Moves to restructure the economy along free market lines, pursue privatisation and strengthen relations with South Africa and the SADC
esotho
is a tiny independent nation, surrounded by South Africa, whose mountainous
terrain has given it the nickname ‘The Kingdom in the Sky’.
Formerly a British colony known as Basutoland, the country was renamed
upon gaining independence in 1966. Constitutional government was restored
in 1993 following 23 years of military rule.
The main economic activity is subsistence farming and improving the
living standards of the 2.2 million population is a priority for the
government. A devastating drought last year destroyed nearly all of
the country’s staple maize crop, leaving tens of thousands of people
facing a food shortage. A humanitarian relief operation is now under
way to help some 40,000 victims.
With
an unemployment rate estimated as high as 45 per cent, job creation
is central to government policy. The issue has become more pressing
because recession in South Africa means jobs there for workers from
Lesotho have disappeared, forcing many to return home, where there is
no alternative employment.
The government is developing a poverty reduction and growth strategy
in an effort to encourage local enterprises and create jobs. The 2002-2003
budget announced in January focuses on what finance and development
planning minister Mohlabi Tsekoa describes as “the scourge of poverty”.
Other
priorities outlined in the budget include: development of economic and
social infrastructure; preservation and sustainable management of natural
resources; development of human resources; good governance; the fight
against HIV/AIDS, which affects an estimated quarter of a million people;
and more efficient collection of revenue. Britain is making a $4.3 million
grant for the establishment of a revenue authority to improve the country’s
tax collection system.
The government is committed to transferring state-controlled enterprises
to the private sector. Around 100 agriculture-based businesses have
been earmarked for privatisation, as well as transport, electricity
and water entities. Successful sell-offs include the telecommunications
corporation, flour mills and two large state banks.
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Prime
minister Bethuel Pakalitha Mosisili
says: “Our economic restructuring programme is very important because
it will free the government to concentrate on things governments do
best. Business isn’t one of them because governments are bureaucratic.
Change is long overdue.”
He draws a direct link between democratic rule and the economic growth
of recent years. “A number of investors have come here to open
up businesses, particularly in the manufacturing industry, and this
has helped to create jobs for our people,” he says. Efforts to
attract foreign investment have been led by the state-run Lesotho
National Development Corporation.
Last
year the International Monetary Fund approved a three-year $32 million
loan under a Poverty Reduction and Growth Facility. The World Bank has
also extended credit for infrastructure and telecommunications projects.
Finance minister Mohlabi Tsekoa says that, despite a bleak global economic
outlook, the prospects for growth in developing countries in general
and Africa in particular remain promising. Lesotho’s gross domestic
product (GDP) rose by nearly three per cent last year, following increases
of 2.4 per cent in 2000 and 2.1 per cent in 1999.
The Lesotho economy is inextricably linked to South Africa and the currency,
the loti, is pegged to and interchangeable with the rand. The government
will continue to peg the loti to the rand, despite the rapid depreciation
of the rand in recent years, says Mr Tsekoa.
“The
cost and benefits of de-pegging the loti from the rand have been considered.
It seems the costs of leaving the Common Monetary Area are likely to
be higher than the benefits derived from remaining within the arrangement,”
he says.
Proceeds from membership of a customs union with South Africa provide
most of the government’s revenue. A hydropower scheme completed
in 1998 enables water to be stored and sold to South Africa, although
last year the country suffered one of the worst droughts in 20 years.
Last year South Africa and Lesotho signed a memorandum of understanding,
which committed the two countries to closer economic cooperation. A
visit to Lesotho made last year by South African president Thabo Mbeki
already appears to be bearing fruit.
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Foreign
affairs minister Thomas Thabane
says: “It is a good thing in the sense that South Africa is the
powerhouse of the region and that situation is not going to change over
the next 20 years. South Africa will carry on being the economic driver
in the SADC. But the European Union will remain our biggest supporter
and partner.”
Lesotho is a member of the Southern African Customs Union (SACU) and
the 14-nation Southern African Development Community (SADC). As such,
it is certain to go along with any move to create a common currency
among these nations.
Mr Thabane hopes British businessmen will take a greater interest in
Lesotho’s economic development. “A lot of British businessmen
operate in South Africa and, being realistic, we would not expect them
to relocate from London to Lesotho,” he says.
“But
they can ultimately expand their activities in South Africa to Lesotho,
particularly as there are many opportunities for them here. This could
be beneficial for them as they would be able to make the same product
for a lower price because our labour remains cheaper than in South Africa
and this will be the case for a long time to come.”
The government is also determined to improve the country’s education
system. Britain, which sponsors Basotho students at British universities,
could play an active role in education and training in fields such as
business and management, says Mr Thabane.
“Cooperation must be enhanced and it is important for ourselves
and the British government that we remember our historical links and
develop them,” he says. “After all, we use English as our
official language. It is part of our history and a useful medium in
commerce, politics and diplomacy.”
Improving
the living standards of the people is a priority
Finance minister Tsekoa emphasises the connection
between education and fighting poverty. “Because education is free,
it addresses poverty by relieving parents of the costs of school fees,
and books. Savings can then be applied to the purchase of food and clothing.
It reduces poverty by increasing the chances of people participating
in economic activity in later life.
The minister adds: “The greatest challenge that faces Lesotho is
to build a culture of peace and stability. Such a culture will enable
the country and its people to concentrate on things that matter, such
as creating jobs, producing saleable goods, engaging in agriculture,
educating children, youth and adults; developing tourism, building roads,
and generally improving the quality of life for all.”
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