ollowing
Lesotho’s independence from British rule in 1966, the drive towards
economic development was directed towards labour-intensive industries
whose locally-produced goods would replace costly imports.
The Lesotho National
Development Corporation (LNDC) was set up in 1967 to promote industrial
development and was then turned into a one-stop shop for foreign investors.
It is 90 per cent-owned by the government and 10 per cent by German
development agency DEG.
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Chief
executive Sophia Mohapi says:
“From the very beginning, the LNDC’s mandate has been to initiate,
promote and facilitate the development of manufacturing and processing
industries, mining and commerce in a manner calculated to raise the
level of income and employment in Lesotho.
“With the assistance of funding from the government, the LNDC embarked
on an aggressive campaign to invite overseas investors to establish
labour intensive manufacturing enterprises.
“Today, our approach concentrates on promoting foreign direct investment
and encouraging the indigenous private sector to go into manufacturing
through joint ventures with overseas investors. That way, skills and
technology can be transferred to our entrepreneurs.”
Development
is directed as much towards producing goods for export as to substituting
imports. “Some success has been recorded over the years,”
says Mrs Mohapi, particularly for textiles and clothing. “Lesotho
is ranked as the biggest producer of jeans in sub-Saharan Africa, all
produced for export markets.”
The LNDC has set up an investment promotion centre whose sole task is
to persuade overseas firms that Lesotho is a solid investment location.
The country offers investors a presence within the 14-member SADC and
– considering the country is entirely surrounded by South Africa
– in the region’s biggest market.
Further afield, goods wholly-produced in Lesotho have access to the
360 million consumers of the European Union. Lesotho also has concessionary
access to North America, Japan and other big export markets under the
Generalised System of Preferences (GSP).
The
authorities have drawn up an array of financial incentives based on
an investor-friendly free-market economy. These include a low rate of
corporation tax of 15 per cent on profits earned by manufacturers and
free repatriation of profits. Withholding taxes are not levied on dividends
distributed by manufacturing firms to foreign or local shareholders,
and there is an exemption from sales tax on capital machinery and equipment.
Investors have unimpeded access to foreign exchange and the government
has a comprehensive export-finance service to support companies with
working capital on concessionary terms.
Other industries earmarked for future development include footwear and
agribusiness, whose output is destined for export. The LNDC has a minority
interest in a pharmaceuticals firm that produces for domestic and overseas
markets, particularly for SADC members, and has leased property to a
television assembly plant. It is looking at other openings, too.
“We are exploring the possibilities of diversifying into sectors
such as light electronics to avoid having all our eggs in one basket,”
adds Mrs Mohapi.
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