also be integrating the Bank’s strategy, risk others are on track. • We have developed both Lag and health, lowerand outputsocial inactivities’. construction Fiscal activity. foreign exchange originating from Public finance rise to 1.6 per cent in 2019, edging up marginally As at the end of March 2019, the same time in the previous year. compared to 5.5 per cent in the previ- nomic indicators of the domestic, holding the required trust account for and performance for effective Lead Measures for all our targets. cash-flow challenges continued to weigh export proceeds from the local annual inflation rate increased to 4.5 Public finance ous financial year. The moderation in regional and international economies. deposit-taking from agents. The planning and monitoring. Business intelligence This will make it easier for project to 2.0 per cent in 2020. Consistent with subdued Medium Term GDP Projections commercial banks. The accumulation The 2019/20 budget was presented per cent from 4.1 per cent in February, on implementation of public infrastruc- During the course of the financial year, consumer inflation mainly benefitted Over the reporting period, the MPCC service will provide financial services teams to know what is expected of tural projects thereby resulting in lower of these funds has assisted to buffer under an unprecedented economic for tracking delivery. the highest inflation rate since Decem- the Bank engaged in an exercise to buy The 2019/20 budget was presented from favourable food prices, which recommended to keep the discount to the banked, underbanked and Risk management remains the main It has taken us a while to put the them in the next 12 months. output inEconomic construction activity activity. is projected to the reserves portfolio against crisis, where the country is faced with ber, amid a sharp rise in fuel prices. foreign exchange originating from under an unprecedented economic recorded a deflation of 0.2 per cent in rate unchanged at 6.75 per cent. unbanked population. area of focus and management is foundation and framework in place for decelerate to 1.4 per cent in 2019 outflows. In the absence of this inter- pressure on Government revenues, • We use information attained export proceeds from the local commer- crisis, where the country is faced with the period under review down from committed to applying international this programme. A lot of research work • We have implemented monthly from 2.4 per cent in 2018 largely due vention, reserves levels would have accumulating arrears, depleted from Departmental, Manage- Medium Term GDP Projections cial banks. The accumulation of these pressure on Government revenues, 5.2 per cent the previous financial Financial stability Financial sector development best practice and standards to ensure was done to ensure that when the monitoring scorecards for the to worsening fiscal challenges. The been significantly lower. The Bank will reserves and sluggish growth. As such, ment Committee, Executive funds has assisted to buffer the reserves accumulating arrears, depleted reserves year. implementation plan that the effects of uncertainty on projects take off, all processes are Projects and Change Management Economicmain activity sectors is projectedthat are toprojected decel- to continue with its efforts to acquire restoring prudent public finance Committee and Board meet- portfolio against outflows. In the and sluggish growth. As such, restoring The Bank, through its macro-pruden- objectives are systematically and properly aligned. Committee and the quarterly score- erate toperform 1.4 per poorlycent in include2019 from ‘Construc 2.4 - foreign exchange from the local management remains pivotal in ings to hold each other absence of this intervention, reserves prudent public finance management Inflation outlook tial mandate, is committed to The Bank continued to coordinate the continuously monitored. This is done cards for the Board Capital Projects per centtion’, in 2018 ‘Wholesale largely due and to worsen-Retail’ and market as a long term objective to helping the country achieve sustaina- accountable, so that the goals levels would have been significantly remains pivotal in helping the country mitigate risks to financial stability. implementation of the Financial through periodic assessments of strate- and Investment Committee, which ‘General Public Administration’. boost the level of reserves. The Bank ble and inclusive growth. do not naturally disintegrate in achieve sustainable and inclusive The inflation outlook, which remains a The financial stability mandate Sector Development Implementation gic objectives, projects and day-to-day will provide compelling scoreboards growth. Plan (FSDIP). the whirlwind.

CBE Integrated Annual Report 2018/19 12 Introduction mism in the global economy being weighed down by prolonged policy It gives me great pleasure to present to uncertainty as trade tensions remain. the Minister for Finance, Eswatini On the trade front, the forecast reflects citizens and other stakeholders the the May 2019 increase of US tariffs on second CBE Integrated Annual Report USD200 billion of Chinese exports from for the financial year ended 31 March 10 per cent to 25 per cent, and retalia- 2019. The Report provides a compre- tion by China. hensive overview of the operations of the CBE during the past financial year. Furthermore, technology tensions have It includes a summarised version of the erupted, threatening global technology financial statements. supply chains, and the prospects of a ‘no deal’ Brexit have increased follow- Coverage ing the appointment of new Prime Minister (PM) Boris Johnson in the Matters included in the Report are United Kingdom. In addition, rising aimed at informing and providing assur- geopolitical tensions, especially relat- ance to stakeholders on the CBE’s ing to sanctions on Iran, supply disrup- ability to deliver on its mandate, tions in Russia, Chile and Libya have commitment to sustained relationships roiled energy prices and, in the process, and responsible corporate citizenship. affected commodity exporters, despite The issues of materiality pertain to a near-term strengthening of oil prices. price stability and broader stability of Overall, risks to the latest growth the financial sector conducive to forecast are mainly to the downside. economic growth in the short, medium Other negative developments include a and long term. protracted increase in risk aversion that has exposed the financial vulnerabili- Materiality ties that continue to accumulate after years of low interest rates; and the In ascertaining matters of materiality mounting disinflationary pressures that for disclosure in this Report, the Bank increase debt service difficulties, has considered issues that either affect constraining monetary policy space to or have potential to substantially affect counter downturns, and make adverse our ability to perform and remain shocks more persistent than normal. relevant, our mode of operation, input factors as well as our ability to create The IMF highlights that, against the value over time. As indicated, issues of observed difficult backdrop in the first materiality pertain to those that direct- half of 2019, there were positive ly affect the Bank’s ability to achieve surprises to growth in advanced econo- its price and financial stability mies, but weaker-than-expected activi- mandate. ty in emerging markets and developing economies. For advanced economies, Global developments growth is projected at 1.9 per cent in 2019 and 1.7 per cent in 2020. In According to the International Monetary emerging markets and developing econ- Fund’s World Economic Outlook (IMF omies, growth is forecast at 4.1 per WEO) Update released in July 2019, cent in 2019, picking up to 4.7 per cent global growth is forecast at 3.2 per cent in 2020. Investment and demand for in 2019, before picking up to 3.5 per consumer durables have been subdued cent in 2020. The softer projections across advanced and emerging market follow a 3.6 per cent expansion record- economies as firms and households ed in 2018. Global growth remains continue to hold back on long-term sluggish and precarious, with the dyna- spending.

GOVERNOR'S STATEMENTSTATEMENT

As at the end of March 2019, the Budget estimates for 2019/20 show The FSDIP has four pillars namely; prescribed in the CBE Enterprise Risk ment (CSI) programme, the Bank annual inflation rate increased to 4.5 Budgetthat the estimates fiscal gap hasfor reduced2019/20 toshow E3.0 financial stability, financial inclusion, Management (ERM) Framework. pursues excellence in community growth in final demand, core inflation per cent from 4.1 per cent in Febru- thatbillion the (equivalent fiscal gap has to reduceda deficit to of E3.0 4.5 diversification of the financial system Incidents are recorded, analysed and involvement and upholding generally Our strategy Regulatory reform across advanced economies has ary, the highest inflation rate since billionper cent (equivalent of GDP) tofrom a deficitan estimated of 4.5 2.672.67 %% and modernisation of the financial reported, and key risk indicators are accepted principles underlying good softened below target (for example, in December, amid a sharp rise in fuel peroutturn cent ofof 5.5GDP) per from cent an in estimated 2018/19. TheThe Bank’s Bank’s inflation inflation forecast forecast for for the the system. More information, including monitored and periodically reported to corporate social responsibility. The Our ‘super-goal’ (V4 target) is to be an The amendment of all the identified the United States) or remained well prices. The financial year ended with outturnThis contraction of 5.5 per wascent mainly in 2018/19. due to This the yearyear 2019 2019 has has been been revised revised down down to to FSDIP achievements, is reflected on the risk governance structures to focus of the CSI programme is three agile, efficient and integrated central legislations is key in our drive to below it (in the Eurozone and Japan). the South African Reserve Bank contractionfiscal consolidation was mainly and due proposedto the 2.672.67 per per cent cent in inSeptember September 2019, 2019, page 26. inform decision-making. priority areas, namely; community bank by the year 2021. We may improve the effectiveness of our Governance its profit declined by 4 per cent to reach (SARB) voting unanimously to hold its fiscalrevenue consolidation measures thatand the proposed Govern - fromfrom the the previous previous forecast forecast of of2.87 2.87 health programmes, educational initia- achieve all other strategic targets, but regulatory mandate. Most of the E190.1 million at end of March 2019. The IMF projects inflation in emerging benchmark repo rate steady at 6.75 revenuement has measures put in place that for the the financialGovern- INFLATIONINFLATION perper cent cent projected projected in inJuly July 2019. 2019. Financial technology CBE top 10 risks tives (covering primary school, high if we miss this one, our entire strategy amendments have been concluded and The Board maintains full and effective This has, once again, been a difficult markets and developing economies, on per cent on 28 March 2019, as widely mentyear. has put in place for the financial school, tertiary institutions) and will fail. In the previous year, we quality assured. The next year we will control over the operations of the Bank year, but the CBE has been able to average, to rise to 4.8 per cent in expected. Policymakers highlighted year. The range, prevalence and evolution of For the period under review, the Bank national research institutions. Total captured our V4 targets for the be focusing on the legislative stages and is accountable and responsible for contend with the challenges presented. 2019, before declining to 4.7 per cent that the current stance on monetary Public debt financial innovations have since identified, analysed and prioritised the amount invested in this programme for 2018/19 financial year. that are outside of our control. its performance and compliance. The in 2020. Core inflation has also policy remains accommodative and Public debt increased incredibly. In the light of top 10 corporate risks according to the the financial year was E1.7 million. Board reviews the strategic priorities of Supplementary reports dropped further below historical monetary policy actions will continue Total public debt stock was recorded policy,policy, isis onon aa downwarddownward trendtrend withwith thetive price of the stability Bank throughobjective formulation of the these technological advancements for Bank’s process construct. The top 10 The Bank identified four strategic Financial sustainability the Bank, determines investment averages in many emerging markets to focus on anchoring inflation near Totalat E17.6 public billion, debt stockan equivalent was recorded of 26.7 at expectedexpected upward upward risks risks towards towards the endthe Bankand throughimplementation formulation of andappropriate imple- financial services, regulators and risks are based on the risk landscape Stakeholder engagement areas of focus, namely; human dynam- policies and delegates to management As stand-alone reports, the Bank, along- and developing economies, barring a to the mid-point of the target range E17.6per cent billion, of GDPan equivalent at the end of 26.7of March per ofend 2019. of The2019. inflation The inflation trajectory trajectory swings mentationmacro-prudential of appropriate policy macro-prumeasures.- supervisors face the challenge of considered against the Bank’s capacity ics, financial sustainability, regulatory The programme did well in counter- the detailed planning and implementa- side the Integrated Annual Report, also few cases such as Argentina, Turkey, in the interest of sustainable growth. cent2019. of This GDP reflects at the endan increaseof March of 2019. 35.4 hingeswings on hingepolicy onuncertainty policy uncertainty as we come as dentialAfter sufficient policy deliberations measures. onAfter finan - harnessing the potential of Financial to avoid and mitigate the likelihood of We have a Stakeholder Management reform and business intelligence. Each acting the negative effects of outflows tion of the objectives and policies in publishes an Economic Review Report, and Venezuela – contributing to the Thisper reflectscent from an theincrease revised of 35.4figure per of towe grips come with to thegrips impact with ofthe the impact freeze of sufficientcial stability deliberations issues, theon financialFinancial Technology (Fintech), while making the risk occurrence as well as the Framework in place that guides stake- of these strategic areas is overseen by in the South African Rand (ZAR) accordance with acceptable risk param- Financial Stability Report and Audited subdued headline inflation across this KINGDOM OF ESWATINI centE13.0 from billion the recorded revised figurein March of E13.02018. onthe increases freeze onin increaseswater and in electricitywater and stabilityStability issues, Committee the Financial (FSC) dischargesStability sure not to undermine consumer impact - should it occur. Mitigation holder engagement activities and a champion. A total of fifteen portfolio. It also performed well in eters. The Board monitors compliance Financial Statements, which can be group of countries. Core inflation has billionThe surge recorded is mainlyin March attributed 2018. The to tariffselectricity introduced tariffs by introduced the new Cabinet by the Committeeits accountability (FSC) throughdischarges the publica- its protection, integrity of financial measures were implemented during processes. During the reporting year, programmes are run under these creating financial efficiencies (per V4 with policies and achievements against accessed on our website: also dropped further below historical GDP developments surgecontinued is mainly issuance attributed of toGovernment continued startingnew Cabinet. in the The2019/20 freeze financial on increases year. accountabilitytion of the annual through Financial the publication Stability markets and stability of the financial the course of the financial year, with we developed a Meaningful Stakehold- strategic areas, with each programme financial efficiency targets). More set objectives by holding management https://www.centralbank.org.sz. averages in many emerging markets issuancesecurities. of GovernmentThe Bank securities. notes Thewith Thein freezethe electricity on increases tariff in the haselectric- been ofReport. the annual Financial Stability system as a whole. strategic and operational projects er Engagement Project as one of our headed by a manager reporting to the interventions will continue even in the accountable for its activities through and developing economies, barring a According to official provisional Bankconcern notes that with the concern country’s that thedebt coun- has ityreflected tariff hasin the been inflation reflected outcome in the for Report. implemented for transformation and to strategic activities. We developed a relevant champion. next financial year. performance reporting and budget Conclusion few cases such as Argentina, Turkey, estimates by the Central Statistics try’sbeen debt rising has beenexponentially rising exponentially over the inflationApril 2019, outcome where for it Aprilfell to 2019, a low where of 1.8 Eswatini’s fiscal challenges still repre- The Eswatini Fintech strategy improve controls. Reasonable success stakeholder engagement measurement updates. and Venezuela. Office (CSO), the Gross Domestic overyear theunder year review. under As review. such, the As formusuch, - itper fell centto a downlow of from1.8 per 5.3 cent per down cent Eswatini’ssent a significant fiscal challenges point of vulnerabilitystill repre- describes the country’s priorities in its was achieved with slight delays in tool to quantify the level of engage- With regards to performance against It has been a strong team effort, and I Product (GDP), which is a measure of thelation formulation of a Debt of Sustainability a Debt Sustainability Analysis fromrecorded 5.3 perin March cent recorded2019. in March sentfor athe significant financial point sector. of Developmentsvulnerability journey to be the ‘leading Fintech hub project deliveries as a consequence of ment, based on identified key engage- strategy, the projects under the four Where are we going? In the year under review, the Board would like to extend my sincere thanks South Africa economic activity, is estimated to main sectors that are projected to foreign exchange from the local Analysisand implementation and implementation of a Medium of Term a 2019. forin theSouth financial Africa sector. (SA) Developmentspresent much in Africa’. The Central Bank of Eswati- the leadership uncertainty among ment measurement indicators. Our strategic areas of focus can be summa- finalised the external Board evaluation and appreciation to the Minister for have expanded by 2.4 per cent in perform poorly include ‘Construction’, market as a long term objective to MediumDebt Strategy Term isDebt now Strategyvital. is now The Bank’s inflation forecast for the incloser South risksAfrica to (SA)Eswatini’s present financial much ni, in partnership with other stakehold- other operational inefficiencies. stakeholders continue to be concerned rised as follows: This is the question we ask ourselves. exercise with the Institute of Directors Finance and his officials, Board of Direc- According to preliminary indicators 2018 compared to 2.0 per cent in ‘Wholesale and Retail’ and ‘General boost the level of reserves. The Bank vital. Theyear Bank’s 2019 hasinflation been forecastrevised downfor the to closerstability risks due to to Eswatini’sSA being thefinancial anchor ers established a regulatory Sandbox to about Government’s fiscal position, Assuming that success was a place, (SA). tors, all staff of the Bank as well as published by Statistics South Africa on 2017. This increase is mainly Public Administration’. will also continue to monitor develop- Balance of payments year2.67 2019per cent has inbeen September revised 2019,down from to stabilityeconomy due for to the SA Commonbeing the Monetaryanchor foster innovation in the financial Corporate social investment slow regulatory reforms, compliance Human dynamics how would we know we are there? We financial institutions and other key 4 June 2019, the annual estimate of accounted for by strong positive ments and offer appropriate advice to Balance of payments 2.67the perprevious cent inforecast September of 2.87 2019, per from cent economyArea (CMA). for the The Common banking Monetary sector sector. This platform provides an and reputational implications. thus must speak to our most important Following the ever-evolving corporate stakeholders for their cooperation, real GDP for 2018 increased by 0.8 per developments in the primary and Going forward, GDP is projected to the Government in order to retain the In the financial year 2018/19, the theprojected previous in forecast July 2019. of 2.87 The perproposed cent Arearemains (CMA). stable, The liquid banking and adequately sector opportunity to test innovative Through its Corporate Social Invest- The impact of this programme will be goals to be achieved in the next 12 governance developments locally and commitment and dedication to the Inflationary pressures remained contained in June cent following an increase of 1.4 per tertiary sectors. increase by 2.9 per cent in 2020 and reserves at levels above the threshold Incountry the financialposted anyear overall 2018/19, balance the of projectedintroduction in Julyof Value 2019. Added The proposed Tax (VAT) remainscapitalised. stable, However, liquid and credit adequately risk is solutions in a live environment whilst seen in the long term. However, months. Again, we focus on our V4 internationally, which call for increased attainment of price and financial stabili- 2019. Rates of increase in input costs and output cent in 2017. The annual real GDP then retreat to 1.3 per cent and 1.7 of three months cover of imports of countrypayments posted deficit an overallof E2.314 balance billion, of introductionon electricity of Valuein the Added year Taxposes (VAT) an capitalised.increasing, However,thus affectingcredit risk bankis ensuring consumer protection. projects like the ones on culture shift Targets, Process Outputs and Strategic regulation, greater transparency, and ty in the Kingdom of Eswatini. I have no charges both ticked lower and remained below growth of 0.8 per cent in 2018 was led High frequency data reflects that per cent in 2021 and 2022, respective- goods and services. paymentstriple the deficitdeficit ofof E2.314E799.3 billion,million onupside electricity risk to inoverall the yearinflation. poses Overan increasing,earnings, whichthus will affecting ultimately bankaffect and stakeholder management have Projects. This is where we demon- more rigorous scrutiny of large institu- doubt that I can continue to rely on their respective long-run averages. Average vendor by increased economic activity in economic activity expanded by 4.2 ly. triplerecorded the indeficit the of2017/18 E799.3 financialmillion upsidethe medium risk to term, overall inflation inflation. is project- Over earnings,solvency whichof banks. will ultimately affect Financial Technology in the world is already identified gaps in the environ- strate ‘The 4 Disciplines of Execution’ tions, the ethics and compliance them for unwavering support and lead times (a bellwether of supply-chain price finance, real estate and business per cent, on a year-on-year basis Private sector credit recordedyear. This in necessitatedthe 2017/18 financiala reduction year. in theed mediumat 4.31 perterm, cent inflation in 2020 is project-and 5.29 solvency of banks. growing at a rapid pace and the Bank is ment and have also identified possible approach, in that; function becomes integral to the strate- dedication in the execution of our pressures) also improved for the first time in six services, which contributed 0.4 of a (seasonally adjusted), in the first Thisreserve necessitated assets, as a financinga reduction item forin edper at cent 4.31 in per 2021. cent in 2020 and 5.29 National payment systems aligning itself accordingly to ensure interventions. As these roll out their gic core of organisations gearing to mandate and objectives in the interest years, as purchasing activity among manufacturers percentage point based on growth of quarter of 2019 compared to 2.4 per External reserves Growth in credit extended to the reservethe deficit assets, recorded as a financing in the item overall for per cent in 2021. National payment systems the country attains Vision 2022. programme of action, we will start to • We have not discarded any targets maintaining public trust. Therefore, of all Emaswati. fell for five consecutive months (IMF WEO Update, 1.8 per cent, and general Government cent in the previous quarter. Sectors private sector decelerated somewhat thebalance deficit of payments.recorded inIn 2018/19,the overall the Monetary Policy Consultative Operations of designated systemically see improvements. Areas where we in the process of identifying our beyond responding to changes in the July 2019). services, which contributed 0.2 of a that recorded significant positive Eswatini’s external reserves continued from the double digit rate recorded in balancecountry ofbenefitted payments. Infrom 2018/19, increased the MonetaryCommittee Policy Consultative Operationsimportant ofnational designated payment systemically systems Risk management approach did not move as swiftly as we had important goals. Instead, we industry, the Central Bank of Eswatini percentage point based on a 1.3 per performance in the first quarter of to fall as the Government made draw- the past year to single digit. The countrydebt security benefitted holdings, from which increased diluted Committee importantcontinued nationalto run smoothlypayment duringsystems the anticipated are in relation to the allocated weights to help us prior- continues to invest its efforts in creating Global inflation and commodities overview cent rise. 2019 included; ‘manufacturing’, downs on its deposits held at the Bank growth was largely supported by debtthe depletionsecurity holdings,in the country’s which diluted claims The Governor makes monetary policy continuedreporting toperiod. run smoothly during the The Bank closely monitors the operat- identification of future skills and itize the targets. The weighting and a scalable ethics and compliance ‘wholesale and retail’, ‘transport to cover the persistent cash shortfalls. increased demand for credit towards theon otherdepletion monetary in the authorities. country’s claims Thedecisions Governor after makes consultative monetary meetings policy reporting period. ing environment using the risk improvement of the performance prioritization was based on an ecosystem that will help meet its needs Majozi V. Sithole The IMF reported that headline inflation has The South African economy shrank by and storage’ and ‘financial services In terms of estimated imports of goods ‘businesses’ and ‘other sectors’ on other monetary authorities. decisionswith the afterMonetary consultative Policy Consultative meetings During the period under review, the exposure, opportunities and management system. The bottlenecks assessment of which targets assist- today and in the future. Governor remained subdued across most advanced and an annualised 3.2 per cent excluding insurance and pension and services, the reserves were (namely ‘other financial corpora- Consumer inflation withCommittee the Monetary (MPCC). Policy In 2018/19,Consultative the DuringBank theapproved period anunder application review, thefrom process-efficiency approach to identify have been identified and in the next ed the Bank more towards achiev- emerging market economies. These developments quarter-on-quarter in the three funds’. Subsectors that performed sufficient to cover 2.0 months at the tions’). The accelerated growth in Consumer inflation CommitteeMPCC held six(MPCC). bi-monthly In 2018/19, meetings. the In BankEswatini approved Mobile an toapplication provide mobilefrom threats and avoid these; as well as find financial year, better results will be ing agility, efficiency and integra- Bank’s financial performance have contributed, in part, to market pricing of months to March 2019, following a 1.4 poorly included the following: end of March 2019, remarkably below credit to businesses is a positive devel- The annual consumer inflation was MPCCthese held meetings, six bi-monthly the MPCC meetings. reviewed In Eswatinimoney transferMobile servicesto provide to its mobilecustom - and pursue opportunities in fulfilling realised. Some projects have missed tion. expected inflation dropping sharply in the United per cent growth in the previous period ‘public administration’, ‘construc- the three-months threshold and also opment as this sector drives domestic Therelatively annual contained consumer in inflation the 2018/19 was thesedevelopments meetings, on the inflation MPCC reviewed(including moneyers. Eswatinitransfer servicesMobile tohas its partneredcustom- its mandate. This is attained through timeliness in terms of delivery, while Operationally, the Bank remained States and the Eurozone. Consumer prices in and compared to market expectations tion’, ‘mining and quarrying’, ‘tour- lower than the 3.2 months covered at economic growth. relativelyfinancial year,contained averaging in the 5.0 2018/19per cent developmentsforecasts) as wellon inflationas other (includingmacroeco - ers.with Eswatini Eswatini Mobile Bank, has who partnered will also with be integrating the Bank’s strategy, risk others are on track. • We have developed both Lag and profitable during the year, even though advanced economies, on average, are projected to of a 1.7 per cent contraction. It was ism activities’, ‘human health, and the same time in the previous year. financialcompared year, to 5.5 averaging per cent 5.0 in theper previcent - forecasts)nomic indicators as well asof other the macroeco-domestic, Eswatiniholding Bank,the required who will trust also beaccount holding for and performance for effective Lead Measures for all our targets. rise to 1.6 per cent in 2019, edging up marginally the sharpest quarterly decline since social activities’. Fiscal cash-flow Public finance comparedous financial to 5.5 year. per The cent moderation in the previ- in nomicregional indicators and international of the economies.domestic, thedeposit-taking required trust fromaccount agents. for depos The- planning and monitoring. Business intelligence This will make it easier for project to 2.0 per cent in 2020. Consistent with subdued Q1-2009, mainly reflecting the effects challenges continued to weigh on During the course of the financial year, ousconsumer financial inflation year. The mainly moderation benefitted in regionalOver the and reporting international period, economies. the MPCC it-takingservice fromwill provideagents. financialThe service services will teams to know what is expected of of power cuts on manufacturing and implementation of public infrastruc- the Bank engaged in an exercise to buy The 2019/20 budget was presented consumerfrom favourable inflation foodmainly prices, benefitted which Overrecommended the reporting to keepperiod, the the discount MPCC provideto the financialbanked, servicesunderbanked to theand Risk management remains the main It has taken us a while to put the them in the next 12 months. mining. tural projects thereby resulting in foreign exchange originating from under an unprecedented economic fromrecorded favourable a deflation food of prices,0.2 per centwhich in recommendedrate unchanged to at keep 6.75 perthe cent.discount banked,unbanked underbanked population. and unbanked area of focus and management is foundation and framework in place for • We use information attained lower output in construction activity. export proceeds from the local crisis, where the country is faced with recordedthe period a deflation under review of 0.2 perdown cent from in rate unchanged at 6.75 per cent. population. committed to applying international this programme. A lot of research work • We have implemented monthly from Departmental, Manage- commercial banks. The accumulation pressure on Government revenues, the5.2 periodper cent under the review previous down fromfinancial 5.2 Financial stability Financial sector development best practice and standards to ensure was done to ensure that when the monitoring scorecards for the ment Committee, Executive Medium Term GDP Projections of these funds has assisted to buffer accumulating arrears, depleted peryear. cent the previous financial year. Financial stability Financialimplementation sector plandevelopment that the effects of uncertainty on projects take off, all processes are Projects and Change Management Committee and Board meet- the reserves portfolio against reserves and sluggish growth. As such, The Bank, through its macro-pruden- implementation plan objectives are systematically and properly aligned. Committee and the quarterly score- ings to hold each other Economic activity is projected to outflows. In the absence of this inter- restoring prudent public finance InflationInflation outlook outlook Thetial Bank, mandate, through itsis macro-prudentialcommitted to The Bank continued to coordinate the continuously monitored. This is done cards for the Board Capital Projects accountable, so that the goals decelerate to 1.4 per cent in 2019 vention, reserves levels would have management remains pivotal in mandate,mitigate risksis committed to financial to mitigatestability. Theimplementation Bank continued ofto coordinatethe Financial the through periodic assessments of strate- and Investment Committee, which do not naturally disintegrate in from 2.4 per cent in 2018 largely due been significantly lower. The Bank will helping the country achieve sustaina- TheThe inflationinflation outlook, outlook, which which remains remains a a risksThe to financialfinancial stability.stability Themandate finan- implementationSector Development of the FinancialImplementation Sector gic objectives, projects and day-to-day will provide compelling scoreboards the whirlwind. to worsening fiscal challenges. The continue with its efforts to acquire ble and inclusive growth. predominantpredominant guideguide forfor monetarymonetary cialcomplements stability themandate price stabilitycomplements objec - DevelopmentPlan (FSDIP). Implementation Plan processes, using various tools as for tracking delivery. (FSDIP).

13 CBE Integrated Annual Report 2018/19 Introduction mism in the global economy being weighed down by prolonged policy It gives me great pleasure to present to uncertainty as trade tensions remain. the Minister for Finance, Eswatini On the trade front, the forecast reflects citizens and other stakeholders the the May 2019 increase of US tariffs on second CBE Integrated Annual Report USD200 billion of Chinese exports from for the financial year ended 31 March 10 per cent to 25 per cent, and retalia- 2019. The Report provides a compre- tion by China. hensive overview of the operations of the CBE during the past financial year. Furthermore, technology tensions have It includes a summarised version of the erupted, threatening global technology financial statements. supply chains, and the prospects of a ‘no deal’ Brexit have increased follow- Coverage ing the appointment of new Prime Minister (PM) Boris Johnson in the Matters included in the Report are United Kingdom. In addition, rising aimed at informing and providing assur- geopolitical tensions, especially relat- ance to stakeholders on the CBE’s ing to sanctions on Iran, supply disrup- ability to deliver on its mandate, tions in Russia, Chile and Libya have commitment to sustained relationships roiled energy prices and, in the process, and responsible corporate citizenship. affected commodity exporters, despite The issues of materiality pertain to a near-term strengthening of oil prices. price stability and broader stability of Overall, risks to the latest growth the financial sector conducive to forecast are mainly to the downside. economic growth in the short, medium Other negative developments include a and long term. protracted increase in risk aversion that has exposed the financial vulnerabili- Materiality ties that continue to accumulate after years of low interest rates; and the In ascertaining matters of materiality mounting disinflationary pressures that for disclosure in this Report, the Bank increase debt service difficulties, has considered issues that either affect constraining monetary policy space to or have potential to substantially affect counter downturns, and make adverse our ability to perform and remain shocks more persistent than normal. relevant, our mode of operation, input factors as well as our ability to create The IMF highlights that, against the value over time. As indicated, issues of observed difficult backdrop in the first materiality pertain to those that direct- half of 2019, there were positive ly affect the Bank’s ability to achieve surprises to growth in advanced econo- its price and financial stability mies, but weaker-than-expected activi- mandate. ty in emerging markets and developing economies. For advanced economies, Global developments growth is projected at 1.9 per cent in 2019 and 1.7 per cent in 2020. In According to the International Monetary emerging markets and developing econ- Fund’s World Economic Outlook (IMF omies, growth is forecast at 4.1 per WEO) Update released in July 2019, cent in 2019, picking up to 4.7 per cent global growth is forecast at 3.2 per cent in 2020. Investment and demand for in 2019, before picking up to 3.5 per consumer durables have been subdued cent in 2020. The softer projections across advanced and emerging market follow a 3.6 per cent expansion record- economies as firms and households ed in 2018. Global growth remains continue to hold back on long-term sluggish and precarious, with the dyna- spending.

GOVERNOR'S STATEMENT

As at the end of March 2019, the Budget estimates for 2019/20 show The FSDIP has four pillars namely; prescribed in the CBE Enterprise Risk ment (CSI) programme, the Bank annual inflation rate increased to 4.5 that the fiscal gap has reduced to E3.0 financial stability, financial inclusion, Management (ERM) Framework. fosterpursues innovation excellence in the financialin community sector. per cent from 4.1 per cent in Febru- billion (equivalent to a deficit of 4.5 Our strategy Regulatory reform growth in final demand, core inflation diversification of the financial systemThe FSDIPIncidents has fourare pillarsrecorded, namely; analysed finan- and Thisinvolvement platform provides and upholding an opportunity generally to ary, the highest inflation rate since per cent of GDP) from an estimated across advanced economies has and modernisation of the financialcial stability,reported, financial and key inclusion, risk indicators diversi- are testaccepted innovative principles solutions underlying in a goodlive December, amid a sharp rise in fuel outturn of 5.5 per cent in 2018/19. Our ‘super-goal’ (V4 target) is to be an The amendment of all the identified softened below target (for example, in system. More information, includingfication monitored of the and financial periodically system reported and to environmentcorporate whilstsocial ensuringresponsibility. consumer The prices. The financial year ended with This contraction was mainly due to the agile, efficient and integrated central legislations is key in our drive to the United States) or remained well FSDIP achievements, is reflected onmodernisation the risk ofgovernance the financial structures system. to protection.focus of the CSI programme is three the South African Reserve Bank fiscal consolidation and proposed bank by the year 2021. We may improve the effectiveness of our below it (in the Eurozone and Japan). page 26. More informinformation, decision-making. including FSDIP priority areas, namely; community Governance its profit declined by 4 per cent to reach (SARB) voting unanimously to hold its revenue measures that the Govern- achieve all other strategic targets, but regulatory mandate. Most of the achievements, is reflected on page 26. Financialhealth programmes,Technology educationalin the world initia is- E190.1 million at end of March 2019. benchmark repo rate steady at 6.75 ment has put in place for the financial if we miss this one, our entire strategy amendments have been concluded and The IMF projects inflation in emerging Financial technology CBE top 10 risks growingtives at(covering a rapid paceprimary and school, the Bank high is The Board maintains full and effective This has, once again, been a difficult per cent on 28 March 2019, as widely year. will fail. In the previous year, we quality assured. The next year we will markets and developing economies, on Financial technology aligningschool, itself tertiary accordingly institutions) to ensure theand control over the operations of the Bank year, but the CBE has been able to expected. Policymakers highlighted captured our V4 targets for the be focusing on the legislative stages average, to rise to 4.8 per cent in The range, prevalence and evolution of For the period under review, the Bank countrynational attains research Vision 2022.institutions. Total and is accountable and responsible for contend with the challenges presented. that the current stance on monetary 2018/19 financial year. that are outside of our control. 2019, before declining to 4.7 per cent Public debt financial innovations have sinceThe range,identified, prevalence analysed and and evolution prioritised of the amount invested in this programme for its performance and compliance. The policy remains accommodative and in 2020. Core inflation has also increased incredibly. In the light offinancial top 10 corporateinnovations risks haveaccording since to the Riskthe management financial year wasapproach E1.7 million. Board reviews the strategic priorities of Supplementary reports monetary policy actions will continue Total public debt stock was recorded policy, is on a downward trend with tive of the Bank through formulation The Bank identified four strategic Financial sustainability dropped further below historical these technological advancements forincreased Bank’s incredibly.process construct. In the Thelight top of 10 the Bank, determines investment to focus on anchoring inflation near at E17.6 billion, an equivalent of 26.7 expected upward risks towards the and implementation of appropriate areas of focus, namely; human dynam- averages in many emerging markets financial services, regulators andthese risks technological are based onadvancements the risk landscape for TheStakeholder Bank closely engagementmonitors the operating policies and delegates to management As stand-alone reports, the Bank, along- to the mid-point of the target range per cent of GDP at the end of March end of 2019. The inflation trajectory macro-prudential policy measures. ics, financial sustainability, regulatory The programme did well in counter- and developing economies, barring a supervisors face the challenge offinancial considered services, against regulators the Bank’s and super- capacity environment using the risk exposure, the detailed planning and implementa- side the Integrated Annual Report, also in the interest of sustainable growth. 2019. This reflects an increase of 35.4 swings hinge on policy uncertainty as After sufficient deliberations on finan- reform and business intelligence. Each acting the negative effects of outflows few cases such as Argentina, Turkey, harnessing the potential of Financialvisors to face avoid the and challenge mitigate ofthe harnessing likelihood of opportunitiesWe have a Stakeholderand process-efficiency Management tion of the objectives and policies in publishes an Economic Review Report, per cent from the revised figure of we come to grips with the impact of cial stability issues, the Financial of these strategic areas is overseen by in the South African Rand (ZAR) and Venezuela – contributing to the Technology (Fintech), while makingthe potentialthe risk occurrenceof Financial as Technologywell as the approachFramework to identify in place threats that guides and stakeavoid- accordance with acceptable risk param- Financial Stability Report and Audited E13.0 billion recorded in March 2018. the freeze on increases in water and Stability Committee (FSC) discharges a champion. A total of fifteen portfolio. It also performed well in subdued headline inflation across this KINGDOM OF ESWATINI sure not to undermine consumer(Fintech), impact while - should making it occur.sure notMitigation to these;holder as wellengagement as find and activitiespursue oppor- and eters. The Board monitors compliance Financial Statements, which can be The surge is mainly attributed to electricity tariffs introduced by the its accountability through the publica- programmes are run under these creating financial efficiencies (per V4 group of countries. Core inflation has protection, integrity of financialundermine measures consumer were protection,implemented integ- during tunitiesprocesses. in fulfilling During itsthe mandate. reporting This year, is with policies and achievements against accessed on our website: continued issuance of Government new Cabinet. The freeze on increases tion of the annual Financial Stability strategic areas, with each programme financial efficiency targets). More also dropped further below historical GDP developments markets and stability of the financialrity ofthe financial course marketsof the financial and stability year, ofwith attainedwe developed through aintegrating Meaningful theStakehold Bank’s- set objectives by holding management https://www.centralbank.org.sz. securities. The Bank notes with in the electricity tariff has been Report. headed by a manager reporting to the interventions will continue even in the averages in many emerging markets system as a whole. the financialstrategic system and asoperational a whole. projects strategy,er Engagement risk and Project performance as one of forour accountable for its activities through According to official provisional concern that the country’s debt has reflected in the inflation outcome for relevant champion. next financial year. and developing economies, barring a implemented for transformation and to effectivestrategic planning activities. and monitoring.We developed a performance reporting and budget Conclusion estimates by the Central Statistics been rising exponentially over the April 2019, where it fell to a low of 1.8 Eswatini’s fiscal challenges still repre- few cases such as Argentina, Turkey, The Eswatini Fintech strategyThe Eswatiniimprove Fintechcontrols. strategy Reasonable describes success stakeholder engagement measurement updates. Office (CSO), the Gross Domestic year under review. As such, the formu- per cent down from 5.3 per cent sent a significant point of vulnerability With regards to performance against and Venezuela. describes the country’s priorities in itsthe country’swas achieved priorities with in slightits journey delays to in Risktool man toagement quantify remains the level the ofmain engage area- It has been a strong team effort, and I Product (GDP), which is a measure of lation of a Debt Sustainability Analysis recorded in March 2019. for the financial sector. Developments strategy, the projects under the four Where are we going? journey to be the ‘leading Fintech hubbe theproject ‘leading deliveries Fintech as huba consequence in Africa’. of of ment,focus andbased management on identified is keycommitted engage- In the year under review, the Board would like to extend my sincere thanks economic activity, is estimated to main sectors that are projected to foreign exchange from the local and implementation of a Medium Term in South Africa (SA) present much strategic areas of focus can be summa- South Africa in Africa’. The Central Bank of EswatiThe- theCentral leadership Bank ofuncertainty Eswatini, amongin to mentapplying measurement international indicators. best practice Our finalised the external Board evaluation and appreciation to the Minister for have expanded by 2.4 per cent in perform poorly include ‘Construction’, market as a long term objective to Debt Strategy is now vital. The Bank’s inflation forecast for the closer risks to Eswatini’s financial rised as follows: This is the question we ask ourselves. ni, in partnership with other stakeholdpartnership- other operational with other inefficiencies. stakeholders andstakeholders standards to continue ensure thatto be the concerned effects exercise with the Institute of Directors Finance and his officials, Board of Direc- 2018 compared to 2.0 per cent in ‘Wholesale and Retail’ and ‘General boost the level of reserves. The Bank year 2019 has been revised down to stability due to SA being the anchor Assuming that success was a place, According to preliminary indicators ers established a regulatory Sandbox toestablished a regulatory Sandbox to of uncertaintyabout Government’s on objectives fiscal are position,system- (SA). tors, all staff of the Bank as well as published by Statistics South Africa on 2017. This increase is mainly Public Administration’. will also continue to monitor develop- Balance of payments 2.67 per cent in September 2019, from economy for the Common Monetary foster innovation in the financial Corporate social investment slow regulatory reforms, compliance Human dynamics how would we know we are there? We financial institutions and other key 4 June 2019, the annual estimate of accounted for by strong positive ments and offer appropriate advice to the previous forecast of 2.87 per cent Area (CMA). The banking sector sector. This platform provides an and reputational implications. thus must speak to our most important Following the ever-evolving corporate stakeholders for their cooperation, real GDP for 2018 increased by 0.8 per developments in the primary and Going forward, GDP is projected to the Government in order to retain the In the financial year 2018/19, the projected in July 2019. The proposed remains stable, liquid and adequately opportunity to test innovative Through its Corporate Social Invest- The impact of this programme will be goals to be achieved in the next 12 governance developments locally and commitment and dedication to the Inflationary pressures remained contained in June cent following an increase of 1.4 per tertiary sectors. increase by 2.9 per cent in 2020 and reserves at levels above the threshold country posted an overall balance of introduction of Value Added Tax (VAT) capitalised. However, credit risk is solutions in a live environment whilst seen in the long term. However, months. Again, we focus on our V4 internationally, which call for increased attainment of price and financial stabili- 2019. Rates of increase in input costs and output cent in 2017. The annual real GDP then retreat to 1.3 per cent and 1.7 of three months cover of imports of payments deficit of E2.314 billion, on electricity in the year poses an increasing, thus affecting bank ensuring consumer protection. projects like the ones on culture shift Targets, Process Outputs and Strategic regulation, greater transparency, and ty in the Kingdom of Eswatini. I have no charges both ticked lower and remained below growth of 0.8 per cent in 2018 was led High frequency data reflects that per cent in 2021 and 2022, respective- goods and services. triple the deficit of E799.3 million upside risk to overall inflation. Over earnings, which will ultimately affect and stakeholder management have Projects. This is where we demon- more rigorous scrutiny of large institu- doubt that I can continue to rely on their respective long-run averages. Average vendor by increased economic activity in economic activity expanded by 4.2 ly. recorded in the 2017/18 financial the medium term, inflation is project- solvency of banks. Financial Technology in the world is already identified gaps in the environ- strate ‘The 4 Disciplines of Execution’ tions, the ethics and compliance them for unwavering support and lead times (a bellwether of supply-chain price finance, real estate and business per cent, on a year-on-year basis Private sector credit year. This necessitated a reduction in ed at 4.31 per cent in 2020 and 5.29 growing at a rapid pace and the Bank is ment and have also identified possible approach, in that; function becomes integral to the strate- dedication in the execution of our pressures) also improved for the first time in six services, which contributed 0.4 of a (seasonally adjusted), in the first reserve assets, as a financing item for per cent in 2021. National payment systems aligning itself accordingly to ensure interventions. As these roll out their gic core of organisations gearing to mandate and objectives in the interest years, as purchasing activity among manufacturers percentage point based on growth of quarter of 2019 compared to 2.4 per External reserves Growth in credit extended to the the deficit recorded in the overall the country attains Vision 2022. programme of action, we will start to • We have not discarded any targets maintaining public trust. Therefore, of all Emaswati. fell for five consecutive months (IMF WEO Update, 1.8 per cent, and general Government cent in the previous quarter. Sectors private sector decelerated somewhat balance of payments. In 2018/19, the Monetary Policy Consultative Operations of designated systemically see improvements. Areas where we in the process of identifying our beyond responding to changes in the July 2019). services, which contributed 0.2 of a that recorded significant positive Eswatini’s external reserves continued from the double digit rate recorded in country benefitted from increased Committee important national payment systems Risk management approach did not move as swiftly as we had important goals. Instead, we industry, the Central Bank of Eswatini percentage point based on a 1.3 per performance in the first quarter of to fall as the Government made draw- the past year to single digit. The debt security holdings, which diluted continued to run smoothly during the anticipated are in relation to the allocated weights to help us prior- continues to invest its efforts in creating Global inflation and commodities overview cent rise. 2019 included; ‘manufacturing’, downs on its deposits held at the Bank growth was largely supported by the depletion in the country’s claims The Governor makes monetary policy reporting period. The Bank closely monitors the operat- identification of future skills and itize the targets. The weighting and a scalable ethics and compliance ‘wholesale and retail’, ‘transport to cover the persistent cash shortfalls. increased demand for credit towards on other monetary authorities. decisions after consultative meetings ing environment using the risk improvement of the performance prioritization was based on an ecosystem that will help meet its needs Majozi V. Sithole The IMF reported that headline inflation has The South African economy shrank by and storage’ and ‘financial services In terms of estimated imports of goods ‘businesses’ and ‘other sectors’ with the Monetary Policy Consultative During the period under review, the exposure, opportunities and management system. The bottlenecks assessment of which targets assist- today and in the future. Governor remained subdued across most advanced and an annualised 3.2 per cent excluding insurance and pension and services, the reserves were (namely ‘other financial corpora- Consumer inflation Committee (MPCC). In 2018/19, the Bank approved an application from process-efficiency approach to identify have been identified and in the next ed the Bank more towards achiev- emerging market economies. These developments quarter-on-quarter in the three funds’. Subsectors that performed sufficient to cover 2.0 months at the tions’). The accelerated growth in MPCC held six bi-monthly meetings. In Eswatini Mobile to provide mobile threats and avoid these; as well as find financial year, better results will be ing agility, efficiency and integra- Bank’s financial performance have contributed, in part, to market pricing of months to March 2019, following a 1.4 poorly included the following: end of March 2019, remarkably below credit to businesses is a positive devel- The annual consumer inflation was these meetings, the MPCC reviewed money transfer services to its custom- and pursue opportunities in fulfilling realised. Some projects have missed tion. expected inflation dropping sharply in the United per cent growth in the previous period ‘public administration’, ‘construc- the three-months threshold and also opment as this sector drives domestic relatively contained in the 2018/19 developments on inflation (including ers. Eswatini Mobile has partnered its mandate. This is attained through timeliness in terms of delivery, while Operationally, the Bank remained States and the Eurozone. Consumer prices in and compared to market expectations tion’, ‘mining and quarrying’, ‘tour- lower than the 3.2 months covered at economic growth. financial year, averaging 5.0 per cent forecasts) as well as other macroeco- with Eswatini Bank, who will also be integrating the Bank’s strategy, risk others are on track. • We have developed both Lag and profitable during the year, even though advanced economies, on average, are projected to of a 1.7 per cent contraction. It was ism activities’, ‘human health, and the same time in the previous year. compared to 5.5 per cent in the previ- nomic indicators of the domestic, holding the required trust account for and performance for effective Lead Measures for all our targets. rise to 1.6 per cent in 2019, edging up marginally the sharpest quarterly decline since social activities’. Fiscal cash-flow Public finance ous financial year. The moderation in regional and international economies. deposit-taking from agents. The planning and monitoring. Business intelligence This will make it easier for project to 2.0 per cent in 2020. Consistent with subdued Q1-2009, mainly reflecting the effects challenges continued to weigh on During the course of the financial year, consumer inflation mainly benefitted Over the reporting period, the MPCC service will provide financial services teams to know what is expected of of power cuts on manufacturing and implementation of public infrastruc- the Bank engaged in an exercise to buy The 2019/20 budget was presented from favourable food prices, which recommended to keep the discount to the banked, underbanked and Risk management remains the main It has taken us a while to put the them in the next 12 months. mining. tural projects thereby resulting in foreign exchange originating from under an unprecedented economic recorded a deflation of 0.2 per cent in rate unchanged at 6.75 per cent. unbanked population. area of focus and management is foundation and framework in place for • We use information attained lower output in construction activity. export proceeds from the local crisis, where the country is faced with the period under review down from committed to applying international this programme. A lot of research work • We have implemented monthly from Departmental, Manage- commercial banks. The accumulation pressure on Government revenues, 5.2 per cent the previous financial Financial stability Financial sector development best practice and standards to ensure was done to ensure that when the monitoring scorecards for the ment Committee, Executive Medium Term GDP Projections of these funds has assisted to buffer accumulating arrears, depleted year. implementation plan that the effects of uncertainty on projects take off, all processes are Projects and Change Management Committee and Board meet- the reserves portfolio against reserves and sluggish growth. As such, The Bank, through its macro-pruden- objectives are systematically and properly aligned. Committee and the quarterly score- ings to hold each other Economic activity is projected to outflows. In the absence of this inter- restoring prudent public finance Inflation outlook tial mandate, is committed to The Bank continued to coordinate the continuously monitored. This is done cards for the Board Capital Projects accountable, so that the goals decelerate to 1.4 per cent in 2019 vention, reserves levels would have management remains pivotal in mitigate risks to financial stability. implementation of the Financial through periodic assessments of strate- and Investment Committee, which do not naturally disintegrate in from 2.4 per cent in 2018 largely due been significantly lower. The Bank will helping the country achieve sustaina- The inflation outlook, which remains a The financial stability mandate Sector Development Implementation gic objectives, projects and day-to-day will provide compelling scoreboards the whirlwind. to worsening fiscal challenges. The continue with its efforts to acquire ble and inclusive growth. predominant guide for monetary complements the price stability objec- Plan (FSDIP). processes, using various tools as for tracking delivery.

CBE Integrated Annual Report 2018/19 14 Introduction mism in the global economy being weighed down by prolonged policy It gives me great pleasure to present to uncertainty as trade tensions remain. the Minister for Finance, Eswatini On the trade front, the forecast reflects citizens and other stakeholders the the May 2019 increase of US tariffs on second CBE Integrated Annual Report USD200 billion of Chinese exports from for the financial year ended 31 March 10 per cent to 25 per cent, and retalia- 2019. The Report provides a compre- tion by China. hensive overview of the operations of the CBE during the past financial year. Furthermore, technology tensions have It includes a summarised version of the erupted, threatening global technology financial statements. supply chains, and the prospects of a ‘no deal’ Brexit have increased follow- Coverage ing the appointment of new Prime Minister (PM) Boris Johnson in the Matters included in the Report are United Kingdom. In addition, rising aimed at informing and providing assur- geopolitical tensions, especially relat- ance to stakeholders on the CBE’s ing to sanctions on Iran, supply disrup- ability to deliver on its mandate, tions in Russia, Chile and Libya have commitment to sustained relationships roiled energy prices and, in the process, and responsible corporate citizenship. affected commodity exporters, despite The issues of materiality pertain to a near-term strengthening of oil prices. price stability and broader stability of Overall, risks to the latest growth the financial sector conducive to forecast are mainly to the downside. economic growth in the short, medium Other negative developments include a and long term. protracted increase in risk aversion that has exposed the financial vulnerabili- Materiality ties that continue to accumulate after years of low interest rates; and the In ascertaining matters of materiality mounting disinflationary pressures that for disclosure in this Report, the Bank increase debt service difficulties, has considered issues that either affect constraining monetary policy space to or have potential to substantially affect counter downturns, and make adverse our ability to perform and remain shocks more persistent than normal. relevant, our mode of operation, input factors as well as our ability to create The IMF highlights that, against the value over time. As indicated, issues of observed difficult backdrop in the first materiality pertain to those that direct- half of 2019, there were positive ly affect the Bank’s ability to achieve surprises to growth in advanced econo- its price and financial stability mies, but weaker-than-expected activi- mandate. ty in emerging markets and developing economies. For advanced economies, Global developments growth is projected at 1.9 per cent in 2019 and 1.7 per cent in 2020. In According to the International Monetary emerging markets and developing econ- Fund’s World Economic Outlook (IMF omies, growth is forecast at 4.1 per WEO) Update released in July 2019, cent in 2019, picking up to 4.7 per cent global growth is forecast at 3.2 per cent in 2020. Investment and demand for in 2019, before picking up to 3.5 per consumer durables have been subdued cent in 2020. The softer projections across advanced and emerging market follow a 3.6 per cent expansion record- economies as firms and households ed in 2018. Global growth remains continue to hold back on long-term sluggish and precarious, with the dyna- spending.

GOVERNOR'S STATEMENT

As at the end of March 2019, the Budget estimates for 2019/20 show The FSDIP has four pillars namely; prescribed in the CBE Enterprise Risk ment (CSI) programme, the Bank annual inflation rate increased to 4.5 that the fiscal gap has reduced to E3.0 financial stability, financial inclusion, Management (ERM) Framework. pursues excellence in community growth in final demand, core inflation per cent from 4.1 per cent in Febru- billion (equivalent to a deficit of 4.5 diversification of the financial system Incidents are recorded, analysed and involvement and upholding generally aticallyOur strategy and continuously monitored. toolRegulatory to quantify reform the level of engage- across advanced economies has ary, the highest inflation rate since per cent of GDP) from an estimated and modernisation of the financial reported, and key risk indicators are accepted principles underlying good This is done through periodic assessment, based on identified key engage- softened below target (for example, in December, amid a sharp rise in fuel outturn of 5.5 per cent in 2018/19. system. More information, including monitored and periodically reported to corporate social responsibility. The mentsOur ‘super-goal’ of strategic (V4 objectives, target) is toprojects be an mentThe amendmentmeasurement of allindicators. the identified Our the United States) or remained well prices. The financial year ended with This contraction was mainly due to the FSDIP achievements, is reflected on the risk governance structures to focus of the CSI programme is three andagile, day-to-day efficient processes, and integrated using centralvarious stakeholderslegislations continueis key into ourbe concerneddrive to below it (in the Eurozone and Japan). the South African Reserve Bank fiscal consolidation and proposed page 26. inform decision-making. priority areas, namely; community toolsbank as byprescribed the year in the 2021. CBE EnterpriseWe may aboutimprove Government’s the effectiveness fiscal position, of slowour Governance its profit declined by 4 per cent to reach (SARB) voting unanimously to hold its revenue measures that the Govern- health programmes, educational initia- Riskachieve Management all other strategic(ERM) targets,Framework. but regulatoryregulatory reforms,mandate. compliance Most of theand E190.1 million at end of March 2019. The IMF projects inflation in emerging benchmark repo rate steady at 6.75 ment has put in place for the financial Financial technology CBE top 10 risks tives (covering primary school, high Incidentsif we miss are this recorded, one, our entireanalysed strategy and reputationalamendments implications. have been concluded and The Board maintains full and effective This has, once again, been a difficult markets and developing economies, on per cent on 28 March 2019, as widely year. school, tertiary institutions) and reported,will fail. andIn thekey previousrisk indicators year, arewe quality assured. The next year we will control over the operations of the Bank year, but the CBE has been able to average, to rise to 4.8 per cent in expected. Policymakers highlighted The range, prevalence and evolution of For the period under review, the Bank national research institutions. Total monitoredcaptured andour periodically V4 targets reported for the to Ourbe focusingstrategy on the legislative stages and is accountable and responsible for contend with the challenges presented. 2019, before declining to 4.7 per cent that the current stance on monetary Public debt financial innovations have since identified, analysed and prioritised the amount invested in this programme for the2018/19 risk governance financial year.structures to inform that are outside of our control. its performance and compliance. The in 2020. Core inflation has also policy remains accommodative and increased incredibly. In the light of top 10 corporate risks according to the the financial year was E1.7 million. decision-making. Our ‘super-goal’ (V4 target) is to be an Board reviews the strategic priorities of Supplementary reports dropped further below historical monetary policy actions will continue Total public debt stock was recorded policy, is on a downward trend with tive of the Bank through formulation these technological advancements for Bank’s process construct. The top 10 The Bank identified four strategic agile,Financial efficient sustainability and integrated central the Bank, determines investment averages in many emerging markets to focus on anchoring inflation near at E17.6 billion, an equivalent of 26.7 expected upward risks towards the and implementation of appropriate financial services, regulators and risks are based on the risk landscape Stakeholder engagement CBEareas top of 10focus, risks namely; human dynam-dynam- bank by the year 2021. We may achieve policies and delegates to management As stand-alone reports, the Bank, along- and developing economies, barring a to the mid-point of the target range per cent of GDP at the end of March end of 2019. The inflation trajectory macro-prudential policy measures. supervisors face the challenge of considered against the Bank’s capacity ics, financial sustainability, regulatory allThe other programme strategic did targets, well in but counter-counter if we- the detailed planning and implementa- side the Integrated Annual Report, also few cases such as Argentina, Turkey, in the interest of sustainable growth. 2019. This reflects an increase of 35.4 swings hinge on policy uncertainty as After sufficient deliberations on finan- harnessing the potential of Financial to avoid and mitigate the likelihood of We have a Stakeholder Management Forreform the periodand business under intelligence.review, the EachBank missacting this the one, negative our entire effects strategy of outflows will tion of the objectives and policies in publishes an Economic Review Report, and Venezuela – contributing to the per cent from the revised figure of we come to grips with the impact of cial stability issues, the Financial Technology (Fintech), while making the risk occurrence as well as the Framework in place that guides stake- identified,of these strategic analysed areas and prioritisedis overseen theby fail.in Inthe the South previous African year, Randwe captured (ZAR) accordance with acceptable risk param- Financial Stability Report and Audited subdued headline inflation across this KINGDOM OF ESWATINI E13.0 billion recorded in March 2018. the freeze on increases in water and Stability Committee (FSC) discharges sure not to undermine consumer impact - should it occur. Mitigation holder engagement activities and topa 10champion. corporate Arisks total according of fifteento the ourportfolio. V4 targets It foralso the performed 2018/19 financialwell in eters. The Board monitors compliance Financial Statements, which can be group of countries. Core inflation has The surge is mainly attributed to electricity tariffs introduced by the its accountability through the publica- protection, integrity of financial measures were implemented during processes. During the reporting year, Bank’sprogrammes process areconstruct. run under The topthese 10 year.creating financial efficiencies (per V4 with policies and achievements against accessed on our website: also dropped further below historical GDP developments continued issuance of Government new Cabinet. The freeze on increases tion of the annual Financial Stability markets and stability of the financial the course of the financial year, with we developed a Meaningful Stakehold- risksstrategic are based areas, onwith the each risk programme landscape financial efficiency targets). More set objectives by holding management https://www.centralbank.org.sz. averages in many emerging markets securities. The Bank notes with in the electricity tariff has been Report. system as a whole. strategic and operational projects er Engagement Project as one of our consideredheaded by againsta manager the reportingBank’s capacity to the Theinterventions Bank identified will continue four strategic even in areas the accountable for its activities through and developing economies, barring a According to official provisional concern that the country’s debt has reflected in the inflation outcome for implemented for transformation and to strategic activities. We developed a torelevant avoid and champion. mitigate the likelihood of ofnext focus, financial namely; year. human dynamics, performance reporting and budget Conclusion few cases such as Argentina, Turkey, estimates by the Central Statistics been rising exponentially over the April 2019, where it fell to a low of 1.8 Eswatini’s fiscal challenges still repre- The Eswatini Fintech strategy improve controls. Reasonable success stakeholder engagement measurement the risk occurrence as well as the financial sustainability, regulatory updates. and Venezuela. Office (CSO), the Gross Domestic year under review. As such, the formu- per cent down from 5.3 per cent sent a significant point of vulnerability describes the country’s priorities in its was achieved with slight delays in tool to quantify the level of engage- impactWith regards- should to performanceit occur. Mitigation against reform and business intelligence. Each It has been a strong team effort, and I Product (GDP), which is a measure of lation of a Debt Sustainability Analysis recorded in March 2019. for the financial sector. Developments journey to be the ‘leading Fintech hub project deliveries as a consequence of ment, based on identified key engage- measuresstrategy, were the projectsimplemented under during the four the ofWhere these strategic are we areasgoing? is overseen by a In the year under review, the Board would like to extend my sincere thanks South Africa economic activity, is estimated to main sectors that are projected to foreign exchange from the local and implementation of a Medium Term in South Africa (SA) present much in Africa’. The Central Bank of Eswati- the leadership uncertainty among ment measurement indicators. Our coursestrategic of the areas financial of focus year, can with be summa-summa strate-- champion. A total of fifteen programmes finalised the external Board evaluation and appreciation to the Minister for have expanded by 2.4 per cent in perform poorly include ‘Construction’, market as a long term objective to Debt Strategy is now vital. The Bank’s inflation forecast for the closer risks to Eswatini’s financial ni, in partnership with other stakehold- other operational inefficiencies. stakeholders continue to be concerned gicrised and as operational follows: projects implement- areThis run is theunder question these we strategic ask ourselves. areas, exercise with the Institute of Directors Finance and his officials, Board of Direc- According to preliminary indicators 2018 compared to 2.0 per cent in ‘Wholesale and Retail’ and ‘General boost the level of reserves. The Bank year 2019 has been revised down to stability due to SA being the anchor ers established a regulatory Sandbox to about Government’s fiscal position, ed for transformation and to improve withAssuming each thatprogramme success headedwas a place,by a (SA). tors, all staff of the Bank as well as published by Statistics South Africa on 2017. This increase is mainly Public Administration’. will also continue to monitor develop- Balance of payments 2.67 per cent in September 2019, from economy for the Common Monetary foster innovation in the financial Corporate social investment slow regulatory reforms, compliance controls.Human dynamicsReasonable success was managerhow would reporting we know towe arethe there?relevant We financial institutions and other key 4 June 2019, the annual estimate of accounted for by strong positive ments and offer appropriate advice to the previous forecast of 2.87 per cent Area (CMA). The banking sector sector. This platform provides an and reputational implications. achieved with slight delays in project champion.thus must speak to our most important Following the ever-evolving corporate stakeholders for their cooperation, real GDP for 2018 increased by 0.8 per developments in the primary and Going forward, GDP is projected to the Government in order to retain the In the financial year 2018/19, the projected in July 2019. The proposed remains stable, liquid and adequately opportunity to test innovative Through its Corporate Social Invest- deliveriesThe impact as ofa this consequence programme ofwill thebe goals to be achieved in the next 12 governance developments locally and commitment and dedication to the Inflationary pressures remained contained in June cent following an increase of 1.4 per tertiary sectors. increase by 2.9 per cent in 2020 and reserves at levels above the threshold country posted an overall balance of introduction of Value Added Tax (VAT) capitalised. However, credit risk is solutions in a live environment whilst leadershipseen in theuncertainty long term. among However, other Withmonths. regards Again, to weperformance focus on ouragainst V4 internationally, which call for increased attainment of price and financial stabili- 2019. Rates of increase in input costs and output cent in 2017. The annual real GDP then retreat to 1.3 per cent and 1.7 of three months cover of imports of payments deficit of E2.314 billion, on electricity in the year poses an increasing, thus affecting bank ensuring consumer protection. operationalprojects like inefficiencies. the ones on culture shift strategy,Targets, Processthe projects Outputs under and Strategicthe four regulation, greater transparency, and ty in the Kingdom of Eswatini. I have no charges both ticked lower and remained below growth of 0.8 per cent in 2018 was led High frequency data reflects that per cent in 2021 and 2022, respective- goods and services. triple the deficit of E799.3 million upside risk to overall inflation. Over earnings, which will ultimately affect and stakeholder management have strategicProjects. areas This ofis focus where can we be demon-demonsumma-- more rigorous scrutiny of large institu- doubt that I can continue to rely on their respective long-run averages. Average vendor by increased economic activity in economic activity expanded by 4.2 ly. recorded in the 2017/18 financial the medium term, inflation is project- solvency of banks. Financial Technology in the world is Corporatealready identified social investmentgaps in the environ- risedstrate as ‘Thefollows: 4 Disciplines of Execution’ tions, the ethics and compliance them for unwavering support and lead times (a bellwether of supply-chain price finance, real estate and business per cent, on a year-on-year basis Private sector credit year. This necessitated a reduction in ed at 4.31 per cent in 2020 and 5.29 growing at a rapid pace and the Bank is ment and have also identified possible approach, in that; function becomes integral to the strate- dedication in the execution of our pressures) also improved for the first time in six services, which contributed 0.4 of a (seasonally adjusted), in the first reserve assets, as a financing item for per cent in 2021. National payment systems aligning itself accordingly to ensure Throughinterventions. its Corporate As these Social roll Investment out their Human dynamics gic core of organisations gearing to mandate and objectives in the interest years, as purchasing activity among manufacturers percentage point based on growth of quarter of 2019 compared to 2.4 per External reserves Growth in credit extended to the the deficit recorded in the overall the country attains Vision 2022. (CSI)programme programme, of action, the weBank will startpursues to • We have not discarded any targets maintaining public trust. Therefore, of all Emaswati. fell for five consecutive months (IMF WEO Update, 1.8 per cent, and general Government cent in the previous quarter. Sectors private sector decelerated somewhat balance of payments. In 2018/19, the Monetary Policy Consultative Operations of designated systemically excellencesee improvements. in community Areas involvement where we The inimpact the processof this programmeof identifying will our be beyond responding to changes in the July 2019). services, which contributed 0.2 of a that recorded significant positive Eswatini’s external reserves continued from the double digit rate recorded in country benefitted from increased Committee important national payment systems Risk management approach anddid notupholding move asgenerally swiftly as acceptedwe had seenimportant in the longgoals. term.Instead, However, we industry, the Central Bank of Eswatini percentage point based on a 1.3 per performance in the first quarter of to fall as the Government made draw- the past year to single digit. The debt security holdings, which diluted continued to run smoothly during the principlesanticipated underlying are in relationgood corporate to the projectsallocated like theweights ones to on help culture us prior-prior shift- continues to invest its efforts in creating Global inflation and commodities overview cent rise. 2019 included; ‘manufacturing’, downs on its deposits held at the Bank growth was largely supported by the depletion in the country’s claims The Governor makes monetary policy reporting period. The Bank closely monitors the operat- socialidentification responsibility. of Thefuture focus skills of the and CSI and itizeitisestakeholder thethe targets.targets. management TheThe weightingweighting haveandand a scalable ethics and compliance ‘wholesale and retail’, ‘transport to cover the persistent cash shortfalls. increased demand for credit towards on other monetary authorities. decisions after consultative meetings ing environment using the risk programmeimprovement is threeof the priority performance areas, alreadyprioritizationprioritisation identified wasgaps inbased the environ-on an ecosystem that will help meet its needs Majozi V. Sithole The IMF reported that headline inflation has The South African economy shrank by and storage’ and ‘financial services In terms of estimated imports of goods ‘businesses’ and ‘other sectors’ with the Monetary Policy Consultative During the period under review, the exposure, opportunities and namely;management community system. health The programmes, bottlenecks mentassessment and have ofalso which identified targets possible assist-assist- today and in the future. Governor remained subdued across most advanced and an annualised 3.2 per cent excluding insurance and pension and services, the reserves were (namely ‘other financial corpora- Consumer inflation Committee (MPCC). In 2018/19, the Bank approved an application from process-efficiency approach to identify educationalhave been initiativesidentified (coveringand in the prima- next interventions.ed the Bank As morethese towards roll out achiev-achiev their- emerging market economies. These developments quarter-on-quarter in the three funds’. Subsectors that performed sufficient to cover 2.0 months at the tions’). The accelerated growth in MPCC held six bi-monthly meetings. In Eswatini Mobile to provide mobile threats and avoid these; as well as find ryfinancial school, highyear, school,better tertiaryresults willinstitu- be programmeing agility, of action,efficiency we andwill integraintegra-start to- Bank’s financial performance have contributed, in part, to market pricing of months to March 2019, following a 1.4 poorly included the following: end of March 2019, remarkably below credit to businesses is a positive devel- The annual consumer inflation was these meetings, the MPCC reviewed money transfer services to its custom- and pursue opportunities in fulfilling tions)realised. and Somenational projects research have institu-missed see tion.improvements. Areas where we did expected inflation dropping sharply in the United per cent growth in the previous period ‘public administration’, ‘construc- the three-months threshold and also opment as this sector drives domestic relatively contained in the 2018/19 developments on inflation (including ers. Eswatini Mobile has partnered its mandate. This is attained through tions.timeliness Total inamount terms ofinvested deliverdelivery, y,in while this not move as swiftly as we had anticipat- Operationally, the Bank remained this programme. A lot of research work States and the Eurozone. Consumer prices in and compared to market expectations tion’, ‘mining and quarrying’, ‘tour- lower than the 3.2 months covered at economic growth. financial year, averaging 5.0 per cent forecasts) as well as other macroeco- with Eswatini Bank, who will also be integrating the Bank’s strategy, risk programmeothers are onfor track.the financial year was ed• are We in haverelation developed to the identification both Lag and of profitable during the year, even though was done to ensure that when the advanced economies, on average, are projected to of a 1.7 per cent contraction. It was ism activities’, ‘human health, and the same time in the previous year. compared to 5.5 per cent in the previ- nomic indicators of the domestic, holding the required trust account for and performance for effective E1.7 million. futureLead skills Measures and improvement for all our targets. of the projects take off, all processes are rise to 1.6 per cent in 2019, edging up marginally the sharpest quarterly decline since social activities’. Fiscal cash-flow Public finance ous financial year. The moderation in regional and international economies. deposit-taking from agents. The planning and monitoring. Business intelligence performanceThis will makemanagement it easier system. for project The properly aligned. to 2.0 per cent in 2020. Consistent with subdued Q1-2009, mainly reflecting the effects challenges continued to weigh on During the course of the financial year, consumer inflation mainly benefitted Over the reporting period, the MPCC service will provide financial services Stakeholder engagement bottlenecksteams to have know been what identified is expected and ofin of power cuts on manufacturing and implementation of public infrastruc- the Bank engaged in an exercise to buy The 2019/20 budget was presented from favourable food prices, which recommended to keep the discount to the banked, underbanked and Risk management remains the main It has taken us a while to put the the themnext infinancial the next year, 12 months. better results mining. tural projects thereby resulting in foreign exchange originating from under an unprecedented economic recorded a deflation of 0.2 per cent in rate unchanged at 6.75 per cent. unbanked population. area of focus and management is Wefoundation have a andStakeholder framework Management in place for will be realised. Some projects have Regulatory reform • We use information attained lower output in construction activity. export proceeds from the local crisis, where the country is faced with the period under review down from committed to applying international Frameworkthis programme. in place A lot that of researchguides stake- work missed• We timeliness have implemented in terms of monthlydelivery, from Departmental, Manage-Manage- commercial banks. The accumulation pressure on Government revenues, 5.2 per cent the previous financial Financial stability Financial sector development best practice and standards to ensure holderwas doneengagement to ensure thatactivities when andthe whilemonitoring others are onscorecards track. for the The amendment of all the identified ment Committee, Executive Medium Term GDP Projections of these funds has assisted to buffer accumulating arrears, depleted year. implementation plan that the effects of uncertainty on processes.projects Duringtake off, the allreporting processes year, are we Projects and Change Management legislations is key in our drive to Committee and Board meet-meet- the reserves portfolio against reserves and sluggish growth. As such, The Bank, through its macro-pruden- objectives are systematically and developedproperly aligned.a Meaningful Stakeholder BusinessCommittee intelligence and the quarterly scorescore-- improve the effectiveness of our regula- ings to hold each other Economic activity is projected to outflows. In the absence of this inter- restoring prudent public finance Inflation outlook tial mandate, is committed to The Bank continued to coordinate the continuously monitored. This is done Engagement Project as one of our cards for the Board Capital Projects tory mandate. Most of the amendments accountable, so that the goals decelerate to 1.4 per cent in 2019 vention, reserves levels would have management remains pivotal in mitigate risks to financial stability. implementation of the Financial through periodic assessments of strate- strategic activities. We developed a It hasand takenInvestment us a Committee,while to put which the have been concluded and quality do not naturally disintegrate in from 2.4 per cent in 2018 largely due been significantly lower. The Bank will helping the country achieve sustaina- The inflation outlook, which remains a The financial stability mandate Sector Development Implementation gic objectives, projects and day-to-day stakeholder engagement measurement foundationwill provide and compellingframework scoreboardsin place for assured. The next year we will be focus- the whirlwind. to worsening fiscal challenges. The continue with its efforts to acquire ble and inclusive growth. predominant guide for monetary complements the price stability objec- Plan (FSDIP). processes, using various tools as for tracking delivery.

15 CBE Integrated Annual Report 2018/19 Introduction mism in the global economy being weighed down by prolonged policy It gives me great pleasure to present to uncertainty as trade tensions remain. the Minister for Finance, Eswatini On the trade front, the forecast reflects citizens and other stakeholders the the May 2019 increase of US tariffs on second CBE Integrated Annual Report USD200 billion of Chinese exports from for the financial year ended 31 March 10 per cent to 25 per cent, and retalia- 2019. The Report provides a compre- tion by China. hensive overview of the operations of the CBE during the past financial year. Furthermore, technology tensions have It includes a summarised version of the erupted, threatening global technology financial statements. supply chains, and the prospects of a ‘no deal’ Brexit have increased follow- Coverage ing the appointment of new Prime Minister (PM) Boris Johnson in the Matters included in the Report are United Kingdom. In addition, rising aimed at informing and providing assur- geopolitical tensions, especially relat- ance to stakeholders on the CBE’s ing to sanctions on Iran, supply disrup- ability to deliver on its mandate, tions in Russia, Chile and Libya have commitment to sustained relationships roiled energy prices and, in the process, and responsible corporate citizenship. affected commodity exporters, despite The issues of materiality pertain to a near-term strengthening of oil prices. price stability and broader stability of Overall, risks to the latest growth the financial sector conducive to forecast are mainly to the downside. economic growth in the short, medium Other negative developments include a and long term. protracted increase in risk aversion that has exposed the financial vulnerabili- Materiality ties that continue to accumulate after years of low interest rates; and the In ascertaining matters of materiality mounting disinflationary pressures that for disclosure in this Report, the Bank increase debt service difficulties, has considered issues that either affect constraining monetary policy space to or have potential to substantially affect counter downturns, and make adverse our ability to perform and remain shocks more persistent than normal. relevant, our mode of operation, input factors as well as our ability to create The IMF highlights that, against the value over time. As indicated, issues of observed difficult backdrop in the first materiality pertain to those that direct- half of 2019, there were positive ly affect the Bank’s ability to achieve surprises to growth in advanced econo- its price and financial stability mies, but weaker-than-expected activi- mandate. ty in emerging markets and developing economies. For advanced economies, Global developments growth is projected at 1.9 per cent in 2019 and 1.7 per cent in 2020. In According to the International Monetary emerging markets and developing econ- Fund’s World Economic Outlook (IMF omies, growth is forecast at 4.1 per WEO) Update released in July 2019, cent in 2019, picking up to 4.7 per cent global growth is forecast at 3.2 per cent in 2020. Investment and demand for in 2019, before picking up to 3.5 per consumer durables have been subdued cent in 2020. The softer projections across advanced and emerging market follow a 3.6 per cent expansion record- economies as firms and households ed in 2018. Global growth remains continue to hold back on long-term sluggish and precarious, with the dyna- spending.

GOVERNOR'S STATEMENT

As at the end of March 2019, the Budget estimates for 2019/20 show The FSDIP has four pillars namely; prescribed in the CBE Enterprise Risk ment (CSI) programme, the Bank annual inflation rate increased to 4.5 that the fiscal gap has reduced to E3.0 financial stability, financial inclusion, Management (ERM) Framework. pursues excellence in community growth in final demand, core inflation per cent from 4.1 per cent in Febru- billion (equivalent to a deficit of 4.5 diversification of the financial system Incidents are recorded, analysed and involvement and upholding generally Our strategy Regulatory reform across advanced economies has ary, the highest inflation rate since per cent of GDP) from an estimated and modernisation of the financial reported, and key risk indicators are accepted principles underlying good softened below target (for example, in December, amid a sharp rise in fuel outturn of 5.5 per cent in 2018/19. system. More information, including monitored and periodically reported to corporate social responsibility. The Our ‘super-goal’ (V4 target) is to be an The amendment of all the identified the United States) or remained well prices. The financial year ended with This contraction was mainly due to the FSDIP achievements, is reflected on the risk governance structures to focus of the CSI programme is three agile, efficient and integrated central legislations is key in our drive to below it (in the Eurozone and Japan). the South African Reserve Bank fiscal consolidation and proposed page 26. inform decision-making. priority areas, namely; community bank by the year 2021. We may improve the effectiveness of our ing Governanceon the legislative stages that are itsMeasures profit declined for all ourby 4targets. per cent This to reachwill (SARB) voting unanimously to hold its revenue measures that the Govern- health programmes, educational initia- achieve all other strategic targets, but regulatory mandate. Most of the outside of our control. E190.1make itmillion easier at for end project of March teams 2019. to The IMF projects inflation in emerging benchmark repo rate steady at 6.75 ment has put in place for the financial Financial technology CBE top 10 risks tives (covering primary school, high if we miss this one, our entire strategy amendments have been concluded and The Board maintains full and effective Thisknow has, what once is expected again, been of them a difficult in the markets and developing economies, on per cent on 28 March 2019, as widely year. school, tertiary institutions) and will fail. In the previous year, we quality assured. The next year we will Financialcontrol sustainabilityover the operations of the Bank year,next but12 months. the CBE has been able to average, to rise to 4.8 per cent in expected. Policymakers highlighted The range, prevalence and evolution of For the period under review, the Bank national research institutions. Total captured our V4 targets for the be focusing on the legislative stages and is accountable and responsible for contend with the challenges presented. 2019, before declining to 4.7 per cent that the current stance on monetary Public debt financial innovations have since identified, analysed and prioritised the amount invested in this programme for 2018/19 financial year. that are outside of our control. Theits programme performance did welland incompliance. counteract- The • We have implemented monthly moni- in 2020. Core inflation has also policy remains accommodative and increased incredibly. In the light of top 10 corporate risks according to the the financial year was E1.7 million. ing Boardthe negative reviews effectsthe strategic of outflows priorities in of Supplementarytoring scorecards reports for the Projects and dropped further below historical monetary policy actions will continue Total public debt stock was recorded policy, is on a downward trend with tive of the Bank through formulation these technological advancements for Bank’s process construct. The top 10 The Bank identified four strategic Financial sustainability the theSouth Bank,African Randdetermines (ZAR) portfolio.investment Change Management Committee and averages in many emerging markets to focus on anchoring inflation near at E17.6 billion, an equivalent of 26.7 expected upward risks towards the and implementation of appropriate financial services, regulators and risks are based on the risk landscape Stakeholder engagement areas of focus, namely; human dynam- It alsopolicies performed and delegates well in creating to management finan- Asthe stand-alone quarterly reports, scorecards the Bank, for alongthe - and developing economies, barring a to the mid-point of the target range per cent of GDP at the end of March end of 2019. The inflation trajectory macro-prudential policy measures. supervisors face the challenge of considered against the Bank’s capacity ics, financial sustainability, regulatory The programme did well in counter- cial theefficiencies detailed planning (per andV4 implementafinancial - sideBoard the CapitalIntegrated Projects Annual and Report, Invest- also few cases such as Argentina, Turkey, in the interest of sustainable growth. 2019. This reflects an increase of 35.4 swings hinge on policy uncertainty as After sufficient deliberations on finan- harnessing the potential of Financial to avoid and mitigate the likelihood of We have a Stakeholder Management reform and business intelligence. Each acting the negative effects of outflows efficiencytion of targets).the objectives More interventions and policies in publishesment Committee, an Economic which Review will provide Report, and Venezuela – contributing to the per cent from the revised figure of we come to grips with the impact of cial stability issues, the Financial Technology (Fintech), while making the risk occurrence as well as the Framework in place that guides stake- of these strategic areas is overseen by in the South African Rand (ZAR) will accordancecontinue even with in acceptable the next financial risk param - Financialcompelling Stability scoreboards Report forand tracking Audited subdued headline inflation across this KINGDOM OF ESWATINI E13.0 billion recorded in March 2018. the freeze on increases in water and Stability Committee (FSC) discharges sure not to undermine consumer impact - should it occur. Mitigation holder engagement activities and a champion. A total of fifteen portfolio. It also performed well in year.eters. The Board monitors compliance Financialdelivery. Statements, which can be group of countries. Core inflation has The surge is mainly attributed to electricity tariffs introduced by the its accountability through the publica- protection, integrity of financial measures were implemented during processes. During the reporting year, programmes are run under these creating financial efficiencies (per V4 with policies and achievements against accessed on our website: also dropped further below historical GDP developments continued issuance of Government new Cabinet. The freeze on increases tion of the annual Financial Stability markets and stability of the financial the course of the financial year, with we developed a Meaningful Stakehold- strategic areas, with each programme financial efficiency targets). More Whereset objectivesare we going? by holding management • https://www.centralbank.org.sz.We use information attained from averages in many emerging markets securities. The Bank notes with in the electricity tariff has been Report. system as a whole. strategic and operational projects er Engagement Project as one of our headed by a manager reporting to the interventions will continue even in the accountable for its activities through Departmental, Management Commit- and developing economies, barring a According to official provisional concern that the country’s debt has reflected in the inflation outcome for implemented for transformation and to strategic activities. We developed a relevant champion. next financial year. Thisperformance is the question reporting we ask ourselves.and budget Conclusiontee, Executive Committee and Board few cases such as Argentina, Turkey, estimates by the Central Statistics been rising exponentially over the April 2019, where it fell to a low of 1.8 Eswatini’s fiscal challenges still repre- The Eswatini Fintech strategy improve controls. Reasonable success stakeholder engagement measurement Assumingupdates. that success was a place, how meetings to hold each other account- and Venezuela. Office (CSO), the Gross Domestic year under review. As such, the formu- per cent down from 5.3 per cent sent a significant point of vulnerability describes the country’s priorities in its was achieved with slight delays in tool to quantify the level of engage- With regards to performance against would we know we are there? We thus Itable, has beenso that a thestrong goals team do noteffort, natural- and I Product (GDP), which is a measure of lation of a Debt Sustainability Analysis recorded in March 2019. for the financial sector. Developments journey to be the ‘leading Fintech hub project deliveries as a consequence of ment, based on identified key engage- strategy, the projects under the four Where are we going? mustIn speakthe yearto our under most importantreview, the goals Board wouldly disintegrate like to extend in the my whirlwind. sincere thanks South Africa economic activity, is estimated to main sectors that are projected to foreign exchange from the local and implementation of a Medium Term in South Africa (SA) present much in Africa’. The Central Bank of Eswati- the leadership uncertainty among ment measurement indicators. Our strategic areas of focus can be summa- to befinalised achieved the in external the next Board 12 months. evaluation and appreciation to the Minister for have expanded by 2.4 per cent in perform poorly include ‘Construction’, market as a long term objective to Debt Strategy is now vital. The Bank’s inflation forecast for the closer risks to Eswatini’s financial ni, in partnership with other stakehold- other operational inefficiencies. stakeholders continue to be concerned rised as follows: This is the question we ask ourselves. Again,exercise we focuswith theon Instituteour V4 ofTargets, Directors GovernanceFinance and his officials, Board of Direc- According to preliminary indicators 2018 compared to 2.0 per cent in ‘Wholesale and Retail’ and ‘General boost the level of reserves. The Bank year 2019 has been revised down to stability due to SA being the anchor ers established a regulatory Sandbox to about Government’s fiscal position, Assuming that success was a place, Process(SA). Outputs and Strategic Projects. tors, all staff of the Bank as well as published by Statistics South Africa on 2017. This increase is mainly Public Administration’. will also continue to monitor develop- Balance of payments 2.67 per cent in September 2019, from economy for the Common Monetary foster innovation in the financial Corporate social investment slow regulatory reforms, compliance Human dynamics how would we know we are there? We This is where we demonstrate ‘The 4 Thefinancial Board maintainsinstitutions full and and othereffective key 4 June 2019, the annual estimate of accounted for by strong positive ments and offer appropriate advice to the previous forecast of 2.87 per cent Area (CMA). The banking sector sector. This platform provides an and reputational implications. thus must speak to our most important DisciplinesFollowing of theExecution’ ever-evolving approach, corporate in controlstakeholders over the foroperations their ofcooperation, the Bank real GDP for 2018 increased by 0.8 per developments in the primary and Going forward, GDP is projected to the Government in order to retain the In the financial year 2018/19, the projected in July 2019. The proposed remains stable, liquid and adequately opportunity to test innovative Through its Corporate Social Invest- The impact of this programme will be goals to be achieved in the next 12 that;governance developments locally and andcommitment is accountable and anddedication responsible to forthe Inflationary pressures remained contained in June cent following an increase of 1.4 per tertiary sectors. increase by 2.9 per cent in 2020 and reserves at levels above the threshold country posted an overall balance of introduction of Value Added Tax (VAT) capitalised. However, credit risk is solutions in a live environment whilst seen in the long term. However, months. Again, we focus on our V4 internationally, which call for increased itsattainment performance of price and and compliance. financial stabili The - 2019. Rates of increase in input costs and output cent in 2017. The annual real GDP then retreat to 1.3 per cent and 1.7 of three months cover of imports of payments deficit of E2.314 billion, on electricity in the year poses an increasing, thus affecting bank ensuring consumer protection. projects like the ones on culture shift Targets, Process Outputs and Strategic • Weregulation, have not discardedgreater transparency, any targets in and Boardty in reviewsthe Kingdom the strategic of Eswatini. priorities I have of no charges both ticked lower and remained below growth of 0.8 per cent in 2018 was led High frequency data reflects that per cent in 2021 and 2022, respective- goods and services. triple the deficit of E799.3 million upside risk to overall inflation. Over earnings, which will ultimately affect and stakeholder management have Projects. This is where we demon- themore process rigorous of identifying scrutiny of our largeimpor- institu- thedoubt Bank, that I determinescan continue investment to rely on their respective long-run averages. Average vendor by increased economic activity in economic activity expanded by 4.2 ly. recorded in the 2017/18 financial the medium term, inflation is project- solvency of banks. Financial Technology in the world is already identified gaps in the environ- strate ‘The 4 Disciplines of Execution’ tanttions, goals. the Instead,ethics weand allocatedcompliance policiesthem andfor delegatesunwavering to managementsupport and lead times (a bellwether of supply-chain price finance, real estate and business per cent, on a year-on-year basis Private sector credit year. This necessitated a reduction in ed at 4.31 per cent in 2020 and 5.29 growing at a rapid pace and the Bank is ment and have also identified possible approach, in that; weightsfunction tobecomes help usintegral prioritize to the thestrate - thededication detailed planningin the executionand implementa- of our pressures) also improved for the first time in six services, which contributed 0.4 of a (seasonally adjusted), in the first reserve assets, as a financing item for per cent in 2021. National payment systems aligning itself accordingly to ensure interventions. As these roll out their targets.gic core The of weighting organisations and prioritiza- gearing to tionmandate of the and objectives objectives and in policiesthe interest in years, as purchasing activity among manufacturers percentage point based on growth of quarter of 2019 compared to 2.4 per External reserves Growth in credit extended to the the deficit recorded in the overall the country attains Vision 2022. programme of action, we will start to • We have not discarded any targets tionmaintaining was based public on an trust.assessment Therefore, of accordanceof all Emaswati. with acceptable risk param- fell for five consecutive months (IMF WEO Update, 1.8 per cent, and general Government cent in the previous quarter. Sectors private sector decelerated somewhat balance of payments. In 2018/19, the Monetary Policy Consultative Operations of designated systemically see improvements. Areas where we in the process of identifying our whichbeyond targets responding assisted to the changes Bank more in the eters. The Board monitors compliance July 2019). services, which contributed 0.2 of a that recorded significant positive Eswatini’s external reserves continued from the double digit rate recorded in country benefitted from increased Committee important national payment systems Risk management approach did not move as swiftly as we had important goals. Instead, we towardsindustry, achieving the Central agility, Bank efficiency of Eswatini with policies and achievements against percentage point based on a 1.3 per performance in the first quarter of to fall as the Government made draw- the past year to single digit. The debt security holdings, which diluted continued to run smoothly during the anticipated are in relation to the allocated weights to help us prior- andcontinues integration. to invest its efforts in creating set objectives by holding management Global inflation and commodities overview cent rise. 2019 included; ‘manufacturing’, downs on its deposits held at the Bank growth was largely supported by the depletion in the country’s claims The Governor makes monetary policy reporting period. The Bank closely monitors the operat- identification of future skills and itize the targets. The weighting and a scalable ethics and compliance accountable for its activities through ‘wholesale and retail’, ‘transport to cover the persistent cash shortfalls. increased demand for credit towards on other monetary authorities. decisions after consultative meetings ing environment using the risk improvement of the performance prioritization was based on an • Weecosystem have developed that will both help Lag meet and itsLead needs performanceMajozi V. Sithole reporting and budget The IMF reported that headline inflation has The South African economy shrank by and storage’ and ‘financial services In terms of estimated imports of goods ‘businesses’ and ‘other sectors’ with the Monetary Policy Consultative During the period under review, the exposure, opportunities and management system. The bottlenecks assessment of which targets assist- today and in the future. updates.Governor remained subdued across most advanced and an annualised 3.2 per cent excluding insurance and pension and services, the reserves were (namely ‘other financial corpora- Consumer inflation Committee (MPCC). In 2018/19, the Bank approved an application from process-efficiency approach to identify have been identified and in the next ed the Bank more towards achiev- emerging market economies. These developments quarter-on-quarter in the three funds’. Subsectors that performed sufficient to cover 2.0 months at the tions’). The accelerated growth in MPCC held six bi-monthly meetings. In Eswatini Mobile to provide mobile threats and avoid these; as well as find financial year, better results will be ing agility, efficiency and integra- Bank’s financial performance have contributed, in part, to market pricing of months to March 2019, following a 1.4 poorly included the following: end of March 2019, remarkably below credit to businesses is a positive devel- The annual consumer inflation was these meetings, the MPCC reviewed money transfer services to its custom- and pursue opportunities in fulfilling realised. Some projects have missed tion. expected inflation dropping sharply in the United per cent growth in the previous period ‘public administration’, ‘construc- the three-months threshold and also opment as this sector drives domestic relatively contained in the 2018/19 developments on inflation (including ers. Eswatini Mobile has partnered its mandate. This is attained through timeliness in terms of delivery, while Operationally, the Bank remained States and the Eurozone. Consumer prices in and compared to market expectations tion’, ‘mining and quarrying’, ‘tour- lower than the 3.2 months covered at economic growth. financial year, averaging 5.0 per cent forecasts) as well as other macroeco- with Eswatini Bank, who will also be integrating the Bank’s strategy, risk others are on track. • We have developed both Lag and profitable during the year, even though advanced economies, on average, are projected to of a 1.7 per cent contraction. It was ism activities’, ‘human health, and the same time in the previous year. compared to 5.5 per cent in the previ- nomic indicators of the domestic, holding the required trust account for and performance for effective Lead Measures for all our targets. rise to 1.6 per cent in 2019, edging up marginally the sharpest quarterly decline since social activities’. Fiscal cash-flow Public finance ous financial year. The moderation in regional and international economies. deposit-taking from agents. The planning and monitoring. Business intelligence This will make it easier for project to 2.0 per cent in 2020. Consistent with subdued Q1-2009, mainly reflecting the effects challenges continued to weigh on During the course of the financial year, consumer inflation mainly benefitted Over the reporting period, the MPCC service will provide financial services teams to know what is expected of of power cuts on manufacturing and implementation of public infrastruc- the Bank engaged in an exercise to buy The 2019/20 budget was presented from favourable food prices, which recommended to keep the discount to the banked, underbanked and Risk management remains the main It has taken us a while to put the them in the next 12 months. mining. tural projects thereby resulting in foreign exchange originating from under an unprecedented economic recorded a deflation of 0.2 per cent in rate unchanged at 6.75 per cent. unbanked population. area of focus and management is foundation and framework in place for • We use information attained lower output in construction activity. export proceeds from the local crisis, where the country is faced with the period under review down from committed to applying international this programme. A lot of research work • We have implemented monthly from Departmental, Manage- commercial banks. The accumulation pressure on Government revenues, 5.2 per cent the previous financial Financial stability Financial sector development best practice and standards to ensure was done to ensure that when the monitoring scorecards for the ment Committee, Executive Medium Term GDP Projections of these funds has assisted to buffer accumulating arrears, depleted year. implementation plan that the effects of uncertainty on projects take off, all processes are Projects and Change Management Committee and Board meet- the reserves portfolio against reserves and sluggish growth. As such, The Bank, through its macro-pruden- objectives are systematically and properly aligned. Committee and the quarterly score- ings to hold each other Economic activity is projected to outflows. In the absence of this inter- restoring prudent public finance Inflation outlook tial mandate, is committed to The Bank continued to coordinate the continuously monitored. This is done cards for the Board Capital Projects accountable, so that the goals decelerate to 1.4 per cent in 2019 vention, reserves levels would have management remains pivotal in mitigate risks to financial stability. implementation of the Financial through periodic assessments of strate- and Investment Committee, which do not naturally disintegrate in from 2.4 per cent in 2018 largely due been significantly lower. The Bank will helping the country achieve sustaina- The inflation outlook, which remains a The financial stability mandate Sector Development Implementation gic objectives, projects and day-to-day will provide compelling scoreboards the whirlwind. to worsening fiscal challenges. The continue with its efforts to acquire ble and inclusive growth. predominant guide for monetary complements the price stability objec- Plan (FSDIP). processes, using various tools as for tracking delivery.

CBE Integrated Annual Report 2018/19 16 Introduction mism in the global economy being weighed down by prolonged policy It gives me great pleasure to present to uncertainty as trade tensions remain. the Minister for Finance, Eswatini On the trade front, the forecast reflects citizens and other stakeholders the the May 2019 increase of US tariffs on second CBE Integrated Annual Report USD200 billion of Chinese exports from for the financial year ended 31 March 10 per cent to 25 per cent, and retalia- 2019. The Report provides a compre- tion by China. hensive overview of the operations of the CBE during the past financial year. Furthermore, technology tensions have It includes a summarised version of the erupted, threatening global technology financial statements. supply chains, and the prospects of a ‘no deal’ Brexit have increased follow- Coverage ing the appointment of new Prime Minister (PM) Boris Johnson in the Matters included in the Report are United Kingdom. In addition, rising aimed at informing and providing assur- geopolitical tensions, especially relat- ance to stakeholders on the CBE’s ing to sanctions on Iran, supply disrup- ability to deliver on its mandate, tions in Russia, Chile and Libya have commitment to sustained relationships roiled energy prices and, in the process, and responsible corporate citizenship. affected commodity exporters, despite The issues of materiality pertain to a near-term strengthening of oil prices. price stability and broader stability of Overall, risks to the latest growth the financial sector conducive to forecast are mainly to the downside. economic growth in the short, medium Other negative developments include a and long term. protracted increase in risk aversion that has exposed the financial vulnerabili- Materiality ties that continue to accumulate after years of low interest rates; and the In ascertaining matters of materiality mounting disinflationary pressures that for disclosure in this Report, the Bank increase debt service difficulties, has considered issues that either affect constraining monetary policy space to or have potential to substantially affect counter downturns, and make adverse our ability to perform and remain shocks more persistent than normal. relevant, our mode of operation, input factors as well as our ability to create The IMF highlights that, against the value over time. As indicated, issues of observed difficult backdrop in the first materiality pertain to those that direct- half of 2019, there were positive ly affect the Bank’s ability to achieve surprises to growth in advanced econo- its price and financial stability mies, but weaker-than-expected activi- mandate. ty in emerging markets and developing economies. For advanced economies, Global developments growth is projected at 1.9 per cent in 2019 and 1.7 per cent in 2020. In According to the International Monetary emerging markets and developing econ- Fund’s World Economic Outlook (IMF omies, growth is forecast at 4.1 per WEO) Update released in July 2019, cent in 2019, picking up to 4.7 per cent global growth is forecast at 3.2 per cent in 2020. Investment and demand for in 2019, before picking up to 3.5 per consumer durables have been subdued cent in 2020. The softer projections across advanced and emerging market follow a 3.6 per cent expansion record- economies as firms and households ed in 2018. Global growth remains continue to hold back on long-term sluggish and precarious, with the dyna- spending.

MONETARY POLICY

As at the end of March 2019, the Budget estimates for 2019/20 show The FSDIP has four pillars namely; prescribed in the CBE Enterprise Risk ment (CSI) programme, the Bank annual inflation rate increased to 4.5 that the fiscal gap has reduced to E3.0 financial stability, financial inclusion, Management (ERM) Framework. pursues excellence in community growth in final demand, core inflation per cent from 4.1 per cent in Febru- billion (equivalent to a deficit of 4.5 diversification of the financial system Incidents are recorded, analysed and involvement and upholding generally Our strategy Regulatory reform across advanced economies has ary, the highest inflation rate since per cent of GDP) from an estimated and modernisation of the financial reported, and key risk indicators are accepted principles underlying good MONETARY POLICY softened below target (for example, in December, amid a sharp rise in fuel outturn of 5.5 per cent in 2018/19. system. More information, including monitored and periodically reported to corporate social responsibility. The Our ‘super-goal’ (V4 target) is to be an The amendment of all the identified the United States) or remained well prices. The financial year ended with This contraction was mainly due to the FSDIP achievements, is reflected on the risk governance structures to focus of the CSI programme is three agile, efficient and integrated central legislations is key in our drive to below it (in the Eurozone and Japan). the South African Reserve Bank fiscal consolidation and proposed page 26. inform decision-making. priority areas, namely; community bank by the year 2021. We may improve the effectiveness of our Governance its profit declined by 4 per cent to reach (SARB) voting unanimously to hold its revenue measures that the Govern- health programmes, educational initia- achieve all other strategic targets, but regulatory mandate. Most of the E190.1 million at end of March 2019. Objective Conduct any potential threats to price stabili- The IMF projects inflation in emerging benchmark repo rate steady at 6.75 ment has put in place for the financial Financial technology CBE top 10 risks tives (covering primary school, high if we miss this one, our entire strategy amendments have been concluded and The Board maintains full and effective This has, once again, been a difficult The Bank has the ultimate aim of With her membership to the CMA, ty. The medium-term orientation markets and developing economies, on per cent on 28 March 2019, as widely year. school, tertiary institutions) and will fail. In the previous year, we quality assured. The next year we will control over the operations of the Bank year, but the CBE has been able to attaining price stability as well as Eswatini has little scope to undertake reflects the existence of economic average, to rise to 4.8 per cent in expected. Policymakers highlighted The range, prevalence and evolution of For the period under review, the Bank national research institutions. Total captured our V4 targets for the be focusing on the legislative stages and is accountable and responsible for contend with the challenges presented. stable and sound financial systems discretionary monetary policy in shocks, the consequences of which 2019, before declining to 4.7 per cent that the current stance on monetary Public debt financial innovations have since identified, analysed and prioritised the amount invested in this programme for 2018/19 financial year. that are outside of our control. its performance and compliance. The that will ensure sustainable economic response to domestic developments monetary policy cannot control in 2020. Core inflation has also policy remains accommodative and increased incredibly. In the light of top 10 corporate risks according to the the financial year was E1.7 million. Board reviews the strategic priorities of Supplementary reports growth. Eswatini’s monetary policy and other prudential measures. With without inducing excessively high dropped further below historical monetary policy actions will continue Total public debt stock was recorded policy, is on a downward trend with tive of the Bank through formulation these technological advancements for Bank’s process construct. The top 10 The Bank identified four strategic Financial sustainability the Bank, determines investment objective, as stated in Section 4 (a) of that level of monetary policy discre- volatility in real activity and interest averages in many emerging markets to focus on anchoring inflation near at E17.6 billion, an equivalent of 26.7 expected upward risks towards the and implementation of appropriate financial services, regulators and risks are based on the risk landscape Stakeholder engagement areas of focus, namely; human dynam- policies and delegates to management As stand-alone reports, the Bank, along- the CBS Order of 1974 (as amended), tion, the Bank has the liberty to use rates. and developing economies, barring a to the mid-point of the target range per cent of GDP at the end of March end of 2019. The inflation trajectory macro-prudential policy measures. supervisors face the challenge of considered against the Bank’s capacity ics, financial sustainability, regulatory The programme did well in counter- the detailed planning and implementa- side the Integrated Annual Report, also is to promote monetary and price the discount rate as a major policy few cases such as Argentina, Turkey, in the interest of sustainable growth. 2019. This reflects an increase of 35.4 swings hinge on policy uncertainty as After sufficient deliberations on finan- harnessing the potential of Financial to avoid and mitigate the likelihood of We have a Stakeholder Management reform and business intelligence. Each acting the negative effects of outflows tion of the objectives and policies in publishes an Economic Review Report, stability. Monetary policy formulation instrument to fight domestic inflation- Monetary policy decisions and Venezuela – contributing to the per cent from the revised figure of we come to grips with the impact of cial stability issues, the Financial Technology (Fintech), while making the risk occurrence as well as the Framework in place that guides stake- of these strategic areas is overseen by in the South African Rand (ZAR) accordance with acceptable risk param- Financial Stability Report and Audited is, to a large extent, influenced by the ary pressures and curb capital flight. The Governor makes monetary policy subdued headline inflation across this KINGDOM OF ESWATINI E13.0 billion recorded in March 2018. the freeze on increases in water and Stability Committee (FSC) discharges sure not to undermine consumer impact - should it occur. Mitigation holder engagement activities and a champion. A total of fifteen portfolio. It also performed well in eters. The Board monitors compliance Financial Statements, which can be country's membership to the Common The discount rate can be at par or at decisions after consultative meetings group of countries. Core inflation has The surge is mainly attributed to electricity tariffs introduced by the its accountability through the publica- protection, integrity of financial measures were implemented during processes. During the reporting year, programmes are run under these creating financial efficiencies (per V4 with policies and achievements against accessed on our website: Monetary Area (CMA). To influence different levels with the repo rate in with the Monetary Policy Consultative also dropped further below historical GDP developments continued issuance of Government new Cabinet. The freeze on increases tion of the annual Financial Stability markets and stability of the financial the course of the financial year, with we developed a Meaningful Stakehold- strategic areas, with each programme financial efficiency targets). More set objectives by holding management https://www.centralbank.org.sz. monetary conditions in the country South Africa, depending on the domes- Committee (MPCC). In 2018/19, the averages in many emerging markets securities. The Bank notes with in the electricity tariff has been Report. system as a whole. strategic and operational projects er Engagement Project as one of our headed by a manager reporting to the interventions will continue even in the accountable for its activities through and achieve its mandate, the Bank tic macroeconomic fundamentals. MPCC held six meetings bi-monthly. In and developing economies, barring a According to official provisional concern that the country’s debt has reflected in the inflation outcome for implemented for transformation and to strategic activities. We developed a relevant champion. next financial year. performance reporting and budget Conclusion uses four different tools, namely; the Eswatini can maintain a positive these meetings, the MPCC reviewed few cases such as Argentina, Turkey, estimates by the Central Statistics been rising exponentially over the April 2019, where it fell to a low of 1.8 Eswatini’s fiscal challenges still repre- The Eswatini Fintech strategy improve controls. Reasonable success stakeholder engagement measurement updates. discount rate (which happens to be differential to curb capital flight. developments on inflation (including and Venezuela. Office (CSO), the Gross Domestic year under review. As such, the formu- per cent down from 5.3 per cent sent a significant point of vulnerability describes the country’s priorities in its was achieved with slight delays in tool to quantify the level of engage- With regards to performance against It has been a strong team effort, and I the major one), reserve requirement inflation forecasts) as well as other Product (GDP), which is a measure of lation of a Debt Sustainability Analysis recorded in March 2019. for the financial sector. Developments journey to be the ‘leading Fintech hub project deliveries as a consequence of ment, based on identified key engage- strategy, the projects under the four Where are we going? In the year under review, the Board would like to extend my sincere thanks ratio, liquidity requirement ratio and Despite the reduced scope to conduct macroeconomic indicators of the South Africa economic activity, is estimated to main sectors that are projected to foreign exchange from the local and implementation of a Medium Term in South Africa (SA) present much in Africa’. The Central Bank of Eswati- the leadership uncertainty among ment measurement indicators. Our strategic areas of focus can be summa- finalised the external Board evaluation and appreciation to the Minister for open market operations. its monetary policy independently, domestic, regional and international have expanded by 2.4 per cent in perform poorly include ‘Construction’, market as a long term objective to Debt Strategy is now vital. The Bank’s inflation forecast for the closer risks to Eswatini’s financial ni, in partnership with other stakehold- other operational inefficiencies. stakeholders continue to be concerned rised as follows: This is the question we ask ourselves. exercise with the Institute of Directors Finance and his officials, Board of Direc- Eswatini’s membership to the CMA has economies. Over the reporting period, According to preliminary indicators 2018 compared to 2.0 per cent in ‘Wholesale and Retail’ and ‘General boost the level of reserves. The Bank year 2019 has been revised down to stability due to SA being the anchor ers established a regulatory Sandbox to about Government’s fiscal position, Assuming that success was a place, (SA). tors, all staff of the Bank as well as Goal benefitted the country in supporting the MPCC recommended to keep the published by Statistics South Africa on 2017. This increase is mainly Public Administration’. will also continue to monitor develop- Balance of payments 2.67 per cent in September 2019, from economy for the Common Monetary foster innovation in the financial Corporate social investment slow regulatory reforms, compliance Human dynamics how would we know we are there? We financial institutions and other key Given the CMA Agreement, the inter- macroeconomic stability as well as discount rate unchanged at 6.75 per 4 June 2019, the annual estimate of accounted for by strong positive ments and offer appropriate advice to the previous forecast of 2.87 per cent Area (CMA). The banking sector sector. This platform provides an and reputational implications. thus must speak to our most important Following the ever-evolving corporate stakeholders for their cooperation, mediate goal of monetary policy in dampening the effects of shocks to the cent. The liquidity requirement was real GDP for 2018 increased by 0.8 per developments in the primary and Going forward, GDP is projected to the Government in order to retain the In the financial year 2018/19, the projected in July 2019. The proposed remains stable, liquid and adequately opportunity to test innovative Through its Corporate Social Invest- The impact of this programme will be goals to be achieved in the next 12 governance developments locally and commitment and dedication to the Eswatini is to maintain the peg with currency. To have a meaningful effect unchanged in 2018/19 at 25 per cent Inflationary pressures remained contained in June cent following an increase of 1.4 per tertiary sectors. increase by 2.9 per cent in 2020 and reserves at levels above the threshold country posted an overall balance of introduction of Value Added Tax (VAT) capitalised. However, credit risk is solutions in a live environment whilst seen in the long term. However, months. Again, we focus on our V4 internationally, which call for increased attainment of price and financial stabili- the South African Rand. This requires on inflation, the Bank uses all policy for commercial banks and 22 per cent 2019. Rates of increase in input costs and output cent in 2017. The annual real GDP then retreat to 1.3 per cent and 1.7 of three months cover of imports of payments deficit of E2.314 billion, on electricity in the year poses an increasing, thus affecting bank ensuring consumer protection. projects like the ones on culture shift Targets, Process Outputs and Strategic regulation, greater transparency, and ty in the Kingdom of Eswatini. I have no that the country's currency in circula- tools at its disposal. However, the for savings and development banks. charges both ticked lower and remained below growth of 0.8 per cent in 2018 was led High frequency data reflects that per cent in 2021 and 2022, respective- goods and services. triple the deficit of E799.3 million upside risk to overall inflation. Over earnings, which will ultimately affect and stakeholder management have Projects. This is where we demon- more rigorous scrutiny of large institu- doubt that I can continue to rely on tion be backed by foreign currencies, implementation of monetary policy is The reserve requirements for all their respective long-run averages. Average vendor by increased economic activity in economic activity expanded by 4.2 ly. recorded in the 2017/18 financial the medium term, inflation is project- solvency of banks. Financial Technology in the world is already identified gaps in the environ- strate ‘The 4 Disciplines of Execution’ tions, the ethics and compliance them for unwavering support and as well as keeping the level of more of a medium-term orientation banks was also left unchanged at 6 per lead times (a bellwether of supply-chain price finance, real estate and business per cent, on a year-on-year basis Private sector credit year. This necessitated a reduction in ed at 4.31 per cent in 2020 and 5.29 growing at a rapid pace and the Bank is ment and have also identified possible approach, in that; function becomes integral to the strate- dedication in the execution of our reserves to at least three months of and forward-looking. Such ensures cent. pressures) also improved for the first time in six services, which contributed 0.4 of a (seasonally adjusted), in the first reserve assets, as a financing item for per cent in 2021. National payment systems aligning itself accordingly to ensure interventions. As these roll out their gic core of organisations gearing to mandate and objectives in the interest import cover. that timely action is taken to address years, as purchasing activity among manufacturers percentage point based on growth of quarter of 2019 compared to 2.4 per External reserves Growth in credit extended to the the deficit recorded in the overall the country attains Vision 2022. programme of action, we will start to • We have not discarded any targets maintaining public trust. Therefore, of all Emaswati. cent in the previous quarter. Sectors private sector decelerated somewhat balance of payments. In 2018/19, the Monetary Policy Consultative Operations of designated systemically see improvements. Areas where we in the process of identifying our fell for five consecutive months (IMF WEO Update, 1.8 per cent, and general Government beyond responding to changes in the FREQUENCY AND ATTENDANCE OF MPCC MEETINGS IN 2018/19 July 2019). services, which contributed 0.2 of a that recorded significant positive Eswatini’s external reserves continued from the double digit rate recorded in country benefitted from increased Committee important national payment systems Risk management approach did not move as swiftly as we had important goals. Instead, we industry, the Central Bank of Eswatini MPCC terms of reference percentage point based on a 1.3 per performance in the first quarter of to fall as the Government made draw- the past year to single digit. The debt security holdings, which diluted continued to run smoothly during the anticipated are in relation to the allocated weights to help us prior- continues to invest its efforts in creating 25 May 20 Jul 21 Sep 23 Nov 18 Jan 29 Mar The MPCC was established under Global inflation and commodities overview cent rise. 2019 included; ‘manufacturing’, downs on its deposits held at the Bank growth was largely supported by the depletion in the country’s claims The Governor makes monetary policy reporting period. The Bank closely monitors the operat- identification of future skills and itize the targets. The weighting and a scalable ethics and compliance 2018 2018 2018 2018 2019 2019 Section 43 of the CBS Order of 1974 (as amended). During the ‘wholesale and retail’, ‘transport to cover the persistent cash shortfalls. increased demand for credit towards on other monetary authorities. decisions after consultative meetings ing environment using the risk improvement of the performance prioritization was based on an ecosystem that will help meet its needs Majozi V. Sithole Mr. Majozi Sithole + + + + + + The IMF reported that headline inflation has The South African economy shrank by and storage’ and ‘financial services In terms of estimated imports of goods ‘businesses’ and ‘other sectors’ with the Monetary Policy Consultative During the period under review, the exposure, opportunities and management system. The bottlenecks assessment of which targets assist- today and in the future. Governor (Governor and Chairman) year under review, the MPCC comprised of the Governor (Chair- remained subdued across most advanced and an annualised 3.2 per cent excluding insurance and pension and services, the reserves were (namely ‘other financial corpora- Consumer inflation Committee (MPCC). In 2018/19, the Bank approved an application from process-efficiency approach to identify have been identified and in the next ed the Bank more towards achiev- Mr. Mhlabuhlangene Dlamini + - - + - - (Deputy Governor) emerging market economies. These developments quarter-on-quarter in the three funds’. Subsectors that performed sufficient to cover 2.0 months at the tions’). The accelerated growth in MPCC held six bi-monthly meetings. In Eswatini Mobile to provide mobile threats and avoid these; as well as find financial year, better results will be ing agility, efficiency and integra- Bank’s financial performance man), Deputy Governor, Assistant Governor, and four additional have contributed, in part, to market pricing of months to March 2019, following a 1.4 poorly included the following: end of March 2019, remarkably below credit to businesses is a positive devel- The annual consumer inflation was these meetings, the MPCC reviewed money transfer services to its custom- and pursue opportunities in fulfilling realised. Some projects have missed tion. Mr. Mfanfikile Dlamini - - + + + + (Assistant Governor) expected inflation dropping sharply in the United per cent growth in the previous period ‘public administration’, ‘construc- the three-months threshold and also opment as this sector drives domestic relatively contained in the 2018/19 developments on inflation (including ers. Eswatini Mobile has partnered its mandate. This is attained through timeliness in terms of delivery, while Operationally, the Bank remained members (appointed by the Minis- ter for Finance) with recognised States and the Eurozone. Consumer prices in and compared to market expectations tion’, ‘mining and quarrying’, ‘tour- lower than the 3.2 months covered at economic growth. financial year, averaging 5.0 per cent forecasts) as well as other macroeco- with Eswatini Bank, who will also be integrating the Bank’s strategy, risk others are on track. • We have developed both Lag and profitable during the year, even though Mr. Dumisani Masilela + + + + - - (Commissioner General, SRA) advanced economies, on average, are projected to of a 1.7 per cent contraction. It was ism activities’, ‘human health, and the same time in the previous year. compared to 5.5 per cent in the previ- nomic indicators of the domestic, holding the required trust account for and performance for effective Lead Measures for all our targets. experience in monetary and rise to 1.6 per cent in 2019, edging up marginally the sharpest quarterly decline since social activities’. Fiscal cash-flow Public finance ous financial year. The moderation in regional and international economies. deposit-taking from agents. The planning and monitoring. Business intelligence This will make it easier for project Dr. Dumsile Dlamini + + + + + + financial matters. The four (Economics Lecturer, UNESWA) to 2.0 per cent in 2020. Consistent with subdued Q1-2009, mainly reflecting the effects challenges continued to weigh on During the course of the financial year, consumer inflation mainly benefitted Over the reporting period, the MPCC service will provide financial services teams to know what is expected of additional members were of power cuts on manufacturing and implementation of public infrastruc- the Bank engaged in an exercise to buy The 2019/20 budget was presented from favourable food prices, which recommended to keep the discount to the banked, underbanked and Risk management remains the main It has taken us a while to put the them in the next 12 months. Ms. Busi Dlamini + + + + + + appointed during the year. Bound (Independent Economist) mining. tural projects thereby resulting in foreign exchange originating from under an unprecedented economic recorded a deflation of 0.2 per cent in rate unchanged at 6.75 per cent. unbanked population. area of focus and management is foundation and framework in place for by the Code of Conduct, the MPCC • We use information attained lower output in construction activity. export proceeds from the local crisis, where the country is faced with the period under review down from committed to applying international this programme. A lot of research work • We have implemented monthly Ms. Khetsiwe Dlamini - + + + + + acts as an advisory body to the from Departmental, Manage- (Entrepreneur) commercial banks. The accumulation pressure on Government revenues, 5.2 per cent the previous financial Financial stability Financial sector development best practice and standards to ensure was done to ensure that when the monitoring scorecards for the Governor on the appropriate ment Committee, Executive Medium Term GDP Projections of these funds has assisted to buffer accumulating arrears, depleted year. implementation plan that the effects of uncertainty on projects take off, all processes are Projects and Change Management Note: (+): Present; (-): Absent monetary policy stance. Committee and Board meet- the reserves portfolio against reserves and sluggish growth. As such, The Bank, through its macro-pruden- objectives are systematically and properly aligned. Committee and the quarterly score- ings to hold each other Economic activity is projected to outflows. In the absence of this inter- restoring prudent public finance Inflation outlook tial mandate, is committed to The Bank continued to coordinate the continuously monitored. This is done cards for the Board Capital Projects The final monetary policy decision remains the prerogative of the Governor. Effectively, the Governor is the sole legal accountable, so that the goals decelerate to 1.4 per cent in 2019 vention, reserves levels would have management remains pivotal in mitigate risks to financial stability. implementation of the Financial through periodic assessments of strate- and Investment Committee, which determiner and public announcer of interest rates. The Governor announces the decisions on the monetary policy stance do not naturally disintegrate in from 2.4 per cent in 2018 largely due been significantly lower. The Bank will helping the country achieve sustaina- The inflation outlook, which remains a The financial stability mandate Sector Development Implementation gic objectives, projects and day-to-day will provide compelling scoreboards through a media statement released a day after the MPCC meeting. The statement states the considerations that led to the whirlwind. to worsening fiscal challenges. The continue with its efforts to acquire ble and inclusive growth. predominant guide for monetary complements the price stability objec- Plan (FSDIP). processes, using various tools as for tracking delivery. the decision on the discount rate. The statement is released in local media and in the Bank's website.

17 CBE Integrated Annual Report 2018/19 Introduction mism in the global economy being weighed down by prolonged policy It gives me great pleasure to present to uncertainty as trade tensions remain. the Minister for Finance, Eswatini On the trade front, the forecast reflects citizens and other stakeholders the the May 2019 increase of US tariffs on second CBE Integrated Annual Report USD200 billion of Chinese exports from for the financial year ended 31 March 10 per cent to 25 per cent, and retalia- 2019. The Report provides a compre- tion by China. hensive overview of the operations of the CBE during the past financial year. Furthermore, technology tensions have It includes a summarised version of the erupted, threatening global technology financial statements. supply chains, and the prospects of a ‘no deal’ Brexit have increased follow- Coverage ing the appointment of new Prime Minister (PM) Boris Johnson in the Matters included in the Report are United Kingdom. In addition, rising aimed at informing and providing assur- geopolitical tensions, especially relat- ance to stakeholders on the CBE’s ing to sanctions on Iran, supply disrup- ability to deliver on its mandate, tions in Russia, Chile and Libya have commitment to sustained relationships roiled energy prices and, in the process, and responsible corporate citizenship. affected commodity exporters, despite The issues of materiality pertain to a near-term strengthening of oil prices. price stability and broader stability of Overall, risks to the latest growth the financial sector conducive to forecast are mainly to the downside. economic growth in the short, medium Other negative developments include a and long term. protracted increase in risk aversion that has exposed the financial vulnerabili- Materiality ties that continue to accumulate after years of low interest rates; and the In ascertaining matters of materiality mounting disinflationary pressures that for disclosure in this Report, the Bank increase debt service difficulties, has considered issues that either affect constraining monetary policy space to or have potential to substantially affect counter downturns, and make adverse our ability to perform and remain shocks more persistent than normal. relevant, our mode of operation, input factors as well as our ability to create The IMF highlights that, against the value over time. As indicated, issues of observed difficult backdrop in the first materiality pertain to those that direct- half of 2019, there were positive ly affect the Bank’s ability to achieve surprises to growth in advanced econo- its price and financial stability mies, but weaker-than-expected activi- mandate. ty in emerging markets and developing economies. For advanced economies, Global developments growth is projected at 1.9 per cent in 2019 and 1.7 per cent in 2020. In According to the International Monetary emerging markets and developing econ- Fund’s World Economic Outlook (IMF omies, growth is forecast at 4.1 per WEO) Update released in July 2019, cent in 2019, picking up to 4.7 per cent global growth is forecast at 3.2 per cent in 2020. Investment and demand for in 2019, before picking up to 3.5 per consumer durables have been subdued cent in 2020. The softer projections across advanced and emerging market follow a 3.6 per cent expansion record- economies as firms and households ed in 2018. Global growth remains continue to hold back on long-term sluggish and precarious, with the dyna- spending.

ECONOMIC REVIEW

As at the end of March 2019, the Budget estimates for 2019/20 show The FSDIP has four pillars namely; prescribed in the CBE Enterprise Risk ment (CSI) programme, the Bank annual inflation rate increased to 4.5 that the fiscal gap has reduced to E3.0 financial stability, financial inclusion, Management (ERM) Framework. pursues excellence in community growth in final demand, core inflation per cent from 4.1 per cent in Febru- billion (equivalent to a deficit of 4.5 diversification of the financial system Incidents are recorded, analysed and involvement and upholding generally Our strategy Regulatory reform across advanced economies has ary, the highest inflation rate since per cent of GDP) from an estimated and modernisation of the financial reported, and key risk indicators are accepted principles underlying good ECONOMIC REVIEW softened below target (for example, in December, amid a sharp rise in fuel outturn of 5.5 per cent in 2018/19. system. More information, including monitored and periodically reported to corporate social responsibility. The Our ‘super-goal’ (V4 target) is to be an The amendment of all the identified the United States) or remained well prices. The financial year ended with This contraction was mainly due to the FSDIP achievements, is reflected on the risk governance structures to focus of the CSI programme is three agile, efficient and integrated central legislations is key in our drive to below it (in the Eurozone and Japan). the South African Reserve Bank fiscal consolidation and proposed page 26. inform decision-making. priority areas, namely; community bank by the year 2021. We may improve the effectiveness of our Governance its profit declined by 4 per cent to reach (SARB) voting unanimously to hold its revenue measures that the Govern- achieve all other strategic targets, but regulatory mandate. Most of the health programmes, educational initia- E190.1 million at end of March 2019. The below is the summarised version of as well as positive performance in the benchmark repo rate steady at 6.75 ment has put in place for the financial if we miss this one, our entire strategy amendments have been concluded and The IMF projects inflation in emerging Financial technology CBE top 10 risks tives (covering primary school, high The Board maintains full and effective This has, once again, been a difficult the Eswatini economic review. For the textile subsector, the manufacturing per cent on 28 March 2019, as widely year. will fail. In the previous year, we quality assured. The next year we will markets and developing economies, on school, tertiary institutions) and control over the operations of the Bank year, but the CBE has been able to full report, please refer to the Bank’s sector contracted by 0.4 per cent in expected. Policymakers highlighted captured our V4 targets for the be focusing on the legislative stages average, to rise to 4.8 per cent in The range, prevalence and evolution of For the period under review, the Bank national research institutions. Total and is accountable and responsible for contend with the challenges presented. website. 2018. The decrease mainly emanated that the current stance on monetary 2018/19 financial year. that are outside of our control. 2019, before declining to 4.7 per cent Public debt financial innovations have since identified, analysed and prioritised the amount invested in this programme for its performance and compliance. The from poor performance in the ‘manu- policy remains accommodative and in 2020. Core inflation has also increased incredibly. In the light of top 10 corporate risks according to the the financial year was E1.7 million. Board reviews the strategic priorities of Supplementary reports GDP developments facturing of beverages’ and ‘other monetary policy actions will continue Total public debt stock was recorded The Bank identified four strategic Financial sustainability dropped further below historical policy, is on a downward trend with tive of the Bank through formulation these technological advancements for Bank’s process construct. The top 10 the Bank, determines investment non-food manufacturing’. These to focus on anchoring inflation near at E17.6 billion, an equivalent of 26.7 areas of focus, namely; human dynam- averages in many emerging markets expected upward risks towards the and implementation of appropriate financial services, regulators and risks are based on the risk landscape Stakeholder engagement policies and delegates to management As stand-alone reports, the Bank, along- Annual GDP developments subsectors were significantly affected to the mid-point of the target range per cent of GDP at the end of March ics, financial sustainability, regulatory The programme did well in counter- and developing economies, barring a end of 2019. The inflation trajectory macro-prudential policy measures. supervisors face the challenge of considered against the Bank’s capacity the detailed planning and implementa- side the Integrated Annual Report, also by weak demand in the South African in the interest of sustainable growth. 2019. This reflects an increase of 35.4 swings hinge on policy uncertainty as After sufficient deliberations on finan- reform and business intelligence. Each acting the negative effects of outflows few cases such as Argentina, Turkey, harnessing the potential of Financial to avoid and mitigate the likelihood of We have a Stakeholder Management tion of the objectives and policies in publishes an Economic Review Report, According to official provisional Economy, which slipped to a technical per cent from the revised figure of we come to grips with the impact of cial stability issues, the Financial of these strategic areas is overseen by in the South African Rand (ZAR) and Venezuela – contributing to the Technology (Fintech), while making the risk occurrence as well as the Framework in place that guides stake- accordance with acceptable risk param- Financial Stability Report and Audited estimates by the Central Statistics recession in the first half of 2018. E13.0 billion recorded in March 2018. the freeze on increases in water and Stability Committee (FSC) discharges a champion. A total of fifteen portfolio. It also performed well in subdued headline inflation across this KINGDOM OF ESWATINI sure not to undermine consumer impact - should it occur. Mitigation holder engagement activities and eters. The Board monitors compliance Financial Statements, which can be Office (CSO), the Gross Domestic Construction subsector on the other The surge is mainly attributed to electricity tariffs introduced by the its accountability through the publica- programmes are run under these creating financial efficiencies (per V4 group of countries. Core inflation has protection, integrity of financial measures were implemented during processes. During the reporting year, with policies and achievements against accessed on our website: Product (GDP), which is a measure of performed poorly due to ongoing fiscal continued issuance of Government new Cabinet. The freeze on increases tion of the annual Financial Stability strategic areas, with each programme financial efficiency targets). More also dropped further below historical GDP developments markets and stability of the financial the course of the financial year, with we developed a Meaningful Stakehold- set objectives by holding management https://www.centralbank.org.sz. economic activity, is estimated to have challenges that resulted in scaling down securities. The Bank notes with in the electricity tariff has been Report. headed by a manager reporting to the interventions will continue even in the averages in many emerging markets system as a whole. strategic and operational projects er Engagement Project as one of our accountable for its activities through expanded by 2.4 per cent in 2018 in the implementation rate of some According to official provisional concern that the country’s debt has reflected in the inflation outcome for relevant champion. next financial year. and developing economies, barring a implemented for transformation and to strategic activities. We developed a performance reporting and budget Conclusion compared to 2.0 per cent in 2017. This mega-public sector infrastructural estimates by the Central Statistics been rising exponentially over the April 2019, where it fell to a low of 1.8 Eswatini’s fiscal challenges still repre- few cases such as Argentina, Turkey, The Eswatini Fintech strategy improve controls. Reasonable success stakeholder engagement measurement updates. increase is mainly accounted for by projects. On a positive note, the Office (CSO), the Gross Domestic year under review. As such, the formu- per cent down from 5.3 per cent sent a significant point of vulnerability With regards to performance against and Venezuela. describes the country’s priorities in its was achieved with slight delays in tool to quantify the level of engage- It has been a strong team effort, and I strong positive developments in the electricity supply subsector performed Product (GDP), which is a measure of lation of a Debt Sustainability Analysis recorded in March 2019. for the financial sector. Developments strategy, the projects under the four Where are we going? journey to be the ‘leading Fintech hub project deliveries as a consequence of ment, based on identified key engage- In the year under review, the Board would like to extend my sincere thanks primary and tertiary sectors. well in light of a 20 per cent increase in economic activity, is estimated to main sectors that are projected to foreign exchange from the local and implementation of a Medium Term strategic areas of focus can be summa- South Africa in South Africa (SA) present much in Africa’. The Central Bank of Eswati- the leadership uncertainty among ment measurement indicators. Our finalised the external Board evaluation and appreciation to the Minister for local power generation over the period have expanded by 2.4 per cent in perform poorly include ‘Construction’, market as a long term objective to Debt Strategy is now vital. The Bank’s inflation forecast for the closer risks to Eswatini’s financial rised as follows: This is the question we ask ourselves. ni, in partnership with other stakehold- other operational inefficiencies. stakeholders continue to be concerned exercise with the Institute of Directors Finance and his officials, Board of Direc- The primary sector rebounded from under review. 2018 compared to 2.0 per cent in ‘Wholesale and Retail’ and ‘General boost the level of reserves. The Bank year 2019 has been revised down to stability due to SA being the anchor Assuming that success was a place, According to preliminary indicators ers established a regulatory Sandbox to about Government’s fiscal position, (SA). tors, all staff of the Bank as well as four years of negative growth with a 7.4 2017. This increase is mainly Public Administration’. will also continue to monitor develop- 2.67 per cent in September 2019, from economy for the Common Monetary Human dynamics how would we know we are there? We published by Statistics South Africa on Balance of payments foster innovation in the financial Corporate social investment slow regulatory reforms, compliance financial institutions and other key per cent increase in 2018 from -4.1 per The tertiary sector depicted resilient accounted for by strong positive ments and offer appropriate advice to the previous forecast of 2.87 per cent Area (CMA). The banking sector thus must speak to our most important 4 June 2019, the annual estimate of sector. This platform provides an and reputational implications. Following the ever-evolving corporate stakeholders for their cooperation, cent in 2017. The positive performance growth of 3.1 per cent in 2018 increas- developments in the primary and Going forward, GDP is projected to the Government in order to retain the In the financial year 2018/19, the projected in July 2019. The proposed remains stable, liquid and adequately The impact of this programme will be goals to be achieved in the next 12 real GDP for 2018 increased by 0.8 per opportunity to test innovative Through its Corporate Social Invest- governance developments locally and commitment and dedication to the in the primary sector largely benefited ing from 2.9 per cent in the previous tertiary sectors. increase by 2.9 per cent in 2020 and reserves at levels above the threshold country posted an overall balance of introduction of Value Added Tax (VAT) capitalised. However, credit risk is seen in the long term. However, months. Again, we focus on our V4 Inflationary pressures remained contained in June cent following an increase of 1.4 per solutions in a live environment whilst internationally, which call for increased attainment of price and financial stabili- from a significant increase in crop year. Notable increases were observed CROP then retreat to 1.3 per cent and 1.7 of three months cover of imports of payments deficit of E2.314 billion, on electricity in the year poses an increasing, thus affecting bank projects like the ones on culture shift Targets, Process Outputs and Strategic 2019. Rates of increase in input costs and output cent in 2017. The annual real GDP ensuring consumer protection. regulation, greater transparency, and ty in the Kingdom of Eswatini. I have no production and forestry output. Favour- in the following subsectors: ‘Wholesale PRODUCTION High frequency data reflects that per cent in 2021 and 2022, respective- goods and services. triple the deficit of E799.3 million upside risk to overall inflation. Over earnings, which will ultimately affect and stakeholder management have Projects. This is where we demon- charges both ticked lower and remained below growth of 0.8 per cent in 2018 was led more rigorous scrutiny of large institu- doubt that I can continue to rely on able weather conditions over the period and retail’, ‘financial and insurance economic activity expanded by 4.2 ly. recorded in the 2017/18 financial the medium term, inflation is project- solvency of banks. already identified gaps in the environ- strate ‘The 4 Disciplines of Execution’ their respective long-run averages. Average vendor by increased economic activity in Financial Technology in the world is tions, the ethics and compliance them for unwavering support and under review resulted in a significant services’ and ‘information and commu- per cent, on a year-on-year basis Private sector credit year. This necessitated a reduction in ed at 4.31 per cent in 2020 and 5.29 ment and have also identified possible approach, in that; lead times (a bellwether of supply-chain price finance, real estate and business growing at a rapid pace and the Bank is function becomes integral to the strate- dedication in the execution of our increase in sugarcane, maize and cotton nication’. The positive (seasonally adjusted), in the first reserve assets, as a financing item for per cent in 2021. interventions. As these roll out their pressures) also improved for the first time in six services, which contributed 0.4 of a National payment systems aligning itself accordingly to ensure gic core of organisations gearing to mandate and objectives in the interest output. It also supported a continuous performance in the quarter of 2019 compared to 2.4 per External reserves Growth in credit extended to the the deficit recorded in the overall programme of action, we will start to • We have not discarded any targets years, as purchasing activity among manufacturers percentage point based on growth of the country attains Vision 2022. maintaining public trust. Therefore, of all Emaswati. recovery in animal production which The financial and insurance services primary sector largely cent in the previous quarter. Sectors private sector decelerated somewhat balance of payments. In 2018/19, the see improvements. Areas where we in the process of identifying our fell for five consecutive months (IMF WEO Update, 1.8 per cent, and general Government Monetary Policy Consultative Operations of designated systemically beyond responding to changes in the suffered immensely during the El Nino subsector recorded a double digit benefited from a that recorded significant positive Eswatini’s external reserves continued from the double digit rate recorded in country benefitted from increased did not move as swiftly as we had important goals. Instead, we July 2019). services, which contributed 0.2 of a Committee important national payment systems Risk management approach industry, the Central Bank of Eswatini induced drought of 2015/16. The good growth of 12.2 per cent in 2018, one significant increase in performance in the first quarter of to fall as the Government made draw- the past year to single digit. The debt security holdings, which diluted anticipated are in relation to the allocated weights to help us prior- percentage point based on a 1.3 per continued to run smoothly during the continues to invest its efforts in creating performance at agriculture level percentage point lower than the previ- crop production and 2019 included; ‘manufacturing’, downs on its deposits held at the Bank growth was largely supported by the depletion in the country’s claims identification of future skills and itize the targets. The weighting and Global inflation and commodities overview cent rise. The Governor makes monetary policy reporting period. The Bank closely monitors the operat- a scalable ethics and compliance supported growth in agro-processing ous year. This sector partially benefit- forestry output. ‘wholesale and retail’, ‘transport to cover the persistent cash shortfalls. increased demand for credit towards on other monetary authorities. improvement of the performance prioritization was based on an decisions after consultative meetings ing environment using the risk ecosystem that will help meet its needs Majozi V. Sithole particularly sugar production which ted from the positive performance in and storage’ and ‘financial services In terms of estimated imports of goods ‘businesses’ and ‘other sectors’ management system. The bottlenecks assessment of which targets assist- The IMF reported that headline inflation has The South African economy shrank by with the Monetary Policy Consultative During the period under review, the exposure, opportunities and today and in the future. Governor rose by 15 per cent. On the downside, the agriculture, forestry and agro-pro- excluding insurance and pension and services, the reserves were (namely ‘other financial corpora- have been identified and in the next ed the Bank more towards achiev- remained subdued across most advanced and an annualised 3.2 per cent Consumer inflation Committee (MPCC). In 2018/19, the Bank approved an application from process-efficiency approach to identify the mining and quarrying subsector cessing subsectors, particularly devel- funds’. Subsectors that performed sufficient to cover 2.0 months at the tions’). The accelerated growth in financial year, better results will be ing agility, efficiency and integra- emerging market economies. These developments quarter-on-quarter in the three MPCC held six bi-monthly meetings. In Eswatini Mobile to provide mobile threats and avoid these; as well as find Bank’s financial performance decreased by nearly 30 per cent. Coal opments in the sugar industry as well as poorly included the following: end of March 2019, remarkably below credit to businesses is a positive devel- The annual consumer inflation was realised. Some projects have missed tion. have contributed, in part, to market pricing of months to March 2019, following a 1.4 these meetings, the MPCC reviewed money transfer services to its custom- and pursue opportunities in fulfilling production fell by approximately a third continuous technological advancement ‘public administration’, ‘construc- the three-months threshold and also opment as this sector drives domestic relatively contained in the 2018/19 timeliness in terms of delivery, while expected inflation dropping sharply in the United per cent growth in the previous period developments on inflation (including ers. Eswatini Mobile has partnered its mandate. This is attained through Operationally, the Bank remained due to geological constraints while in the provision of financial services. tion’, ‘mining and quarrying’, ‘tour- lower than the 3.2 months covered at economic growth. financial year, averaging 5.0 per cent others are on track. • We have developed both Lag and States and the Eurozone. Consumer prices in and compared to market expectations forecasts) as well as other macroeco- with Eswatini Bank, who will also be integrating the Bank’s strategy, risk profitable during the year, even though quarried stone production was affected Information and communication subsec- ism activities’, ‘human health, and the same time in the previous year. compared to 5.5 per cent in the previ- Lead Measures for all our targets. advanced economies, on average, are projected to of a 1.7 per cent contraction. It was nomic indicators of the domestic, holding the required trust account for and performance for effective by a slowdown in construction activity. tor benefitted from increased usage of social activities’. Fiscal cash-flow ous financial year. The moderation in Business intelligence This will make it easier for project rise to 1.6 per cent in 2019, edging up marginally the sharpest quarterly decline since Public finance regional and international economies. deposit-taking from agents. The planning and monitoring. data services under a relatively more challenges continued to weigh on During the course of the financial year, consumer inflation mainly benefitted teams to know what is expected of to 2.0 per cent in 2020. Consistent with subdued Q1-2009, mainly reflecting the effects Over the reporting period, the MPCC service will provide financial services The secondary sector recorded flat competitive environment. Subsectors implementation of public infrastruc- the Bank engaged in an exercise to buy The 2019/20 budget was presented from favourable food prices, which It has taken us a while to put the them in the next 12 months. of power cuts on manufacturing and recommended to keep the discount to the banked, underbanked and Risk management remains the main growth in 2018 due to poor performance that performed poorly within the mining. tural projects thereby resulting in foreign exchange originating from under an unprecedented economic recorded a deflation of 0.2 per cent in rate unchanged at 6.75 per cent. unbanked population. area of focus and management is foundation and framework in place for • We use information attained in the manufacturing and construction tertiary sector include: ‘tourism’, lower output in construction activity. export proceeds from the local crisis, where the country is faced with the period under review down from committed to applying international this programme. A lot of research work • We have implemented monthly from Departmental, Manage- subsectors. Despite recording a signifi- ‘professional services’ and ‘other commercial banks. The accumulation pressure on Government revenues, 5.2 per cent the previous financial Financial stability Financial sector development best practice and standards to ensure was done to ensure that when the monitoring scorecards for the ment Committee, Executive cant increase in food manufacturing services’. Medium Term GDP Projections of these funds has assisted to buffer accumulating arrears, depleted year. implementation plan that the effects of uncertainty on projects take off, all processes are Projects and Change Management Committee and Board meet- (which benefited from agro-processing) the reserves portfolio against reserves and sluggish growth. As such, The Bank, through its macro-pruden- objectives are systematically and properly aligned. Committee and the quarterly score- ings to hold each other Economic activity is projected to outflows. In the absence of this inter- restoring prudent public finance Inflation outlook tial mandate, is committed to The Bank continued to coordinate the continuously monitored. This is done cards for the Board Capital Projects accountable, so that the goals decelerate to 1.4 per cent in 2019 vention, reserves levels would have management remains pivotal in mitigate risks to financial stability. implementation of the Financial through periodic assessments of strate- and Investment Committee, which do not naturally disintegrate in from 2.4 per cent in 2018 largely due been significantly lower. The Bank will helping the country achieve sustaina- The inflation outlook, which remains a The financial stability mandate Sector Development Implementation gic objectives, projects and day-to-day will provide compelling scoreboards the whirlwind. to worsening fiscal challenges. The continue with its efforts to acquire ble and inclusive growth. predominant guide for monetary complements the price stability objec- Plan (FSDIP). processes, using various tools as for tracking delivery.

CBE Integrated Annual Report 2018/19 18 Introduction mism in the global economy being weighed down by prolonged policy It gives me great pleasure to present to uncertainty as trade tensions remain. the Minister for Finance, Eswatini On the trade front, the forecast reflects citizens and other stakeholders the the May 2019 increase of US tariffs on second CBE Integrated Annual Report USD200 billion of Chinese exports from for the financial year ended 31 March 10 per cent to 25 per cent, and retalia- 2019. The Report provides a compre- tion by China. hensive overview of the operations of the CBE during the past financial year. Furthermore, technology tensions have It includes a summarised version of the erupted, threatening global technology financial statements. supply chains, and the prospects of a ‘no deal’ Brexit have increased follow- Coverage ing the appointment of new Prime Minister (PM) Boris Johnson in the Matters included in the Report are United Kingdom. In addition, rising aimed at informing and providing assur- geopolitical tensions, especially relat- ance to stakeholders on the CBE’s ing to sanctions on Iran, supply disrup- ability to deliver on its mandate, tions in Russia, Chile and Libya have commitment to sustained relationships roiled energy prices and, in the process, and responsible corporate citizenship. affected commodity exporters, despite The issues of materiality pertain to a near-term strengthening of oil prices. price stability and broader stability of Overall, risks to the latest growth the financial sector conducive to forecast are mainly to the downside. economic growth in the short, medium Other negative developments include a and long term. protracted increase in risk aversion that has exposed the financial vulnerabili- Materiality ties that continue to accumulate after years of low interest rates; and the In ascertaining matters of materiality mounting disinflationary pressures that for disclosure in this Report, the Bank increase debt service difficulties, has considered issues that either affect constraining monetary policy space to or have potential to substantially affect counter downturns, and make adverse our ability to perform and remain shocks more persistent than normal. relevant, our mode of operation, input factors as well as our ability to create The IMF highlights that, against the value over time. As indicated, issues of observed difficult backdrop in the first materiality pertain to those that direct- half of 2019, there were positive ly affect the Bank’s ability to achieve surprises to growth in advanced econo- its price and financial stability mies, but weaker-than-expected activi- mandate. ty in emerging markets and developing economies. For advanced economies, Global developments growth is projected at 1.9 per cent in 2019 and 1.7 per cent in 2020. In According to the International Monetary emerging markets and developing econ- Fund’s World Economic Outlook (IMF omies, growth is forecast at 4.1 per WEO) Update released in July 2019, cent in 2019, picking up to 4.7 per cent global growth is forecast at 3.2 per cent in 2020. Investment and demand for in 2019, before picking up to 3.5 per consumer durables have been subdued cent in 2020. The softer projections across advanced and emerging market follow a 3.6 per cent expansion record- economies as firms and households ed in 2018. Global growth remains continue to hold back on long-term sluggish and precarious, with the dyna- spending.

ECONOMIC REVIEW

As at the end of March 2019, the Budget estimates for 2019/20 show The FSDIP has four pillars namely; prescribed in the CBE Enterprise Risk ment (CSI) programme, the Bank annual inflation rate increased to 4.5 that the fiscal gap has reduced to E3.0 financial stability, financial inclusion, Management (ERM) Framework. pursues excellence in community growth in final demand, core inflation per cent from 4.1 per cent in Febru- billion (equivalent to a deficit of 4.5 Our strategy Regulatory reform diversification of the financial system Incidents are recorded, analysed and involvement and upholding generally Annual GDP Trends: 2014 to 2018 across advanced economies has ary, the highest inflation rate since per cent of GDP) from an estimated and modernisation of the financial reported, and key risk indicators are accepted principles underlying good 10 3 softened below target (for example, in December, amid a sharp rise in fuel outturn of 5.5 per cent in 2018/19. system. More information, including monitored and periodically reported to corporate social responsibility. The Our ‘super-goal’ (V4 target) is to be an The amendment of all the identified the United States) or remained well prices. The financial year ended with This contraction was mainly due to the FSDIP achievements, is reflected on the risk governance structures to focus of the CSI programme is three agile, efficient and integrated central legislations is key in our drive to 2.5 below it (in the Eurozone and Japan). the South African Reserve Bank fiscal consolidation and proposed page 26. inform decision-making. priority areas, namely; community bank by the year 2021. We may improve the effectiveness of our Governance its profit declined by 4 per cent to reach 5 (SARB) voting unanimously to hold its revenue measures that the Govern- health programmes, educational initia- achieve all other strategic targets, but regulatory mandate. Most of the E190.1 million at end of March 2019. The IMF projects inflation in emerging benchmark repo rate steady at 6.75 ment has put in place for the financial Financial technology CBE top 10 risks tives (covering primary school, high if we miss this one, our entire strategy amendments have been concluded and The Board maintains full and effective This has, once again, been a difficult 2 0 markets and developing economies, on per cent on 28 March 2019, as widely year. school, tertiary institutions) and will fail. In the previous year, we quality assured. The next year we will control over the operations of the Bank year, but the CBE has been able to average, to rise to 4.8 per cent in expected. Policymakers highlighted The range, prevalence and evolution of For the period under review, the Bank national research institutions. Total captured our V4 targets for the be focusing on the legislative stages and is accountable and responsible for contend with the challenges presented. 1.5 2019, before declining to 4.7 per cent that the current stance on monetary Public debt financial innovations have since identified, analysed and prioritised the amount invested in this programme for 2018/19 financial year. that are outside of our control. its performance and compliance. The -5 in 2020. Core inflation has also policy remains accommodative and increased incredibly. In the light of top 10 corporate risks according to the the financial year was E1.7 million. Board reviews the strategic priorities of Supplementary reports 1 dropped further below historical monetary policy actions will continue Total public debt stock was recorded policy, is on a downward trend with tive of the Bank through formulation these technological advancements for Bank’s process construct. The top 10 The Bank identified four strategic Financial sustainability the Bank, determines investment Annual percent Change (%) Change percent Annual -10 averages in many emerging markets to focus on anchoring inflation near at E17.6 billion, an equivalent of 26.7 expected upward risks towards the and implementation of appropriate financial services, regulators and risks are based on the risk landscape Stakeholder engagement areas of focus, namely; human dynam- policies and delegates to management As stand-alone reports, the Bank, along- 0.5 (%) change percentage Annual and developing economies, barring a to the mid-point of the target range per cent of GDP at the end of March end of 2019. The inflation trajectory macro-prudential policy measures. supervisors face the challenge of considered against the Bank’s capacity ics, financial sustainability, regulatory The programme did well in counter- the detailed planning and implementa- side the Integrated Annual Report, also in the interest of sustainable growth. 2019. This reflects an increase of 35.4 reform and business intelligence. Each acting the negative effects of outflows few cases such as Argentina, Turkey, swings hinge on policy uncertainty as After sufficient deliberations on finan- harnessing the potential of Financial to avoid and mitigate the likelihood of We have a Stakeholder Management tion of the objectives and policies in publishes an Economic Review Report, -15 0 and Venezuela – contributing to the per cent from the revised figure of we come to grips with the impact of cial stability issues, the Financial Technology (Fintech), while making the risk occurrence as well as the Framework in place that guides stake- of these strategic areas is overseen by in the South African Rand (ZAR) accordance with acceptable risk param- Financial Stability Report and Audited 2014 2015 2016 2017 2018 subdued headline inflation across this KINGDOM OF ESWATINI E13.0 billion recorded in March 2018. the freeze on increases in water and Stability Committee (FSC) discharges sure not to undermine consumer impact - should it occur. Mitigation holder engagement activities and a champion. A total of fifteen portfolio. It also performed well in eters. The Board monitors compliance Financial Statements, which can be group of countries. Core inflation has The surge is mainly attributed to electricity tariffs introduced by the its accountability through the publica- protection, integrity of financial measures were implemented during processes. During the reporting year, programmes are run under these creating financial efficiencies (per V4 with policies and achievements against accessed on our website: Primary Sector (LHS) Secondary Sector (LHS) also dropped further below historical GDP developments continued issuance of Government new Cabinet. The freeze on increases tion of the annual Financial Stability markets and stability of the financial the course of the financial year, with we developed a Meaningful Stakehold- strategic areas, with each programme financial efficiency targets). More set objectives by holding management https://www.centralbank.org.sz. Tertiary Sector (LHS) Overall GDP (RHS) averages in many emerging markets securities. The Bank notes with in the electricity tariff has been Report. system as a whole. strategic and operational projects er Engagement Project as one of our headed by a manager reporting to the interventions will continue even in the accountable for its activities through Source: Central Statistics Office and developing economies, barring a According to official provisional concern that the country’s debt has reflected in the inflation outcome for implemented for transformation and to strategic activities. We developed a relevant champion. next financial year. performance reporting and budget Conclusion few cases such as Argentina, Turkey, estimates by the Central Statistics been rising exponentially over the April 2019, where it fell to a low of 1.8 Eswatini’s fiscal challenges still repre- The Eswatini Fintech strategy improve controls. Reasonable success stakeholder engagement measurement updates. and Venezuela. Office (CSO), the Gross Domestic year under review. As such, the formu- per cent down from 5.3 per cent sent a significant point of vulnerability describes the country’s priorities in its was achieved with slight delays in tool to quantify the level of engage- With regards to performance against It has been a strong team effort, and I Product (GDP), which is a measure of lation of a Debt Sustainability Analysis recorded in March 2019. for the financial sector. Developments journey to be the ‘leading Fintech hub project deliveries as a consequence of ment, based on identified key engage- strategy, the projects under the four Where are we going? In the year under review, the Board would like to extend my sincere thanks South Africa economic activity, is estimated to main sectors that are projected to foreign exchange from the local and implementation of a Medium Term in South Africa (SA) present much in Africa’. The Central Bank of Eswati- the leadership uncertainty among ment measurement indicators. Our strategic areas of focus can be summa- finalised the external Board evaluation and appreciation to the Minister for Quarterly GDP developments contracted by 10.3 per cent while perform well in 2019. The manufactur- have expanded by 2.4 per cent in perform poorly include ‘Construction’, market as a long term objective to Debt Strategy is now vital. The Bank’s inflation forecast for the closer risks to Eswatini’s financial ni, in partnership with other stakehold- other operational inefficiencies. stakeholders continue to be concerned rised as follows: This is the question we ask ourselves. exercise with the Institute of Directors Finance and his officials, Board of Direc- quarried stone production decreased ing sector would generally benefit According to preliminary indicators 2018 compared to 2.0 per cent in ‘Wholesale and Retail’ and ‘General boost the level of reserves. The Bank year 2019 has been revised down to stability due to SA being the anchor ers established a regulatory Sandbox to about Government’s fiscal position, Assuming that success was a place, (SA). tors, all staff of the Bank as well as High frequency data reflects that by more than 40 per cent. from an improvement in market condi- published by Statistics South Africa on 2017. This increase is mainly Public Administration’. will also continue to monitor develop- Balance of payments 2.67 per cent in September 2019, from economy for the Common Monetary foster innovation in the financial Corporate social investment slow regulatory reforms, compliance Human dynamics how would we know we are there? We financial institutions and other key economic activity expanded by 4.2 per tions in key destination markets. 4 June 2019, the annual estimate of accounted for by strong positive ments and offer appropriate advice to the previous forecast of 2.87 per cent Area (CMA). The banking sector sector. This platform provides an and reputational implications. thus must speak to our most important Following the ever-evolving corporate stakeholders for their cooperation, cent, on a year-on-year basis (season- On a quarter-on-quarter, seasonally These include: a recovery in the South real GDP for 2018 increased by 0.8 per developments in the primary and Going forward, GDP is projected to the Government in order to retain the In the financial year 2018/19, the projected in July 2019. The proposed remains stable, liquid and adequately opportunity to test innovative Through its Corporate Social Invest- The impact of this programme will be goals to be achieved in the next 12 governance developments locally and commitment and dedication to the ally adjusted), in the first quarter of adjusted, economic activity expanded African economy; regaining of lost Inflationary pressures remained contained in June cent following an increase of 1.4 per tertiary sectors. increase by 2.9 per cent in 2020 and reserves at levels above the threshold country posted an overall balance of introduction of Value Added Tax (VAT) capitalised. However, credit risk is solutions in a live environment whilst seen in the long term. However, months. Again, we focus on our V4 internationally, which call for increased attainment of price and financial stabili- 2019 compared to 2.4 per cent in the at a slower rate of 0.9 per cent in the markets such as Africa Growth Oppor- 2019. Rates of increase in input costs and output cent in 2017. The annual real GDP then retreat to 1.3 per cent and 1.7 of three months cover of imports of payments deficit of E2.314 billion, on electricity in the year poses an increasing, thus affecting bank ensuring consumer protection. projects like the ones on culture shift Targets, Process Outputs and Strategic regulation, greater transparency, and ty in the Kingdom of Eswatini. I have no previous quarter. Sectors that record- first quarter of 2019 down from 7.2 tunity Act (AGOA) provided by the US charges both ticked lower and remained below growth of 0.8 per cent in 2018 was led High frequency data reflects that per cent in 2021 and 2022, respective- goods and services. triple the deficit of E799.3 million upside risk to overall inflation. Over earnings, which will ultimately affect and stakeholder management have Projects. This is where we demon- more rigorous scrutiny of large institu- doubt that I can continue to rely on ed significant positive performance in per cent in the previous quarter. and beef export market in the Europe- their respective long-run averages. Average vendor by increased economic activity in economic activity expanded by 4.2 ly. recorded in the 2017/18 financial the medium term, inflation is project- solvency of banks. Financial Technology in the world is already identified gaps in the environ- strate ‘The 4 Disciplines of Execution’ tions, the ethics and compliance them for unwavering support and the first quarter of 2019 included; an Free trade Area (EFTA). In addition, lead times (a bellwether of supply-chain price finance, real estate and business per cent, on a year-on-year basis Private sector credit year. This necessitated a reduction in ed at 4.31 per cent in 2020 and 5.29 growing at a rapid pace and the Bank is ment and have also identified possible approach, in that; function becomes integral to the strate- dedication in the execution of our ‘manufacturing’, ‘wholesale and Medium-term GDP projections there has been exploration of new pressures) also improved for the first time in six services, which contributed 0.4 of a (seasonally adjusted), in the first reserve assets, as a financing item for per cent in 2021. National payment systems aligning itself accordingly to ensure interventions. As these roll out their gic core of organisations gearing to mandate and objectives in the interest retail’, ‘transport and storage’ and markets such as Taiwan (through the years, as purchasing activity among manufacturers percentage point based on growth of quarter of 2019 compared to 2.4 per External reserves Growth in credit extended to the the deficit recorded in the overall the country attains Vision 2022. programme of action, we will start to • We have not discarded any targets maintaining public trust. Therefore, of all Emaswati. ‘financial services excluding insurance Economic activity is projected to Economic Corporation Agreement with fell for five consecutive months (IMF WEO Update, 1.8 per cent, and general Government cent in the previous quarter. Sectors private sector decelerated somewhat balance of payments. In 2018/19, the Monetary Policy Consultative Operations of designated systemically see improvements. Areas where we in the process of identifying our beyond responding to changes in the and pension funds’. The manufactur- decelerate to 1.4 per cent in 2019 Taiwan) and other prospective markets July 2019). services, which contributed 0.2 of a that recorded significant positive Eswatini’s external reserves continued from the double digit rate recorded in country benefitted from increased Committee important national payment systems Risk management approach did not move as swiftly as we had important goals. Instead, we industry, the Central Bank of Eswatini ing sector grew by 8.3 per cent, from 2.4 per cent in 2018 largely due in the African region. percentage point based on a 1.3 per performance in the first quarter of to fall as the Government made draw- the past year to single digit. The debt security holdings, which diluted continued to run smoothly during the anticipated are in relation to the allocated weights to help us prior- continues to invest its efforts in creating year-on-year, in the first quarter of to worsening fiscal challenges. The Global inflation and commodities overview cent rise. 2019 included; ‘manufacturing’, downs on its deposits held at the Bank growth was largely supported by the depletion in the country’s claims The Governor makes monetary policy reporting period. The Bank closely monitors the operat- identification of future skills and itize the targets. The weighting and a scalable ethics and compliance 2019 largely benefiting from strong main sectors that are projected to Going forward, positive performance ‘wholesale and retail’, ‘transport to cover the persistent cash shortfalls. increased demand for credit towards on other monetary authorities. decisions after consultative meetings ing environment using the risk improvement of the performance prioritization was based on an ecosystem that will help meet its needs Majozi V. Sithole performance in manufacturing of perform poorly include ‘Construction’, is expected to be sustained in the The IMF reported that headline inflation has The South African economy shrank by and storage’ and ‘financial services In terms of estimated imports of goods ‘businesses’ and ‘other sectors’ with the Monetary Policy Consultative During the period under review, the exposure, opportunities and management system. The bottlenecks assessment of which targets assist- today and in the future. Governor beverages, textiles and wearing ‘Wholesale and Retail’ and ‘General secondary sector (mainly manufactur- remained subdued across most advanced and an annualised 3.2 per cent excluding insurance and pension and services, the reserves were (namely ‘other financial corpora- Consumer inflation Committee (MPCC). In 2018/19, the Bank approved an application from process-efficiency approach to identify have been identified and in the next ed the Bank more towards achiev- apparel as well as wood products and Public Administration’. Construction ing and energy sub-sectors) through- emerging market economies. These developments quarter-on-quarter in the three funds’. Subsectors that performed sufficient to cover 2.0 months at the tions’). The accelerated growth in MPCC held six bi-monthly meetings. In Eswatini Mobile to provide mobile threats and avoid these; as well as find financial year, better results will be ing agility, efficiency and integra- Bank’s financial performance paper products. The ‘wholesale and activity would be mainly affected by out the medium term, in line with have contributed, in part, to market pricing of months to March 2019, following a 1.4 poorly included the following: end of March 2019, remarkably below credit to businesses is a positive devel- The annual consumer inflation was these meetings, the MPCC reviewed money transfer services to its custom- and pursue opportunities in fulfilling realised. Some projects have missed tion. retail’ and ‘transport and storage’ the slow implementation rate of some investments made in those sectors. expected inflation dropping sharply in the United per cent growth in the previous period ‘public administration’, ‘construc- the three-months threshold and also opment as this sector drives domestic relatively contained in the 2018/19 developments on inflation (including ers. Eswatini Mobile has partnered its mandate. This is attained through timeliness in terms of delivery, while Operationally, the Bank remained subsectors recorded year-on-year major public sector infrastructural The government efforts to clear States and the Eurozone. Consumer prices in and compared to market expectations tion’, ‘mining and quarrying’, ‘tour- lower than the 3.2 months covered at economic growth. financial year, averaging 5.0 per cent forecasts) as well as other macroeco- with Eswatini Bank, who will also be integrating the Bank’s strategy, risk others are on track. • We have developed both Lag and profitable during the year, even though growth rates of 11.8 and 10.1 per projects. On the other hand, the arrears from previous years is expect- advanced economies, on average, are projected to of a 1.7 per cent contraction. It was ism activities’, ‘human health, and the same time in the previous year. compared to 5.5 per cent in the previ- nomic indicators of the domestic, holding the required trust account for and performance for effective Lead Measures for all our targets. cent, respectively. hiring-and-wage-freeze continues to ed to lift performance on heavily rise to 1.6 per cent in 2019, edging up marginally the sharpest quarterly decline since social activities’. Fiscal cash-flow Public finance ous financial year. The moderation in regional and international economies. deposit-taking from agents. The planning and monitoring. Business intelligence This will make it easier for project weigh negatively on real disposable affected sub-sectors (such as to 2.0 per cent in 2020. Consistent with subdued Q1-2009, mainly reflecting the effects challenges continued to weigh on During the course of the financial year, consumer inflation mainly benefitted Over the reporting period, the MPCC service will provide financial services teams to know what is expected of Subsectors that performed poorly incomes thereby affect output for construction) in 2020. However, this of power cuts on manufacturing and implementation of public infrastruc- the Bank engaged in an exercise to buy The 2019/20 budget was presented from favourable food prices, which recommended to keep the discount to the banked, underbanked and Risk management remains the main It has taken us a while to put the them in the next 12 months. included the following: ‘public admin- ‘wholesale and retail trade’ as well as will have a temporal effect on growth mining. tural projects thereby resulting in foreign exchange originating from under an unprecedented economic recorded a deflation of 0.2 per cent in rate unchanged at 6.75 per cent. unbanked population. area of focus and management is foundation and framework in place for istration’, ‘construction’, ‘mining and activities for ‘public administration and in the absence of stronger fiscal • We use information attained lower output in construction activity. export proceeds from the local crisis, where the country is faced with the period under review down from committed to applying international this programme. A lot of research work • We have implemented monthly quarrying’, ‘tourism activities’, and social security’. On a positive consolidation measures and structural from Departmental, Manage- commercial banks. The accumulation pressure on Government revenues, 5.2 per cent the previous financial Financial stability Financial sector development best practice and standards to ensure was done to ensure that when the monitoring scorecards for the ‘human health, and social activities’. note, the manufacturing sector is reforms, it would come at a cost of ment Committee, Executive Medium Term GDP Projections of these funds has assisted to buffer accumulating arrears, depleted year. implementation plan that the effects of uncertainty on projects take off, all processes are Projects and Change Management expected to rebound from poor perfor- higher debt and thereby affect future Committee and Board meet- the reserves portfolio against reserves and sluggish growth. As such, The Bank, through its macro-pruden- objectives are systematically and properly aligned. Committee and the quarterly score- Fiscal cash-flow challenges continued mance in the previous year. In particu- growth prospects. In line with these ings to hold each other Economic activity is projected to outflows. In the absence of this inter- restoring prudent public finance Inflation outlook tial mandate, is committed to The Bank continued to coordinate the continuously monitored. This is done cards for the Board Capital Projects to weigh on implementation of public lar, the manufacturing of ‘beverages’, considerations, GDP is projected to accountable, so that the goals decelerate to 1.4 per cent in 2019 vention, reserves levels would have management remains pivotal in mitigate risks to financial stability. implementation of the Financial through periodic assessments of strate- and Investment Committee, which infrastructural projects thereby ‘textiles and wearing apparel’ and increase by 2.9 per cent in 2020 and do not naturally disintegrate in from 2.4 per cent in 2018 largely due been significantly lower. The Bank will helping the country achieve sustaina- The inflation outlook, which remains a The financial stability mandate Sector Development Implementation gic objectives, projects and day-to-day will provide compelling scoreboards resulting in lower output in construc- ‘wood and wood products’ are the then retreat to 1.3 and 1.7 per cent in the whirlwind. to worsening fiscal challenges. The continue with its efforts to acquire ble and inclusive growth. predominant guide for monetary complements the price stability objec- Plan (FSDIP). processes, using various tools as for tracking delivery. tion activity. Construction activity main subsectors that are expected to 2021 and 2022, respectively.

19 CBE Integrated Annual Report 2018/19 Introduction mism in the global economy being weighed down by prolonged policy It gives me great pleasure to present to uncertainty as trade tensions remain. the Minister for Finance, Eswatini On the trade front, the forecast reflects citizens and other stakeholders the the May 2019 increase of US tariffs on second CBE Integrated Annual Report USD200 billion of Chinese exports from for the financial year ended 31 March 10 per cent to 25 per cent, and retalia- 2019. The Report provides a compre- tion by China. hensive overview of the operations of the CBE during the past financial year. Furthermore, technology tensions have It includes a summarised version of the erupted, threatening global technology financial statements. supply chains, and the prospects of a ‘no deal’ Brexit have increased follow- Coverage ing the appointment of new Prime Minister (PM) Boris Johnson in the Matters included in the Report are United Kingdom. In addition, rising aimed at informing and providing assur- geopolitical tensions, especially relat- ance to stakeholders on the CBE’s ing to sanctions on Iran, supply disrup- ability to deliver on its mandate, tions in Russia, Chile and Libya have commitment to sustained relationships roiled energy prices and, in the process, and responsible corporate citizenship. affected commodity exporters, despite The issues of materiality pertain to a near-term strengthening of oil prices. price stability and broader stability of Overall, risks to the latest growth the financial sector conducive to forecast are mainly to the downside. economic growth in the short, medium Other negative developments include a and long term. protracted increase in risk aversion that has exposed the financial vulnerabili- Materiality ties that continue to accumulate after years of low interest rates; and the In ascertaining matters of materiality mounting disinflationary pressures that for disclosure in this Report, the Bank increase debt service difficulties, has considered issues that either affect constraining monetary policy space to or have potential to substantially affect counter downturns, and make adverse our ability to perform and remain shocks more persistent than normal. relevant, our mode of operation, input factors as well as our ability to create The IMF highlights that, against the value over time. As indicated, issues of observed difficult backdrop in the first materiality pertain to those that direct- half of 2019, there were positive ly affect the Bank’s ability to achieve surprises to growth in advanced econo- its price and financial stability mies, but weaker-than-expected activi- mandate. ty in emerging markets and developing economies. For advanced economies, Global developments growth is projected at 1.9 per cent in 2019 and 1.7 per cent in 2020. In According to the International Monetary emerging markets and developing econ- Fund’s World Economic Outlook (IMF omies, growth is forecast at 4.1 per WEO) Update released in July 2019, cent in 2019, picking up to 4.7 per cent global growth is forecast at 3.2 per cent in 2020. Investment and demand for in 2019, before picking up to 3.5 per consumer durables have been subdued cent in 2020. The softer projections across advanced and emerging market follow a 3.6 per cent expansion record- economies as firms and households ed in 2018. Global growth remains continue to hold back on long-term sluggish and precarious, with the dyna- spending.

ECONOMIC REVIEW

As at the end of March 2019, the Budget estimates for 2019/20 show The FSDIP has four pillars namely; prescribed in the CBE Enterprise Risk ment (CSI) programme, the Bank Inflation dynamics annual inflation rate increased to 4.5 that the fiscal gap has reduced to E3.0 financial stability, financial inclusion, Management (ERM) Framework. pursues excellence in community growth in final demand, core inflation per cent from 4.1 per cent in Febru- billion (equivalent to a deficit of 4.5 diversification of the financial system Incidents are recorded, analysed and involvement and upholding generally Our strategy Regulatory reform The annual consumer inflation was ment’. These sub-categories recorded demand-side factors were also across advanced economies has ary, the highest inflation rate since per cent of GDP) from an estimated and modernisation of the financial reported, and key risk indicators are accepted principles underlying good relatively contained in the 2018/19 decreases of 2.6 and 2.9 percentage contained in the period under review. softened below target (for example, in December, amid a sharp rise in fuel outturn of 5.5 per cent in 2018/19. system. More information, including monitored and periodically reported to corporate social responsibility. The Our ‘super-goal’ (V4 target) is to be an The amendment of all the identified financial year, averaging 5.0 per cent points, respectively, reflecting that the United States) or remained well prices. The financial year ended with This contraction was mainly due to the FSDIP achievements, is reflected on the risk governance structures to focus of the CSI programme is three agile, efficient and integrated central legislations is key in our drive to compared to 5.5 per cent in the previous financial year. The modera- below it (in the Eurozone and Japan). the South African Reserve Bank fiscal consolidation and proposed page 26. inform decision-making. priority areas, namely; community bank by the year 2021. We may improve the effectiveness of our Governance its profit declined by 4 per cent to reach (SARB) voting unanimously to hold its revenue measures that the Govern- health programmes, educational initia- achieve all other strategic targets, but regulatory mandate. Most of the E190.1 million at end of March 2019. tion in consumer prices mainly benefitted from favourable food prices, Inflation Trends: April 2018 to March 2019 The IMF projects inflation in emerging benchmark repo rate steady at 6.75 ment has put in place for the financial Financial technology CBE top 10 risks tives (covering primary school, high if we miss this one, our entire strategy amendments have been concluded and The Board maintains full and effective This has, once again, been a difficult which recorded a deflation of 0.2 markets and developing economies, on per cent on 28 March 2019, as widely year. school, tertiary institutions) and will fail. In the previous year, we quality assured. The next year we will control over the operations of the Bank year, but the CBE has been able to per cent in the period under review 5.4 average, to rise to 4.8 per cent in expected. Policymakers highlighted The range, prevalence and evolution of For the period under review, the Bank national research institutions. Total captured our V4 targets for the be focusing on the legislative stages and is accountable and responsible for contend with the challenges presented. down from 5.2 per cent the previous 2019, before declining to 4.7 per cent that the current stance on monetary Public debt financial innovations have since identified, analysed and prioritised the amount invested in this programme for 2018/19 financial year. that are outside of our control. its performance and compliance. The 5.3 financial year. in 2020. Core inflation has also policy remains accommodative and increased incredibly. In the light of top 10 corporate risks according to the the financial year was E1.7 million. Board reviews the strategic priorities of Supplementary reports 5.2 dropped further below historical monetary policy actions will continue Total public debt stock was recorded policy, is on a downward trend with tive of the Bank through formulation these technological advancements for Bank’s process construct. The top 10 The Bank identified four strategic Financial sustainability the Bank, determines investment 5.1 Favourable weather conditions averages in many emerging markets to focus on anchoring inflation near at E17.6 billion, an equivalent of 26.7 expected upward risks towards the and implementation of appropriate financial services, regulators and risks are based on the risk landscape Stakeholder engagement areas of focus, namely; human dynam- policies and delegates to management As stand-alone reports, the Bank, along- resulted in higher agricultural 5.0 and developing economies, barring a to the mid-point of the target range per cent of GDP at the end of March end of 2019. The inflation trajectory macro-prudential policy measures. supervisors face the challenge of considered against the Bank’s capacity ics, financial sustainability, regulatory The programme did well in counter- the detailed planning and implementa- side the Integrated Annual Report, also produce for food supplies both local- 4.9 few cases such as Argentina, Turkey, in the interest of sustainable growth. 2019. This reflects an increase of 35.4 swings hinge on policy uncertainty as After sufficient deliberations on finan- harnessing the potential of Financial to avoid and mitigate the likelihood of We have a Stakeholder Management reform and business intelligence. Each acting the negative effects of outflows tion of the objectives and policies in publishes an Economic Review Report, ly and regionally. This supported a 4.8 and Venezuela – contributing to the per cent from the revised figure of we come to grips with the impact of cial stability issues, the Financial Technology (Fintech), while making the risk occurrence as well as the Framework in place that guides stake- of these strategic areas is overseen by in the South African Rand (ZAR) accordance with acceptable risk param- Financial Stability Report and Audited moderation in prices for both (%) rate Inflation 4.7 subdued headline inflation across this KINGDOM OF ESWATINI E13.0 billion recorded in March 2018. the freeze on increases in water and Stability Committee (FSC) discharges sure not to undermine consumer impact - should it occur. Mitigation holder engagement activities and a champion. A total of fifteen portfolio. It also performed well in eters. The Board monitors compliance Financial Statements, which can be processed and unprocessed food group of countries. Core inflation has The surge is mainly attributed to electricity tariffs introduced by the its accountability through the publica- protection, integrity of financial measures were implemented during processes. During the reporting year, programmes are run under these creating financial efficiencies (per V4 with policies and achievements against accessed on our website: 4.6 products. In addition to food also dropped further below historical GDP developments continued issuance of Government new Cabinet. The freeze on increases tion of the annual Financial Stability markets and stability of the financial the course of the financial year, with we developed a Meaningful Stakehold- strategic areas, with each programme financial efficiency targets). More set objectives by holding management https://www.centralbank.org.sz. 4.5 inflation, there was a moderation in averages in many emerging markets securities. The Bank notes with in the electricity tariff has been Report. system as a whole. strategic and operational projects er Engagement Project as one of our headed by a manager reporting to the interventions will continue even in the accountable for its activities through Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar prices for semi-durable products and developing economies, barring a According to official provisional concern that the country’s debt has reflected in the inflation outcome for implemented for transformation and to strategic activities. We developed a relevant champion. next financial year. performance reporting and budget Conclusion 2018 2019 such as ‘clothing and footwear’ and few cases such as Argentina, Turkey, estimates by the Central Statistics been rising exponentially over the April 2019, where it fell to a low of 1.8 Eswatini’s fiscal challenges still repre- The Eswatini Fintech strategy improve controls. Reasonable success stakeholder engagement measurement updates. ‘furnishing and household equip- and Venezuela. Office (CSO), the Gross Domestic year under review. As such, the formu- per cent down from 5.3 per cent sent a significant point of vulnerability describes the country’s priorities in its was achieved with slight delays in tool to quantify the level of engage- With regards to performance against It has been a strong team effort, and I Source: Central Statistics Office Product (GDP), which is a measure of lation of a Debt Sustainability Analysis recorded in March 2019. for the financial sector. Developments journey to be the ‘leading Fintech hub project deliveries as a consequence of ment, based on identified key engage- strategy, the projects under the four Where are we going? In the year under review, the Board would like to extend my sincere thanks South Africa economic activity, is estimated to main sectors that are projected to foreign exchange from the local and implementation of a Medium Term in South Africa (SA) present much in Africa’. The Central Bank of Eswati- the leadership uncertainty among ment measurement indicators. Our strategic areas of focus can be summa- finalised the external Board evaluation and appreciation to the Minister for have expanded by 2.4 per cent in perform poorly include ‘Construction’, market as a long term objective to Debt Strategy is now vital. The Bank’s inflation forecast for the closer risks to Eswatini’s financial ni, in partnership with other stakehold- other operational inefficiencies. stakeholders continue to be concerned rised as follows: This is the question we ask ourselves. exercise with the Institute of Directors Finance and his officials, Board of Direc- According to preliminary indicators 2018 compared to 2.0 per cent in ‘Wholesale and Retail’ and ‘General boost the level of reserves. The Bank year 2019 has been revised down to stability due to SA being the anchor ers established a regulatory Sandbox to about Government’s fiscal position, Assuming that success was a place, (SA). tors, all staff of the Bank as well as published by Statistics South Africa on 2017. This increase is mainly Public Administration’. will also continue to monitor develop- Balance of payments 2.67 per cent in September 2019, from economy for the Common Monetary foster innovation in the financial Corporate social investment slow regulatory reforms, compliance Human dynamics how would we know we are there? We financial institutions and other key 4 June 2019, the annual estimate of accounted for by strong positive ments and offer appropriate advice to the previous forecast of 2.87 per cent Area (CMA). The banking sector sector. This platform provides an and reputational implications. thus must speak to our most important Following the ever-evolving corporate stakeholders for their cooperation, real GDP for 2018 increased by 0.8 per developments in the primary and Going forward, GDP is projected to the Government in order to retain the In the financial year 2018/19, the projected in July 2019. The proposed remains stable, liquid and adequately opportunity to test innovative Through its Corporate Social Invest- The impact of this programme will be goals to be achieved in the next 12 governance developments locally and commitment and dedication to the Inflationary pressures remained contained in June cent following an increase of 1.4 per tertiary sectors. increase by 2.9 per cent in 2020 and reserves at levels above the threshold country posted an overall balance of introduction of Value Added Tax (VAT) capitalised. However, credit risk is solutions in a live environment whilst seen in the long term. However, months. Again, we focus on our V4 internationally, which call for increased attainment of price and financial stabili- 2019. Rates of increase in input costs and output cent in 2017. The annual real GDP then retreat to 1.3 per cent and 1.7 of three months cover of imports of payments deficit of E2.314 billion, on electricity in the year poses an increasing, thus affecting bank ensuring consumer protection. projects like the ones on culture shift Targets, Process Outputs and Strategic regulation, greater transparency, and ty in the Kingdom of Eswatini. I have no charges both ticked lower and remained below growth of 0.8 per cent in 2018 was led High frequency data reflects that per cent in 2021 and 2022, respective- goods and services. triple the deficit of E799.3 million upside risk to overall inflation. Over earnings, which will ultimately affect and stakeholder management have Projects. This is where we demon- more rigorous scrutiny of large institu- doubt that I can continue to rely on their respective long-run averages. Average vendor by increased economic activity in economic activity expanded by 4.2 ly. recorded in the 2017/18 financial the medium term, inflation is project- solvency of banks. Financial Technology in the world is already identified gaps in the environ- strate ‘The 4 Disciplines of Execution’ tions, the ethics and compliance them for unwavering support and lead times (a bellwether of supply-chain price finance, real estate and business per cent, on a year-on-year basis Private sector credit year. This necessitated a reduction in ed at 4.31 per cent in 2020 and 5.29 growing at a rapid pace and the Bank is ment and have also identified possible approach, in that; function becomes integral to the strate- dedication in the execution of our pressures) also improved for the first time in six services, which contributed 0.4 of a (seasonally adjusted), in the first reserve assets, as a financing item for per cent in 2021. National payment systems aligning itself accordingly to ensure interventions. As these roll out their gic core of organisations gearing to mandate and objectives in the interest years, as purchasing activity among manufacturers percentage point based on growth of quarter of 2019 compared to 2.4 per External reserves Growth in credit extended to the the deficit recorded in the overall the country attains Vision 2022. programme of action, we will start to • We have not discarded any targets maintaining public trust. Therefore, of all Emaswati. fell for five consecutive months (IMF WEO Update, 1.8 per cent, and general Government cent in the previous quarter. Sectors private sector decelerated somewhat balance of payments. In 2018/19, the Monetary Policy Consultative Operations of designated systemically see improvements. Areas where we in the process of identifying our beyond responding to changes in the July 2019). services, which contributed 0.2 of a that recorded significant positive Eswatini’s external reserves continued from the double digit rate recorded in country benefitted from increased Committee important national payment systems Risk management approach did not move as swiftly as we had important goals. Instead, we industry, the Central Bank of Eswatini percentage point based on a 1.3 per performance in the first quarter of to fall as the Government made draw- the past year to single digit. The debt security holdings, which diluted continued to run smoothly during the anticipated are in relation to the allocated weights to help us prior- continues to invest its efforts in creating Global inflation and commodities overview cent rise. 2019 included; ‘manufacturing’, downs on its deposits held at the Bank growth was largely supported by the depletion in the country’s claims The Governor makes monetary policy reporting period. The Bank closely monitors the operat- identification of future skills and itize the targets. The weighting and a scalable ethics and compliance ‘wholesale and retail’, ‘transport to cover the persistent cash shortfalls. increased demand for credit towards on other monetary authorities. decisions after consultative meetings ing environment using the risk improvement of the performance prioritization was based on an ecosystem that will help meet its needs Majozi V. Sithole The IMF reported that headline inflation has The South African economy shrank by and storage’ and ‘financial services In terms of estimated imports of goods ‘businesses’ and ‘other sectors’ with the Monetary Policy Consultative During the period under review, the exposure, opportunities and management system. The bottlenecks assessment of which targets assist- today and in the future. Governor remained subdued across most advanced and an annualised 3.2 per cent excluding insurance and pension and services, the reserves were (namely ‘other financial corpora- Consumer inflation Committee (MPCC). In 2018/19, the Bank approved an application from process-efficiency approach to identify have been identified and in the next ed the Bank more towards achiev- emerging market economies. These developments quarter-on-quarter in the three funds’. Subsectors that performed sufficient to cover 2.0 months at the tions’). The accelerated growth in MPCC held six bi-monthly meetings. In Eswatini Mobile to provide mobile threats and avoid these; as well as find financial year, better results will be ing agility, efficiency and integra- Bank’s financial performance have contributed, in part, to market pricing of months to March 2019, following a 1.4 poorly included the following: end of March 2019, remarkably below credit to businesses is a positive devel- The annual consumer inflation was these meetings, the MPCC reviewed money transfer services to its custom- and pursue opportunities in fulfilling realised. Some projects have missed tion. expected inflation dropping sharply in the United per cent growth in the previous period ‘public administration’, ‘construc- the three-months threshold and also opment as this sector drives domestic relatively contained in the 2018/19 developments on inflation (including ers. Eswatini Mobile has partnered its mandate. This is attained through timeliness in terms of delivery, while Operationally, the Bank remained States and the Eurozone. Consumer prices in and compared to market expectations tion’, ‘mining and quarrying’, ‘tour- lower than the 3.2 months covered at economic growth. financial year, averaging 5.0 per cent forecasts) as well as other macroeco- with Eswatini Bank, who will also be integrating the Bank’s strategy, risk others are on track. • We have developed both Lag and profitable during the year, even though advanced economies, on average, are projected to of a 1.7 per cent contraction. It was ism activities’, ‘human health, and the same time in the previous year. compared to 5.5 per cent in the previ- nomic indicators of the domestic, holding the required trust account for and performance for effective Lead Measures for all our targets. rise to 1.6 per cent in 2019, edging up marginally the sharpest quarterly decline since social activities’. Fiscal cash-flow Public finance ous financial year. The moderation in regional and international economies. deposit-taking from agents. The planning and monitoring. Business intelligence This will make it easier for project to 2.0 per cent in 2020. Consistent with subdued Q1-2009, mainly reflecting the effects challenges continued to weigh on During the course of the financial year, consumer inflation mainly benefitted Over the reporting period, the MPCC service will provide financial services teams to know what is expected of of power cuts on manufacturing and implementation of public infrastruc- the Bank engaged in an exercise to buy The 2019/20 budget was presented from favourable food prices, which recommended to keep the discount to the banked, underbanked and Risk management remains the main It has taken us a while to put the them in the next 12 months. mining. tural projects thereby resulting in foreign exchange originating from under an unprecedented economic recorded a deflation of 0.2 per cent in rate unchanged at 6.75 per cent. unbanked population. area of focus and management is foundation and framework in place for • We use information attained lower output in construction activity. export proceeds from the local crisis, where the country is faced with the period under review down from committed to applying international this programme. A lot of research work • We have implemented monthly from Departmental, Manage- commercial banks. The accumulation pressure on Government revenues, 5.2 per cent the previous financial Financial stability Financial sector development best practice and standards to ensure was done to ensure that when the monitoring scorecards for the ment Committee, Executive Medium Term GDP Projections of these funds has assisted to buffer accumulating arrears, depleted year. implementation plan that the effects of uncertainty on projects take off, all processes are Projects and Change Management Committee and Board meet- the reserves portfolio against reserves and sluggish growth. As such, The Bank, through its macro-pruden- objectives are systematically and properly aligned. Committee and the quarterly score- ings to hold each other Economic activity is projected to outflows. In the absence of this inter- restoring prudent public finance Inflation outlook tial mandate, is committed to The Bank continued to coordinate the continuously monitored. This is done cards for the Board Capital Projects accountable, so that the goals decelerate to 1.4 per cent in 2019 vention, reserves levels would have management remains pivotal in mitigate risks to financial stability. implementation of the Financial through periodic assessments of strate- and Investment Committee, which do not naturally disintegrate in from 2.4 per cent in 2018 largely due been significantly lower. The Bank will helping the country achieve sustaina- The inflation outlook, which remains a The financial stability mandate Sector Development Implementation gic objectives, projects and day-to-day will provide compelling scoreboards the whirlwind. to worsening fiscal challenges. The continue with its efforts to acquire ble and inclusive growth. predominant guide for monetary complements the price stability objec- Plan (FSDIP). processes, using various tools as for tracking delivery.

CBE Integrated Annual Report 2018/19 20 ECONOMIC REVIEW

On the contrary, there was a significant The Bank’s inflation forecast for 2019 increase in prices for ‘housing and was reviewed downwards in September utilities’ in the 2018/19 financial year. 2019 to 2.67 per cent, from 2.87 per This index averaged 13.9 per cent in cent projected in July 2019. Over the the period under review compared to medium term, inflation is forecasted at 8.1 per cent in the previous year. The 4.31 per cent in 2020 and 5.29 per cent notable increase in ‘housing and in 2021. The upward bias in the medium utilities’ was due to 15 per cent term largely emanates from an expect- increase in rental costs for housing and ed significant impact of administered a 13 per cent increase in water tariffs, prices generated from a tariff on which were effected during the period electricity and the exchange rate that under review. Electricity prices were would exert upward inflationary also elevated as they entered into the pressures on overall inflation. second year of a 15 per cent multi-year tariff that was approved by the energy Public finance regulator in the previous year. The 2019/20 budget was presented Core inflation, which is the Consumer under an unprecedented economic crisis Price Index (CPI) excluding food and where the country is faced with non-alcoholic beverages, auto fuel and challenges such as; pressure on Govern- energy, averaged 7.1 per cent in the ment revenues, accumulating arrears 2018/19 financial year up from 5.7 per and depleted reserves. As such, public cent in the previous year. This increase finances remain unstable. The Govern- largely reflected the elevation in ment has crafted a budget strategy for prices for services. The CPI for services 2019/20 that will take the country out grew by 9.3 per cent in the period of this daunting economic situation. The under review, up from 6.3 per cent the strategies include; fiscal consolidation, previous financial year. revenue mobilisation and stimulating resilience to adversity. Inflation outlook

The inflation outlook, which remains a Comparative Budget Summary: 2016/17 to 2019/20 predominant guide for monetary policy, is on a downward trend with expected upward risks towards the end 25 (3.5) of 2019. The inflation trajectory swings 20 (4.0) hinge on policy uncertainty as we come 15 (4.5) to grips with the freeze on increases in 10 (5.0) water and electricity tariffs introduced 5 (5.5) E' Billion 0 (6.0) by the new Cabinet. The freeze on (5) (6.5) of GDP as % Deficit increases in the electricity tariff has (10) (7.0) been reflected in the inflation 2016/17 2017/18 2018/19 2019/20 outcome for April 2019 where inflation Total Revenue & Grants 14.5 16.7 16.2 18.9 fell to a low of 1.8 per cent down from Total Expenditure 18.4 19.6 19.8 21.8 Budget Defcit (3.9) (2.9) (3.6) (3.0) 5.3 per cent recorded in March 2019. Budget Defcit as % of GDP (RHS) (6.6) (4.6) (5.5) (4.5) The water tariff in May was also suspended for the year 2019 and the Source: Ministry of Finance effect was reflected in the low inflation figures due to higher base The actual outturn for 2017/18 shows a revenue measures that the Govern- effects. The suspension on the deficit of E2.9 billion which is equiva- ment has put in place for the financial increase in the tariff for utilities there- lent to 4.6 per cent of GDP, while the year. fore remains a dampening factor on estimated outturn for 2018/19 is at the inflation outlook. E3.6 billion an equivalent of 5.5 per Public debt cent of GDP. This shows that the fiscal Food prices, which account for the position of Government has worsened Preliminary figures indicate that total largest weight in the CPI basket, are over the past year mainly due to public debt stock was recorded at expected to stabilise as the adverse increasing expenditures against dwin- E17.6 billion, an equivalent of 26.7 per effects of unfavourable weather condi- dling revenues. cent of GDP at end of March 2019. This tions seen in the previous years have reflects an increase of 35.4 per cent dissipated. The advent impact of Budget estimates for 2019/20 show a from the revised figure of E13.0 billion imported inflation given the expected contracting fiscal gap of E3.0 billion recorded in March 2018. The surge is weaker exchange rate and volatile oil translating to a deficit of 4.5 per cent mainly attributed to continued prices remain key risk factors to the of GDP. This contraction supports the issuance of Government securities. inflation outlook in the medium term. fiscal consolidation and proposed

21 CBE Integrated Annual Report 2018/19 ECONOMIC REVIEW

Even though Eswatini’s debt levels are low, the challenge faced is the growth rate of public debt. As such, Public Debt: 2016/17 to 2018/19 one of the immediate goals of the Government as stipulated in the 20 30 2019-2022 Strategic Roadmap is to 18 25 bring public debt and arrears’ 16 14 accumulation to sustainable levels. 20 The Government has further commit- 12 ted itself to keep total public debt 10 15 E' Billion below 35 per cent of GDP. 8 % of GDP 10 6 4 Monetary developments 5 2 Over the year ended March 2019, 0 0 2016/17 2017/18 2018/19 monetary conditions remained supportive of domestic economic Public Domestic Debt Public External Debt activity. The Bank maintained a stable monetary policy stance by Total Public Debt Total as % of GDP keeping the discount rate unchanged Source: Ministry of Finance and Central Bank of Eswatini throughout the year as inflation remained relatively subdued. Accord- ingly, the discount rate stood at 6.75 per cent and the banks’ prime lending rate at 10.25 per cent up to March Private Sector Credit: April 2018 to March 2019 2019. 8 16 Further, the local discount rate and the South African repo rate converged 14 at par since November 2018 thus 6 eliminating the 25 basis points differ- 12 ential that existed during the first 10 seven months of the year under 4 review. The convergence occurred 8 (E' Billions) when the SARB increased the repo (E' Billions) rate while the local rate remained 6

2 Private Sector Credit steady. 4

Growth in credit extended to the Households, Businesses Sectors& Other 0 2 private sector decelerated somewhat Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 from the double-digit rate recorded Households 5.99 6.12 5.90 5.64 5.65 5.76 5.84 5.84 5.84 5.94 5.95 5.94 Other Sectors 1.99 2.07 2.15 2.08 2.06 1.91 1.92 1.98 1.97 2.03 2.12 2.19 in the past year to single digit. The Businesses 6.12 5.98 6.43 6.93 6.61 6.70 6.86 6.90 7.06 6.88 6.74 6.83 growth was largely supported by PSC (RHS) 14.11 14.18 14.49 14.65 14.32 14.36 14.62 14.72 14.87 14.85 14.81 14.96 increased demand for credit towards Source: Central Bank of Eswatini ‘businesses’ and ‘other sectors’ (namely ‘other financial corporations’).

The accelerated growth in credit to contrary to the 6.4 per cent growth abroad. businesses is a positive development registered in the previous year. The as this sector drives domestic net foreign assets were suppressed by Net official assets on the other hand economic growth. However, the both net foreign holdings of the bank- contracted by 35.7 per cent to reach increase in credit was partly weighed ing system and net foreign assets of E3.6 billion compared to a fall of 9.5 down by a fall in credit to local the official sector. per cent recorded in the previous Governments, public enterprises and year. Almost correspondingly, gross to a lesser extent, households. Net foreign assets of the banking official reserves declined by 31.6 per sector fell notably by 37.8 per cent cent over the year to E4.5 billion; Net foreign assets dropped by 36.3 over the year to reach E1.3 billion. worse than the decline of 9.8 per per cent over the year under review This was largely attributed to banks’ cent recorded in the previous year. to E4.9 billion in March 2019. This was disinvestment within the region and

CBE Integrated Annual Report 2018/19 22 ECONOMIC REVIEW

Gross Official Reserves and Import Cover: April 2018 to March 2019 The worsening position of the reserves was largely due to increased demand 8 4 for ZAR by commercial banks combined with lower South African 7 Customs Union (SACU) receipts at E5.8 3 billion during the fiscal year 6 2018/2019 compared to E7.1 billion

during the year 2017-2018. However, 5

SACU receipts for 2019-20 are estimat- GOR E' Billions 2

ed to pick up slightly to E6.3 billion. 4 Cover InImport Months

In terms of estimated imports of goods 3 1 and services, the reserves were Jul-18 Oct-18 Apr-18 Jan-19 Sep-18 Mar-19 Jun-18 Aug-18 Dec-18 Feb-19 Nov-18 sufficient to cover 2.0 months in May-18 March 2019, remarkably below the 3 GOR Import Cover (RHS) months threshold and also lower than the 3.2 months covered in the previous Source: Central Bank of Eswatini year.

External sector developments Current Account: March 2018 to March 2019

In the financial year 2018/19, the 2,500 country posted an overall balance of 2,000 payments deficit of E2.314 billion, 1,500 triple the deficit of E799.3 million 1,000 recorded in the 2017/18 financial 500 year. This necessitated a dent in 0 E' MillionE' reserve assets, as a financing item for -500 the deficit recorded in the overall -1,000 balance of payments. In 2018/19, the -1,500 country benefitted from increased -2,000 debt security holdings, which diluted Mar 2018 Jun 2018 Sep 2018 Dec 2018 Mar 2019 the depletion in the country’s claims Goods Services Primary income on other monetary authorities. Secondary income Current account In 2018/19, Eswatini’s current account balance posted a surplus of E3.530 billion, up by 34.1 per cent when compared to the E2.632 billion recorded in the 2017/18 financial year. The current account for the 2018/19 financial year was at 5.4 per cent of 2019 annual GDP. The current account surplus was supported by a positive trade balance and net inflows in the E3.530 bn 34.1% secondary income account, the primary income account however, recorded Eswatini’s current account balance a deficit albeit lower in the year owing posted a surplus of E3.530 billion, to narrowed deficits in the first and up by 34.1 per cent when compared final quarters of the financial year. to the E2.632 billion recorded in the 2017/18 financial year. CURRENT ACCOUNT BALANCE

23 CBE Integrated Annual Report 2018/19 FINANCIAL STABILITY

FINANCIAL STABILITY

FREQUENCY AND ATTENDANCE OF FSC MEETINGS IN 2018/19 Overview 31 October 2018 30 August 2018 Financial stability fosters sustainable Mr. Majozi Sithole economic development through + + investment, employment and produc- (Governor and Chairman) tion. It is not a sufficient but neces- Mr. Mhlabuhlangene Dlamini sary precondition for sustainable (Deputy Governor) - + economic growth. The Central Bank of Eswatini, through its macro-prudential Mr. Mfanfikile Dlamini + + mandate, is committed to mitigate (Assistant Governor) risks to financial stability. Mr. Mbongiseni Nkambule + + Financial Stability Committee (GM, Financial Regulation) Dr. Melvin Khomo - + The Financial Stability Committee (GM, Financial Markets) (FSC) complements the price stability Ms. Philile Nxumalo objective of the CBE through formula- + + (General Manager, Finance) tion and implementation of appropriate macro-prudential policy meas- Ms. Lungile Dlamini - + ures. Macro-prudential policies are (GM, Operation) formulated to limit the cost of distress in the financial system and negative Mr. Sikhumbuzo Dlamini + + spill-overs to other economic sectors. (GM, EPRS) Ms. Refiloe Mamogobo + + The FSC is chaired by the Governor. (Head Legal and Board Secretary) Membership in the FSC include the Deputy Governor, Assistant Governor, Mr. Wellington Motsa + + General Manager (GM) Financial Regu- (Manager, Financial Stability Unit) lation, GM Economic Policy Research Mr. Joel Dlamini + + and Statistics, GM Finance, GM Finan- (Head, Risk Management) cial Markets as well as GM Operations. The Financial Stability Unit directs the Secretariat FSC Secretariat. After sufficient delib- Mr. Vusumuzi Dlamini - + erations on financial stability issues, (Senior Macro-prudential Expert) the FSC discharges its accountability through the publication of the annual Ms. Sihle Mabuza + + (Senior Macro-prudential Expert) Financial Stability Report. Note: (+): Present; (-): Absent

Risks to financial stability External economies Domestic and foreign risks to financial stability in the past year remained Risks to financial stability emanating advanced economies took a dovish heightened. Risks from the external from the global economy remained turn in the first half of 2019 as The Fed economy mounted at the back of heightened in 2018 and up to the time and the European Central Bank protectionist policies, policy uncer- of compiling this Report. Risks largely indicated a more dovish outlook on tainties, and geopolitical tensions. originated from protectionism in the interest rates should the global econo- Eswatini’s fiscal challenges, still US and China. The US rained tariffs on my weaken more than already expect- represents a significant point of Chinese goods and China retaliated. ed. The possible extended accommo- vulnerability for the financial sector. These protectionist policies coupled dative policy in the advanced econo- The public sector’s interconnected- with geopolitical tensions slowed the mies could keep financial institutions’ ness with households and corporates pace of global economic growth which profitability subdued on one hand, magnifies the risks to the financial has been trade led as facilitated by while on the other hand, boost sector as detailed in turn in the globalisation. Consequently, monetary debt-servicing ability and attract FDI. following sub-sections. policy tightening sentiment by

CBE Integrated Annual Report 2018/19 24 FINANCIAL STABILITY

Developments in SA present much closer in 2018 from 44.6 per cent in 2017. risks to Eswatini’s financial stability due Corporate debt on the other hand grew to SA being the anchor country for the by 2.3 per cent in 2017 from a decline of CMA. Uncertain SA policies regarding 8.8 per cent recorded in 2017. Corpo- land appropriation and conflicting state- rates’ balance sheets will remain under ments about the shareholding of the pressure in the medium term due to South African Reserve Bank from the downcast inflation, fiscal challenges and ruling party made markets jittery and strained households. Corporates, resulted in the Rand reversing some particularly Micro, Small and Medium gains made in the first half of 2019. Enterprises (MSMEs) remain highly Weak economic fundamentals, which exposed to Government. Therefore, the include the widening fiscal deficit and significant steps towards fiscal consoli- burgeoning public debt fuel weak inves- dation could alleviate some pressure on tor confidence. the corporates’ balance sheets and reduce the risk of retrenchments. Domestic economy Households Risks to financial stability remained elevated in 2018 and the first half of In 2018, household indebtedness depict- 2019. The domestic economy challenges ed an upward trend reflecting an continued with weak economic growth, increase in the risks to financial stability which manifested through all economic emanating from this sector. The growth sectors. Throughout 2018, Government’s in household indebtedness is against a fiscal difficulties resulted in a drawdown backdrop of stagnant income growth, in gross official reserves to cover recur- and higher average inflation. In a low ring budgetary obligations. The level of economic growth environment, the import cover consequently fell to below outlook for households remains biased the international benchmark of 3 to the downside due to additional strain months at the end of 2018 and for the from expected higher income taxes, first half of 2019. Low reserves reduce higher VAT, user fees and administered market confidence on the ability of the prices on electricity. Households are a Government to avail ample liquidity in significant contributor to the financial the event of a financial crisis. sector through banks and Non-Bank Financial Institutions (NBFIs). There- The Central Bank’s monetary policy fore, vulnerabilities from this sector stance remained accommodative could escalate and destabilise the finan- throughout 2018 enabling a conducive cial system. environment for credit-driven growth. Extended periods of low interest rates, Banking however, could stifle capital inflows and corporate profitability. On the other The banking sector remains stable, hand, the low interest rates augurs well liquid and adequately capitalised. for the debt servicing capacity of However, credit risk is increasing thus debtors, which is supportive of a stable affecting bank earnings, which will financial system. ultimately affect banks solvency. This is a result of heightened macro-economic Corporate sector risks transmitted to the banking sector through intermediation. Banking sector In 2018, vulnerabilities to financial assets grew by 4.9 per cent to reach stability emanating from the corporate E20.1 billion in 2018 when compared to sector somewhat subsided but remained the previous year. Overall, risks elevated. Corporates’ balance sheets increased when compared to the previ- remained under pressure as profitability ous year. However, the implementation maintained a downward trajectory, of tools like Basel II and IFRS9 are likely while corporate debt remained on an to improve banks resilience to risks. The upward trajectory. sector is expected to grow in the near future as the country’s economy is Corporates’ profits fell by 12.2 per cent projected to grow.

25 CBE Integrated Annual Report 2018/19 FINANCIAL SECTOR DEVELOPMENT IMPLEMENTATION PLAN

FINANCIAL SECTOR DEVELOPMENT IMPLEMENTATION PLAN

Implementation of the Financial Sector Financial stability Development Implementation Plan (FSDIP) continued under the leadership • National Financial Stability Report- of the FSDIP Secretariat. Key achieve- 2018 National Financial Stability ments on FSDIP implementation are Report was developed and presented summarised in terms of the four FSDIP to stakeholders under the leadership pillars namely; financial stability, finan- of the CBE’s Financial Stability Unit. cial inclusion, diversification and • Crises Preparedness Framework – The modernisation of the financial system. CBE, with support from the Toronto Center, offered a crisis preparedness Financial inclusion training to CBE, FSRA and Ministry of Finance (MoF) officials. The training • Financial Capability Survey – The included crisis simulation. Financial Capability Survey was conducted under the leadership of Diversification of the financial the Centre for Financial Inclusion. system Final results of the survey are expected in 2019/20 financial year. • Expansion of Products and Services - • 2017 FinScope - Results of the 2017 In working groups’ discussions, banks FinScope Survey were released reported continued expansion of during 2018/19. The survey provided their products. Further, new an analysis of the MSMEs sector and Automatic Teller Machines (ATMs) its contribution to economic activity. were established in strategic points • Credit Reporting System Develop- in the country to enhance access to ment - Credit Reporting system financial services. scoping was conducted with the • E-Government - The Government is World Bank support. The credit working with MTN on a pilot project reporting diagnostic report was where people will be paying for developed and follow-up activities various Government services through will be done in the year 2019/20. mobile money.

Modernisation

• Modernisation of financial sector laws - Harmonisation and modernisation of financial sector laws was conducted in Financial Services Regulatory Authority (FSRA) and CBE with support from IMF. FSDIP legal committee also held several meetings to work on harmonisation of financial sector laws.

CBE Integrated Annual Report 2018/19 26 BUSINESS MODEL

BUSINESS MODEL

The CBE has a clear mandate; therefore, process Inputs Business Activities efficiency drives our business model. It is our task Financial Develop and implement Maintain Operational Ensure Price monetary and Efficiency to create monetary and & Financial • Income: Expenditure Ratio macro-prudential Stability macro-prudential policies • Capital: Asset Ratio policies Ensure Strategic that will bring about price • Liquidity Ratios Effectiveness and financial stability within Social, relationship capital Eswatini. Where we succeed, • Stakeholder engagement & we will continue to refine System & Process Families Business departments relationship management and maintain operational • Reputation management efficiency. Where we do not 1. Develop, implement & review • Governors achieve this to optimal level, Manufactured capital monetary policy • Financial Markets 2. Develop, implement & review • Operations we will revise our strategic • Central premises macro-prudential policy • Financial Regulation intent so that our strategy • Notes & coins 3. Licence, regulate & supervise • Finance • Bank note machines financial institutions • Economic Policy Research & becomes more effective. In (outsourced) this, we ensure that we 4. Manage foreign exchange Statistics reserves • Information & Communications deliver on our given Intellectual capital 5. Issue & redeem currency Technology mandate, whilst at the same • SAP ERP Systems 6. Ensure an efficient financial • Human Resource & Administra- time, we secure the • Established processes & market Infrastructure tion programmes 7. Acquire & manage resources • Internal Audit relevance of our mandate. • Continuous improvement 8. Manage stakeholder relations • Risk Management • Brand • Employee know-how 9. Monitor performance • Board Secretary & Legal To ensure that we grasp the 10. Process internal intelligence • Internal Affairs & Security environment within which Human capital 11. Transform • Strategy & Communication we work, we do an annual • Specialised knowledge & Exposure, Opportunities and skills Processes (EOP) analysis. • Training & development • Staff engagement This analysis will make sure • 304 full time employees that we know what our risk exposure (E) is; that we can exploit our opportunities (O); and that we fix our Strategic Score cards and performance process inefficiencies (P). In doing so, we will, without end, have policies that ensure price and financial Outputs Outcomes stability within Eswatini. Mandate Vision 1. Create sound monetary policy that will make the country financially stable To have a stable price and 2. Regulate and direct the financial sector in such a self-regulating financial system. way that the financial system stays sound and efficient 3. Issue and redeem currency Mission 4. Hold and manage the foreign exchange reserves of the country To foster price and financial stability that is conducive to the 5. Be a banker, adviser and agent to the Government economic development of Eswatini. 6. Create and run an efficient national payments system 7. Act as a lender of last resort to financial institutions To achieve and aid the growth of domestic financial markets 8. Conduct research on monetary, financial and • Sound monetary policy economic matters that will improve monetary policy • Financial stability • Price stability 9. Engage with stakeholders in such a way that the • Financial sector stability and Bank can deliver on its mandate supervision • Efficient national payments & foreign exchange systems

27 CBE Integrated Annual Report 2018/19 MATERIAL MATTERS AND RISK MANAGEMENT

MATERIAL MATTERS AND RISK MANAGEMENT

MATERIAL MATTERS

In ascertaining matters of materiality 2. Bank and financial services for disclosure in this report, the Bank stability has considered issues that either affect or have a potential to substan- Technological and regulatory devel- 5. Technology and cyber crime tially affect our ability to perform and opments in the Banking and Finan- remain relevant, our mode of opera- cial sector, coupled with political Rapid technological changes, such tion, input factors as well as our and economic developments as cloud computing and financial ability to create value over time. The threaten the financial sector stabil- technology, are both costly and issues of materiality pertain to finan- ity and/or may cause instability in complex and bring about more risks cial sector and price stability condu- the financial sector. to manage, and yet capable of cive to economic growth to fulfil improving operational efficiency. stakeholder expectations in the short, 3. Local and neighbouring medium and long terms. countries’ political develop- The CBE is not isolated from the ments ever increasing cyber risks, which The Bank closely monitors the operat- unfortunately require advanced ing environment using the risk expo- The Bank is considered to be an and expensive technology and skills sure, opportunities and process independent institution. However, to manage. The limited capacity efficiency approach to establish like most central banks, in some against the technological advances, threats to avoid and opportunities to instances political developments therefore, renders cyber security a pursue in fulfilling its mandate. This is tend to affect it in terms of govern- serious threat to information integ- attained through integrating the ance as well as its regulatory rity and continuity with significant Bank’s strategy, risk and performance responsibility. Further, globalisa- financial and reputational damage. for effective planning and monitoring. tion compels the Bank to track and respond to political developments 6. Strategy execution In the period under review, the Bank locally, regionally and globally to was operating in an environment forecast the appropriate monetary Developments in the Bank’s horizon characterised by the following priority policy stance. reflect that the Bank needs to be areas that it focused on to ensure that more proactive and quick to stakeholder expectations are met. 4. Regulatory developments and respond to environmental changes compliance in a more integrated approach to These material matters are prioritised business to increase its efficiency on an inherent basis as follows: The regulatory role of the Bank is and effectiveness. Failure to effec- threatened by emerging financial tively monitor the Bank’s operating 1. Economic developments and technology, such as cryptocurrency, environment as well as deliver on financial stability that is complex to regulate and strategic projects increases the supervise, whilst creating opportu- chances that the Bank may fail to The slow economic growth (in the nities for money laundering and effectively and efficiently deliver country and in neighbouring and other financial crimes. The Bank on its strategy. trading partner countries), due to also has to align itself with best worldwide adverse market develop- practises in the ever-changing ments, requires strategic interven- regulatory space which requires a tions by the Bank to ensure that it is lot of resources for effective able to effectively deliver on its regulation and compliance. mandate. The exchange rate regime, interconnectedness of economies and globalisation bring about exogenous risks to the Bank’s operations.

CBE Integrated Annual Report 2018/19 28 MATERIAL MATTERS AND RISK MANAGEMENT

priate policies and strategies to 7. Financial and funding risks 10. Business continuity adhere to for efficiency and effectiveness. The cost of doing business against Events that trigger business disrup- the limited income base of the Bank tions threatening business continui- 12. Employees poses a threat to the Bank’s finan- ty of the Bank in terms of data, cial sustainability. It is, therefore, systems, people, services and The diversity and dynamics of skills imperative that the Bank closely structures are on the rise with required in the business world monitors its expenditure patterns, technological advancements. against the skills available in the explore and exploit income oppor- market brings about uncertainties. tunities. The increasing levels of Inappropriate organisational cyber-crime culture and leadership style threat- 8. Stakeholder relationship and and challenges in the operating ens effective delivery as it informs reputation environment expose the Bank to the behaviour of the people in the continuity risk that requires effec- Bank. Continuous monitoring and The interdependency in conducting tive response and recovery strate- skills development should form part business is intertwined with contin- gies. These tend to be costly; of the Bank’s strategy. uous interaction with third parties, hence, the Bank needs to build making it difficult to control access resilience against these. 13. Environmental to classified information. Thus, the impact of social media, intercon- 11. Social trends Climate change resulting to erratic nectedness of computing devices, weather patterns with its impact on the speed and ease of information These are the effects of modernisa- socio-economic conditions, which transmission requires the Bank to tion, generational gaps, pandemics may affect the mandate of the improve on its information govern- among other social factors, which Bank. Continuous environmental ance. present opportunities and threats monitoring and appropriate to the operating environment. The response strategies will ensure the In order to manage stakeholder Bank needs to come up with appro- Bank’s agility and sustainability. relations and reputation, the Bank needs to have an effective stakeholder management strategy in place. CBE material matters

9. Fraud and corruption 6

The increasing level of unethical 5 M1 behaviour, perpetuated by needs M2M3M4 and opportunities presented by 4 M8 M9 M5 social and technological develop- M10 M6 3 ments exposes the Bank to corrup- M11 M7 tion and fraud. The Bank has to Impact M12 2 constantly monitor and respond to M13 this challenge for continuity and 1 sustainability.

0 0 1 2 3 4 5 6

Likelihood

29 CBE Integrated Annual Report 2018/19 MATERIAL MATTERS AND RISK MANAGEMENT

CBE TOP 10 RISKS

The CBE top 10 risks are based on the risk landscape considered against the Bank’s capacity to avoid and mitigate the chances of the risk occurrence as well as the impact - should it occur. For the financial year 2018/19, the Bank identified, analysed and prioritised the top 10 corporate risks according the Bank’s process construct.

CBE process construct

License & Regulate Yes Financial Institutions

Develop, Financial Implemen and Manage Stability Review Monetary Foreign Policy Reserves

Monitor No No Performance

Develop, Implement Issue and and Review Price Redeem Stability Micro-prudential Currency Acquire and Policy Manage Resources for the CBE

CBS Order Problem/ and Opportunities? Ensure Efficient No Constitution Financial Market Infrastructure Stakeholder Relationship Management

Internal Transform Yes Intelligence

Mitigation measures were implemented during the course of the financial year with strategic and operational projects implemented for transformation and to improve controls. Reasonable success was achieved with slight delays in delivery of projects as a consequence of the leadership uncertainty among other operational inefficiencies.

CBE Integrated Annual Report 2018/19 30 MATERIAL MATTERS AND RISK MANAGEMENT

CBE TOP 10 RISKS

Link to Link to Strategic CBE Top 10 Risks Material Risk Response Programmes & Matters Strategic Processes Risk Class Risk Description

• Strenthen Business Intelligence 1. Projects Risk Inability to effectively Program comprising: (The Bank’s implement strategic • Intelligence Hub; Business Intelligence strategy projects meant to • Information to improve on the execution respond to Strategy Governance Bank’s agility, approach is environmental analysis execution Management; and • Business Intelligence integration and basically findings leading to Framework. efficiency. project- inefficient delivery and • Fully implement and based) ineffectiveness. monitor the Project Management Framework.

• Review and document Ineffective goods, Business 2. Procurement procurement process and Human Dynamics services and other Continuity:; /Vendor procedure; Programme to aquired resources Financial/ Management • Improve contracts Improve efficiency resulting in business Funding Risk; and Risk management process; and and relationship with losses and operations Stakeholder • Implement a cost stakeholders. disruptions. relations. containment project.

Information insecurity, Business Intelligence ransomware and other to improve cyber 3. Cyber Risk cyber-related incidents Technology and Implement cyber resilience security, awareness that could result in loss Cyber Crime framework . and response of data and business strategies. disruptions.

Hazardous operating environment due to • Improve security processes; unsafe and insecure and Ensure a safe, secure Business 4. Security Risk physical infrastructure • Improve infrastructure and conducive Continuity threatening the safety of management and working environment. staff, visitors and maintenance program. Bank’s assets.

• Develop and implement a Inability to prevent, fraud prevention policy; • Financial detect and effectively • Develop and implement a Sustainability to respond to fraud Combined Assurance Fraud and ensure cost 5. Fraud Risk incidents such as Framework; and corruption containment; falsification of records, • Develop and implement an • Enforce ethical theft, corruption and Internal Controls values. collusion. Framework.

Human Dynamics to create an engaging Loss of stakeholder environment for 6. Reputational confidence and negative Stakeholder • Implement a Meaningful internal and external Risk publicity due to relations and Stakeholder Engagement stakeholders in order ineffective relationships reputation Project. to make all CBE management. communication effective and meaningful.

31 CBE Integrated Annual Report 2018/19 MATERIAL MATTERS AND RISK MANAGEMENT

• Finalise the compilation of the CBE Compliance Universe; Litigation, breach of Regulatory Cost containment and 7. Legal Risk contractual agreements developments • Develop and implement a reputation and penalties and compliance formal legal committee; protection. • Develop and implement a Contract Management Policy.

Ineffective monetary policy due to inadequate reserves to support • Introduce private placement import cover, failure to funding; ensure price stability, Economic • Implement the Payments 8. Monetary and Exchange Control System; Policy Risk unsafe levels of external Developments Regulatory reform to debt, failure to raise and Financial • Develop and Implement a ensure price stability. monetary policy framework required Government Stability maturity-monitoring tool. funding and inappropriately responding to the SA monetary policy stance.

• Regulatory Reforms Program incorporating; • Enabling and alignment Failing to ensure a stable Economic 9. Financial reforms - CBS Order and Regulatory reform to financial sector Developments Stability Risk others; ensure financial conducive for economic and Financial • Financial Sector stability. growth. Stability Regulations Reforms; • Payments and Exchange Control related reforms.

Lack of business agility • Establish and maintain a in response to CBE Intelligence Hub; environmental dynamics • Implement Information Improve business 10. Environmental resulting from Governance Management; intelligence to ensure Risk ineffective research and Environment • Develop and Implement agility, integrated analysis of business Business Intelligence and efficient developments as well as Framework; operations. ineffective data and • Fully Implement the information governance. Fintech program.

CBE Integrated Annual Report 2018/19 32 MATERIAL MATTERS AND RISK MANAGEMENT

CBE top 10 risks heatmap The following are the corporate risks considered to be above the Bank’s 6 tolerable threshold. These are ranked in accordance with the residual expo- R3 5 R4 R1 sure level having considered the R6 R2 R9 R5 Bank’s control environment. 4 R8 R10 R7 RISK MANAGEMENT 3 Impact Risk management remains the core 2 focus area and management is committed to applying international best practices and standards to ensure 1 that the effects of uncertainty on objectives are systematically and 0 continuously monitored. This is done 0 1 2 3 4 5 6 through periodic assessments of Likelihood strategic objectives, projects and day-to-day processes using various tools as prescribed in the CBE ERM Framework. Incidents are recorded, analysed, reported and key risk indica- ERM Framework tors are monitored and periodically reported to the risk governance struc- 2011-2018 ( Current status: tures to inform a thorough Managed implying that the Board decision-making process. determines the implementation of a risk management structure and supports the declaration of risk Enterprise Risk Management appetite. There is a defined risk matrix and a governance structure which reports direct to senior During the reporting period, the management. The information sharing between risk related units Department undertook all the set is still ad hoc. Qualitative and activities to implement the ERM quantitative methods are used to evaluate and monitor the Framework in cooperation with the operational risks, including key risk first and third line of defence. The indicators (KRI), risk register analysis and internal losses. Risk combined assurance program is in results are considered in the place though with limitations in terms strategic, tactical & operational decision process) of a formal and structure framework.

Risk maturity model over the years continuous capacity building and and dependencies across the Bank to Whilst the CBE ERM Policy and Frame- appropriate bank-wide risk structure, facilitate cost-effective BCP strate- work is functioning as intended with is expected to advance the maturity gies. We take a holistic and appropriate tools and methodology in level to the desired Defined (level 3) forward-looking view of the continuity place, the pace to maturity is slower where the process is characterized for risks we face, continually assessing than expected. This is mainly caused the organisation and is proactive with both current and emerging threats in by the low risk culture manifested an upward projection to Optimal (level our operating context. Going forward, through lack of ownership and 5) in 2022. we want our Business Continuity accountability at various levels as Management Program to align to confirmed by the independent assur- Business Continuity Management current standards and best practices ance providers and consultants for efficient and effective response engaged by MEFMI. Gaps noted are We endeavour to build and embed on and recovery from incidents and disas- scheduled to be addressed as per the business continuity as an institution. ters. We are currently working on established roadmap to be implement- Most importantly, we are developing reviewing the Business Continuity ed during the course of the financial our resilience. There are Business Management Policy and Framework as year 2019/20. That, with the automa- Continuity Plan (BCP) activities that well as Business Continuity Plans. tion of the risk assessment process, focus on identifying critical processes

33 CBE Integrated Annual Report 2018/19 MATERIAL MATTERS AND RISK MANAGEMENT

FINANCIAL RISK

Financial risk management Business continuity management

The Bank maintains a comprehensive risk management and control frame- High work to manage risks across its opera- L� tions. The Board has an oversight role in the Bank’s performance of risk management, while the Risk Manage- L� ment Department oversees the enterprise risk management and implemen- CBE is currently at tation of sound management processes L� Level 3 implying to safeguard the Bank’s financial that we can assets. recover some critical functions Operational Resilience Operational L� within agreed In its operations, the Bank is exposed Recovery Time to financial risks associated with finan- Objectives (RTOs) cial securities including credit risk, L� market risk and liquidity risk. The Low Financial Markets Departments manages a large proportion of the Bank’s Low BCM Capability and Maturity High financial risks.

The following is a description of the risks that the Bank is exposed to and how these exposures are managed: licensed banks in the country, this collateral is in the form of Eswatini Credit risk Government Treasury Bills and Bonds.

Credit risk is the risk of a loss due to Interest rate risk the failure of a counterparty or issuer to make payment obligations in Interest rate risk is the risk that the accordance with agreed-upon terms. fair value or future cash flows of a The Bank is exposed to credit risk financial instrument will fluctuate through its cash, foreign deposits and because of changes in interest rates. investments with counterparties. The The Bank’s exposure to interest rate maximum exposure to credit risk is risk arises through fluctuations in the estimated to be the carrying value of fair value of its investments in securi- those assets. The Bank is further ties issued by foreign Governments exposed to credit risk through its and other investment instruments that forward purchases of foreign exchange are permitted in the Bank’s Investment from the licensed banks in the country. Policy and Guidelines. The Bank is also exposed to credit risk in the form of short-term lending that These fluctuations also come from the is offered to licensed local banks from Bank’s holdings of Eswatini Govern- time to time. ment Treasury Bills and Bonds that are affected by changes in interest rates. The credit risk associated with the Bank’s investment portfolio is low Liquidity risk because securities held are primarily obligations of sovereigns, internation- Liquidity risk is the risk that the Bank’s al banks and supranational institutions liquid assets will be unable to provide with a minimum long-term credit for foreseen and unforeseen financial rating of A except for obligations from obligations. In managing this risk, the the Government of the Republic of Bank sets aside and monitors closely a South Africa and local banks in South portion of reserves in the working Africa that are rated in line with the capital tranche and liquidity tranche country’s credit rating. to cater for these obligations. The limits of these tranches are deter- Collateral is taken to secure mined by a historical analysis of short-term credit facilities offered to payments over one-year period.

CBE Integrated Annual Report 2018/19 34 MATERIAL MATTERS AND RISK MANAGEMENT

The Bank seeks to maintain sufficient The weakening of the SZL against the liquidity by investing in securities with United States Dollar (USD) as well as an active secondary market. In other major currencies, will favoura- addition, these securities are invested bly affect the reserve position when in highly rated (investment grade) reported in the local currency. The counterparties. opposite effect holds when the SZL appreciates against these currencies. Currency risk The SZL is pegged to the South African Rand (ZAR) at one is to one parity and Foreign exchange reserves are held in hence there is no currency risk on the foreign currencies, which gives rise to portion of foreign reserves invested in a risk that the foreign reserves will ZAR. decline in value when translated into Swazi Lilangeni (SZL) due to adverse SHERQ changes in foreign exchange rates. As part of its operational risk manage- In terms of the Investment Policy and ment program, the Bank has an Occu- Guidelines, foreign exchange risk is pational Safety, Health, Environment, managed on risk neutral basis through Risk and Quality (SHERQ) program in a currency composition that provides place that ensures management and a natural hedge against potential maintenance of a healthy and safe liabilities. The currency composition working environment as well as quali- of the foreign exchange reserves ty delivery of services to and by the reflects the currency distribution of Bank. It consists of a policy and a the country’s short-term external framework of structures and process- debt and other contingent liabilities. es as required by the relevant regula- The Bank’s foreign reserves are divid- tions and legislative instruments, as ed into three tranches, namely; Work- well as operational requirements. The ing Capital, Liquidity and Investment program is still at infancy stage hence Tranche, which in return are during the year under review, estab- composed of different currencies. lishment of governance and functional structures, training and awareness The effect of SZL exchange rates creation for role player continued to against the foreign currencies can be the focal areas for the function. have an impact on the level of foreign currency reserves in terms of the reporting currency (SZL).

35 CBE Integrated Annual Report 2018/19 STAKEHOLDER ENGAGEMENT AND REPORTING

STAKEHOLDER ENGAGEMENT AND REPORTING The outline below presents how we engaged our stakeholders, their profile according to the salient approach, concerns and expectations.

Stakeholder engagement Stakeholder engagement project philosophy During the reporting year, we devel- Our philosophy is that, in order for the oped a Meaningful Stakeholder CBE to successfully foster price and Engagement project as one of our financial stability conducive to strategic activities. The project aims economic development in Eswatini, a to facilitate the creation of a condu- proper management of our stakehold- cive environment for meaningful ers’ relations is key. We are committed engagements, in order to attain at to generating value for our external least 65 per cent engagement levels by stakeholders and empowering our 2021 for our internal and external employees to be performance driven. stakeholders.

Stakeholder engagement policy It further seeks to re-identify key stakeholders, using the salience We have a Stakeholder Management approach as outlined in the Frame- Framework in place that guides stake- work, investigate stakeholder engage- holder engagement activities and ment gaps and manage expectations. processes. The framework is a subset We have developed a stakeholder-en- of the overall corporate strategy of gagement measurement tool to quan- the Bank. It is built on the realisation tify the level of engagement based on that in order for the Bank to success- identified key engagement measure- fully foster price and financial stabili- ment indicators. ty conducive to economic development in Eswatini, proper management of the Bank’s stakeholders is key.

The approach is stakeholder salience, meaning the degree to which the Bank may give priority to competing stakeholder interests. This notion recognises that there are dynamics inherent in each relationship involving complex considerations that may not be readily explained. It is the Bank’s prerogative to determine which stakeholders are salient and therefore will receive management’s immediate attention.

CBE Integrated Annual Report 2018/19 36 STAKEHOLDER ENGAGEMENT AND REPORTING

The outline below presents how we engaged our stakeholders, their profile according to the salient approach, concerns and expectations. STAKEHOLDER ENGAGEMENT

Stakeholder engagement Stakeholder engagement project Stakeholder concerns & Link to material philosophy Stakeholder group Profile How we engaged During the reporting year, we devel- expectations matters Our philosophy is that, in order for the oped a Meaningful Stakeholder CBE to successfully foster price and Engagement project as one of our • Lack of suitable financial stability conducive to strategic activities. The project aims platforms to educate economic development in Eswatini, a to facilitate the creation of a condu- or orient Government proper management of our stakehold- cive environment for meaningful officials on technical • Slow regulatory regulatory and reform process ers’ relations is key. We are committed engagements, in order to attain at Expectant, • Meetings supervisory issues • Political to generating value for our external least 65 per cent engagement levels by Eswatini possessing two • MoUs • Shortage of developments stakeholders and empowering our 2021 for our internal and external Government attributes • Conferences government staff and • Government’s employees to be performance driven. stakeholders. • Seminars specialised skills fiscal position Stakeholder engagement policy It further seeks to re-identify key • Lack of government (M1, 3,7 & 8) stakeholders, using the salience resources to carryout We have a Stakeholder Management approach as outlined in the Frame- organisational Framework in place that guides stake- work, investigate stakeholder engage- functions holder engagement activities and ment gaps and manage expectations. • Conflicting processes. The framework is a subset We have developed a stakeholder-en- • Improved legislations of the overall corporate strategy of gagement measurement tool to quan- • MoUs collaborations resulting to the Bank. It is built on the realisation tify the level of engagement based on • Periodic meetings • Conflicting priorities Latent, with regulatory overlaps that in order for the Bank to success- identified key engagement measure- Regulators • Conferences among regulators one attribute • Effective regulatory fully foster price and financial stabili- ment indicators. • Seminars • Confidentiality issues. framework ty conducive to economic develop- • Workshops • Enforcement and (M4 & 8) ment in Eswatini, proper management adherence to MoUs of the Bank’s stakeholders is key.

• Government’s The approach is stakeholder salience, persistent cash flow meaning the degree to which the Bank • Risk of Government challenges leading to may give priority to competing stake- Latent, with defaulting on her Investors • Periodic meetings accumulation of holder interests. This notion recognis- one attribute debt domestic arrears es that there are dynamics inherent in (M1,2,7 & 8) • Lack of feasible plans each relationship involving complex for fiscal consolidation considerations that may not be readily explained. It is the Bank’s prerogative • Risk of being left to determine which stakeholders are • Agreements and • Lack of CBE behind on salient and therefore will receive Treaties participation in some implementation of management’s immediate attention. Latent, with • Associations Central banks central bank central bank one attribute • Meetings programmes and initiatives and • Conferences initiatives programmes • Seminars (M1, 2, 4, 5, 6 & 7)

37 CBE Integrated Annual Report 2018/19 STAKEHOLDER ENGAGEMENT AND REPORTING

• Ensuring a stable financial sector • Poor adoption and implementations stated in Technical Assistant mission reports • Information asymmetry on available funding opportunities. • Implementation of Expectant, • Technical missions some of the clauses • Reputational World Bank & possessing two • Technical assistance in the implications IMF attributes • Conferences agreements/treaties (M1, 3 & 8) • Seminars is not uniform in all member states and delays progress • Some of the clauses are in conflict with domestic laws/provisions • Lack of participation in some regional programmes and initiatives by some member states • Meetings Associations Expectant, • Regulators meet to • Seminars • Reputational Regional possessing two share developments o • Workshops implications Global attributes in their jurisdiction o • Conferences (M1 & 8)

• Lack of feedback from • Regulatory and • Meetings regional meetings compliance • Desk officers’ network • Lack of regular implications Latent, with • Currency roadshows consultations to (M1 & 8) Banks one attribute • Engagement Surveys maximise cooperation • Enhancing • Capacity Building (CBE and understanding of collaborations and Learning Academy) compliance issues cooperation (M2 & 8)

• Tender adverts • Transparent and fair • Reputational Suppliers, business Latent, with • Briefing meetings procurement process implications partners one attribute • Delays in payments (M8 & 10) • Internal correspondence • Implications on • Internal roadshows • Lack of meaningful Latent, with performance and Employees • Internal Webinars engagements one attribute conduct • Social Media (M9, 11 & 12) • Periodic surveys • Meetings

• Periodic press releases • Technical language Expectant, • Conferences when communicating • Reputational Communities/ possessing two • CBE Corporate Social • Negative publicity implications Public attributes Investment initiatives • Limited market (M8,12) • Exhibitions disclosure • Public lectures

• Media talks Expectant, • Media briefings and • Reputational possessing two • Need to continuously Media statements implications attributes improve relations • Periodic (M8) correspondence

Notes: Attributes - Power, legitimacy & urgency. Latent – Important possessing only one of the three attributes. Expectant – very important possessing two attributes. Definitive - priority stakeholder possessing all three attributes. M1-13 - CBE Material matters ranked from 1 to 13 (defined on pages 28 & 29).

CBE Integrated Annual Report 2018/19 38 STRATEGY AND OUTLOOK

OUR STRATEGY AND OUTLOOK

V4 scorecard to performance finally, V1. V1 is the ultimate vision of previous year, we captured our V4 the Bank (to have a stable price and targets for the 2018/19 financial year. Our vision is explained in five different self-regulating financial system). In this report, we demonstrate our steps, called 5-V. This simply means efforts in making this ‘super-goal’ a we have identified milestones at each In the current 3-year cycle, our V4 reality. These efforts are validated step that will be an indication of target is to be an agile, efficient and through the table below, which was getting closer to our ultimate vision. integrated central bank by the year refined during the last strategy review The steps are identified as V5 which 2021. If the V4 target is not attained, exercise: we reached in 2018, V4 to be reached the entire strategy fails, even if we in 2021, V3 in 2028, V2 in 2033, and achieve other strategic targets. In the

2018/19 2018/19 V4 Target Variance Report Back Target Actual

1. SAP 95 per cent Target reached. Results achieved through system uptime, Implementation – 99.6 per stable and the ability to resolve incidents/issues for all SAP stability of the cent modules. System

Our first step to achieving efficiency was reviewing and documenting current CBE processes; identifying gaps and developing the desired position. These milestones have 2. Process efficiency 60 per cent 80 per cent been achieved. The next phase will be monitoring the effectiveness of the improved processes.

3. Submit all proposals to Amendment of the Central Bank of Swaziland Order 1974 ensure that we 100 per and the Financial Institutions Act 2005 during the period have conducive 44 per cent cent under review was still outstanding. legislation for the CBE mandate

4. Financial efficiency through 32 per Personnel costs were kept within target, despite income personnel cost to 35 per cent cent reduction in the middle of the year which threatened the income ratio threshold.

5. Financial efficiency through 46 per personnel cost to Costs were high in Q1, declined in Q2 and further declined 45 per cent cent total expenses in Q3. This put the ratio under pressure as it is above the threshold by 1 per cent.

39 CBE Integrated Annual Report 2018/19 STRATEGY AND OUTLOOK

Due to the reduction of SACU receipts and Government 6. Financial withdrawals, it was anticipated that this ratio will come in efficiency through 70 per 76 per cent above the threshold. Good effort was put towards holding cost to income cent the line on expenditure. ratio

The establishment of the Fintech Unit enabled the start of conversations of future financial technologies that will have an impact on operations of the Bank. This is part of 7. Integrated the Intelligence Hub that is designed to feed all business Business 50 per cent 35 per cent decisions with informed intelligence data. Two other critical activities (i.e. the Ideas Factory and Information Intelligence Governance) did not move at the expected pace, and

lots of improvement is still required.

A number of initiatives were put in place to ensure that

the Bank’s employees were continuously engaged. Though 8. Staff engagement 55 per cent 68 per cent the survey result reflects that the target was exceeded, the target for the next financial year will be stretched in order to improve engagement levels.

The EOP analysis identified nine (9) key areas of concern that required immediate action. These were non- documentation of processes, lack of meaningful All the stakeholder engagements, poor cost management, lack of 9. Annual Exposure, 20 per cent concerns risk awareness, poor performance management, lack of Opportunities and decrease are still mentoring, poor coaching and transfer of skills, inadequate Processes Analysis in recurring being conflict management and poor diversity management. (EOP) problems actioned Naturally, these are concerns that cannot be easily addressed within a short period. Specific projects were initiated to address these concerns, and these will be ongoing even in the next year.

Process outputs

Our processes are the repetitive actions that we undertake every day, as we pursue our mandate.

2018/19 Key Process 2018/2019 Variance Report Back Target Actual

Inflation was kept within the 3-7 per cent range. This success was a result of the efficiency of the MPCC in recommending the setting of the discount rate as well 5.0 1. Maintain consumer 3-7 per cent as the Financial Markets Department in conducting its (average) inflation Open Market Operations, coupled with the right levels of the liquidity and reserve requirement ratios, as well as the continued parity with the ZAR.

The Government’s ongoing fiscal challenges had a negative effect on Foreign Exchange (FX) reserves as 2.4 Government resorted to drawing down on FX reserves 2. Maintain a reserve 3-7 months months balances with the CBE and also negotiated for further import cover (average) funding from the Bank through advances. Efforts are underway to boost the level of reserves.

All currency orders were fully met. This demonstrates 3. Maintain adequate 100 per 96 per cent that the currency stock was well managed. supply of currency cent

CBE Integrated Annual Report 2018/19 40 STRATEGY AND OUTLOOK

60 per cent This is a self-assessment result. The process of reviewing Overall critical legislation like the CBS Order 1974 and the 4. Comply with the compliance Financial Institutions Act 2005 is ongoing and needs to Basel core 60 per cent rate: 72 per be concluded quickly. This will improve the regulatory principles cent environment, enhance better self-assessment and independent evaluation.

5. Comply with Our national payment systems have embraced good Principles for international standards in relation to financial markets Financial Market infrastructures (i.e. Swaziland Integrated Payment and Infrastructure 68 per cent Settlement System (SWIPSS), Swaziland Automated (PFMI) Electronic Clearing House (SAECH) and Central Securities Depository (CSD).

6. Comply with the key standards for sound financial The achievement is considerably higher than the 50 92.5 per systems - 50 per cent per cent benchmark. This shows that the country’s cent macroeconomic macroeconomic policy is transparent. policy and data transparency

Legend

Target significantly exceeded

Target met and task progressing well

Task progressing slowly

Task not progressing well

Strategic programmes The programmes discussed below were born out of the four strategic areas of focus - namely human dynamics, business intelligence, regulatory reform and financial sustainability.

STRATEGIC PROJECTS AND PROGRESS

Programme Objective Projects under the programme Progress Update

The impact of this programme will be seen in the long term. However, projects like the ones on culture shift and stakeholder management 1. Development and implementation Identify and develop have already identified gaps in the environment of a culture shift framework relevant skills, and have also identified possible interventions. 2. Facilitation of meaningful manage performance As these roll out their programme of action, we stakeholder engagements Human for CBE to remain will start to see improvements. Areas where we 3. Introduction of futuristic skills Dynamics relevant and keep all did not move as swiftly as we had anticipated development stakeholders are in relation to the identification of future 4. Review of performance meaningfully engaged skills and improvement of the performance management system management system. The bottlenecks have been identified, thus better results are anticipated in the next financial year.

Collecting, analysing, 1. Establishing and maintaining a CBE It has taken us a while to put the foundation and and transforming data Intelligence Hub frameworks in place for this programme. A lot into usable, 2. Implementing Information Business of research work was done to ensure that all actionable Governance Focus Management Intelligence processes are properly aligned when the intelligence for 3. Developing and implementing projects take off. organisational growth Business Intelligence Framework

41 CBE Integrated Annual Report 2018/19 STRATEGY AND OUTLOOK

1. Facilitating the introduction of enabling and alignment reforms – Central Bank of Swaziland Order 1974 To enhance 2. Facilitation of the Financial Sector The amendment of all the identified legislations efficiency, legislative Regulation Reforms – Financial is key for the improvement of the effectiveness alignment and to Regulatory Institutions Act 2005 and Financial of our regulatory mandate. Most of the create visibility in Reforms Stability laws and regulations amendments have been concluded and quality implementing the CBE 3. Facilitating Exchange Control assured. The next year will on the legislative mandate reforms stages that are outside of our control. 4. Facilitating Payments related reforms - National Clearing and Settlement Systems Act 2011

The programme did well in counteracting the To create a 1. Conducting Optimal Human Capital negative effect of outflows in the ZAR portfolio. sustainable Bank Utilisation It also performed well in creating financial Financial through effective 2. Realising new revenue avenues efficiencies (per V4 financial efficiencies targets Sustainability financial 3. Conducting Optimal Cost Structure above). More interventions will continue even in management Realisation the next financial year.

ICT STRATEGY & GOVERNANCE so as to enrich the oversight of the IT ing, system stability, improved securi- function. ty, more automation for license fees Post any major Information Technology paid is already being realised. (IT) project, keeping the business case Over and above the new high level promise is always top of the agenda corporate strategy, business units Risk and opportunity optimisa- for IT management. This will be the were engaged to articulate their tion case for the Bank’s Information short-to-medium term IT require- Communications Technology (ICT) ments, which ensured that the revised IT and cyber security risks are high on Department for the next two to three IT strategy for 2019-2021 is aligned to the Board’s agenda and management’s years as SAP is being explored further. business. Even in the revised IT strate- focus areas, as evidenced by the risks The SAP #Insika project aftermath was gy, the ICT mission to increase noted in the Bank’s top ten risks regis- the major focus for the ICT Depart- business value through innovative, ter. Improving IT Governance and ment during the period under review, robust and agile ICT services and utilising the existing Cyber Resilience including capacitating the support solutions in the Bank still aligns with Framework are the tools aimed at staff to achieve competencies as the Bank’s V4 vision to be agile, mitigating these risks. Going forward, qualified SAP consultants. Over and efficient and integrated by 2021. The implementing the Cyber Security above the SAP environment, the ICT strategic themes also remain Operations Centre (CSOC), more Bank’s technology environment relevant save for a new theme aimed frequent penetration testing and witnessed a period of very high stabili- at business intelligence, data manage- implementing cyber security guide- ty in the other systems and network ment, and automation as well as data lines for supervised entities will intro- environment. analytics capabilities. duce more intelligent tools and practises for the national Financial Governance of Enterprise IT Benefits realisation from IT Markets Infrastructure (FMI) to reduce Investment the residual risks. In this digital era, the importance of IT and IT Governance is heightened for As applicable to most financial institu- The Bank’s ICT Continuity capabilities organisations, as there is a strong tions, technology expenditure, both were further strengthened during the relationship between corporate and IT capital and recurrent, represents a period, starting from Business Impact strategies. Alternatively, some may considerable portion of the budget, Assessment input to revising business argue that the dependence on IT hence much value is expected from continuity and disaster recover proce- means there should essentially be one such an investment. IT investments dures and even testing the plans. strategy, as the corporate strategy deliver both qualitative and quantita- Simulations need to be carried out ultimately depends on the IT strategy. tive benefits which ultimately trans- more frequently to include the other late to cost savings or higher revenues. FMI participants to ensure robustness Due to the elevated importance of IT Whilst process efficiencies and against counter-party risks. Governance, the Bank invested in business intelligence reporting are training the Board and Executive next on the SAP #Insika benefits The Bank complied with the SWIFT Management on the same in line with realisation radar. While value gains in Customer Security Programmer the King IV principles and Control the form of integrated and automated mandatory requirements and there Objectives of IT (COBIT) 5 framework processes, straight through process- was no cyber security breach during the period.

CBE Integrated Annual Report 2018/19 42 PERFORMANCE

PERFORMANCE

FINANCIAL REPORT

The following analysis provides an overview of the CBE statement of comprehensive income, statement of financial position and selected ratios year on year and salient features.

SUMMARY INCOME STATEMENT

31/03/2019 31/03/2018 per cent Commentary E’000 E’000 Movements

o The E125.8 million decrease in interest from banks in SA was mainly due to lower funds under investment given the declining foreign exchange reserves position. o The E63.4 million increase in Government income was as a result of additional advance of E1.66 billion to Interest income 426,813 442,020 (4) per cent Government, which earned interest at a rate of 6.75 per cent. The increase was also a result of higher yields realised on Government securities acquired through securitisation of the previous year’s Government advance.

o Interest expense to the Government and Capital Investment Fund declined as a result of drawdowns on the Investment Fund and Reserves Replenishment Accounts which significantly went down during the Interest expense (154,869) (164,354) (6) per cent period. This resulted in a reduced interest expense since the interest was being calculated on a smaller balance, even though the rates did not change.

Net interest 271,917 277,666 (2) per cent income

About 96 per cent is compensation for ZAR in circulation o This amount is paid by the SA Government in respect of ZAR in circulation in the country; Non-interest 311,587 289,328 7 per cent The 7.13 per cent increase in this amount is as a result income o of increased demand for the ZAR by the local economy and Seigniorage compensation, which increased by 6.77 per cent.

Operating expenses were higher than in the previous year. The main contributor was salaries and staff costs which increased by 8 per cent due to a cost of living adjustment and a salary review exercise.

The significant movements in other expenses were due to Operating (393,386) (369,203) (6) per cent the increase in expenditure towards computer software expenses maintenance (which went up by E7 million) and staff training costs on SAP (which increased expenditure by E2.3 million).

The Bank is increasingly concerned with the decline in Profit for the profitability which has the potential to affect its 190,118 197,791 (4 per cent) year independence as such initiatives to ensure future financial sustainability are embraced in the Bank’s strategy.

43 CBE Integrated Annual Report 2018/19 PERFORMANCE

Attributable to the depreciation of the SZL against major Revaluations trading currencies. gains/(losses) on MAJOR CURRENCIES FY 2018/19 FY 2017/18 433,993 (170,429) 355 per cent foreign exchange USD 14.4408 11.8945 activities EUR 16.2256 14.6443 GBP 18.8634 16.7138

Total comprehensive 624,111 27,362 income for the year

CURRENT YEAR

Description Threshold Budget Actual Personnel Expenses as per cent of 45 per cent 38 per cent 34 per cent income

Personnel expenditure as per cent 55 per cent 46 per cent 50 per cent of total expenditure

Total expenditure as per cent of 80 per cent 82 per cent 67 per cent total income

SUMMARY BALANCE SHEET 31 /03/2019 31/03/2018 per cent Commentary E’000 E’000 Movements

The decrease in external investments was caused by the External (28 per decline in foreign exchange reserves on account of 3,260,061 4,542,595 Investments cent) Government external payments and demand for ZAR by banks.

IMF Quota The E216 million increase in the IMF Quota was caused by 16 per Subscription 1,573,146 1,356,786 the weakening of the SZL against SDR rate from E17.28 in cent Account 2018 to E20.04 in 2019.

Cash and Cash (4 per 959,932 995,851 Equivalents cent)

The increase in amounts due from the Government of the Amounts due Kingdom of Eswatini was caused by the securitisation of 132 per from Eswatini 3,007,667 1,298,566 Government advance and additional advance issued in cent Government tranches (E680 million, E500 million & E480 million) during the year.

Holdings of The E135 million increase in the Holdings in SDR’s was 16 per Special Drawing 977,981 842,536 caused by weakening of the Lilangeni against SDR rate from cent Rights E17.28 in 2018 to E20.04 in 2019.

Currency in 1,072,654 1,033,103 4 per cent Circulation

CBE Integrated Annual Report 2018/19 44 PERFORMANCE

31 /03/2019 31/03/2018 per cent Commentary E’000 E’000 Movements

The E279 million decrease was mainly caused by Domestic (7 per 3,759,919 4,039,174 drawdowns in Government deposits and the Capital Deposits cent) Investment Fund.

Allocation of The E133 million increase in Special Drawing Rights was 16 per Special Drawing 967,629 834,547 caused by the weakening of the SZL against SDR rate from cent Rights (SDRs) E17.28 in 2018 to E20.04 in 2019.

Amounts Payable to the 43 per The increase was caused by revaluation of foreign 253,305 176,568 Consolidated cent activities. Fund

IMF Securities 16 per The increase was caused by revaluation of the Fund’s 1,441,784 1,243,520 Account cent holdings.

CURRENT YEAR RATIO

2018/19 TARGET 2018/19 ACTUAL 2017/18 ACTUAL

Capital to Asset ratio 10 per cent 14.69 per cent 12.9 per cent

DEPARTMENTAL REPORTS

Economic Policy Research and Statistics

The Economic Policy, Research and Statistics (EPRS) Department is the primary economic information and resource centre of the Bank. It compiles, produces and disseminates economic statistics for the major sectors of the economy. It is tasked with conducting applied economic research in order to provide effective policy advice in the pursuit of economic development and economic management and monetary policy in Eswatini. This Department is also responsible for the implementation of the monetary policy framework.

45 CBE Integrated Annual Report 2018/19 PERFORMANCE

The Financial Sector Development Implementation Plan’s Secretariat, which is within the EPRS Department is responsible for coordinating the implementation of the three-year financial sector strategy.

EPRS PERFORMANCE

KEY PERFORMANCE INDICATORS STRATEGIC OBJECTIVES AND KEY PERFORMANCE INDICATORS 2018/19 Target CRITICAL SUCCESS FACTORS 2018/19 Actual

To seek co-operation from the To establish a framework for A Memorandum of Understanding (MoU) for FSRA, develop Report Forms and expanding the coverage of data exchange with the Financial Services begin collection of statistics Monetary and Financial Statistics Regulatory Authority (FSRA) was signed. Report from Non-Bank Financial 1. (MFS) to include statistics of Non- Forms were developed and some preliminary Institutions. Bank Financial Institutions. data from some Non-Bank Financial Institutions was collected (70 per cent).

Develop leading and coincident To develop Composite Indicators Leading and coincident indicators for economic indicators, peer review them for Economic Activity in order to activity (CIEA) were developed and and present to stakeholders for understand the country’s business continuously updated throughout the year. A adoption. Finalize a working 2. cycle. draft working paper was prepared, but is yet to paper on the ‘development of be presented to stakeholders (85 per cent). CIEAs to facilitate peer review process of the indicators.

Collaborate with CSO and To improve macro-economic Collaborated with the CSO in compilation and ensure publication of Quarterly statistics in terms of dissemination of Quarterly National Accounts National Accounts to improve comprehensiveness, accuracy, (QNA) (i.e. improvement in frequency of GDP frequency of GDP statistics. timeliness and high frequency (100 per cent). through collaboration with the Collaborate with CSO in the 3. compilers, the Central Statistics Collaborated with CSO in the initialisation of initiation of PPI. Office (CSO). Producer Price Index (PPI). Focus was mainly Collaborate in development and on sensitisation workshops on the importance launching of Labour Market and use of PPI (improving comprehensiveness Information Systems (LMIS). of price statistics) (50 per cent).

Collaborated with CSO on improving labour Statistics. Hosting technical workshops on Employment and Wages Survey and development of LMIS (50 per cent).

Compilation, presentation and To collaborate with Ministry of Collaborated with MEPD in compilation and dissemination of Macro- Economic Planning and dissemination of GDP Projections. economic projections and Development (MEPD) in conducting A summary report on company surveys, which summary report on company 4. company surveys and compilation Surveys. of Macro-economic medium term act as an advocacy document for policy projections. makers, was developed and disseminated (100 per cent).

Prepare at least one special To prepare special research papers Worked on a paper on ‘Impact of AGOA Loss paper on issues of domestic on the Domestic Economy and Anticipated Gains from re-Admission to economy Interest. Developments. AGOA’, and published this in CBE Bulletin (100 5. per cent). Prepare ad-hoc working papers of economic interest. Drafted a paper on ‘Forecasting Food Inflation in Eswatini’ (80 per cent).

Create strong framework for To prepare comprehensive Create a comprehensive framework for sectoral database to ensure strong 6. database on domestic economy. historical database (25 per cent). database management.

CBE Integrated Annual Report 2018/19 46 PERFORMANCE

KEY PERFORMANCE INDICATORS STRATEGIC OBJECTIVES AND KEY PERFORMANCE INDICATORS 2018/19 Target CRITICAL SUCCESS FACTORS 2018/19 Actual

To produce seven papers. Produce seven research papers and Seven papers were published in the Research 7. compile the research bulletin. Bulletin.

To collaborate with UNESWA in Governor's Lecture. hosting Governor's Lecture. 8. Lecture successfully held (100 per cent).

To host Financial Innovation Host the Financial Innovation Financial Innovation Conference successfully 9. Conference. Conference. held.

National Financial Stability Financial Stability pillar. National Financial Stability Report was Report will be developed and developed and presented to stakeholders under presented to stakeholders under the leadership of the Financial Stability Unit in the leadership of the Financial CBE. Stability Unit in CBE. 10. Crises Preparedness framework- Led by CBE, with support from the Toronto Center, Crises Preparedness framework- conducted a training to CBE, FSRA and Ministry CBE will inform the of Finance (MoF) officials were trained on crisis development of structures preparedness. required for crisis preparedness.

Expansion of products and Diversification of the Financial Banks and NBFIs reported expansion of services in ongoing. System pillar. products and services. Partnership between banks and non-banks were New partnerships will be created. developed, responding to 11. consumer demands. MTN and Government initiated a piloting exercise to make Person to Government (P2G) E-Government - MTN and Government to Persons payments (G2P Government will develop a 5 payments through mobile money. year e-Governance strategy to enhance Person to Government

Modernisation of financial Modernisation Modernisation of financial sector laws - sector laws - Harmonisation Harmonisation and modernisation of financial and modernisation of financial sector laws was conducted in FSRA and CBE sector laws will continue with with support from IMF. FSDIP legal committee MoF, Attorney General’ office also held several meetings to work on FSRA and CBE legal experts harmonisation of financial sector laws. leading the activity. World 12. bank and IMF support will be available.

Movable property registry- A framework for movable property registry will be developed.

47 CBE Integrated Annual Report 2018/19 PERFORMANCE

CURRENT YEAR PERFORMANCE of two sensitisation workshops on this of nancial services. As FSDIP is subject matter. being implemented, there will be o The Department hosted an MFS o The Department continued to work enhancement of nancial inclusion Technical Assistance Mission from on developing CIEA, which is aimed and the nancial system will be the IMF Statistics Department (STA) at providing a picture of the econo- modernised and aligned to best in April 2018. The Mission mainly my’s business cycle. Together with international practices. assisted with reviewing the available MEPD and other stakeholders, the source data for NBFIs in line with Department worked on developing FUTURE FOCUS AREAS AND requirements of the Monetary and Leading and Composite indicators. OUTLOOK Financial Statistics Manual and During the review period, focus was Compilation Guide (MFSMCG), as on methodology issues and internal o The CBE is expected to obtain data well as facilitating collaboration and validation of developed indicators. for all the NBFIs from FSRA on a data exchange between CBE and o The Department continued to regular basis, and the IMF is expect- FSRA. conduct company surveys with the ed to assist with developing o The Mission and CBE reviewed MEPD from which an advocacy mapping of data to be disseminated available FSRA report forms for the report was developed and shared on CBE and IMF Reports. NBFIs. Some gaps were identi ed with policy makers and key o To partner with the CSO in data and changes were suggested to be stakeholders. collection processes of an Economic in line with MFSMCG. o The Department with the MEPD Census. o Some preliminary data for Savings worked on the compilation and o Collaboration on improving labour and Credit Cooperatives (SACCOs) dissemination of annual GDP and price statistics (ongoing). and credit providers were obtained medium term forecasts. o To partake in Macro-Fiscal Working from FSRA and incorporated in the o Research work – Over and above the Group (MFWG) and develop a Finan- MFS database as a rst step in production of a Research Bulletin, cial Programme framework for the expanding the coverage of MFS. the Department prepared and country to improve macro- scal o In December 2018, the CBE and published a paper on ‘Impact of analysis. FSRA signed a Memorandum of AGOA Loss and Anticipated Gains o To peer review and publish the Understanding (MoU) to enable data from Re-Admission to AGOA for the Composite Indicator(s) for Economic exchange between the two institu- Kingdom of Eswatini’. Also initiated Activity (CIEA). Present a paper on tions. research paper on ‘Forecasting Food development of the Eswatini CIEA. o The Bank also collaborated with the Ination in Eswatini’. o To nalise and submit paper on Central Statistics Oce in improving o The Department worked on ‘Forecasting Food Ination’ for peer macro-economic statistics namely strengthening database manage- review. GDP, price statistics and labour ment and improving collection of o Company Surveys and GDP Projec- statistics in terms of comprehensive- high frequency indicators to tions – ongoing. ness, accuracy, timeliness and high strengthen domestic economy o Strengthening database manage- frequency. developments and analysis. ment – ongoing. o On GDP, the focus was to increase o The Bank also initiated monitoring o Increasing monitoring and reporting data frequency. Through collabora- of the country’s mega-projects to on high frequency indicators – tion with the CSO National Accounts monitor implementation of major ongoing. Section on optimal and ecient projects in the country. o Monitoring implementation of data collection processes, the EPRS o FSDIP is a three-year strategy adopt- Mega-Projects in the country and Department facilitated the compila- ed by the Government and launched reporting on their progress – tion and eventual publication of in April 2017. In this regard and in ongoing. Quarterly National Accounts (QNA) principle, strategy implementation is o To develop the Forecasting and which were ocially launched by expected to be until March 2020. Policy Analysis. the Minister of Economic Planning o Implementation of all FSDIP recom- o To produce research papers for and Development (MEPD) in March mended policy action is expected to contribution to the Research 2019. be completed by March 2020. The Bulletin. o On labour statistics, focus was on FSDIP monitoring and evaluation o To work with the Ministry of development of LMIS; the Depart- will inform the future developments Economic Planning and Develop- ment facilitated the hosting of two in FSDIP implementation. ment to produce a macroeconomic workshops on this regard and work o In the short term working FSDIP forecasting model for the country. is ongoing pending the launch of groups and stakeholders will contin- o To co-host the second Eswatini the LMIS. ue to meet and implement the Economic Conference in October o On price statistics, the focus was on recommended policy actions. 2019 in partnership with ESEPARC facilitating the development of o It is expected that nancial stability and UNESWA. Producer Price Index (PPI). The will be enhanced, as there will be an Department facilitated the hosting expansion in the number and quality

CBE Integrated Annual Report 2018/19 48 PERFORMANCE

Human Resources and Administration

The Human Resources and Administration Department consists of three divisions, namely; Human Resources (HR); Learn- ing and Organisational Development (LOD); and Facilities. The generic functions of the HR division are recruitment of new employees, selection, placement, remuneration, Industrial Relations and Employee Assistant Programme. The LOD is responsible for coordinating staff training interventions, and monitoring and implementing the Bank’s performance management system. Facilities division administers and rehabilitates all Bank premises including office buildings, residences, Bank flats, yards and gardens.

HUMAN RESOURCES AND ADMINISTRATION PERFORMANCE

KEY PERFORMANCE INDICATORS STRATEGIC OBJECTIVES KEY PERFORMANCE INDICATORS AND CRITICAL SUCCESS 2018/19 Target FACTORS 2018/19 Actual

Fostering a conducive Employee Engagement Survey result work environment Employee Engagement Survey result at 3.41 out at 5 out of 5. 1. through engaged and of 5. motivated CBE staff.

100 per cent match between critical 42.5 per cent successors ready for critical leadership positions and potential successors. positions. Effectively manage 2. At least 60 per cent of staff at Bank’s talent strategy. 45 per cent of staff at supervisory level fall supervisory level and above fall within Quadrant 5-9 of Talent Matrix. within Quadrant 5-9 of Talent Matrix.

100 per cent of staff expressing to be working towards the accomplishment Culture Index of 2.74 out of 5 reflective of 55 of the Bank’s strategy and mandate. Enhancing a high performance culture. per cent degree of staff commitment towards 3. high performance culture. Performance plans developed for all Bank staff.

Conduct industry training needs analysis.

Establish partnerships with credible To provide safe and Project still at needs assessment stage. institutions. habitable facilities for 4. the Bank. Execute training session starting in September 2018.

Annual average morbidity rate at 12 Streamline Bank’s Annual morbidity rate at 4 per cent of staff per cent of total staff complement. Wellness Policy to align complement. with Wellness and At least 60 per cent staff 5. Disease Management 43 per cent staff participation in the health risk participation in the health risk Systems standard based assessment exercise. assessment exercise. on health risk profile.

Implementation of the Business Enhance operational Partial roll out of the Business Partnership 6. Partnering Approach efficiency. Model.

49 CBE Integrated Annual Report 2018/19 PERFORMANCE

KEY PERFORMANCE INDICATORS STRATEGIC OBJECTIVES KEY PERFORMANCE INDICATORS AND CRITICAL SUCCESS 2018/19 Target FACTORS 2018/19 Actual

Needs-based training calendar.

Partnership with GIBS for Leadership Capability.

ICAP Training Solutions for Technical Banking Courses. Develop training calendar 7. Establish and operationalise the Partnership with CFTE for Fintech courses. Learning Academy. Successfully conducted 9 courses including Anti- Money Laundering, Customer Service, Retire in Dignity, Ms Excel, Report Writing, Project Management and other courses.

CURRENT YEAR PERFORMANCE o Ensure sustained future talent Finance; as well as the National pipeline by conducting a study to Payment Systems (NPS). The core o The Department successfully ascertain the status of futuristic function of the Currency Division is conducted the Culture Survey and skills and their relevance to the the issuance and redemption of feedback given to all stakeholders. Bank. banknotes and coins, whilst ensur- o Implemented the Bank’s Talent o To create a conducive environment ing the quality of currency in circu- Strategy. for meaningful stakeholder engage- lation. The Banking Division is o Successfully migrated from manual ments at CBE to attain at least 65 per primarily a banker to the Govern- to fully automated Performance cent engagement levels by 2021 for ment of Eswatini and licenced Management System. both internal and external financial institutions. The Develop- o Conducted Pay Equity Exercise. stakeholders. ment Finance Division administers o Conducted Health Risk Assessment. o Execution of Facilities Maintenance the Small Scale Enterprise Loan o Implementation of all identi ed and Infrastructure Development Guarantee Scheme and Export activities in the Learning Academy Plan. Credit Guarantee Scheme on behalf Plan. o Establish psychosocial support of Government. programme to enhance sta While, the NPS division is responsi- FUTURE FOCUS AREAS engagement. ble for overseeing the national AND OUTLOOK o Create awareness on psychological payment systems in accordance relationship with money. with the CBS Order 1974 (as amend- o Process mapping for automation of ed) and the National Clearing and o The HR Department is to review the administrative tasks. Settlement System Act 2011. Human Resources policies and circulation of same to sta. Operations o Rollout of the Culture Shift Project Action Plan. The Operations Department o Review of the Bank’s performance comprises of the following divisions: management system. Currency; Banking; Development

CBE Integrated Annual Report 2018/19 50 PERFORMANCE

OPERATIONS PERFORMANCE

KEY PERFORMANCE INDICATORS STRATEGIC OBJECTIVES AND CRITICAL KEY PERFORMANCE INDICATORS 2018/19 Target SUCCESS FACTORS 2018/19 Actual To achieve 100 per cent currency Availability of quality currency in 99.98 per cent. orders. 1. circulation.

Issuance of E5 commemorative coin. E5 commemorative coin issued 2. Issuance and redemption of currency. into circulation (100 per cent). Zero tolerance on incidences of Monitoring incidence of counterfeiting Eight (8) counterfeiting counterfeiting. 3. (Number of counterfeits). incidences.

Minimum of 60 per cent compliance to Overall 68 per cent compliance the Bank for International Settlements Compliance to international achieved (SWIPSS 76 per cent; (BIS) core principles, that is standards/best practice for payment 4. SAECH 64 per cent; CSD 64 per CPSS/IOSCO Principles for Financial systems/financial market cent). Market Infrastructures, 2012. infrastructures.

To find reputable supplier of GBPs and Signed MoU with ABSA Bank to Stable Foreign Currency Supply. Euros. 5. supply Forex.

Provision of banking services to ≥ 96 per cent compliance to SLAs ≥ 96 per cent compliance to SLAs. 6. Government and Commercial services. achieved.

Account opened and signed MoU Assist Government to efficiently with EPTC – Elderly Social distribute elderly grants economically. Grants. 7. 3. Effective Stakeholder Engagement At least six forums held with the Government. Four Forums held with the Government.

Minimum of 60 per cent compliance to Overall 68 per cent compliance the Bank for International Settlements Compliance to international achieved (SWIPSS 76 per cent; (BIS) core principles, that is standards/best practice for payment 8. SAECH 64 per cent; CSD 64 per CPSS/IOSCO Principles for Financial systems/financial market cent). Market Infrastructures, 2012. infrastructures.

Increase uptake on SSELGS Small Scale Enterprise Loan performance. Constant stakeholder consultations. 9. Guarantee Scheme (SSELGS) fund increased by 22.4 per cent.

Signing of an MoU between CBE and Export Credit Guarantee Scheme Research on how to utilise ECGS. 10. Government Ministries of Finance and (ECGS) continued to be stagnant. Commerce, Industry and Trade.

CURRENT YEAR PERFORMANCE Settlement System (SWIPSS), interna- ed by the Central Bank of Eswatini; tionally referred to as the Real Time o The Eswatini Automated Clearing o The Bank has a zero tolerance of Gross Settlement System (RTGS) House (SAECH) is used by nancial counterfeiting and only eight (8) hence the combined acronym institutions and the Central Bank to notes were detected to be counter- “SWIPSS/RTGS”. This system is used clear interbank obligations on feit during the year. by nancial institutions and the paper based instruments (mainly o Compliance - Self-assessments for Central Bank to push domestic cheques) and Electronic Funds compliance were conducted on the credit for wholesale and retail Transfers (EFTs) for settlement in following three designated national transactions. Compliance was Central Bank money, that is in terms payment and settlement systems: found to be at 76 per cent. The of international best practice. o Eswatini Integrated Payment and SWIPSS/RTGS is owned and operat-

51 CBE Integrated Annual Report 2018/19 ing, system stability, improved security, more automation for license fees paid is already being realised.

Risk and opportunity optimisation

IT and cyber security risks are high on the Board’s agenda and management’s focus areas, as evidenced by the risks noted in the Bank’s top ten risks register. Improving IT Governance and utilising the existing Cyber Resilience Framework are the tools aimed at mitigating these risks. Going forward, implementing the Cyber Security Operations Centre (CSOC), more frequent penetration testing and implementing cyber security guidelines for supervised entities will introduce more intelligent tools and practises for the national Financial Markets Infrastructure (FMI) to reduce the residual risks.

The Bank’s ICT Continuity capabilities were further strengthened during the period, starting from Business Impact Assessment input to revising business continuity and disaster recover procedures and even testing the plans. Simulations need to be carried out more frequently to include the other FMI participants to ensure robustness against counter-party risks.

The Bank complied with the SWIFT Customer Security Programmer mandatory requirements and there was no cyber security breach during the period.

PERFORMANCE

Compliance was found to be at 64 signed MoU. adoption by end of March 2020. per cent. The SAECH is a non-pro t o Signed MoU with ABSA bank for o CMA Cross-border Payments body corporate owned by its procurement of Great British Pound Oversight Committee Directive for participants, being the nancial (GBP) and Euro currencies. Low Value Credit Electronic Fund institutions and the Central Bank. o SSELGS individual commercial Transfers (EFTs) - To pursue imple- o The CSD is owned and operated by banks participation increased in mentation of the directive to the Central Bank. It is the electronic number of loans approved by 2.6 regularise the current inappropri- system used to trade and hold per cent whilst in value a growth of ate practice of clearing and settle- treasury bills and securities in 6.9 per cent was recorded during ment of CMA cross-border low uncerti cated and dematerialised the year. value credit EFTs as local transac- form to facilitate the transfer of o ECGS continued to be stagnant tions in the Republic of South Africa ownership through book entry as over the year. jurisdiction. Transactions to and opposed to transfer of physical from other CMA countries are paper based certi cates. Compli- FUTURE FOCUS AREAS AND regarded as cross-border transac- ance was found to be at 6 per cent. OUTLOOK tions and should be treated as o The review of the National Clearing such. and Settlements Systems (NPSS) o Set up Currency Museum for o To implement ticketing access Act, 2011 remained ongoing preservation of the historical system to banking hall in a way to during the period under review. legacy of currency. improve customer service. After the preliminary review and o Improve data analytics pursuant to o To sign MoU with the Government. initial draft, the Bank submitted the SAP #Insika implementation. o Increase loan limits from E500 000 requests for technical assistance to o Implement coin management to E1 million. the International Monetary Fund eciencies. o Open participation of NBFIs under and the World Bank to safeguard o NPSS legislation – Ongoing review SSELGS. quality assurance in the outcome of of the National Clearing and Settle- o Way forward on outcomes of banks the review. Correspondence ment Systems Act 2011 to continue Inspections on SSELGS. between these donor organisa- and nal draft to be submitted by o To improve performance from tions and the Bank remained end of March 2020. Technical current leverage of 0.96 times the ongoing during the period under assistance to be received from the fund balance to 2 times. review. World Bank. o Opened Eswatini Posts and o NPSS Vision and Strategy Frame- Telecommunications Corporation - work – To review NPSS Vision and Elderly Social Grant Account and Strategy Framework and present nal draft for consideration and

CBE Integrated Annual Report 2018/19 52 PERFORMANCE

Financial Markets

The Financial Markets Department is predominantly responsible for managing the country’s foreign currency assets commensurate with three investment objectives namely; capital preservation, liquidity and income generation. In addition, the Department issues short- and long-term Government debt securities to help the Government raise funding in the domestic market, conducts open market operations in support of the Bank’s monetary policy framework and finally, provides international banking and treasury services to the Government.

FINANCIAL MARKETS PERFORMANCE

KEY PERFORMANCE INDICATORS STRATEGIC OBJECTIVES AND CRITICAL KEY PERFORMANCE INDICATORS 2018/19 Target SUCCESS FACTORS 2018/19 Actual

Operational structure 80 per cent Completion and implementation of Modernisation and Optimisation of complete with Treasury new operational structure, job Financial Markets Department 1. Operational Processes being profiles and operational processes. Organisational Structure and Operations. finalised.

An equivalent SZL 1.6 billion in FX Engage key stakeholders to ensure raised as at the end of March 2019 Build and protect the level of Foreign enacting of Regulations on FX Sales to through moral suasion. Good Exchange Reserves through support FX Reserves Mobilisation progress made towards 2. participation in the local FX market. Initiative. implementation of Regulations on FX Sales.

Engage rating agency and, produce Undertake Sovereign credit rating information and data that will Current Sovereign rating affirmed review for the Government of support maintenance of current 3. and maintained by Moody’s. Eswatini. rating.

Comprehensive and informative Develop a Domestic Liquidity Approval of Liquidity Monitoring Monthly Domestic Markets reports Framework and presentation of Management Framework to support 4. produced inclusive of domestic ongoing reports. monetary policy implementation. liquidity conditions.

Review Strategic Asset Allocation in SAA review completed and aligned Optimise returns on foreign exchange line with changing reserves with changes in CBE’s risk-return 5. reserves. fundamentals. dynamics and reserves levels.

CURRENT YEAR PERFORMANCE o In uential stakeholder relations implementation dependent on management ensured buy-in from ongoing collaboration with Eswatini o Implementation of new operational local market and key stakeholders to Stock Exchange on implementation model on track with Domestic ensure participation in the Bank’s of Automated Trading System. Markets Unit functional and Treasury reserves accumulation initiative and o Integration of the CSD with Eswatini Operations straight-through move towards regulations imple- Stock Exchange’s Automated processing stable on implementa- mentation. Trading System (ATS) and integration of SAP. o Infrastructure Bond Programme tion tests at an advanced stage. o Foreign exchange dealing desk functional and raising of funds o Credit rating of Eswatini maintained created and the Department’s ongoing. by Moody’s at B2 following on operations in the local FX market o Concept paper for Retail Bond provision of information to support initiated. Programme was developed and the rating review.

53 CBE Integrated Annual Report 2018/19 PERFORMANCE

FUTURE FOCUS AREAS AND o Introduce the Government of the o Fully optimise SAP Treasury system, OUTLOOK Kingdom of Eswatini as a sovereign straight-through processing and borrower in the international production of management o To contribute to nancial inclusion market. information. by introducing a Retail Bond o Integration of CSD with ESE’s ATS o Automate sanction screening Programme in the local market and expansion of scope and role of processes and implement SWIFT (ongoing). current CSD as a market CSD to GPI project to enhance payment o Building the levels of reserves cover all instruments in the market. process management. gradually by participating in the o Capacitate internal Portfolio local market through the purchase Managers to be able to manage of foreign exchange proceeds from individual USD-Fixed income exports (ongoing). portfolios.

Financial Regulation 2005, CBS Order 1974 (as amended), regulations, as well as to collect, Anti-Money Laundering/Combating analyse and disseminate information The Financial Regulation Department the Financing of Terrorism Act 2011 relating to exchange control and cross comprises of the following divisions: and other secondary legislations. The border foreign exchange transactions. Bank Supervision; Policy and Enforce- Financial Stability Division is responsi- It also ensures that all banks are ment; Financial Stability; as well as ble for ensuring financial sector cognisant of the general principles Exchange Control. The Supervision stability by assessing the robustness and guidelines with regard to money Division carries the responsibility of and efficiency of the financial system laundering and terrorist financing in licensing, regulating and supervising and engaging the relevant stakehold- order to deter and detect money banks and other financial institutions ers to strengthen the regulatory laundering and terrorist financing in Eswatini. The Policy and Enforce- environment. The Exchange Control activities, thereby preventing abuse ment Division deals with the develop- Division’s main functions are to imple- of the financial system by money ment and enforcement of regulatory ment, administer and monitor the launderers and terrorists. tools, that is Financial Institutions Act provisions of the exchange controls

KEY PERFORMANCE INDICATORS STRATEGIC OBJECTIVES AND KEY PERFORMANCE INDICATORS 2019/20 Target CRITICAL SUCCESS FACTORS 2018/19 Actual Financial Institutions Act 2005 review approved by Board of Directors and sent to Attorney 1. Review Financial Institutions Legislation review (70 per cent). General (AG) and Ministry of Act Finance.

Issuance of Pillars 2 and 3 guidelines to commercial banks. 2. Implement Pillars 2 And 3 Basel II implementation (80 per cent). Go-live in January 2020.

Issuance of Agency-Banking Draft Guidelines On Agency- Draft guidelines with internal consultations guidelines. 3. Banking ongoing (70 per cent).

Issuance of revised fitness and Draft fitness and probity guidelines in place probity guidelines. 4. Fitness And Probity Guidelines (50 per cent).

CBE Integrated Annual Report 2018/19 54 PERFORMANCE

KEY PERFORMANCE INDICATORS STRATEGIC OBJECTIVES AND KEY PERFORMANCE INDICATORS 2019/20 Target CRITICAL SUCCESS FACTORS 2018/19 Actual

To develop and implement a risk Developed a manual to establish the risk based supervisory framework for To establish and operationalise based supervision framework. the regulation of anti-money a framework for risk based Commenced a project to supplement and 5. laundering and counter financing of supervision in the Anti-Money customise the supervisory tools inherited terrorism matters in the financial Laundering Unit from IMF to ensure that they address the industry. risk in the industry. (60 per cent).

Develop concept paper to migrate To migrate from Exchange Reviewed the operational structure to from exchange control function to a 6. Control to Financial adopt a risk based approach in carryout out financial surveillance function. Surveillance. supervisory mandate (10 per cent).

To enhance efficiency, Financial Stability Bill developed with the Submission of the Financial Stability legislative alignment, and assistance of the IMF. The Bill has been Bill to the Ministry of Finance by 31 7. create visibility in reviewed by the Legal sub-committee of May 2019. implementing the CBE FSIDP. mandate.

Financial stability assessments are reported Collect, analyse, and transform through the Financial Stability Report, CMA Continuous reporting of financial data into visible and actionable 8. Review, Board Papers, COMESA Review, stability assessments. intelligence for organisational SADC Review, IMF Review and stakeholder growth. engagements.

CURRENT YEAR PERFORMANCE o In February 2019, the AML unit in Authorised Dealers with Limited collaboration with the National Authority. o Hosted Basel II implementation of Payment System conducted a full o Exchange Control issued circulars Technical Assistance Mission from scope risk based onsite inspection on and guidance to liberalise exchange the IMF in July 2019. The Mission MTN Mobile Money. controls relating to the foreign mainly assisted with reviewing Pillar II o The AML Unit had technical working portfolio investment facility. and Pillar III guidelines and imple- group meetings with the industry to o Initiated a project on monitoring mentation thereof. discuss trends in the market and residential house prices to strength- o O ered training to the Ministry of guide on implementation of en the household sector assessment. Finance on the fundamentals of Basel AML/CFT requirements. An IMF consultant was engaged in II. o The AML Unit participated in the Task June 2019. Preliminary work, which o Reviewing the Single Obligor Limit Team forums that discuss and formu- includes scoping available data, is which is a guideline to be adopted by late policy on the AML/CFT regime. under way. the banking sector (ongoing). o The AML Unit facilitated a training on o Initiated a project on establishing a o In December 2018, the Bank and the anti-money laundering and counter credit and collateral registry. Prelimi- Financial Services Regulatory Author- nancing of terrorism standards on nary discussions with the Royal ity participated in a Mock Mutual behalf of the Central Bank Academy. Science and Technology Park (RSTP) Evaluation Exercise hosted by the o The Exchange Control Division have been held in April 2019. The Ministry of Finance. The Mock Evalua- participated in the Common Mone- RSTP will help centre the data from all tion Exercise was a preparedness tary Area forums to discuss policy stakeholders. assessment exercise to help the and trends relating exchange o The CBE collaborated with the Centre regulators identify gaps in their controls. for Financial Inclusion (CFI), Eswatini supervisory frameworks in prepara- o The Exchange Control conducted a Bankers’ Association (EBA) and Junior tion for the mutual evaluation by capacity building workshop for all Achievement (JA) in hosting the ESAAMLG in June 2020. authorised dealers in August 2018. Global Money Week for 2018. o Approved the expansion of two

55 CBE Integrated Annual Report 2018/19 PERFORMANCE

The event was held over the week of risk-based supervisory framework tools. Exchange Transaction Reporting 25 – 29 March 2018 under the theme o To implement the risk based supervi- System from version 2 to version 3. ‘Learn. Earn. Save.’ sory tools in the industry. o Strengthen and maintain stakeholder o The unit continued to work towards a o To participate in the hosting of an engagements and stakeholder more consistent and frequent AML/CFT Indaba by the Task Force as mapping – ongoing. non-bank data ow. The unit an awareness exercise. o To strengthen sectorial assessments engaged with non-bank entities to o To act as a focal point for nancial – ongoing. refresh stakeholder appreciation of institutions as they develop a domes- o To establish the Financial Stability data importance and providing tic list for Politically Exposed Persons. Panel and the Financial Stability feedback on nancial stability issues. o To participate in the Task Team Forum. The establishment of these o Finalise the Financial Stability Act. Forums as the country hosts the macro-prudential committees is ESAAMLG Meeting and 20th anniver- dependent on a developed legal FUTURE FOCUS AREAS AND sary of ESAAMLG in September 2019. framework for nancial stability OUTLOOK o Cement the partnership with the assessment. Central Bank Academy in facilitating o Mapping returns for non-bank o Strengthen consumer protection AML/CFT Standards training. nancial institutions - ongoing. oversight in banking practice. o Continue with the project on migra- o Complete full rollout of Basel II imple- tion to Financial Surveillance and mentation by December 2020. further liberalise exchange controls. o To nalise the development of the o Migrate the Cross Border Foreign

CBE Integrated Annual Report 2018/19 56 PERFORMANCE

Finance

The Finance Department comprises the following divisions: Financial and Management Accounting; Supply Chain; as well as Fintech.

The Financial and Management Accounting is responsible for the recording and reporting of all financial transactions relating to the CBE and the preparation of all financial statements that are compliant with the CBS Order of 1974 (as amended) as well as International Financial Reporting Standards. It also provides management with accurate, relevant and timely financial information for decision-making.

The Supply Chain Division is responsible for the strategic sourcing, procurement, contracting and evaluation of goods and services required by the Bank by implementing the approved procurement and supplier management policies. On the other hand, the Fintech Unit role is to monitor the space of financial technology developments in the country and globally.

FINANCE PERFORMANCE

KEY PERFORMANCE INDICATORS KEY PERFORMANCE INDICATORS STRATEGIC OBJECTIVES AND CRITICAL 2018/19 Target SUCCESS FACTORS 2018/19 Actual

Central Bank Digital Currency Central Bank Digital Currency Central Bank Digital Currency 1. Diagnostic. Implementation Consultative Forum.

Partnership formulation with MoUs Partnerships formulated with with Regulatory bodies. 2. Partnerships with key stakeholders Regulatory bodies (85 per cent).

Creation of Eswatini Fintech LinkedIn and Slack Communication Community. 3. Event for Consumer education Mediums setup (35 per cent).

Create financial efficiency by remaining within set guidelines 45 per cent 32 per cent • Personnel costs to income 4. 55 per cent 47 per cent • Personnel costs to total expenses 80 per cent 67 per cent • Total cost to total income

Implement recommendations to Cost Containment and Revenue Some objectives have been achieved contain costs. 5. Diversification and some are still in progress.

Provide accurate and timely Resolve tax calculation issues on compensation for work performed Tax calculations on SAP now aligned SAP to zero errors. 6. ensuring that all deductions, benefits to PAYE guidelines with zero errors. and taxes are correctly deducted or remitted to appropriate stakeholders

60 per cent capital procurement Cost Cutting measures through Increase effectiveness, efficiency spend achieved as at mid-year leveraging on procurement plans and governance of the supply chain 7. through elimination of unnecessary and aggregate procurement. function expenditure.

Rollout plan for the material master Implementation of SAP’s 100 per cent successful including Business Partner module. 8. procurement module implementation.

57 CBE Integrated Annual Report 2018/19 PERFORMANCE

CURRENT YEAR PERFORMANCE tion through dierent mediums (Social the Bank’s operating costs. media, trade fair). o Optimal Human Capital Utilisation - o Consultative Forum on CBDC’s This project’s objective is to evaluate facilitated to explore the possibility FUTURE FOCUS AREAS AND the extent to which human resourc- of issuing a central bank-issued OUTLOOK es are deployed eectively for the digital currency in Eswatini. maximum achievement of the Bank’s o Innovation committee establish- o To conduct CBDC Country Diagnos- goals, and to propose corrective ment to allow for streamlining all tic to understand the bene ts that measures where appropriate. innovative solutions internally and Eswatini could draw from imple- o New revenue avenues - This project externally facing. menting CBDC based on its speci c analyses and implements revenue o Fintech Regulatory Sandbox Guide- characteristics. optimisation initiatives that can be lines Implemented to enable live o To develop Eswatini Fintech Working taken within the Bank’s mandate and testing of new innovative Fintech Group. in line with the CBE Order 1974 (as solutions in a controlled environ- o To coordinate Eswatini Innovation amended). ment Hackathon competition with o Create a travel strategy to minimise o Fintech Challenge successfully run, partners (ESSCOM, CFI, FSRA, expenditure to contribute to overall 75+ applicants received and 3 teams UNESWA and FinMark Trust). Bank cost containment. successfully received for incubation. o Mobile Payment Gateway imple- o Review the Bank’s insurance portfo- o Achieved membership with interna- mentation to promote payments for lio and identify policies which could tional group of nancial regulators e-commerce and online retailers. be combined to contain costs. GFIN (Global Financial Innovation o To draft Digital Identity policy for a o Present the draft supplier manage- Network). person, organisation or application. ment policy to Management o Successful partnership with other o Optimal Cost Structure Realisation - Committee. regulators (MoUs). This project’s objective is to explore o Focus on stakeholder engagement o Conduct regular consumer educa- and implement solutions to optimise by hosting a supplier symposium.

Information and Communications Technology

The role of the Information and Communications Technology (ICT) Department is to lead technology agenda and delivera- bles within the Bank driven by a mission to increase business value through innovative and the implementation of robust and agile ICT services and solutions in the Bank, in line with international best practice. Currently, the Department is structured to deliver this value based on the functions, namely; systems, infrastructure and information security.

ICT PERFORMANCE

KEY PERFORMANCE INDICATORS STRATEGIC OBJECTIVES AND CRITICAL KEY PERFORMANCE INDICATORS 2018/19 Target SUCCESS FACTORS 2018/19 Actual

95 per cent Stability 1. SAP Stability. 99 per cent

50 per cent 2. Integrated business intelligence. 35 per cent

Implementation of IT Governance (ITG) 3. 80 per cent Framework. 65 per cent

Project not concluded. Still progressing Conclude project by 31 with stakeholder engagements, business 4. CSD Phase II-Upgrade to integrate with August 2018. Automated Trading System. rules and process definitions and systems test.

96 per cent 5. ICT Systems and Network availability. 99 per cent

BCP and DRP review. Completed and tested BC and DR Plan. 100 per cent Audit Protection of confidentiality, integrity and resolutions. 6. availability of the Bank’s information assets. Resolved all audit issues. Less than 2 security No security breaches. breaches.

CBE Integrated Annual Report 2018/19 58 PERFORMANCE

CURRENT YEAR PERFORMANCE followed by testing of the revised adopting a more innovative culture BCP and DRP plans. evidenced by allocating resources o The SAP system and wider IT to trial latest technologies that the environment stability achieved 99 FUTURE FOCUS AREAS AND Bank can adopt. per cent uptime during the period OUTLOOK o Information Security Management under review based on the de ned - Expanding the Cyber Resilience measures. o Change in the ICT Department scope through issuing guidelines o Eight IT resources quali ed as SAP reporting line to enable a broader to the supervised nancial institu- Certi ed Consultants in various base IT meant to contribute more tions and the implementation of a modules, which is in line with the strategically to the Bank’s overall Cyber Security Operations Centre objective to curtail the SAP total advancement. (CSOC) to adopt intelligent threat cost of ownership for the long term o Business Automation – In addition detection tools. Progress the cyber by using internal resources to to a focus on SAP business process resilience and FMI continuity support and extract more value eciencies as supported by testing plans to include the from the SAP investment. re-mapping the processes and connected counter-parties or o The Business Intelligence (BI) eliminating ineciencies, more commercial banks. Programme performed below par solutions have to be implemented. o Technology Management – at 35 per cent completion The aim is to reduce manual and Enhancing the Bank’s collaboration compared to a targeted 50 per cent paper-based processes. and intranet/extranet capabilities mostly impacted by a focus in o Business Intelligence, data to improve information sharing stabilizing SAP which impacted the management, automation and with a wide community. Also of BI Framework project and nding data analytics – Implementation of; focus is implementing technolo- feet in the Information Governance information governance policy, gies that support automated (IG) project. enterprise documents and records workows, these being robotic o Completed a review of the Bank’s management system, business process automation, electronic ICT Business Continuity Plans (BCP) intelligence framework, data signatures and upgraded biomet- and Disaster Recovery Procedures warehousing and business intelli- rics that integrated with the SAP (DRP) in line with the revised BCM gence dashboard and reporting. environment. objectives and new application and o IT Governance and Innovation – technology architectures. This was Enhance IT Governance further and

99% ICT Systems and Network availability.

59 CBE Integrated Annual Report 2018/19 PERFORMANCE

Internal Affairs and Security

The Internal Affairs and Security Department consists of two divisions, namely; Compliance and Ethics, and Security.

The Compliance and Ethics Division provides compliance management services and contributes to processes that optimise achievement of the Bank’s objectives. The division does this through the facilitation and co-ordination of all compliance management activities of the Bank including ethics management, management of policies and the provision of customer due diligence (stakeholder profiling) services to the Bank.

The Security Division performs the security function on all the Bank assets, including money and people. To fulfil this mandate, the division operates an Integrated Security System that regulates access and manages security incidents in the Bank.

INTERNAL AFFAIRS AND SECURITY PERFORMANCE

KEY PERFORMANCE INDICATORS STRATEGIC OBJECTIVES AND CRITICAL KEY PERFORMANCE INDICATORS 2018/19 Target SUCCESS FACTORS 2018/19 Actual

Inculcating an ethical culture by Provide appropriate and timely Providing ethical advice and providing advice to internal advice provided to CBE’s support to internal stakeholders on 1. stakeholders on Code of Ethics and stakeholders on ethical matters. an ongoing basis (100 per cent). other ethics-related matters.

Investigate potential breaches of Investigating allegations of potential the Code and recommend A number of alleged ethical breaches of the Code of Ethics and appropriate remedial action to breaches and corrective action 2. recommending remedial action where management where breaches recommended (100 per cent). breaches are established. have been identified.

To create awareness and socialise The reporting mediums have been Operationalising reporting mediums for the reporting mediums to internal successfully activated (80 per 3. ethics-related incidents. and external stakeholders. cent).

Maintenance of the Gifts and The Gifts and Hospitality Register Maintaining gifts and hospitality Hospitality Register and analysed maintained (100 per cent) and register. for potential reputational/ethical 4. analysis thereof reported to the risks. Board.

Co-ordinate the implementation Continue to embed the compliance Implementation of Compliance of an integrated Bank-wide management process and enhance the Management Policy and Framework 5. compliance management process. reporting on the state of compliance in (70 per cent). the Bank.

CURRENT YEAR PERFORMANCE o Ensuring transparency on the Code of Ethics and thereby improv processes adopted by reporting on ing the compliance and ethics o Provision of advice and support to the activities of the ethics function. culture of the Bank. internal stakeholders on ethical o To enhance processes for the matters in an e ort to inculcate a FUTURE FOCUS AREAS AND monitoring of compliance risk as business culture founded upon OUTLOOK well as reporting on the status of values espoused in the CBE Code of compliance across the Bank. Ethics. o To enhance training and awareness o To support e orts relating to o Implementation of the Code of of compliance and ethics related conduct risk by collaborating with Ethics by investigating potential topics across all internal stakehold- relevant stakeholders in an e ort to breaches and recommending ers to minimise or reduce risks of develop and implement a Code of appropriate corrective action violating the law, policies, proce- Conduct applicable to all members where ethical breaches have been dures, adopted standards and the of sta . identied.

CBE Integrated Annual Report 2018/19 60 PERFORMANCE

Board Secretary and Legal

The office of the Secretary to the Board is the custodian of corporate governance for the Bank. It houses the Legal office which is responsible for providing professional legal advice in all operations to avoid and/or mitigate legal risks. It is also in charge of the information and records section which provides the central filing repository for the Bank. The office also provides administrative services to the Board of the Bank. It also serves as the office of the Ombudsman which provide individual and small business bank customers with a fair, quick and effective dispute resolution process, free of charge. It provides an informal, easily accessible alternative to other remedies, such as litigation.

BOARD SECRETARY AND LEGAL PERFORMANCE

KEY PERFORMANCE INDICATORS STRATEGIC OBJECTIVES AND CRITICAL KEY PERFORMANCE INDICATORS 2018/19 Target SUCCESS FACTORS 2018/19 Actual To finalise CBE and Financial Draft Bills finalised. Institutions Bills. 1. CBE and Financial Institutions Bills.

To conduct Board evaluation Conducted Board evaluation 2. Board Evaluation exercise. exercise. exercise.

CURRENT YEAR PERFORMANCE FUTURE FOCUS AREAS AND OUTLOOK o Finalised the draft Central Bank of Eswatini Bill and the Financial Institu- o To nalise the draft Financial Stability tions Bill, and these will now be Bill and amendment of the National forwarded to the Ministry of Finance Clearing Settlement Act 2011 and and the Attorney General. Exchange Control Order 1974. o In the year under review, the Board nalised the external Board evaluation exercise with the Institute of Directors (SA).

61 CBE Integrated Annual Report 2018/19 PERFORMANCE

Risk Management

The Risk Management Department provides, coordinates and oversees the implementation of an enterprise risk management framework that ensures that threats and opportunities that prevail in the Bank’s operating environment are addressed through a systematic and structured approach that aligns strategy, risk and performance. This is done through a risk assessment process that involves risk identification, analysis, evaluation, mitigation, reporting and continuous monitoring for efficient and effective delivery of the Bank’s objectives.

RISK MANAGEMENT PERFORMANCE

KEY PERFORMANCE INDICATORS KEY PERFORMANCE INDICATORS STRATEGIC OBJECTIVES AND CRITICAL 2018/19 Target SUCCESS FACTORS 2018/19 Actual

Complete (100 per cent) review of Up to date ERM policy and Sound ERM Policy and Framework. ERM policy and Framework. 1. Framework aligning with ISO 31000.

Availability of prescribed Bank- Bank-wide risk structure in place. wide risk structure, Board and Annual Risk Assessment Workshops. Management Committees. Adequate & Effective Risk Periodic workshops and meetings Quarterly tests and exercises. 2. Governance Structure. held. Quarterly Committee and Board meetings. Periodic tests and exercises for BCPs and DRPs.

Sharing of information and periodic Effective coordination and meetings with stakeholders in the 3. Appropriate Scope and Outcome. cooperation with combined combined assurance role players. assurance role players.

Facilitate development, review and monitoring of:

Corporate Risk Register;

Departmental Strategic Risk Complete and up-to-date registers Effective Risk & Business Continuity Registers; within the first quarter of the 4. Management Process. financial year. Business Units’ Process Risk Registers;

Projects Risk Registers; and

Business Continuity as well as Disaster Recovery plans.

KRI and Loss Incidents Reports. Timely and accurate periodic reports. 5. Effective Risk Reporting. Management and Board reports.

Periodic Risk Training and continuous risk awareness initiatives. Tone set at the top and high level 80 per cent compliance to risk of appreciation and ownership of 6. Appropriate Risk Culture. responsibilities. the risk function, ownership and responsibility across the Bank. Risk being a KPI for all Risk Champions.

Achievement of targeted maturity Level 3 for Risk Management and Desired Risk Maturity Level. levels in Risk Management and Level 4 for BCM. 7. Business Continuity Management.

CBE Integrated Annual Report 2018/19 62 PERFORMANCE

CURRENT YEAR PERFORMANCE FUTURE FOCUS AREAS AND o To review risk forums and reporting OUTLOOK structures along with ERM Frame- o 40 per cent completion of ERM Policy work review. and Framework Review. Delay due to o Complete review and implementa- o To nalise and implement the risk reliance on external expertise. tion of revised ERM Policy and training and awareness program; to o Registers and plans were completed Framework. review risk champions’ roles and later than set timelines. o To Review Risk Governance responsibilities; to ensure that all risk o Reports received, discussed and structures and their Charters or champions’ performance contracts presented at di erent forums. Terms of Reference along with the include a Risk KPI. o Conducted training for all risk cham- ERM Framework review. o To address maturity gaps through pions; risk awareness initiatives still o Develop and implement combined implementation of Risk and BCM lacking; risk responsibilities still assurance framework (with Audit and quality assurance exercise secondary in the list of role player’s stakeholders). recommendations. priorities; some risk champions do o Fully implement automation of risk not have Risk KPIs in their perfor- assessment process (SAP-GRC); mance contracts. develop and implement the Incident o Level 2 for Risk Management; Level 3 Management Framework. for BCM.

Internal Audit

The Internal Audit Department evaluates the Bank’s compliance with the law and its own internal policies and operational procedures. It provides an independent, objective assurance and consulting service designed to add value and improve the Bank’s operations. It helps the Bank to achieve its objectives by bringing a systematic, disciplined approach to evaluate and improve effectiveness of risk management, control and governance processes.

INTERNAL AUDIT PERFORMANCE

KEY PERFORMANCE INDICATORS STRATEGIC OBJECTIVES AND KEY PERFORMANCE INDICATORS 2018/19 Target CRITICAL SUCCESS FACTORS 2018/19 Actual

To achieve 100 per cent coverage To provide assurance on high and 92 per cent coverage on annual plan. of the annual audit plan. 1. very high risks areas.

To facilitate on time remediation 100 per cent follow-up on due 2. of Audit issues for effective 100 per cent achievement. action plans for audit issues. mitigation of risks.

Quality assure seven (7) completed To conform with international Eight (8) projects were quality assured. audit projects. 3. auditing standards.

Training plan in place Improve process efficiency as an 100 per cent fulfilment of the training plan. accomplished. enabler to achieve performance 94 per cent completed projects within 100 per cent projects completed targets. 4. budget. within budget. 82 per cent productivity achieved. 80 per cent staff productivity.

63 CBE Integrated Annual Report 2018/19 PERFORMANCE

CURREN YEAR PERFORMANCE o The good e ciency ratios derive from the commitment of the audit o The 92 per cent coverage is for the sta to exibility. They were prepared annual plan approved by the Board to help one another so that great Audit Committee. The plan covered output was achieved collectively. almost all the Bank’s Departments whilst emphasising on the high risk FUTURE FOCUS AREAS AND areas. On top of this coverage, the OUTLOOK function conducted special assignments at the request of management, o To pursue implementation of and further provided continuous combined assurance. A budget is in auditing of cash using both the place for the forthcoming year to train intraday and end of day surprise all assurance providers on the checks. combined assurance model and assist o Agreed management action were Internal Audit to implement it. followed-up on monthly basis as they o To conduct an external quality fell due and were reported to the assurance review for the Internal Board Audit Committee on a quarter- Audit. This is a best practice initiative ly basis. where the Internal Audit function is o The Department conducted quality reviewed by an independent person. assurance reviews on eight fully completed audits, thus exceeding the planned seven.

The Department conducted quality assurance reviews on eight fully completed audits, thus exceeding the planned seven.

CBE Integrated Annual Report 2018/19 64 PERFORMANCE

Strategy and Communication

The Strategy and Communication Department is responsible for the CBE strategy and all Bank projects. The Department ensures a positive public image (brand) and healthy relationships with all stakeholders, both internal and external.

STRATEGY AND COMMUNICATIONS PERFORMANCE

KEY PERFORMANCE INDICATORS STRATEGIC OBJECTIVES AND CRITICAL KEY PERFORMANCE INDICATORS 2018/19 Target SUCCESS FACTORS 2018/19 Actual

Level 3 fully achieved, meaning that the Bank’s strategy maturity is structured and proactive in the relation to the 8 elements i.e. Achieving at least level three (3) Strategy planning, execution and leadership; culture and values; 1. of Strategic Management evaluation strategic thinking and planning; Maturity Model. alignment; performance management; performance measurement; process improvement and business sustainability.

Full compliance with PMBOK

project management guidelines 100 per cent compliance with achieved in the management of PMBOK Project Management Projects management 2. the 4 types i.e. capital, Guidelines. compliance, strategic and

operational projects.

Full compliance with the framework achieved, using the 100 per cent compliance with adopted stakeholder salience, Stakeholder Management Stakeholder management which simply refers to the degree Framework. 3. to which the Bank may give priority to competing stakeholder interests.

Less than 20 per cent negative Brand Communication Through various awareness and publicity, through awareness push strategies, negative publicity push strategies. 4. kept at 13 per cent for the year under review.

CURREN YEAR PERFORMANCE FUTURE FOCUS AREAS AND OUTLOOK o Full compliance with quarterly monitoring guidelines for CBE strate- o Continuous execution and monitoring gy. of CBE strategy. o Successful rst annual review of the o Second annual review of CBE strategy. 2018/2021 CBE strategy. o Completion and roll-out of process o Full compliance with PMBOK project re-engineering project. management guidelines in the o Completion and roll-out of meaning- coordination of capital, compliance, ful stakeholder engagement project. strategic and operational projects. o Management of negative publicity, kept below the 20 per cent threshold.

65 CBE Integrated Annual Report 2018/19 GOVERNANCE

> Our Board > Board Committees

OVERVIEW Clearly mandated Board Committees each have a specific written Charter The Board maintains full and effective approved by the Board and adopted by control over the Bank, rendering it that committee. All committee chair- accountable and responsible for the persons are required to prepare an Bank’s performance and compliance. executive report on the proceedings The Board reviews the strategic priori- of their meetings and present same at ties of the Bank, determines invest- the Board meetings. The Board retains ment policies and delegates to accountability and is satisfied that it management the detailed planning has fulfilled its responsibilities in and implementation of the objectives accordance with the Board Charter and policies in accordance with during the year. acceptable risk parameters. The Board monitors compliance with In the year under review, the Board policies and achievements against set met six times with all meetings sched- objectives by holding management uled within the statutory requirement accountable for its activities through of at least one meeting in two months. performance reporting and budget The Governor, Deputy Governor and updates. Board Secretary attend Board meetings in their capacity as Executive The Central Bank of Swaziland Order Directors. The Assistant Governor, 6/1974 (CBS Order) and Board Charter General Manager (GM) Economic codifies the composition of the Board, Policy and Research Statistics, GM appointment, responsibilities and Financial Regulation, GM Operations, processes, and sets out the fiduciary GM Finance, Head Strategy & Commu- duties of the Directors of the Bank. It nications, as well as GM Human provides the Board with a mandate to Resource and Administration attended exercise leadership, determines the Board meetings, enabling the Board to Bank’s vision, mission, strategy and tackle specific issues and develop- monitors operational performance. ments in greater detail.

CBE Integrated Annual Report 2018/19 66 OUR BOARD

Executive Board Members

Mr. Majozi V. Sithole Mr. Mhlabuhlangene P. Dlamini Ms. Refiloe M. Mamogobo Governor Deputy Governor Board Secretary

Non-Executive Board Members

His Royal Highness Prince Simelane Mr. Bheki Bhembe Mrs. Sonile Dlamini Dlamini

Dr. Khanyisile Dlamini Dr. Sikhomba Gumbi Prof. Mike Matsebula Mr. Daniel Shabangu

67 CBE Integrated Annual Report 2018/19 GOVERNANCE

INDIVIDUAL DIRECTORS’ ATTENDANCE AT THE BOARD AND BOARD SUB-COMMITTEE MEETINGS

Capital Board Board Risk Date appointed/ Audit Projects & Remuneration Name (6 and IT re-appointed* Committee Investment Committee Meetings) Committee Committee

Mr. M.V. 1st November Sithole 6/6 - 3/4 2/2 3/5 2013 Governor

Mr. M.P. Dlamini 1st November 2/6 5/6 2/4 1/2 2/5 Deputy 2015 Governor

HRH Prince Simelane 1st March 2018 3/6 - - 1/2 - Dlamini**

Dr. D.K. 1st July 2016* 5/6 6/6 3/4 Dlamini

Dr. S. Gumbi 1st June 2018* 6/6 4/4 2/2 5/5

Prof. M. 1st July 2016 6/6 4/4 2/2 2/5+ Matsebula

Mr. B. Bhembe 1st July 2016 5/6 1/2 3/5

Mrs. A.S. 1st July 2016 6/6 6/6 5/5 Dlamini

Mr. D. 1st July 2016* 6/6 5/6 4/4 Shabangu

**HRH resigned in November 2018 upon appointment into Cabinet. +Prof. Matsebula joined Committee mid-stream.

In the year under review the Board whom shall be a public officer of the of State. finalised the external Board evaluation Ministry responsible for Public The Board is satisfied that it has the exercise with the Institute of Directors Finance. The Governor is the Chairman appropriate knowledge, skills, experi- (SA). of the Board as well as Chief Executive ence, diversity and independence to Officer appointed by the Head of State carry out its mandate. BOARD COMPOSITION for a period of five (5) years and is eligible for re-appointment. The The role of the Chairman and the The Bank is governed following the Governor was accordingly re-appoint- Governor are separate with the clear Unitary Board structure regime whose ed when his term of office lapsed in roles specified in the CBS Order and structure and functions is governed by November 2018. The ultimate govern- Board Charter. The Chairman is respon- the CBS Order 1974. The Board, on this ing authority of the Bank is the Board sible for providing overall leadership basis, is the ultimate and final authori- of Directors appointed by the Minister of the Board and ensuring that it ty of the institution. The Board of for Finance for a period not exceeding performs effectively. The Governor is Directors comprises nine members, three (3) years. HRH Prince Simelane responsible for the execution of the inclusive of two executive members resigned as a member of the Board of strategic direction, which is approved (the Governor and Deputy Governor) as Directors in October 2018 following his by the Board through the delegation of well as seven other directors, one of appointment into Cabinet by the Head authority.

CBE Integrated Annual Report 2018/19 68 GOVERNANCE

Executive Executive

Mr. Majozi V. Sithole Mr. Mhlabuhlangene Governor and Chairman of P. Dlamini the Board of Directors Deputy Governor

Mr. Sithole is the Chairman of the Board of Directors and Mr. Dlamini is the Deputy Governor of the Central Governor of the Central Bank of Eswatini, a position he Bank of Eswatini, a position he has held since has held since November 2013. He was re-appointed when November 2015. his term of office elapsed in November 2018. Prior to this current position, he held the political positions of: Minis- Prior to this current position, he has held the ter for Finance (2001–2013); Minister for Economic following positions: Board Secretary and Head Planning and Development (1998-2001); Elected Member Legal at the Central Bank of Eswatini of Parliament for Mafutseni Inkhundla (1998–2008) and (2008-2015); Legal Officer at the Central Bank of Appointed Member of Parliament (2008–2013). Eswatini (2007–2008); Partner at Magagula and Hlophe Attorneys; Manager Legal Compliance at Prior to engaging in a political career, he was an academi- Standard Bank (Eswatini) Limited; Company cian and held the following positions: Research Assistant Secretary at Stanlib (Eswatini); and Candidate at University of Eswatini (UNESWA) (1981–1983); Research Attorneys at Millin and Currie Attorneys. Fellow at UNESWA (1986–1994); Lecturer in Economics Department (1986 – 1998); and Research Associate in Academically, Mr. Dlamini was a part-time law Women and Law in Southern Africa. lecturer at the University of Eswatini, Distance Education Unit. He holds professional admission Mr. Sithole is a Fulbright Scholar (Iowa State University as an Attorney of the Supreme Court of Eswatini 1996-1997) and holds academic qualifications which and the following academic qualifications: include a B.A. Social Sciences in Economics and Account- ing from the then UNESWA (1981); an M.Sc. Agricultural • A British Chevening Scholar; Economics from the University of Alberta, Canada (1986); • Master of Laws in Banking and Financial and a few post graduate diplomas. He has attended many Regulation, Kings College – University of Leadership Training Programs, Emotional Intelligence London – (Non-degreed); • Master of Laws Mercantile Law, Stellen- Workshops and Strategy Formulation Workshops both bosch University, SA – (Degreed); locally and internationally. He has done a few consultancy • Bachelor of Laws, Rhodes University, SA - projects while working at UNESWA. His area of specialisa- (Degreed); and tion is Transportation Economics, Project Evaluation and • Bachelor of Arts in Law, University of Agricultural Economics. Eswatini – (Degreed, 1994).

Mr. Sithole has an extensive administration experience Currently, he is a Non-Executive Board member including being Head of the Department of Economics at of the Eswatini Revenue Authority, Eswatini Post UNESWA, Chairman and Secretary General of the Associa- and Telecommunications Corporation and Lomati tion of Lecturers and Academic Personnel of UNESWA, Mine (Pty) Ltd. Governor of IMF/WB, Governor of the African Develop- ment Bank and many other positions. He is well published in research journals and referred journals, and possesses numerous unpublished papers and conference papers. He is currently a Board member of the Eswatini Revenue Authority and, the Eswatini Economic Policy and Research Centre.

69 CBE Integrated Annual Report 2018/19 GOVERNANCE

Executive Non-Executive

His Royal Highness (HRH) Ms. Refiloe M. Prince Simelane Mamogobo Dlamini Board Secretary Non-Executive Board Member

Ms. Mamogobo is the Head Legal and Secretary to the HRH Prince Simelane Dlamini currently serves as Minis- Board of Directors of the Central Bank of Eswatini. ter for Housing and Urban Development. He resigned as She holds a Bachelor of Laws Degree (LLB) (2000) and a member of the Board in November 2018 after he was a Bachelor of Arts Degree (B.A. Law) (1998), appointed into Cabinet by the Head of State. UNESWA. Ms. Mamogobo is currently pursuing a Chartered Banker Master in Business Administration Prior to his current position, HRH Prince Simelane programme with Bangor University, United Kingdom. Dlamini was employed by the Eswatini Umbutfo Defence Force as Major General. He also served as the She was admitted and enrolled as an attorney of the Chairman of the Land Control Speculation Board that is High Court of Eswatini in October 2001; admitted in charge of issuing exemption certificates to foreign and enrolled as a Conveyancer June 2006; and persons that want to transfer private land in the coun- further admitted and enrolled as a Notary Public in try upon proof that the land has been registered with March 2011. the Board.

She has served in several boards and including being HRH Prince Simelane holds a Bachelor of Science (Polit- President of the Malkerns Town Board Evaluation ical Science), Indiana State University, USA; and a Court, Matsapha Town Board Evaluation Court and National Development Strategy Diploma, Fu Hsing Kang Ngwenya Town Board Evaluation Court. She has also College, Taiwan. HRH Prince Simelane also served on served as a board member of the Eswatini Railways, the Board of Tibiyo Taka Ngwane and continues to serve Royal Eswatini National Airways Corporation and the as Umbhekeli weMakhosi (Kutenkholo). Lihle Lemaswati - Prince Lindani Foundation.

CBE Integrated Annual Report 2018/19 70 GOVERNANCE

Non-Executive Non-Executive

Mrs. A. Sonile Dlamini Mr. Bheki S. Bhembe Non-Executive Ex-Officio Member, Board Member Principal Secretary Ministry for Finance Non-Executive Board member

Mr. Bhembe has been the Principal Secretary in the Mrs. Dlamini is a retired Chartered Global Manage- Ministry for Finance since 2014. Prior to his appointment Accountant subscribing to the Chartered ment as the Principal Secretary, he held the position Institute of Management Accountants, UK. She served of Budget Director within the Ministry of Finance Tibiyo Taka Ngwane for 30 years holding various (2009-2014). Mr. Bhembe is an economist by profes- positions of Project Accountant, Manager Finance and sion with extensive experience in the public sector finally, retiring as Manager Investments in 2016. She having served over seven years as a planning officer has previously held positions of accountant at Council and economist in various Departments of the Minis- of Eswatini Churches, The Swazi Observer group of try of Economic Planning and Development. He has newspapers and Dalcrue Agricultural Holdings. also worked as an economist and statistician for the Central Bank of Eswatini and the Eswatini Railways, She has served previously as board member of Tibiyo respectively. Leisure Resorts (t/a Royal Villas), Tibiyo Properties Pty Ltd and Chairperson of the Tibiyo Pension and He holds a Master of Arts Degree in Development Provident Funds. She also currently sits on the follow- Economics from Williams College, Massachusetts, ing boards: USA (2005) and a Bachelor of Arts’ Degree, UNESWA (1997). Mr Bhembe served as an Alternate Executive • Dalcrue Agricultural Holdings where she is Director in the African Development Bank (AfDB) Chairperson of the Audit Committee and representing Lesotho, Eswatini and SA in the Board Remuneration Committee; and (2015-2018). He also has served in various boards • Structo (Pty) Ltd. within the country such as the Eswatini Bank, Eswatini Revenue Authority, National Emergency She holds a Bachelor’s Degree in Accounting obtained Response Council on HIV/AIDS, UNESWA and Eswatini from Cuttington University (Summa cum laude), Environment Authority. Liberia as well as an MBA in Corporate Finance (Magna cum laude) from Adelphi University, New York, USA.

She is a proud recipient of His Majesty’s 45th Anniver- sary Medal for Good National Service bestowed at the Lozitha Royal Residence in 2014 by His Majesty King Mswati III.

71 CBE Integrated Annual Report 2018/19 GOVERNANCE

Non-Executive Non-Executive

Dr. Khanyisile Dr. Sikhomba C. Gumbi D. Dlamini Non-Executive Non-Executive Board Member Board Member

Dr. Khanyisile Dlamini is the Senior Executive Manag- Dr. Gumbi is the Chief Executive of the Regional Excel- er – Investment Promotion at the Eswatini Invest- lence and Development Initiative, a leading management ment Promotion Authority (EIPA), a public enterprise consulting services company based in Eswatini but with a which is a gateway for investors to Eswatini as well regional footprint. He specialises in Leadership, Strategy as a support centre for export companies operating and Governance. He is a Certified Project Manager and in Eswatini. Accredited Corporate Governance Facilitator. He has served as Project Director for long term assignments for Dr. Dlamini is passionate about nurturing small the AfDB, Common Market of East and South Africa (COME- businesses and entrepreneurs to reach their full SA) as well as US African Development Foundation. In potential. She is the founder and director of TOWAK addition to several Diploma certificates mainly in Consultancy, a financial and business management management and human resources, he holds a Bachelor of consulting firm that has footprints in Eswatini and Science in Agriculture Education, a Master of Science, South Africa. She specialises in designing funding UNESWA and a Doctor of Philosophy in Education Manage- models, conducting financial due diligence, finan- ment, Walden University, Minnesota, USA. He has studied cial wellness, training on managing finance, business Quality Management programmes at the University Sians, management and mentorship, as well as conducting Malaysia; the World Bank Institute, University of Illinois, commissioned market surveys. She mainly works Urbana-Champaign, USA and the Asia Institute of Technol- with Government Departments, private companies, ogy in Bangkok, Thailand. He has also done short term non-Governmental organisations and, micro small training in Finance and Strategy at Wits Business School and medium enterprises. Previously, she was a and the Gordon Institute of Business Studies, SA. lecturer at UNESWA and University of Derby, UK and has been a visiting lecturer at California State Dr. Gumbi’s previous Board appointments include Eswatini Polytechnic University, Pomona, USA. Post and Telecommunications Corporation, Conciliation Mediation and Arbitration Commission, UNESWA, Eswatini Dr. Dlamini holds a Bachelor of Commerce Degree, Standards Authority, the Scholarship Selection Board as UNESWA (1990); Master of Business Administration, well as Boards of Non-Governmental Organisations: De Montfort University, Leicester, UK (1994); Gradu- Schools Health and Population Education; Citizen Empow- ate Diploma in Marketing from The Chartered erment Centre; and Gone Rural BoMake. He is a Rotarian Institute of Marketing, London, UK (1995); and a and past President of the Mbabane-Mbuluzi Rotary Club Degree of Doctor of Philosophy in SME and Economic where he is a Paul Harris Fellow. He was honoured for Development from Aston University, Birmingham, UK exceptional national service by His Majesty King Mswati III (2006). and bestowed with a 45th Anniversary Award and is also a member of the Royal Commission. Dr. Dlamini’s previous Board appointments include: Central Transport Organisation, Industrial and Vocational Training and being a trustee of the Eswatini Royal Insurance Corporation Preservation Provident Fund and Eswatini Royal Insurance Corpo- ration Pension Fund. Dr. Dlamini currently sits in several Boards including: Central Bank of Eswatini; Greystone Partners Limited; and Lojaf (Pty) Limited.

CBE Integrated Annual Report 2018/19 72 GOVERNANCE

Non-Executive Non-Executive

Prof. Mike Mr. Daniel Shabangu S. Matsebula Non-Executive Board Member Non-Executive Board Member

Prof. Matsebula is an independent economist, having Mr. Shabangu began his career as an Investment Analyst retired from the position of Chief Executive Officer with Baker Williams and Associates in Cape Town, SA at the Eswatini Sugar Association (ESA) in 2016 (1994-1996), where he acquired all round skills in corpo- where he had served for 19 years. Previously, he was rate finance advisory, dealing primarily with listed compa- an Economics Professor at UNISWA. He completed his nies. He has been exposed to the practical aspects of Bachelor's Degree at the then University of Botswa- public finance, handling State Owned Enterprises at the na, Lesotho and Swaziland (now National University Public Enterprise Unit, Ministry for Finance (1997-2002). of Lesotho) (1972); completed his Master's Degree in He was Head of Loans and Equities at Eswatini Industrial Economics at the University of Manitoba, (Manitoba, Development Corporation (2002-2016) with responsibili- Canada) (1975); and completed his Doctorate ties in origination, structuring and execution of project Degree in Economics at Queen's University, (Ontario, finance transactions. Canada) (1981). Mr. Shabangu holds a Bachelor of Science (BSc.) from Prof. Matsebula has published extensively on various UNESWA (1991); Bachelor of Business Science from the issues related to the Eswatini economy, regional University of Cape Town, SA (1996); and an MBA from economic integration as well as international Maastricht School of Management, Netherlands (2001). He economic relations. He has made several presenta- won a Cash Prize in economics at UCT and his MBA was tions at national and international conferences. He awarded with distinction. He is an Alumni of the European subscribes to the King Code of Corporate Govern- Institute of Business Administration Business School, Paris, ance and has been involved with its application in a France. He has served in a number of Boards of companies few enterprises. Over the period 1982-1998, he was locally, including Swazi Fruit Canners (2001-2002), Protea a Non-Executive Director for various terms in boards Hotel (2001–2002), Eswatini Water Services Corporation of 20 organisations. He dropped all the director- (1998 – 2000), Eswatini Property Investments Limited ships when he joined ESA, save for three. (2014 – 2016), Swazi Plaza Properties (Pty) Ltd (2014-2016), to name but a few. He was a member of the Monetary Policy Consulta- tive Committee (2011-2018). Currently, he is also a Mr. Shabangu has advised broadly on greenfield transac- Non-Executive Director of Allan Gray Eswatini tions across various industries including telecommunica- (2010–present); Allan Gray Orbis Foundation (2010 – tions, pulp and paper, insurance and water reticulation present); National Agricultural Marketing Board (Eswatini), oil & gas (Mozambique), mining (Zimbabwe) (2017–present); and Eswatini Stock Exchange Board and Oil Refining (Namibia). He is presently a Director of (Feb 2019-present). Prof. Matsebula has been deco- Saluelo Capital (2016-present), a specialist project rated twice with national honours in recognition of finance advisory company focusing on the origination, his meritorious efforts. These are the Royal Order of preparation and capital raising for impactful greenfield Sobhuza II, Chief Counsellor (awarded in 1992) and projects regionally. the Order of Eswatini, Rank of Commander (awarded in September 2008).

73 CBE Integrated Annual Report 2018/19 GOVERNANCE

BOARD COMMITTEES

The Board is assisted by four committees, namely: the Audit Committee; Remuneration Committee; Capital Projects Committee; and the Risk and IT Committee, whose functions are set out in specific Committee Charters. The structure and composition of the Committees is in line with international corporate governance best practice in central banks. The ratio of less Executive Directors to Non-Executive Directors of the Board is generally considered a balancing factor to the Board Chairmanship by the Governor who is also the Chief Executive Officer.

In addition to the aforementioned control, chairing of all Board Committees is limited to independent Non-Executive Directors, and the Governor being an ordinary member in all committees except for the Audit Committee. These committees had several meetings during the 2018/19 financial year.

Audit committee Remuneration committee

Dr. Khanyisile Dlamini Dr. Sikhomba Gumbi

Mrs. Sonile Dlamini Mr. Daniel Shabangu Mrs. Prof. Mr. Sonile Dlamini Mike Matsebula* Bheki Bhembe

The Committee met five times during the year. The *Prof. Mike Matsebula was seconded to the Deputy Governor, Assistant Governor, the Head Committee in the place of Mr. Bheki Bhembe who Internal Audit and the Head Internal Affairs and could not be available for meetings as he was Security attend the meetings with other members engaged with other official duties upon appoint- of management as required. ment of Cabinet in October 2018 as he is the substantive Principal Secretary Ministry for The role of the Audit Committee is to: Finance.

• review significant accounting and reporting The committee met six times during the year. The issues; Governor, Deputy Governor, Assistant Governor and • review results of audits with management and the GM HR and Administration attend the meetings the external auditors; along with other members of management as • review other sections of the Integrated Annual required. Report and related regulatory filings before release, while evaluating the accuracy and The role of the Remuneration Committee is to: completeness of the information; • oversee the setting and administering of remu- • review interim financial reports with manage- neration at all levels within the Bank; ment and external auditors, and consider • oversee the formation of a Remuneration Policy whether they are complete and consistent with that will promote the achievement of strategic the information known to committee members; objectives and encourage individual perfor- • consider the effectiveness of the Bank’s internal mance; control systems, including information technol- • review the outcomes of the implementation of ogy security and control; the Remuneration Policy to ascertain whether • understand the scope of internal and external the set objectives are being achieved; auditors’ review of internal control over finan- • ensure that the mix of fixed and variable pay in cial reporting, and obtain reports on significant cash, benefits and other elements meets the findings and recommendations, with manage- Bank’s needs and strategic objectives. ment’s responses.

CBE Integrated Annual Report 2018/19 74 GOVERNANCE

Capital Projects and Investment Committee Risk and IT Committee

Prof. Mike Matsebula Mr. Daniel Shabangu

HRH Prince Dr. Mr. Dr. Dr. Prof. Simelane Dlamini* Sikhomba Gumbi Bheki Bhembe Khanyisile Dlamini Sikhomba Gumbi Mike Matsebula

*Dr. Khanysile Dlamini replaced HRH Prince Simel- The committee met four times during the year. The ane Dlamini in this committee upon his appoint- Governor, Deputy Governor, Assistant Governor, ment into Cabinet in October 2018. Head Risk, and Head IT attend the meetings with other members of management attend as required. The committee met four times during the year. The Governor, Deputy Governor, Assistant Governor, the The role of the Risk and IT Committee is to GM HR and Administration, Head Strategy and oversee the: Communication, and Head IT attend the meetings • alignment of IT and the business; along with other members of management attend • delivery of value by IT to the business; as required. • management of IT-related risks; • integrated holistic risk management approach The role of the Capital Projects and Investment to achieve optimal business decision-making; Committee is to: and • oversee all strategic and capital projects of the • proactive risk management with equal attention Bank; to current risks and emerging risks. • recommend identified strategic projects of the Bank to the Board for approval; oversee reserves management operations of the Bank; • review and recommend to the Board for approval, the Investment Strategy and Strategic Asset Allocation.

Concluding statement

The Board remains accountable for all the matters where it has delegated responsibility to its committees. The Board is satisfied that all the committees fulfilled their responsibilities in line with each specific written Charter during the year.

The Bank assesses the governance framework against best practices annually. This includes the Bank’s Governing Statutes and the principles and recommendations set out in the “King IV Code of Corporate Governance” in so far as they are not repugnant or in conflict with the governing law.

75 CBE Integrated Annual Report 2018/19 OUR EXECUTIVE COMMITTEE

To assist the Governor in discharging his duties, there is an Executive Committee (EXCO) which comprises GMs and Heads of Departments with the requisite skills and competences to run the various Departments of the Bank. EXCO directs the execution of the strategic objectives of the Bank on a day to day basis.

Mr. Majozi V. Sithole Mr. Mhlabuhlangene Dlamini Mr. Mfanfikile Dlamini Governor Deputy Governor Assistant Governor

Dr. Melvin Khomo Ms. Lungile Dlamini Mr. Sikhumbuzo Dlamini Ms. Beverly Gilbert GM Financial Markets GM Operations GM EPRS GM Financial Regulation

Ms. Philile Nxumalo Ms. Bonsiwe Masuku Mr. Sikhumbuzo Fakudze Mr. Sinaye Dlamini GM Finance GM HR & Admin Head Internal Affairs & Security Head of ICT

Mr. Zithulele Gina Ms. Isabel Made Ms. Refiloe Mamogobo Mr. Joel Dlamini Head Strategy and Communication Head Internal Audit Head Legal and Board Secretariat Head of Risk

CBE Integrated Annual Report 2018/19 76 GOVERNANCE

integrity of all employees and their Bank continuously strives to ensure COMPLIANCE AND ETHICS IN commitment to the highest standards that no one is intimidated or victim- ACTION of personal and professional conduct ized for having made such a report. In that underlie the Bank’s ethical giving effect to the Code, the Bank Following the ever-evolving corporate culture. All stakeholders of the Bank continues to provide guidance on governance developments locally and are held against this standard, and matters such as conflicts of interests, internationally, which call for necessary action is taken where stand- disclosures of assets and liabilities by increased regulation, greater transpar- ards have been violated. In addition to the Bank’s Senior Management, receiv- ency, and more rigorous scrutiny of the internal stakeholders of the Bank, ing and giving of gifts and hospitality, large institutions, the ethics and the CBE Code of Ethics also applies to compliance with laws and the dissemi- compliance function becomes integral any other persons representing or nation of confidential information. to the strategic core of organisations acting for the Bank, such as (a) profes- gearing to maintaining public trust. sionals and consultants to the Bank; The Board has ultimate responsibility and (b) contractors and suppliers of the for the compliance and ethical culture Therefore, beyond responding to Bank. All these parties and stakehold- of the Bank. The Board Risk Committee changes in the industry, the Central ers have a duty to uphold the principles and Board Audit Committee continue Bank of Eswatini continues to invest its and values espoused in the Code. The with their oversight roles over the efforts in creating a scalable ethics and emphasis on the scope of application of Bank’s compliance and ethical compliance ecosystem that will help the Code is on those external stake- matters, respectively. These roles and meet its needs today and in the future. holders whose actions or conduct could responsibilities are set out in the terms pose reputational or other risks to the of reference of the committees. All This past year, the Bank continued to CBE. Indeed, there could be conse- Senior Executives continue to declare focus on the value of its corporate quences for violating the code by an their assets and liabilities before the culture. As a result, the Bank has external stakeholder, for example Integrity Commission. Board members identified the need for promoting termination of the relationship where continue to disclose conflicts of inter- corporate culture, not just to avoid such violation is established. est at each meeting. potential enforcement actions, but as a separate goal meant to achieve In the event of unethical conduct The Bank has an Ethics hotline and optimal performance. As a result, the occurring, all Bank’s stakeholders are other mediums of reporting wrongdo- Bank continued to maintain a encouraged to make use of the report- ings. Unethical behaviour is not toler- value-based performance management ing structures set out in the Bank’s ated within the Bank or its business system. Code of Ethics. The intention is to partners and all criminal behaviour is make the code available to our exter- reported to the police. The Bank The Bank continues to enhance its nal stakeholders as well, hence the continually strives to ensure a culture efforts of upholding the highest stand- process of socialising the Code extends of ethical behaviour and good govern- ards of personal and professional to our external stakeholders, particu- ance to create an environment that conduct among the members of the larly those who have dealings with the ensures the realisation of its values. Board, employees and other stakehold- Bank. As much as we appreciate that ers. To this end, the Bank continues to this process of socialising the Code The Bank’s ethics reporting lines are implement and provide guidance on externally has not taken place yet, we as follows: the Code of Ethics to guide its business have decided to include details of the practices and processes. reporting lines so that members of the Ethics toll free: 800 6060 public could utilise them in the event Email: [email protected] The Bank, through all levels, under- they need to report any unethical P.O. Box 3221 Mbabane stands that ethical conduct requires conduct. Fax: (+268) 2404 7688 more than compliance with laws, rules and regulations. It extends to personal All reports are taken seriously and the

RESPONSIBLE CORPORATE CITIZENSHIP

The Bank fully appreciates that it has the responsibility to behave in a way that gives effect to not only its strategic objectives and direction, but considers the well-being of employees, vendors, the environment, community and society as a whole. Therefore, the Board took a decision to adopt a Code of Corporate Governance founded on best practices applicable to central banks in an effort to guide its decision-making process and ensure business responsibility in all its endeavours.

The Board has oversight over the Bank’s social matters, essentially governed by roles and responsibilities set out in the terms of reference of the committee. The key areas of focus are socio-economic development of the financial sector, corporate citizenship within the community, the natural environment and, relationships with Government and employees. Applicable laws, internal policies and best practices guide the Bank on how to manage its social outcomes.

77 CBE Integrated Annual Report 2018/19 ASSURANCE

ASSURANCE

INTERNAL AUDIT ments as requested by management.

Overview Sufficient audit coverage was thus achieved from the completed audits, The Bank manages significant risk that and the Bank’s internal controls and affects it and the business environment governance processes were in place for in which it operates. The Bank main- the mitigation of major risks and the tains internal controls and systems achievement of the strategy of the designed for providing reasonable Bank. assurance that it effectively and continually discharges its mandate and Achievements safeguards against material financial misstatement or loss. Client Satisfaction Surveys, which followed completed audit engage- The internal audit function evaluates ments, are used by the business units the internal control system with a view to rate the services received from the to improve the operations and report internal audit function. The average its findings and recommendations to rating for the year was a 3.6 against a management and the Audit Commit- target of 3, where a rating of 1 is tee. The purpose, authority and extremely dissatisfied, 5 is extremely responsibility of the internal audit satisfied and 3 is satisfied. function is formally defined in the Internal Audit Charter. The annual The internal quality assurance team audit plan is based on an assessment of completed seven quality assurance risk areas identified by internal audit in assessments for the completed audits liaison with management, as well as and the average rating for the seven areas highlighted by the Audit Commit- audits was 76 per cent against a target tee. Other work undertaken by the of 65 per cent. function includes consulting engagements and special requests. An Audit Committee Evaluation of the internal audit function was conducted The function has fully implemented the this financial year. Themes evaluated recommendation of the last external included communication of the quality assurance review and another function through the quarterly reports external assessment has been planned submitted to the committee, perfor- and budgeted for in the next financial mance of the function and overall year. value add to the Bank.

Audit coverage Staff Development

During the year 2018/19, Internal Audit The Department trained its staff in conducted 13 audits across the Bank as accordance with training plans aimed per the approved audit plan. Topics at closing gaps identified during covered included audits of Corporate performance and further enhance the Governance, Procurement and value added by Internal Audit. Some of Contracts management, Foreign the training attended by the auditors Payments and Investments, SAP Post were Forensic Auditing, Building Core Implementation, Payroll management, Leadership, Supervisory and Team IT General Controls, Banking and Competencies, and Risk Based Auditor Currency, and Fixed Assets manage- Certification. Two auditors attended ment. As part of partnering with and passed the COBIT 5 Assessor Certif- management in adding value, Internal icate Training and Examination. Audit completed two special assign-

CBE Integrated Annual Report 2018/19 78 ASSURANCE

Future Outlook

The Bank has a budget in place to pursue the combined assurance model in the next financial year. This will assist the internal assurance providers to operate with efficiency and avoid duplication of efforts.

STATEMENT OF COMBINED ASSURANCE

Our aim is to implement a combined assurance model, which will consolidate the Bank’s assurance activities into one seamless process. This approach will increase confidence in overall assurance coverage of the significant risks for the Board and Executive Management.

The process to implement the combined assurance model started in 2018. This process involves four Departments within the Bank; Internal Audit, Risk Management, Internal Affairs and the Legal Department. In implementing the model, a meeting with the assurance providers was conducted to set the objectives and anticipated benefits of the model, which resulted in a buy-in and understanding of the model. The Head of Internal Audit was appointed as the coordinator of the Bank’s assurance. We have also completed draft assurance and performance matrices for management’s appreciation.

The project’s success depends greatly on strong support and participation from the assurance providers and management. Hence, we are in a process of identifying a service provider who will assist in the education of management on the combined assurance model. We will also be working with the service provider to formulate a framework that will guide the assurance providers on how to implement the model and formulate a combined assurance plan.

The end result from the implementation of the model, which we believe will be achieved in the 2019/20 financial year, should be improved and streamlined reporting and issues tracking, comprehensive view of risks across the Bank, and reduction in duplication of work amongst the assurance providers.

INTEGRATED REPORTING ASSURANCE

As part of the contemplated combined assurance model, an integrated reporting assurance matrix has been developed to determine the maturity of the extent of assurance over underlying reporting processes and performance streams. The initial assessment of the maturity has been set out and will be used to further develop the holistic combined assurance model.

79 CBE Integrated Annual Report 2018/19 HUMAN RESOURCES

HUMAN RESOURCES

HR REPORT People dashboard

The Human Resources office concen- trates on human capital management, mainly promoting organisational development and talent management Total staff - 301 Female - 133 (44%) through an effective performance Male - 168 (56%) management culture, whilst ensuring Staff whose tenure is over 20 years - 54 (18%) Staff whose tenure is over 10 years but below 20 years - 76 (25%) efficient asset management within a Staff whose tenure is below 10 years - 171 (57%) safe and conducive environment. Staff Staff turnover - April 2018 to March 2019 - 1 (0.3%)

The human resources report highlights how we attract and develop our key resources. It also covers information on Growth opportunities Secondment and placements employment relations, engagement and Projects, rotations and exposures wellness. Creating an enabling environ- Reward and recognition ment continues to be a priority in Needs & Expectations support of the high performance culture, which the Bank embraces even this year. Motivating and energizing staff Engaging staff Training and development Providing tools to enhance performance Co-creating a conduciveworkplace culture Collabortaing to create a conducive workplace environment Creating Value

The Bank not only assists in addressing youth employment, but also addresses the skills gap through the graduate program. The Bank engaged seven graduate trainees to be capacitated in the Values That Guide How We Create Value following Departments: Operations; Relevant and Performance Driven Open Communication Respect Finance/Fintech; and Financial Regula- Accountability Integrity tion. The program runs for a duration of 24 months. The programme is ongoing with the current groups to complete their training in 2020. In the same period, the Bank engaged 33 interns from our local tertiary institutions for a period of 2.5 increasing prevalence of non-com- The partnership with the Eswatini months. municable diseases, the Bank’s Business Coalition on Health and wellness program continued to AIDS (SWABCHA) has continued to EMPLOYEE WELLNESS strengthen health education, physi- afford the Bank eligibility to a cal activity and provided onsite number of services. In the year Activities wellness clinics. Through the Sports under review, the Bank conducted and Culture Club, the Bank has a holistic health risk assessment. Employee welfare remains a top priority enhanced staff engagement by for the Bank such that its investment in financially supporting staff members the wellness program has grown over the who engage in various sporting activ- years. In an effort to change the face of ities in and outside the country. workplace health challenges due to

CBE Integrated Annual Report 2018/19 80 HUMAN RESOURCES

SERVICES PROVIDED BY SWABCHA TO CBE IN 2018/19 Number of Sports and Recreation Services Target sessions held Staff awareness 2 6 The Bank is a participating member of the four states Inter-Central Bank games that Glucose and Cholesterol screening 6 6 are hosted in all the member central banks. Hepatitis screening sessions 6 6 The central banks that have been taking HIV counselling and testing 6 6 part in these games over the past few years Training of Peer Educators 1 1 are the Central Bank of Lesotho, the Bank of Botswana, the South African Reserve Bank as Health Risk Assessment 1 1 well as the Central Bank of Eswatini.

EVENTS SUPPORTED BY SWABCHA IN 2018/19 In 2018, the Central Bank of Eswatini’s hosted the games as required. The Reserve Number of Services Target Bank of Zimbabwe joined the other three sessions held countries for the games in Eswatini. The CBE Staff motivational sessions 4 4 Sports Committee organised and rendered a World AIDS Day Commemoration 1 1 high level event for its guests. The well-organised Easter Games were held in high regard by the other banks. EVENTS HOSTED BY SWABCHA TO WHICH THE BANK WAS INVITED Health Risk Assessment Number of CBE Target Services attendees (minimum) After many years of implementation of interventions as stated above, the Bank Wellness Aerobathon 12 6 found it important to conduct a health risk Peer Educator’s Days 7 1 assessment to establish a new baseline of Men’s March Against GBV 0 5 key health risks on which interventions Best of the Best Awards 9 16 should be based going forward in the next three to five years. The major purpose of this exercise is to:

i) identify gaps in the knowledge on health and wellness; ii) identify any attitudes and perceptions that have a negative impact on the employees’ health and reception of the wellness program; and iii) identify behaviours that increase the employees’ risks of contracting health problems.

The health risk assessment was conducted by SWABCHA with assistance of a lead consultant (Monitoring and Evaluation specialist) from National Emergency Response Council on HIV and AIDS (NERCHA). The way forward shall be to develop a new 3-5 year wellness strategy addressing the identified key risks. The impact of the strategy shall be evaluated on yearly basis and if necessary, it will be redesigned to increase effectiveness.

81 CBE Integrated Annual Report 2018/19 HUMAN RESOURCES

EMPLOYEE RELATIONS Recognition programmes

Disciplinary process The Bank recognises and appreciates its staff who have attained academic quali- In the year under review, five cases of fications in pursuit of arming themselves employee misconduct were reported with relevant knowledge and keep and resulted in disciplinary enquiries. Of abreast with the latest best practices. those, only two resulted in dismissals. On that regard, 28 employees were The most common form of misconduct is recognised in the year under review for related to dishonesty, misuse of compa- long service. The Bank also takes pride ny property and insubordination. in awarding its employees ‘The Gover- nor’s Award’, which is a prestigious Cost of living negotiations award recognising an employee who has not only performed exceeding expecta- The Bank embarked on a process to tions, but also lived the Bank’s values. negotiate jointly with the two staff The Governor’s Award has three compo- formations’ representatives. The nents: The Governor’s Award; Excellent process led to a seamless negotiation of Performer Award; and Emerging Excel- the 2019/2020 Cost of Living Award. The lent Performer. Thus, three staff mem- Bank’s partners supported the proposal bers were accordingly awarded in these resulting in a record conclusion of nego- categories. tiations; within one session. Collective Agreement signed between the Bank and Corporate Social Investment the partners is currently under review. The Bank, through its CSI programme, CHANGE MANAGEMENT pursues excellence in community involvement and upholding generally Staff engagement through HR road accepted principles underlying good shows corporate social responsibility. Further- more, the Bank is committed to a CSI In ensuring actuality of the change programme that is an integral compo- management concept, the HR Depart- nent of a broader economic, social and ment embarked on road shows across environmentally-friendly strategy. The the Bank’s Departments to discuss CSI programme has three priority areas matters of interest to staff. Amongst namely: community health programmes; other pertinent issues, this function educational initiatives (covering primary entailed the provision of information on and high schools, tertiary institutions); the pay equity processes to ensure and national research institutions. common understanding and seamless flow of information across the Bank.

CBE Integrated Annual Report 2018/19 82 HUMAN RESOURCES

KEY PROJECTS SUPPORTED DURING 2018/19 FINANCIAL YEAR

Institution Amount spent Impact

Priority Area 1: Education and E1,204 456.77 Research

1.UNESWA 1. E1,027,459.77 1. Faster computer performance and internet connection for approximately 200 students that use the lab daily.

2.Nyatsini Primary 2. E75,000.00 2. At least 323 students attending the school benefitted from the rehabilitation of classrooms, including the donation of new desks and chairs.

3. At least 360 students attending the school benefitted 3.Mafutseni Roman Catholic 3. E52,000.00 from 30 desks and chairs donated to the school computer lab.

4.Mbalenhle Christian Academy 4. E49,997.00 4. Currently, 1 000 students attend the school.

5. The school was able to supplement 220 learners’ 5.St Manettus Primary School 5. E20,000.00 diet from the produce grown in the garden and chicken broilers.

Priority Area 2: Seminars and E45,000.00 Conferences 1.Imbita Women’s Trust Stokvel E 45,000.00 Indaba benefitted 100 community based members of Business Conference stokvels and exposed members to opportunities and legal issues regarding the business. It also presented a discussion with the financial sector with the aim of facilitating the creation of a conducive environment for formal and legal savings products.

Priority Area 3: Community Health E466,720.00 1.Hope House 1.E280 860.00 1. 100 patients benefitted from using the physiotherapy room and equipment donated.

2.Eswatini Breast and Cervical 2.E35,860.00 2. At least 3 000 students under 10 SBCCN Cancer Network schools benefitted from an awareness programme on prevention and treatment of breast and cervical cancer.

3. At least 30 constituencies benefitted 3.Eswatini Non Communicable 3.E150,000.00 from an awareness programme on Non Diseases Alliance Communicable Diseases for example Cancer, diabetes, HBP, in less privileged communities.

Total contribution E1,716, 176.77

83 CBE Integrated Annual Report 2018/19 HUMAN RESOURCES

REMUNERATION COMPENSATION

Remuneration philosophy Base salary

The Bank’s remuneration philosophy seeks to create an enabling environment to BENEFITS attract and retain employees who believe in and live by the Bank’s culture and values. Medical aid, housing, car and leave allowances, risk and income protection programmes. We endeavour to encourage and foster delivery of results by creating a workplace environment that motivates high perfor- WORK-LIFE mance so that all employees can positively Employee assistance programme, paid time off contribute to the strategy, vision, goals and and financial support programmes. values of the Bank. The Bank is committed to the concept of total reward, which recog- PERFORMANCE AND RECOGNITION nises that reward is multifaceted and not limited to direct financial components. The Financial incentives for outstanding performance. remuneration mix comprises fixed remuneration in the form of a total guaranteed package (TGP) and variable remuneration DEVELOPMENT AND CAREER OPPORTUNITIES depicted by a short-term incentive plan (STIP). Learning and development opportunities.

Future outlook on remuneration

In the Bank’s quest to align with developments in the industry, future plans entail reviewing and streamlining the Bank’s remuneration philosophy. It is an established fact that the approach to remuneration must not remain static in order to ensure future sustainability.

The Bank is mindful of rapid changes in the financial industry and therefore seeks to position itself as a leader in aligning its value proposition and rewards with the evolving needs in the future financial environment where different skill sets and competencies will be required.

This process will therefore translate into a review of the Bank’s remuneration philosophy in order to support other talent strategy related programmes. This will ensure that the Bank continues to place itself ahead of its peers as an employer of choice that not only offers competitive pay and benefits, but a holistic growth and development experience in support of the high performance culture.

CBE Integrated Annual Report 2018/19 84 ABRIDGED FINANCIAL STATEMENTS

Detailed financials can be found at www.centralbank.org.sz

85 CBE Integrated Annual Report 2018/19 ABRIDGED FINANCIAL STATEMENTS

STATEMENT OF COMPREHENSIVE INCOME for the year ended 31 March 2019

2019 2018 E’000 E’000

Interest income Interest and discount earned 426 813 442 020 Interest expense ______(154 896) ______(164 354)

Net interest income ______271 917 ______277 666

Non-interest income Other income ______311 587 ______289 328

Operating expenses Property occupation expenses (11 958) (11 262) Salaries and employee benefits (198 450) (184 320) Depreciation of property, plant and equipment (33 594) (34 127) Currency expenses (20 322) (20 105) Other expenses (126 972) (119 389) Credit impairment losses – Financial Assets ______(2 090) ______-

Total operating expenses ______(393 386) ______(369 203)

Profit for the year ______190 118 ______197 791

Profit attributable to: Equity holders of the equity ______190 118 ______197 791

Profit for the year 190 118 197 791 Revaluation losses on foreign exchange activities ______433 992 ______(170 429)

Total comprehensive income for the year 624 110 27 362

Total comprehensive income attributable to: Equity holders of the entity ______624 110 ______27 362

CBE Integrated Annual Report 2018/19 86 STATEMENT OF FINANCIAL POSITION for the year ended 31 March 2019

2019 2018 E’000 E’000 Assets Property, plant and equipment 302 760 317 613 Intangible assets 63 094 58 766 External investments 3 260 061 4 542 595 Claims on private sector 2 064 8 138 IMF Quota subscription account 1 573 146 1 356 786 Holdings of Special Drawing Rights 977 981 842 536 Loans and advances 28 176 24 598 Amounts due from Government of Eswatini 3 007 667 1 298 566 Other assets 119 099 585 775 Currency inventory - notes and coins 84 788 97 128 Cash and cash equivalents ______959 932 ______995 851

Total assets 10______378 768 10______128 352

Equity Capital and reserves Capital contribution 185 768 185 768 Revaluation reserve 433 876 108 353 Buildings revaluation reserve 127 238 130 235 Building fund reserve 50 000 50 000 Contingency reserve 73 817 73 817 General reserve 602 013 553 735 SDR/IMF underwriting reserve 51 795 51 795 ______

Total equity 1 524 507 1 153 703 ______

Liabilities Currency in circulation 1 072 654 1 033 103 Allocation of Special Drawing Rights 967 629 834 547 Domestic deposits 3 759 919 4 039 174 Foreign deposits and liabilities 1 114 424 1 067 263 Other liabilities 221 955 557 654 Provisions 22 591 22 820 Amounts payable to the Consolidated Fund 253 305 176 568 IMF Securities Account 1 441 784 1 243 520 ______

Total liabilities 8 854 261 8 974 649 ______

Total equity and liabilities 10______378 768 10______128 352

87 CBE Integrated Annual Report 2018/19 ABRIDGED FINANCIAL STATEMENTS

STATEMENT OF CASH FLOWS for the year ended 31 March 2019

2019 2018 E’000 E’000 Cash flows from operating activities Operating profit 624 111 27 362 Adjusted for: Depreciation and amortization 33 594 34 033 Loss on disposal of property plant and equipment - Adjusted for unrealized gains on IMF Accounts: (20 459) 5 471 IMF Quota subscription account (216 360) 65 320 Holdings of Special Drawing Rights (135 444) 40 196 IMF securities account 198 264 (59 867) Allocation of Special Drawing Rights ______133 081 ______(40 178)

Net cash inflow from operating activities ______637 246 ______66 866

Increase in external liabilities 47 161 806 977

Decrease in other liabilities and provisions (334 964) 167 346 Increase in claims on private sector and loans and advances 2 496 (4 139) Decrease in other assets 466 676 (500 721) (Increase)/decrease in notes and coins ______12 339 ______(53 860)

Net increase /(decrease) in operating assets and liabilities ______193 708 ______415 603

Net cash inflows from operating activities ______830 954 ______482 469

Cash flows from investing activities Purchase of property, plant and equipment and software equipment (24 033) (51 476) Proceeds from disposal of property, plant and equipment - - Decrease in external investments 1 282 533 197 398 Increase in amounts due from Government (1 709 101) (175 355) Amounts paid to the Government through the consolidated fund ______(176 568) ______(243 681)

Net cash outflows from investing activities ______(627 169) ______(273 114)

Cash flows from financing activities Increase in currency in circulation 39 551 123 350 Decrease in domestic deposits ______(279 255) ______(857 328)

Net cash outflows from financing activities ______(239 704) ______(733 978)

Net movement in cash and cash equivalents (35 919) (524 623) Cash and cash equivalent at the beginning of the year ______995 851 ______1 520 474

Cash and cash equivalent at the end of the year ______959 932 ______995 851

CBE Integrated Annual Report 2018/19 88 ) ------0 7 703 Total E’000 153 624 11 (144 836) (108 470 1 1 524 50 ------0 11 tion 2 997 E’000 (48 279) account 624 (144 836) (433 992) Appropria - ) ------5 353 E’000 Reserve 108 433 992 433 87 (108 470 Revaluation ------235 E’000 0 (2 997) reserve 13 127 238 Buildings Revaluation ------E’000 eserve 73 817 73 817 R Contingency ------erve E’000 51 795 51 795 res SDR/IMF nderwriting ------Fund 0 000 E’000 50 000 5 reserve Building ------4 735 3 E’000 5 48 279 reserve General 5 602 01 ------E’000 Capital 185 768 185 768 d revaluation surplus 2018 he order he SDR/IMF underwriting reserve 31 March 2019 31 March (bis) (3) of the Order the of (3) ransfer to the Consolidated Fund as provide ransfer to the Consolidated Fund terms in of nder ransferred of terms in to Revaluation Reserve o fund the shortfall in Holdings in Special Balance at 31 March at 31 March Balance Net profitfor the year including revaluation of foreign currency activities Revaluation of foreign currency activities t Orderthe 35(1) Section of for yearRevaluationthe surplus Transfer of depreciation on to appropriation account providedas under reserve general to Transfer section 8 (1) of t Increase in contingency reserve in terms of section 41 T u Section 8 T Order the of (4) 35 Section the to Transfer t Rights Drawing at Balance STATEMENT OF CHANGES IN EQUITY STATEMENT for the year ended 31 March 2019

89 CBE Integrated Annual Report 2018/19 ------Total E’000 27 362 302 909 153 703 (27 088) (149 480) 1 1 ------362 tion E’000 1 517 27 (49 828) account 170 429 (149 480) Appropria ------088) E’000 (27 Reserve 305 870 108 353 (170 429) Revaluation ------517) E’000 (1 reserve 131 752 130 235 Buildings Revaluation ------E’000 73 817 73 817 reserve Contingency ------E’000 51 795 51 795 reserve SDR/IMF underwriting ------00 Fund E’0 50 000 50 000 reserve Building ------E’000 reserve General 49 828 503 907 553 735 ------E’000 Capital 185 768 185 768 d urplus to urplus terms of 7 2018 depreciation on revaluation s ransferthe to Consolidated Fund as provide of terms in Fund Consolidated the to ransfer ransfer to the underwriting SDR/IMF reserve to nder STATEMENT OF CHANGES IN EQUITY STATEMENT for the year ended 31 March 2019 ransferred to Revaluation Reserve in terms of of terms in Reserve Revaluation to ransferred und the shortfall in Holdings in Special Drawing Drawing Special in Holdings in shortfall und the Balance at 31 March 201 of revaluation including year the for profit Net foreign currency activities Revaluation of foreign currency activities t Section 35(1) of theOrder the for year surplus Revaluation Transfer of appropriation account under provided as reserve general to Transfer section 8 (1) of the order in reserve contingency in Increase section 41(bis) T u Order 8(3) Section of the T Section 35 ( 4)the ofOrder T f Rights Balance at 31 March

CBE Integrated Annual Report 2018/19 90 ABBREVIATIONS

ABBREVIATIONS

AGOA African Growth and Opportunity Act KYC Know Your Customer AML Anti-Money Laundering LMIS Labour Market Infrastructure ATS Automated Trading System System BCM Business Continuity Management LOD Learning and Organisational BCP Business Continuity Plans Development CBE Central Bank of Eswatini MEPD Ministry of Economic Planning CBS Central Bank of Swaziland Order and Development CFI Centre for Financial Inclusion MoU Memorandum of Understanding CFT Combating the Financing of Terrorism MPCC Monetary Policy Consultative CIEA Composite Indicator for Economic Committee Activity MSMEs Micro, Small and Medium CMA Common Monetary Area Enterprises COMESA Common Market for Eastern and MTN Mobile Telephone Network Southern Africa NBFIs Non-Bank Financial Institutions CPI Consumer Price Index NPS National Payment Systems CSD Central Security Depository NPSS National Payment & Settlement CSI Corporate Social Investment Systems CSO Central Statistics Office PFMI Principles for Financial Markets CSOC Cyber Security Operations Centre Infrastructure DRP Disaster Recovery Procedures PPI Producer Price Index ECGS Export Credit Guarantee Scheme QNA Quarterly National Accounts EOP Exposure, Opportunities and Processes RTGS Real Time Gross Settlement EPRS Economic Policy Research and Statistics SA South Africa ERM Enterprise Risk Management SACU Southern African Customs Union ERP Enterprise Resource Planning SADC Southern African Development ESEPARC Eswatini Economic Policy Analysis and Community Research Centre SAP Systems Applications and ESSCOM Eswatini Communication Commission Products in Data Processing EXCO Executive Committee SSELGS Small Scale Enterprise Loan Fintech Financial Technology Guarantee Scheme FSDIP Financial Sector Development Imple- SDR Special Drawing Rights mentation Plan SHERQ Occupational Safety, Health, FSC Financial Stability Committee Environment, Risk and Quality FSRA Financial Services Regulatory Authority SME Small Medium Enterprises GDP Gross Domestic Product SWABCHA Eswatini Business Coalition on GFIN Global Financial Innovation Network Health and AIDS GM General Manager SWIFT Society for Worldwide Interbank HR Human Resource Financial Telecommunication HRH His Royal Highness SZL Eswatini Lilangeni ICT Information and Communications UCT University of Cape Town Technology UK United Kingdom IT Information Technology UNESWA University of Eswatini IFRS International Financial Reporting UNISWA University of Swaziland Standards USA United States of America IG Information Governance USD United States Dollar IIRC International Integrated Reporting V4 Vision 4 Council VAT Value Added Tax IR Integrated Reporting WEO World Economic Outlook IMF International Monetary Fund ZAR South African Rand KPIs Key Performance Indicators

91 CBE Integrated Annual Report 2018/19 ABRIDGED FINANCIAL STATEMENTS

CONTACT DETAILS Physical Address Head Office Mahlokohla Street Mbabane H100 Telephone: +268 2408 2000 Email address: [email protected] Website: http://www.centralbank.org.sz

Postal Address P.O. Box 546 Mbabane Eswatini Southern Africa

BRANCHES Matsapha Cash Centre CNR 3 & 5 Avenue OF ESWATINI Telephone: +268 2408 2735 Umntsholi Wemaswati