Lesotho’s economy relies mainly on South African Economy. This became evident during the lockdown. Lesotho’s economy is now on its knees due to the lockdown, especially due to closed borders. In this interview, local economist Majakathata Mokoena (MM) tells theReporter’s ‘Majirata Latela (ML) what the country needs to do for its economy to recover.
The question on people’s lips at the moment is how the economy of Lesotho will recover from the devastation caused by Covid-19. What’s your take?
Lesotho’s economy was not down because of the pandemic. Goods were allowed to enter the country during lockdown. The country’s economy was down due partly to mismanagement and reduced SACU revenues, lack of informed domestic investment and misguided procurement practices which favoured Chinese companies over Basotho companies (who do not send money abroad but keep it in the country) thus effecting what in economics we call “the grouching out effect”.
The dependence on South Africa is in a large number of goods but it is Basotho spending on South African goods and not the other way round. One could say that a significant portion of South Africa’s economy is dependent on Lesotho purchases… without which the Free State economy always feels the pain.
What can Lesotho do to increase food productivity in the country despite the challenges of climate change, soil erosion and the likes?
As for the recovery of Lesotho’s economy, prudent expenditure on the part of the government that will keep most of government expenditures within Lesotho is needed. This means higher expenditure must be targeted towards the resurrection of Lesotho’s agricultural sector… especially in areas of cash crops and horticulture.
This will increase the country’s self-sufficiency in foods and therefore reduce dependence on South Africa. This is possible because most Basotho have access to land. What is required is for the government to better plan for product mix and diversify agricultural production. This will spawn related industries such as packaging and processing as well as distribution thus increasing the robustness of Lesotho’s economy.
This calls for targeted investment in the chosen products and this will lead to a natural distribution of wealth as most Basotho will have the ability to participate. As for financing such activities the government can devise different means of seeking targeted finance including claiming unclaimed benefits and monies from South African insurance companies owed to Basotho ex-miners and their children (these run in the Billions of Maloti).
Judging by the fact that there is no household in Lesotho that does not have at least three people who have worked in the mines in South Africa over time, each household is entitled to substantial amounts of money which if they were you have access to would provide them enough money to begin their agribusiness operations. This money can only be given to beneficiaries and therefore stands little chance of misappropriation. What the government can find immediately is to facilitate the repatriation of such monies.
The mining sector, what can be done to make sure that Lesotho’s mines contribute more to the economy of the country? How have they been affected by the lockdown?
Lesotho has not collected its due dividends from the current companies mining diamonds in Lesotho. A serious effort must be made by the government to collect dividends and due royalties from all companies in which it owns a stake so it can buttress its cash reserves – reserves that can further be used to finance the formation of financial institutions (such as the Development Bank, Sovereign Fund, Industrial Bank) thus giving the country the ability to determine its own economic destiny and achieve economic freedom for Basotho. Furthermore Lesotho needs to increase its shareholding in the mines,( held either through the government or indigenous citizens) so that the country can keep an increased amount of the profits these mines make out if the huge diamonds the country’s mines have proven to produce
How can were diversify the mining sector with the studies that have been consulted (quarrying and uranium)?
Lesotho needs to open more diamond mines as the country is endowed with the largest number of diamondiferous kimberlite pipes and blows in the world. Lesotho should also explore ways of diversifying its mining products… including the development of semi-precious stones proliferative throughout the country. We are literally walking in riches
SACU collection – What can Lesotho do to maximise tax collection from SACU revenue?
This organisation is dependent on trade between its members and the world. Lesotho needs to diversify and increase its exports in order to collect a larger share if the SACU revenues than it does now. The country is rich in potential organic agriculture products that can be desirable to Europe and Asia as well as the United States. The government should carefully select products where Lesotho has a comparative and competitive advantage in and help develop these for global export. That way we can earn unthought-of foreign currency to afford machinery and equipment with which to further develop the country’s agribusiness foundation.
As for South Africa’s economic impact on Lesotho, South Africa went into recession because of its own financial and economic mismanagement to leading to SACU. A decline in global trade before the pandemic affected SACU revenues which in turn would affect Lesotho
The private sector and the informal sector, what can be done to make sure that they also recover from the ordeal?
As for the private sector, Lesotho needs to develop a true private sector not the cronies the government has been supporting so far. Cronies are not entrepreneurs and have therefore proven inadequate to grow the economy of Lesotho. In fact one could say with a high degree of confidence that the current informal sector bares greater promise to develop and grow the economy. So government should stop wasting time in supporting cronies and focus on true entrepreneurs (most of whom are women who have proven reliable in family economic development so far).
When we talk about economic recovery, there is a possibility of corruption tagging along; do you think we have the political will to tackle corruption while we recover the economy?
As for economic recovery, Lesotho must focus on new business development I have already talked about this in the agribusiness sector and erect targeted financial institutions that can help entrepreneurs to grow in their chosen sectors. If the government endeavours to help ex-miner families recover monies due to them from South African insurance companies (these monies go directly to beneficiaries and therefore reduce potential corruption that can be triggered by monies collecting in government institutions) we can reduce corruption as well as provide start-up capital for families using their land for agribusiness operations.
Furthermore we can further reduce corruption opportunities by creating stand-alone institutions that are self-managed and are therefore better auditable. We should also punish corruption where we can prove it. This can serve as a deterrent for officials and politicians to engage in corruption. The government’s PAC must pursue people who have been found to have stolen public funds and the DCEO must be depoliticised.
As for political will leading to economic recovery the global Post-COVID 19 economic environment is scary enough to serve as a catalyst. We must make sure that everyone knows that we are likely to be on our own. Most developed countries will be too focused on their problems to even worry about us.