Trade Lesotho’s Prospects in Trade

Writes Keketso Lawrence

The Kingdom of Lesotho has a rich history of trade with people from clans and tribes from neighbouring nations. Legend has it that Basotho in the early 1800s were already in regular contact with other nations from across the seas and beyond the plains of the great deserts, exchanging artifacts, animal skins, food and other important items.

It is therefore no coincidence that even at the founding of the nation in 1824, the Thaba-Bosiu headquartered administration under Moshoeshoe I, continued to seek new allies and maintained greater relations with the nations of the world. From the production of iron-age tools and weapons to large scale farming, especially wheat, sorghum and meat production. The country was the main supplier during the gold rush in South Africa while also maintaining contact with the traders from afar. It is also recorded in history that King Moshoeshoe I used to exchange the then pricey ostrich feathers and eggs as well as jewels and cattle in with other nations.

In the modern day economy, Lesotho has continued from where the founding fathers left off, forging trade links with international partners on a number of fronts – from mountain grown wool and mohair, textiles and clothing, indigenous agro produce, precious stones and water resources, amongst others.

Categorised as one of the least developed countries of the world, Lesotho enjoys some preferential market access across the globe through facilities like the United States’ Africa Growth and Opportunities Act (AGOA), the European Union’s Everything But Arms market platform, the Africa-Caribbean setup, several Asian trade partnerships, the vast African Continental Free Trade Area agreement as well as other lucrative markets from around the world and in the region.

Lesotho is ranked 122nd among 190 world economies in the ease of doing business, having declined from a record high of 100 in 2016 due to a number of factors such as persistent political instability, especially post-election conflicts. While the country’s economy is largely dependent on its only neighbour, the giant South African economy, it is however, susceptible to external shocks from the larger world economies due to its structural trade nature which makes it difficult to bring equilibrium to its balance of payments.

For the Mountain Kingdom, whose economy is highly dependent on trade across regional and overseas exchanges, the recent negative economic developments meant a sudden stand-still of the manufacturing sector amid unprecedented cancellation of orders from the AGOA and other outside markets and even newly found opportunities such as the cannabis industries had to face sudden closure.

Even with temporary interventions from the government to secure the industry and save jobs, the effects were felt much deeper in the villages where the survival of some of the most humble enterprise establishments is very dependent on this sector.

Though not organised and overlooked for a long time, the Lesotho Micro-Small and Medium Enterprise sector has been one of the strongest since independence and has actually shielded the country from some of its worst unemployment levels over the years.

The sector has no clear identity at the moment and the Government is well advanced in the process of developing MSME Policy which will create an enabling environment for the development and growth of small businesses in the country. Furthermore, a data management system to register all MSMEs has been developed, through which even the smallest of businesses can be reached for empowerment and access to finance as a way of sustained job creation, especially for women and youth.

The Government has recently commenced the implementation of an ambitious policy aimed at encouraging the sustainability and indigenisation of local industries. Through the project, the objective is to at least see business establishments grow and run down through three generations of success. The policy is deliberately designed for youth participation in the private sector development programme, while also empowering women for continuity, especially where they are usually side-lined after the passing on of the husband who was the anchor of the business establishment.

The Government continues to support the revival of the economy through supporting Private Sector Investment, and growing MSMEs, especially women and youth, while at the same time encouraging programming that will tap into the capabilities of the diaspora to promote investment and improve service delivery in health, education and other sectors. And, this is thanks to development support from a number of vital development agreements such as with the UN agencies, the US, the EU, China and other global friends and financial institutions.

In her maiden budget speech, Finance Minister Dr Retšelisitsoe Matlanyane emphasised the commitment of the new government to Inclusive and Sustainable Economic Growth and Private Sector-Led Job Creation as the cornerstone for economic recovery and growth.

“…inclusive and sustainable economic growth is a critical aspect of any country’s development strategy. It is characterised by an economy that grows in a manner that benefits all members of society, regardless of their income level or social status, while also being environmentally sustainable,” she told parliament, adding that a key driver of such growth is private sector-led job creation and livelihood opportunities by businesses and enterprises.

She said this approach recognises that a thriving private sector is fundamental to generating and poverty reduction, while stating the economy has to be set on a new growth trajectory of at least 5 to 7%per annum.

She said the road to recovery and growth that produces employment and reduces poverty was anchored on the pursuit and achievement of the following: Restoration of Macro-fiscal stability and consolidation of public financial management reforms to entrench fiscal discipline; efficient use of resources and improved controls and accountability.

“These are critical in rebuilding the confidence of the local and foreign investors, as well as development partners in our public policy and management,” she emphasised, adding that this required aggressive implementation of the Investment climate reform agenda, otherwise Lesotho will be disadvantaged in attracting the much needed investment in areas where the country has competitive advantages.

“We are compelled to be forward looking and dynamic and develop futuristic industries that are driven by innovation and technology development (such as sustainable production technology, Health care predictive analytics, digital education, fintech, nanotechnology and others). Furthermore, we will build systems and enhance the capacity of relevant institutions to fight economic crimes, especially corruption, and money laundering, and close any potential conduits for terrorism financing,” she said.

She continued the focus will be on enhancing productivity, promoting diversification and value chain development through the use of improved technology and mechanisation, especially in the agricultural and manufacturing sectors, while also adopting appropriate technology and advanced mechanisation including appropriate seed and fertilisers inputs as well as climate-smart technologies in agriculture to increase yield of basic grains, legumes, vegetables and deciduous.

She added that in the same vein, the Government of Lesotho would facilitate increased production of meats (poultry, beef and pork) as well as eggs, fish and milk by farmers to satisfy local demand and processing for export.

Among others, she also mentioned the tourism sector has been identified as one of the priority sectors that will enhance sustainable and inclusive economic growth and private sector job creation, stating that plans for the sector that her maiden budget would address were related to investment promotion and marketing Lesotho as a preferred tourism destination to stimulate recovery, as the sector was hard hit by the COVID-19 pandemic.

On the new investments in this sector, she said the construction of additional facilities by Semonkong Operator to enhance adventure activities while improving tourist engagement and experience so that eventually, tourists would spend more time in Lesotho and spend money on local accommodation facilities.

“The traditional events that act as major tourist magnets will be resuscitated and enhanced through such programmes as organising Basotho Diaspora Homecoming Event in partnership with the International Organization for Migration to host Basotho from about 48 countries in the world to come and tour the attractions sites in view of creating Lesotho Tourism Ambassadors new tourism investment leads,” she said.

The Government had partnered with the World Bank and would in the future launch an initiative aimed at boosting the availability of financial products and business support services, primarily for small and medium-sized enterprises (MSMEs) and entrepreneurs, with a particular focus on women and youth.

This endeavour, she explained, sought to promote financial inclusion by improving the efficiency and dependability of digital services offered by the government to businesses, as well as by increasing access to financial services that can help facilitate the establishment and operation of new businesses.

This initiative, she said would also improve the business environment by reducing the time and cost involved in regulatory compliance, especially for MSMEs, and make it easier for entrepreneurs to start and run their own businesses. Additionally, the project aimed to enhance the resilience of firms in the face of climate change, pandemics, and other natural disasters, she added.

“The initiative also aims to enhance the emerging entrepreneurial ecosystem and improve access to early-stage financing for start-ups and youth-owned businesses. This will be achieved through the establishment of an entrepreneurship hub in Maseru, as well as the support of digitalisation among MSMEs. Private investment in high potential value chains will also be facilitated, with a focus on upgrading skills and promoting the adoption of sustainable production practices to boost productivity and promote environmentally friendly growth,” Dr Matlanyane stated.

She said the two priority value chains targeted by this initiative were horticulture and the textile and clothing industry. Specifically, the initiative aimed to aid the recovery of textile companies while promoting the participation of Basotho-owned firms in the value chain. In terms of horticulture, the initiative sought to promote the growth and development of this sector through various measures that would be outlined in more detail during the implementation period. This sector which includes trade, tourism and industrial promotion, plus SMME development has a proposed budget allocation of M475.2 million this year.

Lesotho had in recent years suffered economic stagnation and it needed sustainable public and foreign direct investment that would allow it to create sustainable jobs and reduce poverty. The country also needed a productive private sector investment for increased exports and value chain and thus the support of traditionally small players in manufacturing and food production to meet some of the set targets, Dr Matlanyane added.

The country had also put in place new investment strategies focusing more on people’s participation and empowering Basotho to take part in directly building their own economy. With the Lesotho National Development Corporation(LNDC), Basotho Enterprise Development Corporation (BEDCO) as lead agencies, together with commercial and development partners, Lesotho has set a new route that has widened not only the SMMEs playing field in the growth economy, but also encouraging the ordinary villager who is a smallholder farmer to broaden their dreams.

Among others, the Ministry of Trade and Industry has developed the National Trade Policy Framework together with its requisite strategy, the National Export Strategy, both spanning the period 2021-2025. The Strategy is meant to strengthen the capacities of producers and service providers in strategic export potential sectors.

These include Horticulture; Textiles and Apparel; and Light Industries to take advantage of market access opportunities provided under arrangements such as AGOA, SADC, EU and African Continental Free Trade Area (AfCFTA). The implementation of the National Trade Facilitation Roadmap is ongoing to improve movement of goods and services across borders, thereby, reducing cost and time of doing business.