Industrial development and mining
Lesotho has undergone significant industrial expansion in the past several years, with numerous international textile and garment firms having successfully established their manufacturing concerns in the country. Further development in this sector has been prioritised due to its ability to create sustainable employment opponunities, thereby contributing substantially to poverty alleviation.
The industry resumed its upward growth trend during 2006, supported by the country's sound economic fundamentals and a number of proactive steps taken by government to support the sector as well as to diversify products and export markets. An essential element in future economic development is the expansion of the private sector, which has the capacity to stimulate economic growth and rapidly increase employment opportunities.
Industrialisation programmes centre on labour-intensive and export-orientated manufacturing, address the supply-side constraints which hamper Lesotho's integration into the global economy. The Ministry of Trade and Industry, Cooperatives and Marketing is tasked with enhancing institutional capacity to promote industrial expansion as well as creating the appropriate investor-friendly policies. This includes the development of an industrial master plan and the creation of new strategies to offer an enabling environment for the development of commerce and industry. Parastatal institutions support the manufacturing sector by providing the necessary physical infrastructure and services. The implementation of these strategies has a number of objectives, including greater private sector participation in the economy and increased levels of investment, both local and foreign.
Furthermore, new markets are being explored and the industrial base diversified in order to benefit from existing markets. Promoting citizen entrepreneurship and supporting locally owned industries is also vital, with the goal of affording smaller enterprises a more important role in the economy through building industrial linkages with foreign businesses.
The Lesotho National Development Corporation (LNDC) is a parastatal development institution which encourages economic growth in Lesotho through initiating, promoting and facilitating the development of manufacturing and processing industries, mining and commerce, in a manner calculated to raise levels of income and employment in Lesotho.
While the LNDC's main role is to promote Lesotho as an attractive private sector investment location to local and foreign investors, the corporation also provides serviced industrial and commercial sites and buildings, subsidies to those wishing to build factories at serviced sites, financial assistance to investors on a selective basis, and equity participation in projects considered to be of strategic importance to the economy. Supported by a healthy government-administered incentive regime, including export, financial and tax incentives, the LNDC has had success in attracting labour-intensive manufacturing enterprises.
Both the commercial sector and international finance institutions are becoming involved in defining the future role of the private sector. This includes developing public-private partnerships, building capacity to manage such partnerships, and the transfer of technology.
Government recognises the fundamental importance of creating a solid institutional framework for the private sector and minimising the cost of bureaucracy. A Private Sector Development (PSD) forum was held in April 2001, where a consensus was reached between the private sector, government and development partners on areas that need attention in order to unlock the growth potential of the economy. The forum's deliberations created a basis for developing funding proposals from donors such as the United States, under the Millennium Challenge Account, and the World Bank.
The Private Sector Development project, which is a joint programme with the World Bank and International Finance Corporation, is expected to address a number of barriers to doing business in Lesotho. These include the long and unwieldy process of licensing new firms or businesses; difficulties in obtaining land; inadequate water supply to industrial areas; poor rail connections; low levels of productivity among workers; a weak and divided labour movement; and inadequate dispute resolution mechanisms.
Government has been making strides in many of these areas, and has worked to simplify company registration and licensing procedures through the establishment of a Trade and Investment Facilitation Unit, reviewed obsolete trade legislation, and established commercial courts, among other reforms. Priority goals are to:
- Simplify and streamline immigration, customs and work permit procedures and processes
- Reduce the time it takes to register a company from 92 days to under one week
- Reduce the time it takes to pay taxes to less than 24 hours Computerise land titles and deeds registration, and introduce a mortgage market to stimulate housing finance and construction
- Speed up the passage of the Married Persons Equality Bill to give female entrepreneurs access to credit in their own right
- Modernise and update leasing and hire purchase legislation
- Reform and decentralise government procurement to line ministries and district councils within a framework of strict oversight and financial controls
- Update and modernise the Pension Proclamation of Laws, including the introduction of a defined contribution pension scheme for public servants and regulation of other retirement annuities
The privatisation of state-owned enterprises is encouraged, with input from local as well as foreign investors in the form of partnerships with workers and the business community, who obtain minority shareholdings in privatised enterprises. An essential element in the privatisation programme is the participation of Basotho in partnership with foreign strategic investors. Stakeholders from business and labour, including the Lesotho Chamber of Commerce and Industry, employers' associations, lawyers and women's business groups, are part of the private sector advisory committee.
Under the auspices of the Lesotho Privatisation Unit, which is guided by the Ministry of Finance and Development Planning, Lesotho's privatisation programme is an important facet in the process of restructuring the economy, and is governed by the guidelines of transparency and accountability. Privatisation exercises are undertaken in order to bring in technical expertise, reduce' the cost of utilities, and open such enterprises for public ownership. A diverse range of business concern has already been privatised.
Small, Medium and Micro Enterprises
The Small, Micro and Medium Enterprises (SMMEs) sector in Lesotho consists of more than 100 000 small and micro enterprises, of which the majority are sole proprietors that employ between one and three workers. The sector is estimated to employ nearly 200 000 people in both formal and informal enterprises.
The Basotho Enterprise Development Corporation (BEDCO) was established over two decades ago as a subsidiary of the LNDC to develop Basotho-owned and managed small-scale businesses.
BEDCO currently assists SMMEs in the following fields:
- Business counselling on an individual basis at workshop level
- Discovering, evaluating and formulating viable projects for financing by local financial institutions
- Providing manufacturing/technical assistance to small-scale enterprises
- Training entrepreneurs in skills such as woodwork, pattern drafting, designing and sewing for employment in the construction as well as textile industries
- Supplying business training courses focusing on areas such as marketing, management, stock control, pricing and costing
BEDCO is also engaged in supplying real estate services, with commercial and industrial rooms and units available for rental in Leribe, Maseru, Mafeteng, Mohale's Hoek, Qacha's Nek and Botha-Bothe. Thaba-Tseka Industrial Park and BEDCO Commercial Centre are the corporation's latest enterprises
The Maseru and Leribe districts are growth points for much of Lesotho's industrial development. Manufacturing concerns established here comprise enterprises involved in clothing, textiles and footwear, agribusiness, engineering, chemicals and pharmaceuticals, building materials, distribution and commercial services. Access to industrial estates is via tarred roads and, for freight purposes, those situated in Maseru are linked by rail from Maseru's industrial area to the South Africanrailway system. Additionally, Maputsoe Industrial Area is close to South Africa's Ficksburg station.
As part of the Lesotho government's commitment to creating an enabling environment for manufacturing enterprises, thereby promoting exports and attracting further investment, industrial estates across the country are being upgraded and expanded. Real estate and infrastructural services provided through various parastatals comprise serviced sites, factory shells and reliable and affordable infrastructure, namely telecommunications and power and water utilities.
Services offered by the LNDC include the following:
- Serviced industrial and commercial sites at competitive rentals
- Provision of industrial and commercial buildings at competitive rentals
- Subsidies to investors wishing to construct their own industrial buildings at LNDC-serviced sites
The Lesotho government has for some time" encouraged the decentralisation of industrial activity. The present focus is on developing four new industrial estates in Tikoe, Mafeteng, Mohale's Hoek and Botha-Bothe, which are being established in a phased manner depending on financial and economic viability. These new industrial areas are being developed in order to fulfil the demands created by industrial expansion and improved market access, and public-private partnerships are entered into where appropriate. Furthermore, the government is to ensure that all new industrial estates have built-in water recycling measures.
The mining and quarrying subsector has seen substantial growth in the past few years. During 2005 value added was estimated to rise by 10 percent compared with 164.1 percent in the preceding year. Growth continues to be underpinned by the pick-up in diamond exports, following the reopening of the Letšeng diamond mine late in 2003. The subsector is likely to continue to contribute positively to the economy of Lesotho, with a further diamond mine coming on stream in the 2006/07 financial year. Although still a marginal contributor to Lesotho's GDP (around 5 percent in 2005), growth in this subsector is important in ensuring sustained economic growth, creating employment prospects, boosting government revenue earnings and foreign investment, and increasing foreign exchange earnings through higher exports. Furthermore, the industry has a very high value added, and with most mines based in the highlands where poverty is greatest, the subsector is able to serve as a foundation for rural development.
Discovery in August 2006 at Letšeng Diamond Mine, the 603 – carat Lesotho Promise diamond is the 15th largest rough diamond ever discovered, and the biggest diamond uncovered this century.
The reopening of the Letšeng mine has renewed interest in Lesotho as a source of diamonds, as well as uranium, base metals and clay, and several private companies are engaged in prospecting activities. Reserves of coal and bituminous shale deposits have also been identified in a number of areas. Although only employing some 300 people, sandstone quarrying and mining has some potential for growth. Lesotho's sandstone reserves are being evaluated, with efforts made to strengthen market links. However, the weight of the stone means that it can only be sold within a limited distance of the source.
Government's main objective in the mining industry is to enhance workers' technical capabilities, making mines more competitive and making it possible for locals to hold jobs normally handled by expatriates. According to Lesotho's Poverty Reduction Strategy, mining initiatives that generate employment are to be provided with access to credit and training. Over the next few years production is to be increased by the private sector in the areas of Ha Teko, Ha Motloheloa (clay), Kolo, Letseng and Kao (diamonds). Government is committed to creating an enabling environment for mining activities by implementing the new Mines and Minerals Act of 2005 and monitoring the use. of resources to ensure safety, health and environmental concerns. Information on the mining and quarrying industry is available from the Department of Mines and Geology, which also issues licences for diamond digging, buying, cutting and export.
With a long history of alluvial diggings in the area, in present-day Lesotho the exploitation of diamonds occurs in the Maluti range of mountains in the north-east of the country. Lesotho has several diamond dealers as well as two diamond cutting enterprises.
The diamond mining sector is dependent on large-scale foreign investment, and its potential is thereby linked to currency fluctuations as well as international demand. The favourable investment climate offered by the Lesotho authorities, together with the recovery of diamond prices and significant weakening of the rand - to which the loti is pegged - has seen the revival of the country's diamond industry.
Jointly owned by the Gem Diamond Mining Company of Africa and the Lesotho government, which also receives income from tax and customs dues, the Letšeng Diamond Mine is situated in the Lesotho highlands. Reopened in 2003, Letšeng is the highest diamond mine in the world at over 3 kilometers above sea level. Although not generating large quantities of gems when compared with larger industrial mines, Letšeng nevertheless produces the highest proportion of large stones of any mine in the world, and is famous for its high quality 100-plus carat stones. In 1967 a 60 I-carat stone was discovered here, and a 215-carat stone was recovered in 2005.