ESWATINI AGRICULTURE SECTOR REVIEW Catalyzing Agri-Food System Transformation FINAL REPORT June 20, 2025 Agriculture and Food Global Practice Eastern and Southern Africa World Bank TABLE OF CONTENTS ACRONYMS .......................................................................................................................... iii ACKNOWLEDGEMENTS .......................................................................................................... v EXECUTIVE SUMMARY .......................................................................................................... vi 1. Introduction ................................................................................................................... 1 2. Trends in agriculture sector performance ....................................................................... 4 3. Key drivers and bottlenecks of agricultural growth in Eswatini ...................................... 11 3.1 Drivers ....................................................................................................................... 11 4. Unlocking opportunities for value-chain development in Eswatini ................................ 14 4.1 Overview .............................................................................................................. 14 4.2 Value Chain Profitability Snapshot ........................................................................ 15 4.3 Constraints to Value Chain Development............................................................... 20 4.4 Value chain development as an opportunity to bridge the dualistic agriculture system ……………………………………………………………………………………………………………………………..22 5 Reorienting public investment toward agri-footransformation through market-driven outcomes ........................................................................................................................ 24 5.1 Overview .............................................................................................................. 24 5.2 Assessment of the policies and strategies .............................................................. 25 5.3 Trends in agricultural public spending ................................................................... 26 5.4 Why Current Public Programs Are Underperforming for Value Chain Development 31 6. Conclusions and Recommendations ............................................................................. 34 6.1 Conclusions .......................................................................................................... 34 6.2 Recommendations ................................................................................................ 35 ANNEX 1. METHODOLOGY AND LIMITATIONS....................................................................... 39 ANNEX 2. RECENT GOVERNMENT POLICIES AND PROGRAMS TARGETING THE AGRICULTURE SECTOR ............................................................................................................................... 42 ANNEX 3. COUNTRY COMPARISONS ..................................................................................... 44 BIBLIOGRAPHY .................................................................................................................... 46 ii ACRONYMS AFIA Agri-Food Industry Association APE Agricultural Public Expenditures AU African Union CAADP Comprehensive Africa Agriculture Development Programme CMA Common Monetary Area CPF Country Partnership Framework CSA Climate-Smart Agriculture DFA Development Finance Assistance DFI Development Finance Institution E Emalangeni (Eswatini Currency) EADF Eswatini Agricultural Development Fund EDB Eswatini Dairy Board EMI Eswatini Meat Industries ENAIP Eswatini National Agricultural Investment Plan EWADE Eswatini Water and Agricultural Development Enterprise FAO Food and Agriculture Organization FFS Farmer Field Schools FMD Foot and Mouth Disease GDP Gross Domestic Product GMO Genetically Modified Organism GoE Government of Eswatini IA Investment Area IFAD International Fund for Agricultural Development IMF International Monetary Fund ISP Input Subsidy Program LME Liquid Milk Equivalents LMIC Low Middle-Income Country LUSIP Lower Usuthu Smallholder Irrigation Project MOA Ministry of Agriculture MOF Ministry of Finance MCC Milk Collection Centers NAMBoard National Marketing Board NMC National Maize Corporation PER Public Expenditure Review PII Policy Implementation Instrument PMO Producer Marketing Organizations PPPs Public Private Partnerships iii PPP Purchasing Power Parity SACU Southern African Customs Union SADC South African Development Community S&M Small and Medium SNL Swazi Nation Land SMLP Smallholder Market-Led Project SOE State-Owned Enterprise TDL Title Deed Land TFP Total Factor Productivity EU European Union iv ACKNOWLEDGEMENTS This Agriculture Sector Review (ASR) was prepared by a team led by Hardwick Tchale (Lead Agricultural Economist) and co-led by Hanane Ahmed (Senior Agriculture Economist) and included Daniel P. Gerber (Senior Agricultural Specialist), Easther Chigumira (Senior Agricultural Economist), Marko Kwaramba (Senior Economist), and Simangele Batiti Nkambule (Executive Assistant). The analysis and preparation of the background studies were conducted by a team of consultants including Nils Junge (main consultant for preparation of the review), Abhinav Kumar Gupta (main consultant for the value-chain study), Dr. Sicelo Dlamini (Consultant for the value-chain study), and Mmeli Makhanya (Consultant for the public expenditure review study). The team is grateful for their inputs which formed the basis for this synthesis report. The team extend gratitude to the peer reviewers for their critical comments and guidance at various stages of the review: Sergiy Zorya, Lead Agriculture Economist/Global Lead for Agriculture Public Policies and Support Programs (SAGGL); Farbod Youssefi, Senior Agribusiness Specialist (SSAA2); Nathan Were, Senior Operations Officer (CM3U1); and Prof. A. Manyatsi, Dean (Faculty of Agriculture, University of Eswatini) for being the external reviewer. The review benefited significantly from consultations and engagements with representatives of the Government of Eswatini (GoE). The team is especially grateful to Ms. Thabsile Mlangeni, Principal Secretary, Ministry of Economic Planning and Development MEPD), Mr. Sydney Simelane, Principal Secretary, Ministry of Agriculture (MOA), Mr. Siboniso Masilela, Under Secretary (MEPD), Ms. Gugu Shabangu, Undersecretary, MOA, Mr. Nelson Mavuso, Director, Extension Department (MOA), Mr. Henry Mndawe, Principal Agricultural Economist and Head of Policy and Planning Department at the Ministry of Agriculture, Ms. Nokwazi Hlophe Mamba, Director, Eswatini Agricultural Development Fund (EADF), Ms. Thulile Phasha Zwane, Resource Mobilization Specialist (EADF), Mr. Bheki Ndzinisa, Acting Director of Budget, Ministry of Finance (MOF), Mr. Anthony Mthunzi and Ms. Siphiwe Sibandze, Principal Economists (MEPD), the team from the Eswatini Water and Agricultural Development Enterprise (EWADE) led by Dr. Samson Sithole, Chief Executive Officer, Ms. Ms. Thabo Hlophe, Chief Financial Officer and the team from NAMboard, Ms. Frank Ngwenya, Chief Financial Officer and the team from National Maize Corporation (NMC), Dr. Sotja Dlamini, Head of Agricultural Economics Department, UNESWA, Private sector representatives from Royal Eswatini Sugar (RES) Corporation, Ntabankulu, Cane Growers, Nisela Farms, African Chicks, Eswatini Feedlotters Association, and technical representatives from development partners institutions such as World Food Program (WFP), Food and Agricultural Organization (FAO), United Nations Development Program (UNDP), African Development Bank (AfDB), International Fund for Agricultural Development (IFAD) and the European Union (EU). The ASR was prepared under the overall direction of Frauke Jungbluth (Practice Manager) and the guidance from Satu Kristiina Kahkonen (Country Director), Feyi Boroffice (Manager, Operations), Ikechi B. Okorie (Resident Representative for Eswatini), Wakhile Mkhonza (Operations Officer) and Bekele Debele (Program Leader). v EXECUTIVE SUMMARY Context Eswatini’s agriculture sector is at an inflection point. While there are clear opportunities for transformation, long-standing structural challenges continue to impede progress. Central to the sector’s potential are profitable value chains – particularly in dairy, maize, beef, and vegetables - identified through an in-depth value-chain analysis. These commodities are increasingly proving commercially viable, driven by growing domestic demand, and improved access to regional markets. Additionally, the enabling environment for agricultural transformation is beginning to take shape. Over the past decade, Eswatini has developed several key policy and institutional frameworks, notably the National Development Plan (2023-2028), and the Eswatini National Agricultural Investment Plan (ENAIP) (2023- 2028) both aimed at driving agricultural growth, rural development, and food security. Although Eswatini’s agriculture public expenditures (APE) have fluctuated, they have grown significantly over time. Between 2010 and 2021 APE increased by 113 percent in real terms. Development partners have also played a significant role by co-financing initiatives that promote sector growth and development. These combined investments are laying the foundation for sustainable agricultural transformation. Eswatini is a member of various regional groups that offer trade and private sector benefits. The country benefits from membership in several regional economic communities including the Southern African Development Community (SADC), the Common Monetary Area (CMA) and the Southern African Customs Union (SACU). These partnerships enhance economic integration, facilitate trade, and enable the sharing of customs revenues, offering significant advantages for private sector engagement and export growth. Despite these positive opportunities, a persistent disconnect remains between the sector’s potential and actual performance. Agricultural Gross Domestic Product (GDP) has stagnated, rural poverty remains high, and many smallholder farmers continue to operate at subsistence levels. This underperformance is due to several constraints: implementation bottlenecks, lack of strategically designed investments along commodity value chains, fragmented institutional coordination, weak data systems for monitoring and evaluation, and limited private sector engagement in downstream value addition. While over time public expenditures on agriculture have increased, returns on these investments have declined. According to the Ministry of Agriculture (MOA) data agriculture public expenditures rose from Emalangeni (E)896 million to E2.86 billion (in nominal terms) between 2010 and 2021, but total agriculture output declined by 4 percent over the same period. This decline is largely attributable to inflation eroding the real value of government support, reducing its purchasing power even as nominal spending increased. Smallholder farmers face heightened vulnerability to shocks stemming from climate change, international market fluctuations, and natural disasters. Eswatini is highly vulnerable to extreme weather events such as droughts, floods, violent storms, as well as forest and grazing land fires, epidemics and vi other disasters. These shocks significantly hinder food security and jeopardize the country’s progress towards the Sustainable Development Goals (SDGs). Persistent drought and water scarcity pose ongoing threats to agricultural productivity and resilience. The Agriculture Sector Review (ASR), informed by two background studies—a value chain analysis and a public expenditures review (PER) — aims to support the Government of Eswatini’s Ministry of Agriculture in identifying strategic priorities and a roadmap for reforms. The ASR offers practical guidance on transforming Eswatini’s agri-food system within the context of constrained public resources and multiple sector needs. It seeks to identify what works, where improvements are needed, and how to charter a viable path forward. Trends in agriculture sector performance The World Bank’s 2011 review of Eswatini’s agriculture sector focused on key value chains that were not only vital to the country’s development at the time but also seen as having significant potential. The review highlighted the country’s major development challenges and found that previous investments yielded limited results. Key challenges included inefficient links between smallholder farmers and markets; high transaction costs to source from smallholder farmers; and weak public services delivery to small-scale horticulture farmers. These challenges contributed to low agricultural productivity, food production lagging behind population growth, and rising food insecurity, particularly in rural areas. The review concluded that the Government needed to “do more with less” by increasing efficiency and integrating smallholder farmers more effectively into the horticulture and livestock value chains. Although agriculture’s share in Eswatini’s GDP has been gradually declining — estimated at about 7 percent in 2023 — it remains crucial to the economy and population. Compared to other countries in the region, this share is relatively high, reflecting a slower pace of economic transformation. However, the sector’s importance goes beyond contribution to GDP. Agriculture has a significant social footprint, acting as a vital safety net for vulnerable populations, including women, youth and the poor. It supports household food security, underpins the industrial and services sectors, drives food and nutrition security, has export potential, and remains central to inclusive growth and rural development. Agriculture continues to make a significant contribution to Eswatini’s export earnings, particularly through cash crops. In 2019, agricultural products accounted for 34 percent of the country’s total exports, with 66 percent of these destined for South Africa. Refined export is the key agri-food export, while the country remains a net-importer of staple food items such as maize, vegetables, beef and dairy. Despite fluctuations, the overall value of agricultural exports has increased in recent years, underscoring the sector's resilience and its critical role in sustaining the national economy amidst evolving global and regional market dynamics. Average maize yields in Eswatini remain low compared to regional peers, reflecting broader productivity challenges facing smallholder farmers. In 2024, the average maize yield was estimated at 1.2 tons per hectare. Over 90 percent of the country’s maize, a dietary staple, is produced by smallholder farmers. vii Overall, the country’s production of food commodities consistently falls below the domestic consumption needs. This persistent production shortfall reinforces the country’s dependence on food imports, which in turn strains foreign currency reserves and increases vulnerability to external market fluctuations. Given the minimal systemic changes and stagnant sector growth in recent years, there is an urgent need to identify pathway for accelerating agricultural transformation. A more strategic and targeted approach is needed to revitalize the sector. As outlined in this review, understanding the challenge - the “what” - is essential, but it is equally important to address the - “how” - by proposing actionable strategies to unlock the sector’s full potential. Key drivers and bottlenecks of agricultural growth Drivers: Commercially produced crops and livestock remain the primary contributors to agricultural output in Eswatini. Although commercial crops are cultivated on only 26 percent of the arable land – primarily under Title Deed Land (TDL) – they account for approximately 80 percent of total agricultural output. This productivity is largely due to the widespread use of modern agricultural technologies, including mechanization, improved seed varieties, efficient farming practices, and extensive irrigation systems. These factors contribute to higher yields, improved product quality, and enhanced market competitiveness. The sugar and forestry sub-sectors contribute significantly to the national economy. Eswatini is among the leading sugarcane producers in the region, exporting 92 percent of total output. Furthermore, the country is expanding into other high-value cash crops, such as strawberries, watermelons, and sunflowers to diversify agricultural production and meet both domestic and international market demands.1 Bottlenecks/constraints: Low productivity and low production levels characterize a large segment of Eswatini agriculture, particularly for farms operating on Swazi Nation Land (SNL). Multiple structural, environmental, and institutional challenges constrain productivity among smallholder farmers. These include climate vulnerability, low use of technology and inputs, limited irrigation coverage, poor access to finance, weak extension services, land tenure issues, poor infrastructure, limited market access, underinvestment in research and innovation, and labor and demographic pressures. These constraints are compounded by exogenous shocks which collectively depress productivity growth, limit smallholder participation in commercial agriculture and hinder overall sectoral contribution to national economic growth. Unlocking opportunities for value-chain development in Eswatini Eswatini’s agriculture sector holds significant untapped potential, particularly in four priority value chains: maize, dairy, beef, and vegetables. These commodities are not only crucial to national food security and rural livelihoods, but offer strong commercial opportunities, when supported by strategic high-impact investments. Addressing systemic bottlenecks and leveraging sustainable and inclusive public- 1 International Trade Administration. (2024). Eswatini - Agriculture. U.S. Department of Commerce. viii private collaboration aligned with the national priorities are essential. The four-commodity value-chains were covered through in-depth value-chains analysis, as follows: • Maize: As a staple crop with strong local and regional demand, maize remains a reliable agriculture option. Current production yields an estimated profit margin of E6,729 (United States Dollar (US$)364 per hectare), or 19 percent of revenue. It is a profitable, yet not lucrative, crop under current production costs and revenue streams. Its advantage is the relatively low input costs. • Beef: The financial analysis of beef production in Eswatini shows a strong profit margin for feedlot enterprises. A typical feedlot with 20 cattle generates an estimated gross profit of E 66,155, or a 21 percent profit margin. • Vegetables: Vegetable cultivation in Eswatini is highly profitable due to low input costs, high yield potential, and relatively higher market prices. The profit margin for carrots of E81,788 per hectare (51.9 percent) reflects strong profitability in carrot cultivation. Cabbage production is even more profitable, with a margin of E134,604 per hectare (67.3 percent). • Dairy: Dairy farming shows high returns. Analysis shows that an operation with 5 cows can achieve net margins of E88,288 on revenues of E211,532 against costs of E123,244. This indicates that dairy farming is a potentially lucrative agrobusiness in Eswatini. Despite the promise of these value-chains, several systemic constraints limit the realization of the optimal economic benefits. The constraints include high input costs due to inefficiencies at the production level, limited access to markets, inadequate value-addition, weak extension system and knowledge transfer. This leads to low adoption of high-yielding technologies, limited access to finance and risk mitigation tools, and institutional fragmentation and coordination gaps which affect the delivery of services. Overcoming these constraints will require holistic interventions that strengthen input systems, enhance farmer capacities, and improve infrastructure, finance, and market linkages. Eswatini, as other countries in the region, manage a dualistic agriculture system. A dualistic agriculture system refers to the coexistence of two structurally different farming models within the same national or regional agricultural economy. While it reflects economic disparity, dualism can be a structural advantage for value chain development when managed strategically. While this dualism reflects structural inequality deeply rooted in Eswatini’s agricultural history - where commercial estates coexist with smallholder producers on Swazi Nation Land – it also presents a unique opportunity. If managed strategically, it can support inclusive agricultural transformation, provided both segments are integrated into well-developed value chains. Several successful examples of value chain development in dualistic agriculture systems have lessons for Eswatini, where both smallholder farmers and large commercial farmers coexist. This dualism is common in Sub-Saharan Africa such as South Africa, Zambia, Kenya, and elsewhere globally (e.g. Brazil, ix India). Strategic integration pathways exist for Eswatini, including contract farming and outgrower models; cooperative development and aggregation; mentorship and joint ventures; extension and innovation transfer; post-harvest infrastructure; and global Good Agricultural Practices (GAP) Certification to align smallholder production with regional/international export standards. These approaches align with the ongoing initiatives under ENAIP to develop Sector Development Plan Agreements (SDPAs) and Industry Associations that foster coordination (both horizontally and vertically) across value chains, particularly to integrate smallholders. Reorienting public investment toward agri-food transformation through market-driven outcomes Eswatini’s primary challenge is not a lack of public investment in agriculture, but rather the inefficiency and fragmentation of existing programs. Many investments are misaligned with market realities, poorly targeted, and fail to incentivize private sector participation. A shift is needed from input/production driven support to market-oriented value chain-based investments informed by successful models elsewhere - to transform agriculture into a driver of inclusive, profitable growth. The government’s agricultural development and transformation objectives will be constrained by the limitations of public spending in the sector. Despite recent increases in public agricultural spending over 80 percent is spent on capital projects comprising irrigation development (56 percent), livestock production (7.2 percent), farm input subsidies (6.9 percent), on average annually. Meanwhile critical areas such as research, innovation, extension, veterinary services, and land resources conservation remain underfunded - undermining the sector’s long term growth potential. The returns on government investments in the agriculture sector have fallen significantly over time. As noted, above, between 2010 and 2021 APE more than doubled in real terms. However, this did not result in improved agricultural sector performance. Several well-intentioned public programs to support value chain development face structural limitations and have not yielded transformative results. Public investment is falling short because spending is focused on inputs rather than systems. For example, large scale irrigation investments have focused heavily on infrastructure without integrating access to water with input supply, farmer capacity building, market access and institutional support. As a result, returns on irrigation investment have been lower than expected, particularly among smallholder farmers given that less than 10 percent of arable land under smallholder farming systems is irrigated, and most production remains rain-fed. Large-scale irrigation schemes mainly benefit commercial sectors like sugarcane. Besides capital investments in infrastructure, a large share of APE goes to input subsidies and recurrent expenditures. Input subsidies, while widely used, are often poorly targeted, insufficiently supported by complimentary interventions, and not linked to a broader strategy for improving productivity and market access. Without a system- based approach such subsidies cannot catalyze sustainable agricultural transformation. On the other hand, Eswatini’s recurrent agricultural expenditures must be restructured to align with the sector’s x transformational objectives – moving beyond subsidies to support value chain integration, innovation and institutional reform. Therefore, the challenges related to public spending on agricultural programs fail to address systemic constraints holding back smallholder farmers and limiting yields and productivity growth particularly under the predominant smallholder system. Conclusions Eswatini’s agricultural sector holds substantial potential for driving rural transformation, employment, and economic diversification. However, realizing this potential requires addressing the disconnect between public investment and real-world value chain outcomes. Current expenditures are fragmented and fail to consider the holistic requirements for specific value chains, hence there is need for re-alignment to contribute towards driving sector transformation. A shift toward strategic, market-oriented public investment—anchored in profitability, private sector engagement, and inclusion—can change this trajectory. This will require a systems approach to improve the enabling environment for smallholders as well as an ecosystem tailored to the specific value chain requirements in each agro-ecological zone. Eswatini’s agriculture sector holds significant untapped potential. Profit margins are evident in crops such as sugarcane and vegetables as well as in beef and dairy production - offering clear opportunities both for import substitution and export promotion. However, to fully realize this potential, these value chains must be well organized and strongly linked to markets. Promising examples already exist, such as bananas and baby vegetables for niche export markets in South Africa, managed under Eswatini Water and Agricultural Development Enterprises (EWADE) projects. The challenge now is to scale up these successes, through strategic, market-led public investments aimed at removing systematic barriers, crowding in the private sector, and integrating smallholders into a vibrant and inclusive agribusiness ecosystem. Overall, a strategic reorientation of public investment is needed-one guided by the principles of profitability, sustainability, and inclusiveness. Recommendations The following prioritized recommendations and roadmap outline strategic directions for supporting ENAIP and EADF as key instruments to drive the transformation of Eswatini’s agricultural sector: Strategic Specific actions Responsibility Timeline recommendation 1. Promote • Promote public investments in basic seed MOA, Short-term (1-2 smallholder systems technology, and delivery systems to Department of years) commercialization smallholder farmers. Research, for food security, • Scale-up smallholder access to irrigation Extension, job creation and facilities, as well as operations and EWADE import substitution maintenance capacity for small-scale water- users. • Scale-up smallholder land consolidation models to enable organized production of xi Strategic Specific actions Responsibility Timeline recommendation commodities into regional/international export markets. 2. Adopt an • Operationalize SDPAs and industry MOA, EADF Short-term (1-2 integrated value- associations for key commodity value-chains years) chain approach (including maize, beef, milk and vegetables). 3. Leverage private • Address the binding policy and regulatory MOA, Ministry Medium to long sector investment constraints (e.g., access to land, Public Private of Finance term (3-5 years) in agriculture Partnerships (PPP) policy and regulatory (MOF), Industry framework in agriculture, etc.,) Associations, • Improve access to affordable finance, i.e., Private sector EADF’s capacity to design financial stakeholders instruments, derisking, blended financing, etc. • Provide strategic critical public goods (e.g., bulk irrigation infrastructure, market access infrastructure, storage/warehousing infrastructure, etc.,) • Establish a Public Private Dialogue (PPD) Short-term (1-2 Forum to discuss and address issues affecting years) the private sector in agriculture 4. Strengthen MOA’s • Build MOA’s capacity in policy formulation, MOA/EADF, Medium term (2- institutional implementation and oversight MOF 3 years) capacity for ENAIP • Improve MOA’s technical and operational and EADF skills development (e.g., EADF’s capacity for implementation derisking, blended financing instruments, Short-term (1-2 mobilize increased funding to EADF, etc. years) • Enhance Monitoring and Evaluation of programs – real-time digital M&E tools Short-term (1-2 • Build and launch a reliable Integrated years) Agricultural Statistics and Information System 5. Deepen agriculture • Enhance farmers adoption of climate smart MOA/MOF Short-term (1-2 sector’s climate agricultural technologies and practices Departments of years) resilience • Explore the adoption of risk insurance Research and instruments Extension delivery 6. Review several • Consider lifting of the ban on beef imports MOA/SOEs in Medium term (2- instruments to • Create awareness on the established collaboration 3 years) enhance their procedures for importing Genetically with MOF. effectiveness to Modified Organism (GMO) seed (maize, the sector’s vegetables, cotton, etc.) transformation • Review of the import tariffs levied on objectives vegetables • Review the agricultural subsidies for effective targeting and impact xii 1. INTRODUCTION The Ministry of Agriculture aims to optimize the utilization of agricultural resources to create sustainable wealth for Emaswati and to transform the agricultural sector by 2030 into a modernized, sustainable, diversified production and export-oriented sector that contributes to improved food security, export revenue generation, job creation and overall economic development? Government of Eswatini (2023)2 1. Eswatini’s agriculture sector stands at a pivotal juncture: while persistent challenges remain, the potential for transformative growth is increasingly evident. At the core of this opportunity is the rising profitability in several key agricultural value chains, including dairy, maize, beef, and vegetables, all of which have been the focus of recent in-depth value-chain analyses. These commodities demonstrate growing commercial viability, driven by growing domestic demand, and access to regional markets. For example, returns in the dairy value chain have improved through producers’ adoption of better genetics, enhanced feed practices, and strengthened cold chain infrastructure. High-value horticulture — particularly tomatoes, leafy greens, and peppers — offers fast production cycles and strong profit margins across both formal and informal markets. Meanwhile, beef producers are investing in feedlot systems and expanding into more lucrative regional markets. Although maize remains sensitive to climate vulnerability, its profitability remains significant when paired with quality inputs and post-harvest management. These trends reveal numerous opportunities to diversify and commercialize smallholder agriculture, enabling the production of high-value food products and positioning Eswatini for a more dynamic and inclusive agri- food sector. 2. Furthermore, the enabling environment for agricultural transformation in Eswatini is steadily strengthening. Over the past decade, the country has developed a suite of policy and institutional frameworks aimed at catalyzing agricultural growth, rural development, and food security. These include: (i) the National Development Plan (2023-2028), which emphasizes the promotion of agriculture, high value crops, value addition and processing; and (ii) the Eswatini National Agricultural Investment Plan (ENAIP) (2023-2028) which focuses on increasing agricultural productivity and production while diversifying agricultural production and consumption patterns.3 These frameworks reinforce Eswatini’s participation in regional trade agreements and its geographic proximity to key markets like South Africa - together offering a strategic comparative advantage for the sector. (See Annex 2 for a summary of Government programs and policies targeting the agriculture and agri-food sectors.) 3. Public expenditure in agriculture has increased significantly in recent years, with a growing share directed towards development-oriented interventions. From Emalangeni (E)896 million (US$119) in 2Government of Eswatini. 2023. Eswatini National Agriculture Investment Plan-ENAIP. 3Some ENAIP activities have already been implemented while others are ongoing, e.g. irrigation, access to funding by value chain players through the Fund, and the subsidy programs. 1 2010, agriculture public expenditures (APE)4 rose to E2.861 billion (US$196.3 million) in 2021,5 the highest level on record.6 Development partners have also played a significant role by co-financing initiatives aimed at stimulating sector growth and transformation. Together, these investments are beginning to lay the foundational infrastructure and institutional capacity required for sustainable agricultural transformation ranging from improved service delivery to the development of inclusive value chains and agri-enterprises. However, for these investments to yield their full impact they must be strategic, well targeted, and aligned with the national priorities and market needs. 4. As a member of various regional groups that offer trade and private sector benefits, Eswatini has considerable potential to further enhance its business environment and trade competitiveness. Eswatini is a member of the Southern African Development Community (SADC) and participates in the monetary union, Common Monetary Area (CMA), with Lesotho, Namibia, and South Africa. Eswatini is also a member of the Southern African Customs Union (SACU), which fosters economic integration among its member states. SACU members operate under a unified external tariff policy, enabling the free exchange of goods across borders. Additionally, the union ensures a coordinated system for collecting and distributing customs and excise revenues among member countries.7 Despite these institutional advantages supporting economic integration, trade facilitation, and shared customs revenues, Eswatini ranks low in terms of doing business and continues to face challenges in improving its overall business climate. In the 2020 Ease of Doing Business Index,8 it placed 121 out of 190 countries, with a score of 59.5. This is largely attributable to the slow pace in reforming investment policies, implying that the institutional environment is still not conducive to starting and operating businesses.9 5. A persistent disconnect exists between the availability of profitable investment opportunities and actual performance of the agriculture sector. While there is evident potential in several value chains, agricultural GDP has remained largely stagnant, rural poverty levels remain high, and a large proportion of smallholder farmers continue to operate at a subsistence levels. Several factors contribute to this gap: implementation bottlenecks, fragmented coordination across institutions, weak data systems for monitoring and evaluation, and limited private sector engagement in value addition and market linkages. Moreover, public investment often fails to align with private sector needs and market demands, resulting in underutilized infrastructure, weak returns on investment, and missed opportunities for broader impact. 6. While public expenditure in the agriculture sector has been growing, returns on these investments have declined over time. While agriculture public expenditure rose by from 113 percent between 2010 4 APE is based on the Classification of the Functions of the Government (COFOG), to allow for cross-country comparisons. Under COFOG, APE covers extension services, irrigation and infrastructure development, crop production, livestock, fisheries. Expenditures for nutrition health programs unrelated to agricultural production, and social safety nets, rural development (e.g., rural infrastructure), food safety do not fall under COFOG. 5 2021 is the last year for which complete and reliable MOA expenditure data is available. 6 In keeping with IMF guidelines, which stipulate that when only one year is given it refers to the year during which most of the fiscal year occurs. Since Eswatini’s fiscal year ends March 31, when single years are given, in charts and in the text, they refer to the beginning of the fiscal year. For example, fiscal year 2010/11 is referred to as “2010.” 7 World Bank. (2023). Eswatini Economic Update: Toward inclusive jobs and economic transformation. 8 Economies are ranked on their ease of doing business, from 1–190. The rankings are determined by sorting the aggregate scores on 10 topics, each consisting of several indicators, giving equal weight to each topic. 9 World Bank. (2024). Doing Business in Eswatini. 2 and 2021, total agriculture output fell by 4 percent over the same period.10 This paradox is partly explained by inflation, which eroded the real value of public spending (181 percent inflation) during the same period.11 This is clearly illustrated by the case of input subsidies — the number of farmers benefiting from input subsidies declined despite increased budget allocations. However, the full potential of this support is not being realized, due in part to weak linkage with market systems and the exclusion of subsistence production from agricultural GDP statistics. APE excludes private sector inputs, while agricultural GDP presumably does not measure output by subsistence farmers that do not reach the market. However, public expenditures benefit private sector actors through provision of irrigation and input subsidies, among other things. 7. The dualistic nature of Eswatini's agriculture sector, consisting of both commercial and smallholder systems, poses unique challenges to achieving sector transformation. While the building blocks for profitable agri-food transformation exist, the number of farmers enjoying healthy profit margins is too low. The overarching challenge lies in scaling up conditions conducive to healthy profit margins while addressing the barriers preventing the majority of smallholder farmers from integrating into various agricultural value chains. 8. The challenges faced by smallholder farmers are exacerbated by their vulnerability to shocks due to climate change, international market fluctuations, and natural disasters. Eswatini is highly vulnerable to extreme weather events and other shocks including natural disasters such as occasional drought and flooding, violent storms, epidemic diseases, forest and grazing land fires, all of which take a large toll on the country. These events adversely impact agricultural productivity, food security, and the country’s ability to attain the Sustainable Development Goals. Regions such as Lubombo and Shiselweni are especially hard hit by drought and water scarcity. Climate change is projected to negatively impact crop production across all crop types and agro-ecological zones. The decline in domestic milk production is primarily attributed to the adverse impacts of climate change. In response to these challenges, the Government of Eswatini has committed to promoting climate-smart agricultural practices, as outlined in its Nationally Determined Contributions (NDC) 2021. These initiatives aim to mitigate the adverse impacts of climate change on the agricultural sector by promoting adaptive strategies and sustainable practices.12 9. The overarching objective of the ASR is to support the Ministry of Agriculture in identifying strategic priorities and a roadmap for sector transformation in an environment of constrained public resources and numerous sectoral challenges. Building upon the 2011 Agriculture Sector Review, the ASR provides a data-based update that assesses what is working, identifies areas for improvement and proposes actionable steps and path forward. It also highlights data and information gaps, pointing to areas for further research. Fundamentally, it explores why sector performance has stagnated given the potential profits and favorable policy environment. Focused on promoting the evolution of sector dynamics and 10 Eswatini MOA data (for expenditures) and World Development Indicators data (for agricultural production). 11 Author calculations based on World Development Indicators. 12 International Monetary Fund. (2024). Kingdom of Eswatini: Selected Issues. 3 opportunities, this ASR is part of a broader analytical and advisory services (ASA) program by the World Bank (WB), which traces back to its 2011 rural sector study. 10. The ASR is informed by two background studies: a value chain analysis and a review of agriculture public expenditures (PER). Based on primary data (quantitative and qualitative) the value chain study provides a comprehensive overview of the strategic investment opportunities in Eswatini’s maize, vegetables, dairy and beef value chains in meeting the Government’s vision and objectives for sector transformation. The PER, based on secondary data, analyzes, public spending trends in agriculture, and how public expenditures are allocated relative to areas of demonstrated value chain profitability and growth.13 The goal is not to question the need for investment, but rather to understand where public funds are being deployed, and why they are not unlocking the full potential of Eswatini’s profitable value chains for broader sector transformation. Recommendations for public expenditure reorientation are proposed to maximize impact. See Annex 1 for an overview of the methodology and limitations for the value chain and PER studies. 11. The structure of the review is organized as follows: Section 2 gives an overview of Eswatini’s agriculture sector performance since the last ASR; Section 3 describes the select profitable but underdeveloped value chains; Section 4 describes the enabling environment pertaining to sector policies/strategies and public spending; Section 5 presents conclusions, and Section 6 provides key recommendations. 2. TRENDS IN AGRICULTURE SECTOR PERFORMANCE 12. The World Bank’s 2011 review of Eswatini’s agriculture sector focused on livestock and horticulture value chains, both considered important to the country’s development, and poised for future growth. The goal of the 2011 review, “Livestock and Horticulture Value Chains in Swaziland: Challenges and Opportunities” was aimed to generate insights that would “contribute to rapid and sustainable integration of small-scale farmers into the livestock and horticulture value chains” in Eswatini (then Swaziland). It identified key constraints contributing to poor performance in the two value chains, evaluated technological options for improving productivity, and recommended priority areas for future government interventions. 13. The 2011 review found that earlier investments had produced limited results. Key challenges included inefficient links between smallholder farmers and markets, high transaction costs to source from smallholder farmers; weak public services delivery to small-scale horticulture farmers; integrating small- scale farmers who can benefit from export opportunities; and vulnerability to climate change. These challenges contributed to low productivity, food production failing to keep pace with population growth, 13 The PER should be considered an initial attempt to assesses the overall agriculture budget envelope and the efficiency of allocation. A fuller analysis would cover the effectiveness of program implementation and price incentives. This would help guide public expenditure decisions in ways that would increase returns to investment. However, due to data inadequacies and lack of time, such exercise will need to be conducted later. 4 and increasing food insecurity, especially in rural areas. The review called on the Government to do more with less and find ways of integrating smallholder farms into the horticulture and livestock value chains.14 It evaluated technological options for improving productivity and identified priority areas for future government interventions. For the livestock sector, it recommended “investments in technological innovation, strengthening of market coordination mechanisms, and more effective targeting of public resources allocated to the sector.” For the horticulture sector it noted that smallholder “have to reduce production costs and improve the quality of their produce, but they will have to develop mechanisms that will allow them to access markets efficiently” and that they should pursue strategies for “increasing scale, for example by forming producer organizations that can coordinate marketing activities, working through producer marketing organizations (PMOs), or seeking out alliances with large-scale commercial producers and processors.”15 14. Agriculture remains a crucial sector for the Eswatini economy and population despite a declining share in GDP. In 2023, primary agriculture contributed 7.1 percent of GDP, down from 10.3 percent in 201016 while services and industry sectors contributed 51.3 percent and 34.6 percent to GDP. While agriculture’s contribution to GDP has decreased it remains relatively high compared to regional peers, suggesting that economic transformation in Eswatini has been slower. The share of services in GDP grew slightly, while industry’s share declined by 3.1 percentage points. Although agriculture’s GDP share has declined, it remains a cornerstone of the national economy due to its broader social footprint. According to the Government estimates 70 percent of the population “is wholly dependent on agriculture for their livelihoods,”17 even if it is informal or subsistence-based. The sector serves as a critical safety net for vulnerable groups - including women, youth and the poor - and underpins household food security. Beyond its social role, agriculture is a key input provider for industrial and services sectors, a driver for food and nutrition security, a potential catalyst for export growth, and central to inclusive growth and rural development. Sector performance could be significantly improved to contribute meaningfully to Eswatini’s economic growth, job creation, poverty reduction, and reduced import-dependency. Moreover, the agricultural sector growth would have positive spillover effects on manufacturing which relies on agriculture raw materials. 14 World Bank. 2011. Livestock and Horticulture Value Chains in Swaziland: Challenges and Opportunities. Report 70201-SZ. 15 World Bank. 2011. Livestock and Horticulture Value Chains in Swaziland: Challenges and Opportunities. 16 World Bank. World Development Indicators. 17 Government of Eswatini. 2023. ENAIP. 5 Figure 1. Agriculture, Services and Manufacturing as a share of GDP (percent) 100 90 10 10 10 9 8 8 6 8 8 8 7 8 7 8 80 70 38 37 36 36 37 38 35 34 34 31 32 35 35 37 60 50 40 30 50 50 48 49 49 49 51 51 51 51 53 53 50 51 20 10 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Services Indiustry Agriculture, forestry, fishing Source: World Bank indicators 15. While the share of employment in manufacturing has fallen in recent years (from 25.9 percent to 18.5 percent), the agriculture sector’s share has decreased only marginally. In 2023, agriculture sector employed 13.8 percent of Eswatini’s formal labor force – a figure lower than most regional peers except Mauritius (5.3 percent). In contrast, South Africa agriculture’s employment share is 18.8 percent, and Mozambique’s is 69.5 percent. The trend of declining agricultural employment is common across the region (excluding South Africa). In Eswatini, agriculture employment fell from 15.1 percent in 2010 to 13.8 percent in 2023 (See Annex 3 for figures with country comparisons). Employment figures are important as they relate to the sector’s size, output and share of public investment. Given that over 70 percent of Eswatini’s population live in rural areas and many of whom are reliant on agriculture even informally, there is significant room for expansion if productivity improves. Encouragingly, value added per agricultural worker increased by 36.9 percent, from United States Dollar (US$)6,473 in 2010 to US$8,860 in 2020, indicating improved efficiency in the sector, and demonstrating what is possible.18 16. Agriculture also contributes significantly to export earnings, particularly through high-value cash crops. Despite fluctuations, Eswatini’s agricultural exports have shown a growth trend in recent years. In 2019, agricultural products accounted for 34 percent of the country’s total exports, with 66 percent destined for South Africa. Eswatini exports agricultural commodities such as refined sugar, a manufactured product made from sugarcane (which contributes to 80 percent of the agricultural sector’s income). Despite this, the total value of agricultural exports has increased by 7.2 percent from US$ 577.92 million in 2019 to USD 620.09 million in 2023.19 This growth highlights the sector's resilience and its critical role in sustaining Eswatini's economic performance amidst evolving market dynamics. 17. The country’s agricultural output is primarily maize, cotton, sugarcane, wood pulp, citrus, forestry products, and livestock. Maize, the dominant food crop, is primarily grown for subsistence purposes, 18 World Bank. (2023). Eswatini economic update: Toward inclusive jobs and economic transformation. 19 Food and Agriculture Organization. (2024). FAOSTAT - Crops and livestock products. 6 alongside other subsistence crops including legumes, tubers, sorghum, and a variety of horticultural crops. However, the average yield across all other smallholder rainfed crops (such as groundnuts, beans, sorghum, etc.) have been stagnant remaining well below their potential for the past decade. This contributed to Eswatini’s heavy reliance on food imports, including maize, vegetables, beef and dairy. 20 21 18. Lower average maize yields relative to other countries in the region, illustrate the broader productivity challenge facing smallholder farmer in Eswatini. Maize, of which 90 percent of which is grown by Eswatini’s smallholder farmers, and is a dietary staple, had average yields of just 1.2 tons per hectare in 2024, consistent with the long-term average but below regional benchmarks (see Figure 2a). This yield gap signals limited progress in improving crop productivity despite the sector’s importance for food security. Additionally, agriculture’s total factor productivity (TFP) index in Eswatini has remained stagnant since 2010, indicating no significant gains in overall sector efficiency over the last decade (Figure 2b). While many of Eswatini’s regional peers have experienced sluggish TFP growth, countries such as Botswana, South Africa and Namibia’s TFP growth has outperformed Eswatini, suggesting stronger sector outcomes. Eswatini’s underperformance relative to its peers further emphasizes the need for strategic, evidence-based interventions that boost both yield and efficiency in the country’s agri-food system. Figure 2: Maize yield (mt/ha) in Eswatini and overall agricultural TFP index (2015=100), compared to other countries in the region a) Average maize yield b) TFP Index (2015=100) 4 Agricultural TFP Index (2015=100) metric tons/ha 140 3 120 100 2 80 60 40 1 20 0 2017 2010 2011 2012 2013 2014 2015 2016 2018 2019 2020 2021 0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Botswana Lesotho Eswatini Lesotho Namibia Zimbabwe Namibia Zambia Zimbabwe Botswana Eswatini Zambia South Africa Sources: Maize yield - FAOSTAT https://www.fao.org/faostat/; TFP Index – United States Department of Agriculture (USDA), 2021 19. The country’s production of food commodities consistently falls short of national consumption needs. For example, based on the value-chain analysis of four commodities, maize has met only 63 percent 20 International Fund for Agricultural Development. (2022). Country Strategic Opportunities Programme 2022-2027. – Eswatini 21 U.S. Department of Commerce. (2024). Agriculture - Eswatini. 7 of the national demand on average, reflecting a 37 percent shortfall over the past decade. Beef production has fared slightly better with an estimated shortfall of about 16 percent over the last decade. However, this apparent improvement may be misleading as it may not reflect an increase in domestic production. Stakeholder consultations with the private sector suggest that narrowing beef gap may be due to the 2019 import ban implemented to protect the country’s cattle from foot and mouth disease (FMD) rather than improvements in local production capacity.22 Meanwhile, the gap between vegetables and milk remains among the largest with shortfall consistently ranging between 60-80 percent of total consumption (see figure 3). These persistent deficits highlight critical challenges in domestic agri-food systems and underscore the urgency of targeted interventions to boost local production, especially in high-demand, high-nutrition value chains. Figure 3. Production, consumption and shortfall for key commodities (metric tons) a) Maize b) Beef 300 35 Thousands Thousands 250 30 200 25 150 20 100 15 50 10 0 5 -50 0 -100 -5 -150 -10 2022 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2014 2015 2016 2017 2018 2019 2020 2021 2023 Cons. Demand Production Shortfall/surplus Cons. Demand Production Shortfall/surplus Source: Ministry of Agriculture Source: Ministry of Agriculture 22According to USDA, the January 2019 outbreak of foot and mouth disease in South Africa led to several countries, including China, Botswana, Mozambique, Namibia, Eswatini, Zambia and Zimbabwe, suspending imports of cloven-hoofed animals and their products from South Africa. In Eswatini this ban has largely been in force since then (although it was temporarily lifted in 2020) leading to a surge in beef prices, and an increase in the slaughter of breeding stock – which may ultimately affect the beef sector growth. https://www.fas.usda.gov/data/south-africa-fmd-outbreak-leads-bans-imports-red-meat-south-africa 8 c) Vegetables d) Milk Thousands 60 140 50 120 100 40 80 30 60 20 40 10 20 0 0 -10 -20 -40 -20 -60 -30 -80 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2022 2014 2015 2016 2017 2018 2019 2020 2021 2023 Cons demand Production shortfall Cons demand Production shortfall Source: Ministry of Agriculture Source: Ministry of Agriculture 20. As a result of persistent shortfalls, Eswatini remains a net importer of food commodities to meet its domestic consumption needs. In 2023, the country imported approximately E1.604 billion (US$89 million) worth of cereals, E287 million (US$16 million) worth of vegetables and E87 million (US$5 million) worth of meat and edible offals, mostly from South Africa (Figure 4a). This heavy reliance on imports places considerable pressure on the country’s foreign currency reserves and increases vulnerability to external market shocks including price volatility and supply chain disruptions. While refined sugar accounts for the majority of the country's food export revenue, it is not sufficient to offset the import bill (Figure 4b). From an agricultural development perspective, there are clear opportunities to expand domestic production in key commodity areas where Eswatini holds a comparative advantage. By focusing on import substitution and targeting regional export markets the country could reduce its external dependency and strengthen food security. However, to achieve true competitiveness and reduce productivity gaps, value chain inefficiencies, infrastructure deficits, Eswatini must address a range of structural and systemic challenges. These challenges, highlighted above, have been known for years. 9 Figure 4. Eswatini Food Imports and Exports a) Food imports (E million) b) Food exports (E million) 2,000 1,200 Millions Millions 1,800 1,000 1,600 1,400 800 1,200 600 1,000 800 400 600 200 400 200 - 2018 2019 2020 2021 2022 2023 - 2018 2019 2020 2021 2022 2023 Refined sugar Cereals Cereals Vegetables, roots and tubers Vegetables, roots and tubers Meat and edible offals Meat and edible offals Source: Eswatini Statistics Office Source: Eswatini Statistics Office 21. Given the limited systemic changes and stagnant sector growth over the past decade, it is imperative to reassess how to catalyze meaningful transformation in Eswatini’s agriculture sector. The findings and recommendations of the 2011 Agriculture Sector Review largely remain valid and relevant today, as many fundamental sector challenges and systemic issues persist. This underscores the new for a renewed strategic approach that moves beyond diagnostic and toward implementation and impact to trigger sector transformation. Recognizing this, the current review not only reiterates and updates the "what"—the critical challenges and opportunities—but also places a strong emphasis on the “how”: identifying practical entry points, strategic priorities, and actionable policy shifts necessary to drive sector-wide transformation. It is time to shift from analysis to action and deliver results that improve productivity, enhance resilience, and unlock the sector’s potential as a driver of inclusive growth and rural development. 10 3. KEY DRIVERS AND BOTTLENECKS OF AGRICULTURAL GROWTH IN ESWATINI 3.1 Drivers 22. Commercially produced crops and livestock constitute the core of Eswatini’s agricultural output. Despite being cultivated on only 26 percent of the country’s arable land, commercial crops account for approximately 80 percent of total agricultural output. This disproportionate contribution is largely due to the widespread adoption of modern agricultural technologies, including mechanization, improved seed varieties, and efficient farming practices, and the concentration of irrigation infrastructure with commercial farms controlling 90 percent of the country’s irrigated land. These factors collectively result in higher yields, superior quality produce, and greater market competitiveness. 23. The backbone of Eswatini’s commercial agriculture sector is sugar and forestry production. The sugar and forestry sub-sectors contribute significantly to the economy. Eswatini is among the leading regional sugarcane producers, exporting 92 percent of total output. In 2022, the sugar sub-sector produced 5.3 million metric tons of sugarcane, generating 630,000 tons of processed sugar, accounting for 5 percent of GDP and providing employment to 20,000 individuals. Forests covering 33 percent of Eswatini’s land area, also makes a substantial contribution to the economy. In 2022 the forestry sector contributed 1.3 percent to GDP, 5.9 percent of export earnings, and supported 14 percent of formal employment (as of 2018), playing a significant role in the commercial agriculture sector. Beyond sugar and forestry, Eswatini is diversifying its commercial agriculture bases with emerging production of cash crops, including strawberries, watermelons, and sunflowers targeting both domestic and international market demands to enhance sector resilience and reduce overreliance on a narrow crop base.23 Box 1. Swazi Nation Land and Title Deed Land Eswatini’s agrarian economy is characterized by two distinct land tenure systems: Swazi Nation Land (SNL) and Title Deed Land (TDL). SNL covers 214,000 ha and TDL encompasses 104,000 ha. The SNL system consists of communal land primarily cultivated by smallholder farmers who grow maize and rear livestock mainly for household consumption, reflecting predominantly subsistence farming. In contrast, the TDL system provides exclusive land rights to individuals and corporate entities, mostly enabling large-scale commercial farming with modern production techniques and market-oriented crops such as sugarcane, citrus, and timber. (Detailed data on the distribution of commercial versus smallholder farmers by land tenure is not available, limiting deeper analysis on this topic). An analysis by the World Bank of Agriculture’s contribution to GDP in 2011, revealed that crops grown on SNL accounted for just 6.5 percent of the total agricultural output, compared to 80 percent for TDL operated by commercial farmers. It estimated that TDL was 12 times more productive than SNL. Most smallholder farmers under the SNL system rely on rainfed agriculture, traditional farming methods, and limited access to inputs such as fertilizers and improved seeds, resulting in lower yields and productivity. Despite occupying majority of the crop land in Eswatini, smallholder farmers contributed only 11 percent of total agricultural output. For example, average cereal yields were only 1.1 tons/ha in 201824 significantly below the potential range of 4-6 tons/ha. Given that enabling conditions have remained largely unchanged since 2011, it is 23International Trade Administration. (2024). Eswatini - Agriculture. U.S. Department of Commerce. 24Rugube, L. M., Nsibande, S. P., Masarirambi, M. T., & Musi, P. J. (2019). Factors affecting profitability of smallholder vegetable farmers in the Shiselweni region, Kingdom of Eswatini (Swaziland). Sustainable Agriculture Research, 8(1), 104–115. 11 unlikely that productivity of SNL has improved meaningfully. Conversely farmers operating under TDL system engage in commercial agriculture, utilizing modern production methods to cultivate export-oriented crops. TDL is primarily used for cropland, livestock ranching, timber and fruit plantations, and mining concessions. The commercial sector produces key exportable commodities such as sugarcane, wood products, citrus fruits, meat and meat products, and textiles. Commercial farmers employ modern and intensive production methods, including the extensive use of high-quality inputs, mechanization, and advanced farming technologies. 3.2 Bottlenecks and Constraints 24. The low productivity and low production levels that characterizes a large segment of Eswatini agriculture among SNL farmers has made the country increasingly dependent on food imports to meet domestic food consumption needs. This dependence on imports has negative fiscal implications, as it requires the outflow of hard currency. The World Bank’s Public Finance Review notes that rising imports are putting pressure on Eswatini’s gross official reserves, which declined from 3.5 months of import cover in 2021 to 2.6 months in 2023.25 The implications run beyond fiscal pressures. Rural households remain trapped in poverty as they spend a disproportionate share of their income on food, leaving little room for investing in farming technologies, education, or other businesses. As a result, a large proportion of the population remains undernourished, malnourished and food insecure with limited capacity to build resilience and pursue upward mobility. 25. The vulnerability of small-holder farmers is further exacerbated by external shocks including climate change, international market fluctuations, and natural disasters. Eswatini is highly exposed to extreme weather events s such as droughts, floods, violent storms, and epidemic outbreaks as well as forest and grazing land fires. These shocks significantly affect agricultural production26 and have a compounding effect on food insecurity. Regions like Lubombo and Shiselweni, which are among the most food-insecure areas, are also the most affected by drought. The persistent droughts and water scarcity continue to challenge the country’s ability to meet its Sustainable Development Goals, especially in terms of zero hunger and climate resilience. 26. The low productivity of Eswatini’s agriculture sector stems from multiple interrelated constraints. These include biophysical, structural, knowledge-based, financial, technological, and market access constraints (Figure 5). These interlocking challenges reinforce each other, trapping large segments of the population in poverty, and making them more dependent on weather patterns, global price trends, and government support. Unless these constraints are addressed comprehensively, agricultural transformation will remain elusive. 25World Bank. 2025. Eswatini Public Finance Review. 26World Bank, 2021. Eswatini Country Climate Risk Profile. World Bank Group. Washington DC 20433. https://climateknowledgeportal.worldbank.org/sites/default/files/2021-08/15929-WB_eSwatini%20Country%20Profile- WEB.pdf. 12 Figure 5. Summary of key constraints affecting smallholder farmers in Eswatini Biophysical/ climatic factors - poor soil quality - climate vulnerability Structural constraints - tenure insecurity Low Financial constraints - market infrastructure - limited access to finance - post harvest losses productivity - inability to afford inputs - gender and youth exclusion Limited knowledge of technologies, such as: - modern technologies including digital tools - climate-smart technologies - pest management technologies 27. The constraints described above generate negative synergies, with far-reaching implications both for the economy and the population of Eswatini. Economic impacts include: (i) reduced agricultural output, which undermines food security and heightened national vulnerability to fluctuations in global markets; fluctuations; (ii) limited job creation in the rural economy, contributing to rising unemployment, particularly among youth; and iii) stunted agricultural sector growth which despite it contributes significantly to GDP, restrict overall economic development in Eswatini. Impacts on the population are manifested in: (i) food insecurity, as low levels of local production lead to higher food prices, increasing vulnerability among low-income households, contributing to malnutrition and related health risks; (ii) persistent poverty, given that agriculture is a primary source of income for rural populations and constrained productivity directly exacerbates poverty levels; and (iii) increased rural-to-urban migration, driven by economic hardships, which in turn intensifies urban unemployment and places added pressure on municipal infrastructure and services. 13 4. UNLOCKING OPPORTUNITIES FOR VALUE-CHAIN DEVELOPMENT IN ESWATINI 4.1 Overview 28. Eswatini’s agriculture sector holds significantly untapped profit potential, particularly within four priority value chains: maize, dairy, beef, and vegetables. These commodities are not only crucial to national food security and rural livelihoods, but also increasingly represent increasingly viable commercial opportunities. When supported with the right inputs, services, and infrastructure, they can generate meaningful profit margins through integration into structured markets. The selection of these four value chains is based on their strategic importance to Eswatini’s economy, food security, export potential, and employment generation: • Maize: As the staple crop in Eswatini, maize is grown by the majority of farming households, primarily for subsistence. It plays a vital role in household nutrition and income, while also underpinning the broader agricultural economy. In 2024, domestic maize demand was estimated at 140,000 metric tons per year, compared to a supply of only 75,000 metric tons, highlighting a significant gap and opportunity to scale up local production and reduce reliance on imports. Increasing maize productivity remains a national priority. • Beef: The beef sector is a critical driver of rural income and national economic development, contributing 2.9 percent to GDP and 32 percent to agricultural GDP as of 2018. In 2023, domestic beef consumption was approximately 7,900 metric tons. The value chain sustains over 60,000 jobs across farming, feedlot, slaughterhouses, and retail positions. It acts as a cornerstone of employment, rural livelihood support and economic activity. • Vegetables: Vegetable production enhances rural livelihoods by creating jobs and diversifying farming income. Eswatini has demonstrated strong export performance, particularly in high-value baby vegetables. Export volumes have increased by 30 percent in recent years, reaching 184 metric tons, with a value of US$3.1 million, signaling a strong market potential. • Dairy: The dairy sector in Eswatini is significant for the country’s agricultural and economic landscape as it contributes significantly to food security by providing essential products such as milk, cheese, and yogurt. As of 2022, per capita dairy consumption in Eswatini was estimated at 90 liters annually, one of the highest rates in Africa. In 2020, total dairy consumption in the country was approximately 88.4 million liters (Liquid Milk Equivalents). Valued at over US$56.6 million, the dairy sector supports more than 1,800 jobs and plays an important role in rural development. 29. This section examines current profitability trends within the four value chains, identifying key bottlenecks that limit their growth. It then reviews the role of ongoing programs and interventions, drawing lessons from successful regional and global case studies. Based on these insights, the section proposes targeted, actionable reforms to unlock the full commercial potential of Eswatini’s agriculture sector. 14 4.2 Value Chain Profitability Snapshot 4.2.1 Maize 30. As a staple crop, maize offers a reliable agricultural option due to its widespread consumption and consistent demand in both local and regional markets. The average profit margin is approximately E6,729 (US$364 per hectare), representing 19 percent of total revenue. While maize provides a steady return, its profitability is still considerably lower than other agricultural commodities such as green beans or livestock farming. The main cost drivers in maize cultivation include seed (E2,675/ha), fertilizer (E7,396/ha), and chemicals (E4,180/ha), land preparation (E5,300/ha), labor (E5,520/ha) and transport (E3,000/ha).Together input costs such as seeds, fertilizers and pesticides account for over 51percent of total production expenses, underscoring the input-intensive nature of maize farming. Labor and land preparation are also significant, reflecting the crop’s high dependence on manual work and mechanization constraints. Transport costs, while notable, are moderate relative to other cost components. These figures, illustrated in Figure 6, highlight the need for strategic cost-reduction interventions and improved productivity to boost maize profitability and make it more competitive with other value chains. The question arises as to why so many farmers grow maize when profit margins are much lower than for alternative products. A likely explanation is low production costs (E28,071/ha), which enables them to grow maize without the need to borrow much for inputs. Upfront costs are low, and farmers struggle with access to finance. In other words, while other crops (as well as beef and dairy) offer higher margins, the barriers to entry for growing maize are low. Figure 6. Costs and Margin for Maize Cultivation in Eswatini (per hectare) Source: Author’s estimates based on gross margin data from MOA. 15 4.2.2 Beef 31. Beef remains one of Eswatini’s most high-value agricultural commodities commanding premium market prices ranging between E60—E70 per kilogram. Livestock production in the country encompasses beef cattle, dairy cows, goats, sheep, poultry, and pigs, providing a vast range of products such as meat, milk, eggs, draft power, manure, and hides. 32. Despite its market potential, beef supply has declined steadily over the years. Beef production declined from 12,650 tons in 2015 to 8,099 tons in 2023 reflecting a combination of low productivity and systematic constraints. This downward trend may be related to various factors including: Low-input, traditional production systems (e.g., free-range grazing without fodder cultivation), which are increasingly unsustainable in the face of climate variability and land degradation; unpredictable weather patterns affecting pasture availability and livestock health; and animal health risks notably the prevalence of Foot and Mouth Disease (FMD) which has severely impacted trade. Since 2019, a government-imposed import ban to prevent FMD spread has reduced beef imports to just 90 tons in 2023 (Figure 7). Figure 7. Domestic Production and Imports in Eswatini 14000 12000 Beef (Tones) 10000 8000 6000 4000 2000 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Total Domestic Beef Production Imports Source: Eswatini Department of Veterinary and Livestock Services 33. A financial analysis of beef production in Eswatini shows a strong profit margin for feedlot enterprises, reinforcing the sector’s commercial viability. Based on a model feedlot with 20 feeders, the analysis shows total costs of E241,845, total revenue of E308,000, resulting in a gross profit of E66,155. A profit margin of 21 percent shows that beef farming is profitable, particularly for more intensive and commercially oriented models. The primary cost drivers include feed (E224,800), the single largest expenditure accounting for 93 percent of total cost, followed by transport (E7,700), veterinary care (E1,395), and labor (E4,500). These figures are further illustrated in Figure 8 highlighting the feed-intensive nature of feedlot operations. While feed costs dominate the expense structure, the model demonstrates that with efficient management and access to markets, beef production can yield consistent financial returns. Strategic investments in feed production, animal health services, and transport logistics could further enhance profitability and scalability of the beef value chain in Eswatini. 16 Figure 8. Costs and Margin for Beef Production in Eswatini Source: Author’s estimates based on gross margin data from MOA. 4.2.3 Vegetables 34. The profitability of vegetable production in Eswatini depends on several key factors including input costs, yield potential, and market prices. Key cost drivers typically include seedlings, fertilizers, labor, irrigation and transport. While a range of vegetables were assessed under the broader value chain analysis, this section highlights carrot and cabbage, two of the highest margin vegetables to illustrate profitability trends. Carrot 35. Carrot production plays a significant role in Eswatini’s horticultural sector, benefiting from favorable agro-climatic conditions and a growing local market. A detailed cost analysis for carrot production (Figure 9) shows that seeds and labor represent the largest share of total production expenses. The total production cost for carrots is approximately E75,712 per hectare, whereas the gross revenue is E157,500. Despite the relatively high input expenses, carrot farming demonstrated strong profit margin of E81,788 (51.9 percent) (Figure 9). These figures underscore the commercial potential of carrot cultivation, particularly for farmers with access to inputs, reliable irrigation, and organized markets. 17 Figure 9. Costs and Margin for Carrot Production in Eswatini (per hectare) Source: Author’s estimates based on gross margin data from MOA. Cabbage 36. Cabbage is one of the most widely grown vegetables in Eswatini, valued for its high market demand and relatively short growing cycle. The crop performs well under well-managed conditions, offering farmers a profitable and reliable income stream due to its high yield potential and consistent demand. Cabbage production is highly profitable, with a margin of E134,604 (67.3 percent). The high profit margin is primarily driven by strong gross revenue generation (E200,000) relative to relatively moderate input costs (E65,396). The primary cost components include seedlings, fertilizer and transport, while labor costs are comparatively low (E5,200) - highlighting the crop’s less labor-intensive nature compared to others. The details are further illustrated in Figure 10. Cabbage thus represents a highly attractive opportunity for both smallholder and commercial farmers, particularly where access to quality inputs and irrigation is available. 18 Figure 10. Costs and Margin for Cabbage Production in Eswatini (per hectare) Source: Author’s estimates based on gross margin data from MoA. 4.2.4 Dairy 37. Dairy plays a crucial source in Eswatini’s agricultural economy providing income and employment supporting rural livelihoods and enhancing food security. The sector not only provides essential nutritional products such as milk, cheese, and yogurt, but also sustains a wide network of actors, from small-scale and commercial farmers to processers, distributors, and retailers. Eswatini’s competitive advantage in dairy lies in its ability to generate diverse employment opportunities across the value chain, while simultaneously contributing to rural income generation and nutritional security. 38. A financial analysis of milk production from 5 cows (Figure 11) highlights the strong profitability of the sector. The total costs are E123,244 and total revenue is E211,532, yielding a net profit margin of E88,288. The key cost components include feed (E62,770), which is the largest expense, followed by the costs associated with natural feed (hay) (E4,500), breeding (E1,125), and veterinary drugs (E1,604). Altogether, over 63 percent of the total costs are attributed to feeding, and animal health (veterinary services including pest control through dipping. Despite these costs, dairy farming offers higher revenue and strong margins compared to most crop-based ventures (e.g., maize or green beans). Its profitability is supported by consistent demand for milk and dairy products in both local and regional markets, therefore, making it a lucrative and resilient option within Eswatini’s agriculture sector (Figure 11). 19 Figure 11. Costs and Margin for Milk Production in Eswatini (for 5 cows) Source: Author’s estimates based on gross margin data from MOA. 4.3 Constraints to Value Chain Development 39. Despite the promising commercial viability of these value-chains, several systemic constraints continue to hinger the full realization of their optimal economic potential. These include high input costs and inefficiencies in the input supply system, limited access to market and weak value-addition leading to lower output prices, inadequate extension services and knowledge transfer leading to low adoption of high-yielding technologies, restricted access to finance and insufficient risk mitigation tools which leads to inadequate affordability for inputs, vulnerability to risk, and institutional capacity constraints and poor coordination mechanisms. As the comparison between selected commodities shows, the cost of producing dairy, beef and horticulture products are much larger than for maize: access to finance is a key binding constraint preventing farmers from investing more in these profitable areas. This shows the importance of improving the access to finance (especially for investment grants) to accelerate diversification. The following constraints help to explain why, for example, most small farmers do not cultivate apparently profitable crops, growing maize instead, and why they remain outside the value chain. 40. Input supply challenges: Input costs account for a significant share of total production expenses across all value chains indicating persistent inefficiencies within the input supply chain. These inefficiencies contribute to low adoption of productivity-enhancing technologies such as certified seeds, vaccines, and high-quality livestock feed, etc.,) due to issues of cost, availability, or awareness. Additional challenges lowering productivity and profit margins include limited access to mechanization delaying critical land preparation, affecting timely planting and other practices necessary for achieving higher yield; inefficient 20 irrigation infrastructure reducing resilience to climate risks; and a lack of post-harvest facilities leading to significant losses particularly in perishable commodities. This ASR noted that the Government of Eswatini, through State-Owned Enterprises (SOEs)27 has attempted to address some of these challenges through an input subsidy program. This program covers seed, fertilizer and mechanization, offering a fifty percent subsidy for white maize, sugar beans, and sorghum for up to one hectare per farmer. However, its impact has been limited. A study conducted to assess the impact of the subsidy among smallholder farmers in Hlohlo region showed that subsidy recipients saw an average productivity increase of only 0.13 tons/ha compared to non-beneficiaries.28 Declining farmer participation and inadequate program funding, as reported by MOA, further constrain its effectiveness. 41. Limited access to markets and value-addition: Fragmented smallholder production systems result in low volumes and high transaction costs to reach formal markets. Most smallholder farmers sell raw produce at the farmgate to intermediaries due to lack of transport, cold storage, absence of real-time price information and limited value-addition infrastructure especially for perishables such as dairy and vegetables. As a result, farmers earn minimal value for their products, reducing profitability and discouraging commercial investment in agriculture. 42. Limited access to finance and vulnerability to risk: Most smallholder farmers have limited access to credit due to collateral constraints and high-risk perception of agricultural lending. This is further exacerbated by lack of insurance products to hedge against drought, pests and diseases and price shocks. To date, no structured weather risk mitigation mechanisms have been implemented in Eswatini, leaving farmers vulnerable and discouraging long-term investment in productivity-enhancing inputs. 43. Limited institutional capacity and coordination gaps: An analysis of public expenditure in agriculture shows limited funding towards research and extension services, resulting in weak institutional capacity to deliver services including but not limited to climate-smart technologies, veterinary services, business support, soil health, prevention of disease and pests, limited adoption of modern yield-enhancing practices among smallholder farmers. Poor coordination among agricultural programs and infrastructure investments are one of the main challenges. For example, this resulted in irrigation schemes often lacking operational funding, complementary services (e.g., operations and maintenance), and inadequate linkages to markets due to a lack of last mile infrastructure such as feeder roads. Data gaps and inconsistencies, which impede evidence-based planning and monitoring, also became apparent during the preparation of this ASR. Although the Government and its partners have developed an integrated agricultural statistics and information system, it is yet to become operational. 44. Ongoing programs supporting value chain development. Several government and development partners initiatives have demonstrated localized success in addressing value chain bottlenecks, however, scaling of such successes remains limited. These include the Smallholder Market-Led Project (SMLP) which aims at facilitating and strengthening smallholder linkage to markets through contract farming and 27Namboard and National Maize Corporation (NMC) administer the input subsidy program. 28Sotja G. Dlamini, Laudia T. Ogunniyi, Fundindaba M. Vilane, and Gbenga E. Fanifosi. Impact of agricultural input subsidy on productivity of small-scale maize farmers in the Hhohho Region of Eswatini. International Journal of Development and Sustainability ISSN: 2186-8662 – www.isdsnet.com/ijds Volume 8 Number 12 (2019): Pages 785-794. 21 commodity aggregation; the Eswatini Water and Agricultural Development Enterprise (EWADE) which focuses on irrigation development and farmer organization for commercial production; the Livestock Development Policy which supports improved animal health services, feed supply and artificial insemination; and the Input Subsidy program which provides affordable inputs (seed and fertilizers) to maize and vegetable farmers via a 50 percent subsidy. Despite these efforts, limited integration and weak coordination, especially with the private sector, restrict the scalability and sustained impact of these programs. Enhancing alignment, resource sharing, and co-investment across initiatives is critical to unlocking Eswatini’s full agricultural potential. 4.4 Value chain development as an opportunity to bridge the dualistic agriculture system 45. Eswatini, like many countries in the region, uses a dualistic agriculture system. “Dualistic agriculture system” refers to the coexistence of two structurally different farming models within the same national economy: large scale commercial farms and smallholder farmers. While this dualism reflects economic disparities, it can also serve as strategic asset when leveraged effectively. When integrated thoughtfully, a dualistic structure can support inclusive value chain development where both commercial and smallholder segments contribute to and benefit from agricultural transformation. This dualistic structure is deeply rooted in Eswatini’s agricultural history, where commercial estates coexist with smallholder producers on Swazi Nation Land. In Eswatini, value chains are well developed to serve large commercial farmers and private sector actors who benefit from better access to finance, markets, infrastructure, and services. In contrast smallholder producers remain largely excluded, facing systemic constraints such as weak market linkages, high input costs, and limited access to technology and extension services. To transform Eswatini’s agriculture in an inclusive and sustainable way, deliberate efforts are needed to bridge this structural divide—ensuring that smallholders are integrated into modern value chains through coordinated investments, targeted support, and institutional reforms. 46. Leveraging complementarities between smallholder and commercial farming: Smallholder farmers bring several unique strengths to Eswatini’s agricultural landscape including abundant family labor, indigenous knowledge systems, and experience in climate adaptation. When organized into cooperatives, associations or outgrower schemes, smallholders can collectively supply commercial processors or participate in vertically integrated supply chains anchored by large farms or agribusinesses. This inclusive model offers mutual benefits: For smallholders’ integration into structured value chains provides market access, often through price guarantees and stable demand, while also facilitating inputs, services, and technology transfer. Spillover in knowledge and skills—particularly in agronomic practices, post-harvest handling, and quality standards—further strengthen their productivity and resilience. For commercial farmers and agribusinesses, collaboration with smallholders offers a diversified and reliable supply base. Commercial actors also benefit from shared input delivery infrastructure (e.g. bulk input procurement of seed, fertilizer and chemicals), helping reduce operational costs and enhance efficiency. By sharing mechanization services (e.g., land preparation, planting, harvesting), technical expertise, and innovations through well-defined contract farming or partnership models, commercial entities can support consistency, traceability, and quality assurance in supply chains—thereby improving market competitiveness and brand value. Box 2 presents successful regional and global examples of integrating 22 smallholder farmers into commercial value-chains, offering practical lessons that could be adapted to the Eswatini context. Box 2. Value chain development in dualistic agriculture systems Several successful examples of value chain development in dualistic agriculture systems offer valuable lessons for Eswatini, where both smallholder farmers and large commercial farmers coexist. This form of agricultural dualism is common in Sub-Saharan Africa such as South Africa, Zambia, Kenya, and elsewhere globally (e.g. Brazil, India). The cases below have shown how inclusive models can drive growth, reduce poverty, and improve food security through integrating smallholders into structured value chains: Zambia – Maize and Soybean Value Chains: Commercial grain processors source maize and soybeans from smallholder farmers through mechanisms such as contract farming, aggregation centers, and extension services bundled with input delivery. Such investments resulted in increased production of maize and soybean, strengthened local processing industries (e.g., feed and oil), and reduced price volatility through structured markets and aggregation platforms. Kenya – Dairy Value Chain: Large dairy processors partner with smallholder dairy cooperatives, investing in chilling infrastructure, extension services, and quality control systems. This model has helped transform Kenya into one of Africa’s largest milk producers, while also improving rural livelihoods and household nutrition. South Africa – Horticulture and Wine Value Chains: Export-oriented wine and fruit companies mentor smallholder farmers and integrate them in outgrower schemes for EU markets. As a result, export volumes from smallholder-linked cooperatives have increased, contributing to rural poverty reduction in several districts. Brazil – Soybean and Beef Value Chains (Global Example): Wile large farms dominate exports, small family farms are integrated through inclusive service models such as machinery rentals, rural research and development (R&D) and access to finance. Inclusive public policies, adaptive research systems, and rural credit and insurance have been the key mechanisms in bridging the dualistic system. Today, Brazil is a leading global exporter of soy and beef. Table 1. Strategic integration pathways for Eswatini Pathway How it works in dualistic systems Action Contract farming and outgrower Links smallholders to large Formalize dairy, maize, and models processors or exporters horticulture contracts Cooperative development and Enables economies of scale for Invest in cooperative aggregation aggregation smallholders centers Mentorship and joint ventures Commercial farms support Pilot joint ventures/equity sharing smallholder development in sugar and horticulture Extension and innovation transfer R&D benefits both large and small Build adaptive extension systems farmers with dual-targeted services Post-harvest infrastructure Shared infrastructure reduces losses Fund rural cold chains, dryers, and and improves marketability storage Certification and export standards Enables access to premium markets Promote compliance schemes for smallholder exports 47. Drawing on successful regional and global practices, Eswatini has an opportunity to build a more inclusive, productive and resilient agricultural economy. This can be achieved through the following 23 strategic actions: (i) mobilize public and private capital to strengthen smallholders’ participation in value- added markets. This includes expanding access to finance, risk mitigation instruments (such as insurance), and public investment in market-enabling infrastructure like roads, irrigation, and storage facilities; (ii) mobilize public and private capital to strengthen smallholder participation in value-added markets. This includes expanding access to finance, risk mitigation instruments (such as insurance), and public investment in market-enabling infrastructure like roads, irrigation, and storage facilities; (iii) Leverage commercial farms as anchors enterprises within inclusive agribusiness ecosystems. By integrating smallholders into their supply chains through contract farming, input provision, and knowledge transfer, commercial farms can catalyze broader sectoral development while benefiting from a reliable and diversified supplier based; and (iv) promote integrated agricultural value chain development through well- functioning inputs and output markets, extension services and agro-processing facilities. This integration can support improved productivity, value capture, and resilience across the sector. In doing so, Eswatini can transition from a dualistic agricultural structure to a more equitable and cohesive system — where both smallholder and commercial farming models contribute to sustainable economic growth, enhanced food security, and poverty reduction. 5 REORIENTING PUBLIC INVESTMENT TOWARD AGRI-FOOD TRANSFORMATION THROUGH MARKET-DRIVEN OUTCOMES 5.1 Overview 48. Over the past decade, Eswatini has made consistent public investments in agriculture aimed at enhancing food security, improving rural livelihoods, and promoting economic diversification. These investments— covering input subsidies, land development, livestock services, and infrastructure—were designed to revitalize key agricultural value chains such as maize, dairy, beef, and vegetables. 49. However, the returns on these investments are not fully capitalized. Agricultural GDP growth is stagnant, rural poverty persists, and many value chains continue to underperform both in terms of commercial viability and social returns. The underperformance suggests that while the scale of public investment is noteworthy, its design and execution require substantial improvement. 50. The core issue lies not in the quantity of investment, but in its inefficiency, alignment, and strategic focus. Current public programs often operate in silos, are often poorly targeted and fail to reflect market dynamics or leverage private sector participation. To transform agriculture’s potential into a driver of inclusive, market-led growth, Eswatini must shift from production-centric interventions to value chain- based public spending, learning from successful models elsewhere on the continent and globally. 24 5.2 Assessment of the policies and strategies 51. In 2023 the Government of Eswatini took a significant step toward transforming the agricultural sector by launching the Eswatini National Agricultural Investment Plan (ENAIP). ENAIP provides a comprehensive roadmap for targeted investment that requires immediate support to transition agriculture to the desired level of production and productivity. The Plan aims to develop value chains as a way of transforming subsistence farming into commercial agriculture. The ENAIP is to be implemented by all public and private sector value chain players in the country (including SOEs). The same year the Government launched the Eswatini Agriculture Development Fund (EADF), to support ENAIP implementation with the main purpose of transforming the agriculture sector by providing catalytic incentives and investments to stimulate growth in farming and actively encourage private sector participation in agricultural value chains. Together, ENAIP and EADF represent a paradigm shift in Eswatini’s agricultural policy, moving from fragmented, production-centric support towards a more coordinated, investment-led approach that emphasizes profitability, inclusivity, and long-term sustainability. 52. The distribution of public funding under ENAIP reveals important insights into sectoral priorities and potential gaps. Areas that receive low budget allocations may indicate perceived low priority, limited need for public sector support, or lack of integration within the broader strategic framework of the plan. A notable concern is the dominance of capital irrigation projects, which account for 56.4 percent of all spending. It is unclear, however, whether spending on irrigation has yielded the expected returns when spending on complementary factors such as extension, R&D, etc. are either small or non-existent. Irrigation is important but on its own it is not enough. The areas receiving the lowest funding are Smallholder Dairy Production, Fisheries, Home Economics, and Development Partner Subscriptions which receive less than 0.5 percent, suggesting limited focus or lower perceived importance. The skewed spending patterns raise concerns about the overall balance and synergy of investment required to achieve meaningful transformation. To fully unlock the transformative potential of ENAIP, there is a pressing need for more balanced, integrated investment planning, enduring that high capital areas like irrigation are complemented by ‘soft’ investments in human capacity, technology and institutional strengthening. 53. Eswatini’s agriculture sector strategies and plans reflect strong national ambition to enhance food security, boost economic growth, and alleviate poverty. However, despite some commendable strengths, the sector also faces significant challenges. These include: i. Budget constraints limiting long-term investment in rural infrastructure and value chain integration. Agriculture consistently receives less than 10 percent of the national budget, falling short of the Maputo and Malabo Declaration targets of allocating at least 10 percent of public spending to agriculture. This constrains the implementation capacity of many programs. ii. Erratic spending patterns, with periods of high investment often followed by abrupt budget cuts due to fiscal pressure. In addition, weak coordination across government ministries, parastatals, and other stakeholders often leads to duplication of efforts, inefficiencies, and slow project delivery. 25 iii. In some cases, dependence on donor-funded projects raising questions about sustainability and ownership. iv. Weak statistical systems that hamper evidence-based decision-making, progress tracking, and accountability. 54. With its public debt level exceeding 40 percent, Eswatini must exercise fiscal prudence in repurposing its budget to maximize returns catalyze private sector engagement. This requires identifying areas where public goods, such as research and development, large irrigation systems, and other investments can stimulate private sector production. Government-funded irrigation systems which are implemented in SNL are aimed at stimulating private sector growth, helping smallholder farmers enter the value chain. To support the MOA’s goals to transform Eswatini's agricultural production, encourage commercial farming, and diversify small and medium holder agriculture, the agriculture budget can be repurposed to efficiently allocate and utilize resources for agricultural development, ensure support for smallholder farmers through loans and financial assistance, collaborate with international development partners to secure loans and grants for agricultural projects, and improve agricultural productivity and sustainability through targeted funding. Realizing Eswatini’s agricultural development and transformation goals will be significantly constrained by the current limitations of public spending in the sector. Even though expenditures have been increasing in recent years, on average 80 percent of the annual agricultural budget is spent on capital projects comprising irrigation development (56 percent), livestock production (7.2 percent), and farm input subsidies (6.9 percent). This spending pattern has come at the expense of critical functional areas that are essential for long-term sectoral sustainability. These underfunded areas include research and innovation, provision of extension and veterinary services, and monitoring and evaluation. This issue is explored in the next section on agriculture public expenditures. 5.3 Trends in agricultural public spending 56. Despite significant increases in public investment, the returns on government investments in the agriculture sector have declined significantly over time. In 2010, agriculture public expenditures (APE) were E896 million, rising to E2.86 billion (113 percent in real terms). However, over this period agriculture contribution to GDP declined by 4.1 percent, from E5,209 million to E4,997 million.29 This divergence between investment and output highlights inefficiencies in expenditure allocation and underscores the need for a more strategic, value-driven approach to public spending in agriculture. (Figure 12 for a comparison, adjusted to constant 2015 lilangeni, i.e. in real as opposed to nominal terms to account for inflation). 29All in constant 2015 currency. WDI indicator “GDP (constant LCU)” was multiplied by the indicator “Agr as a percent of GDP” to arrive at Agr in constant LCU, i.e. SZL. 26 Figure 12. APE vs. Agriculture Sector Value Added (constant 2015, E million) 6,000 5,209 5,640 5,105 5,108 5,000 5,097 4,951 4,914 5,151 4,997 4,797 4,568 4,000 3,485 3,000 2,212 2,000 1,872 1,756 990 1,442 1,515 993 1,309 1,000 1,081 1,002 1,330 348 - 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Agr GDP contribution APE Source: Author calculations based on World Bank World Development Indicators; MOA data 57. In a typical year, agriculture investments in Eswatini are mostly funded through the Government’s own budget, with relatively limited reliance on development partner funding. The largest source of APE is the Government budget exceeding 70 percent in most years, followed by development partner loans (see Figure 13). Major Capital projects are funded through loans from development partners like the African Development Bank and the International Fund for Agricultural Development. In 2021, 71 percent of total APE was sourced from the government budget and 24 percent from development partner loans. Capex varies significantly each year due to being tied to specific projects. 27 Figure 13. APE by Share of Funding Source 100% 0% 0% 8% 11% 8% 10% 90% 12% 7% 11% 17% 21% 24% 80% 70% 60% 50% 91% 92% 91% 86% 83% 84% 84% 86% 40% 81% 78% 75% 71% 30% 20% 10% 0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Government Levies Dev. Partner Loans Dev. Partner Grants Source: Author calculations based on MOA data 58. Most agricultural public expenditures by allocation, are directed towards capital investments. APE categories include capital expenditures (capex), MOA administration and extension services, subventions and farm input subsidies. According to the Bank’s Public Finance Review, agriculture accounts for 12.2 percent of all capital investments in Eswatini, which is almost twice the sub-Saharan Africa average of 6.8 percent.30 In 2021 MOA administration (including grants and subsidies) accounted for E308.7 million (US$22.0 million), representing 10.8 percent of total APE that year. 59. A review of the functional allocation of MOA funding shows that most expenditures were directed towards irrigation system and livestock activities. This strong emphasis suggests a strategic importance in enhancing agricultural productivity and resilience. However, low funding for research, fisheries, and home economics may represent missed opportunities for diversification and innovation. Low budget allocations for these areas under ENAIP may reflect their perceived lower priority, reduced need for public sector support, or limited integrated into a broader strategic framework. Notably, capital irrigation projects account for 56.4 percent of total sector spending. Despite this significant investment, it remains unclear whether the returns on irrigation have met expectations when spending on complementary areas such as extension, R&D, etc. are either small or non-existent. While irrigation is an important component of agricultural development, it is insufficient on its own. Moreover, it is uncertain whether the increased funding towards irrigation includes key aspects such as scheme governance, operation and maintenance arrangements, and whether water users are contributing through water charges, an essential element for ensuring long-term sustainability of these investments (Figure 14). 30 World Bank. 2025. Eswatini Public Finance Review. 28 Figure 14. Functional Allocation of the Agriculture Public Expenditure (APE), percent Capital Project Irrigation Development 56.40% Livestock Production & Extension Services 7.20% Farm Input Subsidies 6.90% Promotion & Extension Services 5.90% Import Levies (dairy and Veg) 5.80% Smallholder Market led Project 4.80% MOA Ministry Administration 4.10% Land Use Planning & Development 1.60% Purchase of Heavy plant 1.60% SOE Subventions 1.30% Household Resettlement 1.20% Research & Specialist Services 1.20% Livestock, Breeding and Beef value chain 0.70% Maguga Dam Fish Hatchery 0.40% Planning and Analysis 0.40% Home Economics 0.20% Smallholder dairy production 0.20% Fisheries 0.10% Development partner Subscriptions 0.10% Nursery built at Ntondozi 0.00% 0% 10% 20% 30% 40% 50% 60% Source: Author calculations based on MOA data 60. In the last fiscal year, major capital projects have been funded through a mix of external and domestic sources, leading to an increase in total debt in nominal terms. Domestic debt, as a percentage of total debt, stood at about 52 percent.31 The government's primary objective is to channel significant investment into capital projects, with a dual aim of creating an enabling environment for private sector growth and improving the welfare of the population. As a share of the total consolidated budget, the actual APE has ranged from 3.0 percent in 2013 (although this low appears to reflect data issues rather than an abrupt change in APE) to a peak of 13.2 percent in 2021. During the five-year period of 2017 and 2021, expenditure averaged 10.2 percent of the total Government budget—higher than the 7 percent average recorded during the 2010-2014 period.32 This trend suggests a growing prioritization of agriculture in recent years (Figure 15). 31IMF. Kingdom of Eswatini 2024. Article IV Consultation—Press Release; And Staff Report IMF Country Report No. 24/304. 32 Note that the ENAIP, citing the 2022 Eswatini Government Budget Speech, reported that the “Government allocates 5.9 percent of its total expenditure to the agricultural sector.” This calculation was based on a total government budget of E23.2 billion and E1.36 billion allocated by MOA “improve food security and minimize external risks.” It is possible that the MOA does not account 29 Figure 15. APE as Share of Consolidated Budget 14.0% 13.2% 12.0% 10.4% 10.3% 9.8% 9.7% 10.0% 9.3% 8.2% 8.3% 8.2% 8.0% 8.0% 7.5% 6.0% 4.0% 3.0% 2.0% 0.0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Source: Author calculations based on MOA data 61. The gross burden of APE is greater than the net burden. This is because part of APE is funded through grants, which do not require repayment, and another portion through levies, which are collected and distributed outside of the formal budget process. When these off-budget sources – grant and levies – are excluded, a clearer picture emerges of the true fiscal implications of agriculture spending. Since neither source contributes to government debt, they reduce the net burden on public finances. 62. Based on the MOA allocations, Eswatini is falling short of regional benchmarks. The 2003 Maputo Declaration on Agriculture and Food Security called for Africa to “progressively increase its domestic contribution to agricultural investment” setting a target of allocating at least 10 percent of national budgets to APE. According to the African Agriculture Development Programme (CAADP) which operationalizes the Maputo Declaration, Eswatini has not made sufficient progress towards this target, either in terms of increasing its allocation or in closing the gap toward the 10 percent benchmark.33 The ENAIP notes that “Eswatini will require allocating public resources to the agricultural sector to rise significantly and reach 10 percent of the total government budget.”34 However, these conclusions are opposed by the PER findings, which indicate that Eswatini is not only close to the 10 percent threshold, but has exceeded it in recent years (2016, 2020, 2021) (Figure 15). The discrepancy between the PER findings, may be related to data inconsistencies and measurement difficulties, which created challenges for the analysis. However, more important than hitting the 10 percent target is the effectiveness of spending, discussed below. Finally, not all funds allocated in a given budget year to MOA are executed. for all APE, as preliminary data for 2022 suggest that APE far exceeded this amount. The likely explanation is that not all APE falls under MOA. 33 AU 2003 Maputo Declaration on Agriculture and Food Security. https://www.nepad.org/caadp/publication/au-2003-maputo- declaration-agriculture-and-food-security 34 Government of Eswatini. 2023. ENAIP 30 63. While overall government expenditure has exceeded budget allocations indicating execution rates above 100 percent, agriculture sector execution rates have underperformed. According to a recent analysis by the World Bank, from 2018 to 2023, the average execution rate (the share of the allocated budget that was spent) for all recurrent expenditures averaged 103 percent. In contrast, the execution rate for capital expenditures (capex) was 54.6 percent over the same period. Considering only agriculture capex, the execution rate was just 42.0 percent, a level well below the regional average of 64.5 percent among peer countries.35 This under-execution points to persistent challenges in the implementation of capital projects within the sector. 64. Execution rates for MOA administration and subvention budgets were slightly below initial appropriations overall. However, focusing solely on MOA administration and subvention budgets execution is stronger. As shown in Table 2, execution rates for MOA administration and subventions averaged 87.9 percent during the period 2017-2021 consistently remaining above 80 percent. At the same time, MOA’s administrative budget has shown an upward trend, reflecting a steady increase in resource allocation to operational and support functions. Table 2. APE as a Share of GDP – MOA Functional Estimates vs. Actual Execution Rates 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Actuals 239 193 204 221 233 266 290 308 288 312 309 309 Estimates 276 245 248 245 284 302 329 345 323 368 377 327 Actual execution 86.8 78.9 82.4 90.0 81.8 88.3 88.1 89.2 89.4 84.7 81.9 94.5 share of estimates (%) Source: Author calculations based on MOA data 5.4 Why Current Public Programs Are Underperforming for Value Chain Development 65. The government has established several public programs to support value chain development. These include the Input Subsidy Program (ISP), the Smallholder Market-Led Project (SMLP), and infrastructure development through Eswatini Water and Agricultural Development Enterprise (ESWADE). While these programs are well-intentioned and aim to boost productivity and market access, they face significant structural limitations that hinder their overall impact. 66. Public investment in Agriculture is falling short of delivering meaningful returns largely because expenditures are focused on inputs rather than systemic improvements. Excluding capital investments in infrastructure, a substantial share of APE is directed towards recurrent costs and input subsidies. This spending pattern does little to address the systemic constraints faced by smallholder farmers – constraints that suppress yields and productivity, limit market participation and reduce profitability. Looking ahead, the challenge for the government is not necessarily increase agricultural spending but to allocate 35 World Bank. 2025. Eswatini Public Finance Review. 31 resources more strategically. Many of the key levers that drive value chain profitability such as access to technology, infrastructure and markets remain out of the reach of most smallholders. To summarize: i. Shift from input distribution to building sustainable systems. APS need to transition from a focus on inputs subsidies toward the development of resilient and sustainable agricultural system. While input subsidies have improved access to seeds and fertilizers, they do not guarantee market access or farmer profitability. As a result, programs tend to prioritize production volumes over value addition, product quality, and commercial viability. ii. Overemphasis on infrastructure undermines effectiveness., Large scale investments in infrastructure such as irrigation schemes and processing facilities often lack complimentary services such as extension support, access to finance, and efficient logistics. This limits the overall impact of infrastructure investments. Many public assets (e.g., abattoirs, silos) remain underutilized or non-operational due to weak management models and inadequate maintenance planning. iii. Fragmentation and poor coordination hinder impact. Agriculture programs are often implemented across multiple ministries with overlapping mandates. Ministries and agencies often operate in silos, leading to duplication, inefficiencies and fragmented service delivery. Furthermore, projects are often designed without adequate consultation with the private sector, limits market integration and weakens long-term sustainability. iv. Weak monitoring and evaluation limits accountability and learning. for expenditure tracking and results-based management is weak. Many public funded initiatives lack robust systems for expenditure tracking and results-based management. There is limited analysis of returns on investment, making it difficult to evaluate impacts. Programs are rarely adapted based on evidence, and their impact on income generation or market participation remain poorly measured. As a result, government spending often fails to achieve scale or produce intended outcomes. Box 3. Regional and Global Lessons: What Has Worked Elsewhere Eswatini can draw valuable lessons from countries that have successfully reformed their public investment approaches in the agriculture sector. Rwanda: Bundled Support Through Crop Intensification Program • Rwanda’s government integrated input support, extension services, market aggregation, and irrigation into it flagship Crop Intensification Program. • As a result, yields of maize, rice, and beans increased 2–3 times. Private sector millers also co-invested in storage and processing facilities. Key Lesson: Bundled support services aligned with market demand are significantly more effective than standalone input subsidies. Kenya: Value Chain Integration in Dairy Sector 32 • Kenya’s dairy sector transformation was led by private processors (e.g., Brookside, New KCC) with government support in the form of investment in milk collection infrastructure, training programs, and certification systems. • Today, over 80 percent of Kenya’s milk is sold in formal markets, benefiting 1.8 million households with improved incomes. Key Lesson: Public infrastructure in infrastructure and capacity building with complemented by private processing and quality-based incentives drives formal market participation and producer income. Ethiopia: Strategic Planning through a Livestock Master Plan • Ethiopia developed a 15-year national livestock roadmap, to guide investments in feed, genetics, animal health, and export infrastructure aligning donor and government investments. • This plan resulted in improved off-take rates, higher meat yields, and increased export earnings. Key Lesson: Long-term data driven planning, with strong public-private coordination, accelerates structural transformation in agriculture. India: Enabling Contract Farming and Agri-Tech A. Several Indian states have adopted legal frameworks for contract farming, enabling formal buyer-producer agreements backed up by mechanisms for dispute resolution. B. Government subsidies helped agri-tech firms scale digital solutions for soil testing, traceability, and price discovery. Key Lesson: Legal and digital frameworks build trust and transparency in value chains, enhancing smallholder inclusion and profitability. 33 6. CONCLUSIONS AND RECOMMENDATIONS 6.1 Conclusions 67. Eswatini’s agricultural sector holds significant potential to drive rural transformation, generate employment, and contribute to economic diversification. However, a persistent disconnect between public spending and real-world value chain outcomes continues to hinder progress. Current expenditures are fragmented and fail to consider the full spectrum of requirements needed for successful value chain transformation. 68. To change this trajectory, Eswatini must shift toward strategic, market-oriented public investment anchored in profitability, private sector engagement, and inclusivity. This requires adopting a systems- based approach that enhances the enabling environment for smallholder farmers. A value chain-specific ecosystem tailored to agro-ecological conditions as demonstrated in Ethiopia and Rwanda should guide investment decisions. This means identifying the critical inputs and services needed for each value chain needs to thrive, whether cold storage, drip irrigation, high quality seeds, land tenure security, or climate resilient practices. 69. The story of Eswatini’s agriculture sector is not just about underperformance; it is one of untapped opportunity. Healthy profit margins already exist in select value chains — in sugarcane in vegetables, beef, dairy, in high-value exports. These early examples of transformation demonstrate that where value chains are well-organized, adequately supported, and market-linked, farming becomes a viable and profitable livelihood. What Eswatini now needs is strategic, market-led public investment that scales successful models, remove barriers, crowds in the private sector, and integrates smallholders into a dynamic agribusiness ecosystem. 70. A fundamental reorientation of public investment — guided by principles of profitability, sustainability, and inclusivity — is essential. By focusing government funds on functions that only the public sector can or should do while creating space for private sector growth, the country can build a resilient, inclusive, and competitive agricultural economy. The path to growth lies not in spending more across the board, but in spending smarter, targeting areas with the greatest potential to unlock value, scale impact and drive long term transformation. 71. Eswatini has a real opportunity to achieve agricultural transformation by reallocating public resources toward system-wide enablers while leveraging private capital. This would require a clear investment strategy that differentiates between public goods (infrastructure, irrigation, research), catalytic support (youth and women programs, market access), and areas best served by the private sector (processing, logistics, input delivery). By aligning investments with this framework, Eswatini can build a resilient, inclusive, and competitive agricultural economy. 72. Agriculture has the potential to drive rural transformation, create jobs, reduce reliance on food imports, and expand export earnings. However, this potential can only be realized if Eswatini shifts its focus away from doing more of the same, and towards scaling up what works and improving where past 34 efforts have fallen short. Eswatini can transition from stagnant agricultural output to a dynamic, competitive sector that delivers jobs, raises incomes, and strengthens resilience. This will mean: (i) improving allocative efficiency of spending; (ii) increasing the effectiveness of implementation of specific programs; and (iii) ensuring agricultural price incentives are in sync with public expenditures. 6.2 Recommendations 73. Key recommended measures to guide a future roadmap for supporting the ENAIP and driving agri- food transformation in Eswatini include the following: A. Promote smallholder commercialization for food security, job creation, and import substitution. To facilitate commercialization of smallholder farmers, the public sector should prioritize creating an enabling environment for greater private sector participation, i.e. encourage more farmers to transition into market-oriented production. This requires targeted public investment and policy interventions across several strategic areas: • Strengthen robust public-private partnerships to ensure reliable, quality input-supply systems, promote climate-smart agriculture (CSA) technologies and, where feasible, integrate digital tools to enhance productivity. • Strengthen the technical and organizational capacities of farmers (horizontal) – through farmer field schools FFS (extension service delivery), cooperative development, and commodity-based associations. • Strengthen farmers’ linkage to markets – through well-structured productive partnerships with the private sector in key value-chains (vertical). • Address structural constraints, e.g., land tenure security, access to irrigation, exclusion of women, youth from commercial opportunities in agriculture. B. Adopt an integrated value chain approach. Eswatini’s value chains analyzed in this review — maize, dairy, beef, and vegetables — offer compelling profit opportunities and could transform the agricultural sector from largely subsistence-based to a dynamic engine of growth, employment and rural transformation. Although the enabling environment is gradually improving, persistent constraints related to markets access, input delivery, financing, and coordination continue to limit full realization of these gains. By leveraging successful regional and global models, and tailoring them to Eswatini’s unique context, the country can significantly boost farmer incomes, improve food security, and support inclusive rural development. The approach should focus on: • Bundling services around farmer groups and commercial clusters. This is already occurring through Sector Development Plan Agreements (SDPAs). However, while SDPAs are a step in the right direction, greater efforts are needed to evolve them into functional and sustainable Industry Associations. 35 • Investing in market and processing infrastructure. Expand investments in aggregation centers, cold storage, abattoirs, and processing facilities to reduce post-harvest losses and increase value addition within the country. • Enhancing access to finance, innovation, and climate resilience tools. This would target the capacity of institutions such as the Eswatini Agricultural Development Fund (EADF) to design and implement appropriate financing instruments, including de-risking mechanisms, blended finance and strengthening linkages with the commercial financial sector to support smallholder farmers’ access to capital. C. Public investment in agriculture should be strategically deployed to catalyze private sector participation. The private sector plays a critical role in driving growth, developing competitive value chains, and achieving food security, higher incomes, and job creation. To incentivize private sector investment in agriculture, Eswatini must address key constraints and prioritize conducive policy and regulatory reforms required to create incentives for private sector participation to partner with government in key investments necessary for agri-food systems transformation.36 • Address the binding policy and regulatory constraints such as access to land, weak public- private partnership (PPP) policy and regulatory frameworks in agriculture or outdated or unclear investment regulations. • Access to affordable finance, e.g. by strengthening the EADF’s capacity to design innovative financial instruments, including derisking mechanisms, blended finance solutions that crown in private capital. • Prioritize government investment in critical public goods, such as bulk irrigation infrastructure, market access infrastructure, rural roads, and storage/warehousing facilities that reduce risk and improve returns for private investors. D. Establishing a Public Private Dialogue (PPD) forum to strengthen public-private coordination. Build on the momentum of the annual sector Indabas (sector stakeholder workshop) by institutionalizing regular PPD forum. These should be convened at an appropriate decision-making level to enable ongoing collaboration, ensure responsive policy adjustments, and align public and private investment priorities. E. Strengthen MOA’s institutional capacity for ENAIP and EADF implementation. There is a strong need for a well-resourced MOA with robust technical and operational capabilities to support the implementation capacity for ENAIP and EADF. Strengthening institutional capacity is essential to ensure coherent policy execution, transparent oversight, and impactful service delivery. This would cover: • Policy formulation, implementation and oversight. 36 World Bank, 2024. Eswatini Country Economic Memorandum: In search of the drivers of inclusive growth, World Bank Group. Washington D.C.; International Finance Corporation (IFC). 2022. Creating markets in Eswatini. Strengthening the private sector to grow export markets and create jobs. 36 • Technical and operational skills development. • Monitoring and Evaluation of programs – real-time digital M&E tools. • Building a reliable Integrated Agricultural Statistics and Information System. F. Deepen the agriculture sector’s climate resilience. Building climate resilient into Eswatini’s agriculture sector is essential for long-term productivity, food security, and rural livelihoods. As climate risks intensify, value chains development must be rooted in climate resilient agricultural practices that safeguard resources and reduce vulnerability. • Invest in climate-resilient technologies and infrastructure. Support breeding programs for drought and heat tolerant crops and livestock. Improve pasture management practices and provide incentives to farmers to adopt water efficient infrastructure and climate resilient technologies. • Promote climate-smart agricultural practices. Train farmers on climate-smart practices like conservation agriculture, crop rotation, soil health management and integrated water management. Ensure these practices are integrated into extension service delivery and supported through research and demonstration sites. • Expand research on climate-resilient crops. Increase investment in agricultural research to develop and disseminate varieties that are better adapted to local agro-ecological conditions and shifting climate patterns. Areas requiring further analysis G. To ensure that improvements and reform measures under ENAIP are relevant and effective, stronger data systems and analytical capacities are required. The lack of reliable, disaggregated data limits the ability to evaluate the impact of current public spending and policy interventions. In particular, more detailed analysis is required in the following key areas: • Input subsidies: Subsidies are mostly implemented through the SOEs under the MOA. However, limited access to detailed financial and performance data has constrained an analysis of the returns on investment and the effectiveness of these subsidies. For ENAIP to meet its objectives, there is a critical need for evidence-based analysis to assess issues such as: (i) the impact of subsidies on productivity and farmer income; (ii) their cost-effectiveness compared to alternative interventions; and (iii) whether current targeting mechanisms are equitable and efficient. • Import tariffs and bans: Government levies import tariffs on select commodities to regulate domestic markets and support local producers. Notably a ban on beef import introduced in 2019 to prevent the spread of FMD outbreak from South Africa remains in place. The government has also put in place restrictions on the import of genetically modified (GMO) seeds, particularly for maize, vegetables and cotton. These trade restrictions have broader implications for market performance and private sector participation. There is a pressing need to analyze their overall impact on the sector's development, the country’s competitiveness in 37 specific commodities, potential areas for import substitution, and opportunities for high-value exports. • Price incentives: Understanding how farmers respond to different prices is critical for designing sector reforms. Price incentives analysis looks at how farmers respond to different prices and changes in prices when deciding what and how much to produce. Distortions to agricultural incentives—essentially the difference between the price farmers receive for their products and the price they would receive if there were no government interventions agricultural markets—impact production and farmer decision-making. In many Sub-Saharan African countries consumers benefit because farmgate prices are below world prices, while farmers lose out. Thus, when designing programs to support smallholder farmers, it is important to identify the prices farmers face, including for inputs and transport, and the farmgate prices and border prices for their commodities. For example, if the government were to remove import protection, domestic producers could potentially suffer. H. Exploring potential for import substitution and export development: One of the core objectives of ENAIP is to reduce reliance on food imports while identifying and expanding opportunities for export growth. However, due to significant data gaps, it has not been possible to evaluate the country’s competitiveness in specific commodities, potential areas for import substitution and opportunities in high-value exports. Conducting a comprehensive competitiveness and value chain analysis is necessary to guide strategic investments and inform policies aimed at enhancing Eswatini’s trade position in regional and global markets. 38 ANNEX 1. METHODOLOGY AND LIMITATIONS The ASR is based on analysis provided in the two studies, a value-chain analysis (VCA) and a review of public expenditure (PER) in agriculture. This ASR report synthesizes the findings from the value chain and PER drawing on qualitative and quantitative research conducted for the two studies. Data for analysis was collected from both primary sources (for VCA) and secondary sources (both VCA and PER). Value Chain Analysis The value chain analysis assessed four value chains: maize, beef, vegetables and dairy selected for the critical role they play in production, demand, income generation, import substitution and export potential. The analysis evaluates the different stages of each value chain, including input supply, production and post-harvest, processing, and marketing and distribution. It also describes the support services in these value chains, including finance, storage, power, transport, packaging, and technology and market information. It analyzes margins earned by the farmers and price parity between imported and domestically produced commodities in selected value chains in Eswatini. Finally, it highlights the key challenges and presents targeted recommendations for improvement of each of the value chains. The value chain analysis employed qualitative research methods, incorporating both primary and secondary data sources to analyze the following value chains: maize, beef, vegetables, and dairy. It is mainly based on secondary research, with primary research conducted to address the information gaps identified in existing data. • Secondary Research: A comprehensive desk review was conducted, analyzing existing literature and available data on the four value chains. This review aimed to: o Assess each value chain based on its role in production, demand, income generation, and export potential. o Assess the competitiveness of support services, including finance, storage, power, transport, packaging, agricultural technology, and market information for each value chain. o Examine each stage of the value chain (input supply, production, processing, marketing, distribution, and margin analysis) to identify key challenges and propose targeted recommendations. o Provide an overview of government and donor-funded policies affecting each value chain. • Primary Research: Primary data was collected to address information gaps identified in secondary research and validate the value chain analysis findings. The primary research tools include Key Informant Interviews (KIIs) and Focus Group Discussions (FDGs) with experts to assess key constraints and opportunities within each value chain. o Key Informant Interviews (KII): A total of 19 participants drawn from smallholder farmers, private sector actors, and State-Owned Enterprises (SOE) across the vegetable, beef, maize, and dairy value chains were interviewed to gain insights on important aspects of value chains. Structured and semi-structured interview questionnaires were designed as a part of KIIs to 39 gather insights on specific challenges, including limited access to finance, high input costs, inadequate infrastructure, and weak market linkages. o Focus Group Discussion (FGD) with experts: FDGs were conducted to discuss emerging opportunities, expert perspectives on policy interventions, and investment potential for strengthening value chains. FGDs were conducted with the following organizations: ▪ Ministry of Economic Planning and Development (MEPD) ▪ Eswatini Water and Agricultural Development Enterprise (EWADE) ▪ National Agricultural Marketing Board (NAMBOARD) ▪ Eswatini Dairy Board (EDB) ▪ National Maize Corporation (NMC) ▪ Private Sector Representatives ▪ University of Eswatini (UNESWA) Limitations The primary limitation of this research was the unavailability of publicly accessible data from relevant institutions. As a result, the analysis had to rely on multiple years of data, some dating as far back as 2018, which may not fully reflect current market dynamics. Additionally, engagement with private sector stakeholders proved challenging, as many were unwilling to disclose information regarding their operations or respond to inquiries about the value chain. This limited access to recent and detailed industry insights, potentially affected the comprehensiveness of the findings. As a result, it proved challenging to collect information on the following aspects: • Gross margin analysis: Data on gross margins beyond the production stage were not readily available, as many value chain actors—particularly larger agro-processing companies—considered such information confidential. Thus, gross margin analyses at the production stage of the value chains were presented instead of the whole value chain gross margin analysis. • Comparison of SNL and TDL: Eswatini's land tenure system consists of two types: Swazi Nation Land (SNL), primarily used for subsistence farming, and Title Deed Land (TDL), which supports commercial agriculture. While data on the proportion of land under SNL and TDL farming were available, detailed information on differences between the two systems in productivity levels, service provision, and access to key resources—such as agricultural inputs—was not readily available. Secondary sources were used extensively to inform the report, considering the above challenges. Published research articles provided empirical insights that helped construct a meaningful representation of the value chain in Eswatini. Additional consultations were conducted with government agencies, and relevant government reports were analyzed. Furthermore, officials from the Eswatini Agriculture Development Fund were consulted to validate inferences drawn from descriptive secondary data. However, gaps in data—particularly regarding differences between SNL and TDL farmers—persisted, as this information was not available even through secondary sources. 40 Public Expenditure Review The Public Expenditure Review (PER) assessed how public expenditure relates to sector needs and whether budget allocations are aligned with stated priorities. The PER analysis was based on secondary research and secondary and primary data. It used data provided by MOA and Eswatini Country Statistics Office, and from the World Development Indicators. The PER analyzed agriculture public expenditures (APE) from 2010 to 2021. The analysis examined the fiscal impact of APE, compares budget allocation and execution rates, reviews the functional allocation of the budget and concludes with recommendations for improving the composition, scaling, and impact of public spending. Limitations Complete MOA data was typically only available through the 2021/22 fiscal year, and thus most tables and figures encompass the years from 2010 to 2021. There are also information gaps which limit the analysis. For example, the review could not avail itself of data on the numbers of smallholder farmers, the number of commercial farmers, how much individuals/companies in each group receive in subsidies and other government support, and the exact extent to which manufacturing on agriculture, In keeping with the “rapid review” approach described earlier, this PER does not analyze returns to investment on specific government interventions. Finally, there are various datasets with different totals for agriculture public expenditures—MOA data, Country Statistics Office, Budget speeches, the ENAIP. 41 ANNEX 2. RECENT GOVERNMENT POLICIES AND PROGRAMS TARGETING THE AGRICULTURE SECTOR • National Development Plan (2023-2028): The National Development Plan of Eswatini aims to drive economic and social transformation in the country. While the plan encompasses broader economic objectives, it places significant emphasis on modernizing and enhancing the agricultural sector to ensure food security, stimulate economic growth, and improve rural livelihoods. • The Fresh Water Fisheries and Aquaculture Policy which seeks to implement the National Food Security Policy and the Comprehensive Agricultural Sector Policy through the promotion and development of fisheries and aquaculture in line with national, regional and international standards. • Financial Inclusion and Cluster Development Project (FINCLUDE) (2018-2025) a collaboration between the Government of Eswatini and the International Fund for Agricultural Development (IFAD), which aims to enhance the income and financial stability of approximately 30,900 rural smallholder farmers and entrepreneurs. • National Irrigation Master Plan: The Irrigation Master Plan (IMP) was developed in partnership with the Food and Agriculture Organisation (FAO) as a means of implementing the ENAIP. The IMP aims to direct irrigation development that is in line with national priorities. In addition, the IMP works to channel agricultural development to technically feasible, economically beneficial, environmentally and socially sustainable agribusinesses. • Eswatini Agriculture Development Fund Regulations (2023): The Eswatini Agriculture Development Fund Regulations established the Eswatini Agricultural Development Fund (EADF) to implement the Eswatini National Investment Plan by addressing critical financing gaps in the nation's agricultural sector. Launched in July 2023 with an initial allocation of US$2.6 million, the fund aims to transform Eswatini's agriculture by providing catalytic incentives and investments. Its core objective is to stimulate growth in farming activities, enhance productivity, and encourage greater private sector participation across agricultural value chains. The EADF operates through a combination of financial and policy instruments, aiming to strengthen linkages within Eswatini’s agriculture and food industry ecosystem. By strategically channeling resources into priority value chains, the fund seeks to improve national competitiveness and drive sustainable sectoral growth.37 • Eswatini National Agriculture Investment Plan (ENAIP): ENAIP, launched in September 2023, maps out areas of investment that require immediate support to transform the agriculture sector 37 Food and Agriculture Organization of the United Nations. (2024). Eswatini Investment Proposal - Hand-in-Hand Initiative. 42 to achieve production and productivity targets. The ENAIP aims to develop value chains, using an approach that fosters a “systems perspective” to development. Because ENAIP is now the focus of agriculture investments, the next section describes and assesses it more in-depth. • Comprehensive Agricultural Sector Policy (CASP) 2005. This was a strategic framework for sustainable agricultural development, targeting productivity improvements, poverty alleviation, and food security 43 ANNEX 3. COUNTRY COMPARISONS Figure A1. Agriculture sector – Share of Total Employment by Country (2023) 80.0 69.5 70.0 61.7 60.0 52.5 55.4 50.0 40.0 29.2 30.0 21.5 18.0 18.8 20.0 13.8 10.0 5.3 0.0 Source: World Bank. World Development Indicators Figure A2. Agriculture, Forestry, and Fishing, Value Added (percent of GDP), Eswatini Compared to Regional Peers 25 20 15 10 5 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Botswana Lesotho Eswatini Namibia Zambia Zimbabwe Source: World Bank World Development Indicators 44 Figure A3. Productivity Change Over Time (metric tons/ha) 4 metric tons/ha 3 2 1 0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Lesotho Namibia Zimbabwe Botswana Eswatini Zambia 45 BIBLIOGRAPHY African Development Bank. 2020. 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